S-4

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As filed with the Securities and Exchange Commission on February 11, 2008

Registration No. 333-            

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM S-4

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

The Reader's Digest Association, Inc.
(Exact name of registrant issuer as specified in its charter)

See Table of Registrant Guarantors for information regarding additional Registrants

Delaware
(State or other jurisdiction of
incorporation or organization)

1-10434
(Primary Standard Industrial
Classification Code Number)

13-1726769
(I.R.S. Employer
Identification Number)

Reader's Digest Road
Pleasantville, New York 10570
(914) 238-1000
(Address, including zip code, and telephone number, including area code, of registrants' principal executive offices)

Andrea Newborn, Esq.
Vice President, General Counsel and Secretary
The Reader's Digest Association, Inc.
Reader's Digest Road
Pleasantville, New York 10570-7000
(914) 238-1000
(Name, address, including zip code, and telephone number, including area code, of agent for service)

With a copy to:

Andrew J. Pitts, Esq.
Cravath, Swaine & Moore LLP
Worldwide Plaza
825 Eighth Avenue
New York, New York 10019
(212) 474-1000

Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this registration statement.

          If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box: o

          If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

          If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

CALCULATION OF REGISTRATION FEE

Title of Each Class of Securities to be Registered	Amount to be Registered	Proposed Maximum Offering Price per Security(1)	Proposed Maximum Aggregate Offering Price(1)	Amount of Registration Fee
9% Senior Subordinated Notes due 2017	$600,000,000(2)	100%	$600,000,000	$23,580
Guarantees of 9% Senior Subordinated Notes due 2017	—	—	—	(3)

(1)

This estimate is made pursuant to Rule 457(a) of the Securities Act solely for the purpose of determining the registration fee. The above calculation is based on a bona fide estimate of the maximum offering price.

(2)

Represents the aggregate principal amount of the 9% Senior Subordinated Notes due 2017 issued by The Reader's Digest Association, Inc.

(3)

Pursuant to Rule 457(n), no additional registration fee is payable with respect to the note guarantees.

The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment that specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this registration statement shall become effective on such date as the Commission acting pursuant to said Section 8(a), may determine.

Table of Registrant Guarantors

Exact Name of Registrant Guarantor as Specified in its Charter(1)	State of Incorporation or Organization	Primary Standard Industrial Classification Code Number	I.R.S. Employer Identification Number
Alex Inc.	Delaware	511130	13-3765531
Allrecipes.com, Inc.	Washington	541519	91-1693797
Ardee Music Publishing, Inc.	Delaware	512200	13-2852291
Books Are Fun, Ltd.	Iowa	454390	42-1360501
Christmas Angel Productions, Inc.	Delaware	541990	13-4062729
Compasslearning, Inc.	Delaware	511210	13-4066535
Direct Holdings Americas Inc.	Delaware	511130	13-2861045
Direct Holdings Custom Publishing Inc.	Delaware	511130	13-3867452
Direct Holdings Customer Service, Inc.	Delaware	511190	13-3389015
Direct Holdings Education Inc.	Delaware	511130	13-3765535
Direct Holdings Libraries Inc.	New York	511130	13-2537299
Direct Holdings U.S. Corp.	Delaware	551112	32-0134998
Family Reading Program Corp.	Delaware	541990	58-2038239
Fundraising.com, Inc.	Delaware	541990	06-1411934
Funk & Wagnalls Yearbook Corp.	Delaware	511130	13-3603787
Gareth Stevens, Inc.	Wisconsin	511130	39-1462742
Home Service Publications, Inc.	Delaware	511120	13-3439525
Lifetime Learning Systems, Inc.	Delaware	511190	13-3783276
Pegasus Asia Investments Inc.	Delaware	523900	13-3850077
Pegasus Finance Corp.	Delaware	541990	51-0395213
Pegasus Investment, Inc.	Delaware	523900	13-3864252
Pegasus Sales, Inc.	Delaware	541800	13-1883259
Pleasantville Music Publishing, Inc.	Delaware	512200	13-2852289
QSP Distribution Services, LLC	Delaware	541990	58-1876903
QSP Products and Programs, LLC	Delaware	541990	13-4100056
QSP Sales, LLC	Delaware	541990	13-4100059
QSP Services, LLC	Delaware	541990	55-0867913
QSP Ventures, LLC	Delaware	541990	51-0462443
QSP, Inc.	Delaware	541990	13-1996792
R.D. Manufacturing Corporation	Delaware	323100	13-6120230
RD Large Edition, Inc.	Delaware	511120	13-3941489
RD Magazine Value Partners, Inc.	Delaware	551112	55-0872879
RD Member Services Inc.	Delaware	541990	13-3734738
RD Publications, Inc.	Delaware	511120	13-3439115
RD Trade Shows, Inc.	Delaware	561490	13-4033632
RD Walking, Inc.	Delaware	511120	13-3936509
Reader's Digest Children's Publishing, Inc.	Delaware	511120	13-3616326
Reader's Digest Consumer Services, Inc.	Delaware	511120	43-2018469
Reader's Digest Entertainment, Inc.	Delaware	512100	13-3144742
Reader's Digest Financial Services, Inc.	Delaware	541990	13-4177291
Reader's Digest Latino America S.A.	Delaware	511120	52-1275836
Reader's Digest Sales and Services, Inc.	Delaware	541990	13-1952377
Reader's Digest Sub Nine, Inc.	Delaware	541990	13-4062727
Reader's Digest Young Families, Inc.	Delaware	511120	06-1396158
Reiman Media Group, Inc.	Delaware	511120	47-0861192
Retirement Living Publishing Company, Inc.	Delaware	511120	13-3439118
SMDDMS, Inc.	Delaware	493100	13-3122751
Taste of Home Entertaining, Inc.	Delaware	454390	86-1135910
Taste of Home Media Group, Inc.	Delaware	541800	47-0861190

Taste of Home Productions, Inc.	Delaware	722300	47-0861193
The Reader's Digest Association (Russia) Incorporated	Delaware	511120	13-3534963
Travel Publications, Inc.	Delaware	511120	11-2832927
Videovation, Inc.	Delaware	512100	13-3534961
W.A. Publications, LLC	Delaware	541990	13-6120229
Wapla, LLC	Delaware	551112	13-4199272
Weekly Reader Corporation	Delaware	511130	13-3603780
World Almanac Education Group, Inc.	Delaware	511130	13-3603781
World Wide Country Tours, Inc.	Delaware	561500	47-0861189
WRC Media Inc.	Delaware	551112	13-4066536

(1)

The address of each Registrant Guarantor is c/o The Reader's Digest Association, Inc., Reader's Digest Road, Pleasantville, NY 10570, and the telephone number is (914) 238-1000.

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is declared effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED FEBRUARY 11, 2008

PROSPECTUS

The Reader's Digest Association, Inc.

Offer to Exchange
Up to $600,000,000 Principal Amount Outstanding of
9% Senior Subordinated Notes due 2017
for
a Like Principal Amount of
9% Senior Subordinated Notes due 2017
which have been registered under the Securities Act of 1933

        We are offering to exchange registered 9% Senior Subordinated Notes due 2017, or the "Exchange Notes", for our outstanding unregistered 9% Senior Subordinated Notes due 2017, or the "Original Notes". We sometimes refer to the Original Notes and the Exchange Notes in this prospectus together as the "Notes". The terms of the Exchange Notes are substantially identical to the terms of the Original Notes, except that the Exchange Notes are registered under the Securities Act of 1933, as amended, or the "Securities Act", and the transfer restrictions and registration rights applicable to the Original Notes do not apply to the Exchange Notes. The Original Notes may only be tendered in an amount equal to $2,000 in principal amount or in integral multiples of $1,000 in excess thereof. This offer will expire at 5:00 p.m., New York City time, on                                    , 2008, unless we extend it. The Exchange Notes will not trade on any established exchange. The Original Notes are, and the Exchange Notes will be, guaranteed on a senior subordinated basis by all of our subsidiaries that guarantee our senior secured credit facility. All references to the Notes include reference to the related guarantees.

        Each broker-dealer that receives Exchange Notes for its own account pursuant to this exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. The letter of transmittal accompanying this prospectus states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Notes received in exchange for Original Notes where such Original Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities. We have agreed that, for a period of 180 days after the expiration of this exchange offer, we will make this prospectus available to any broker-dealer for use in connection with any such resale. See "Plan of Distribution".

Please see "Risk Factors" beginning on page 12 for a discussion of certain factors you should consider in connection with this exchange.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

Prospectus dated                    , 2008.

You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with different information. This prospectus is not an offer to sell or a solicitation of an offer to buy the Notes in any jurisdiction or under any circumstances in which the offer or sale is unlawful. You should not assume that the information contained in this prospectus is accurate as of any date other than the date on the front of this prospectus.

Table of Contents

	Page
Where You Can Find More Information	1
Forward-Looking Statements	2
Prospectus Summary	3
Risk Factors	12
Use of Proceeds	33
Ratio of Earnings To Fixed Charges	34
Selected Consolidated and Combined Financial Data	35
Management's Discussion and Analysis of Financial Condition and Results of Operations	36
Business	60
Properties	83
Legal Proceedings	83
Management	84
Executive Compensation	88
Security Ownership	121
Certain Relationships and Related Party Transactions	125
The Exchange Offer	127
Description of Notes	135
Description of Other Indebtedness	200
Material United States Federal Income Tax Considerations	203
Plan of Distribution	203
Validity of The Exchange Notes	204
Experts	204
Index to Consolidated and Combined Financial Statements	F-1

i

WHERE YOU CAN FIND MORE INFORMATION

        We have filed with the SEC a registration statement on Form S-4 under the Securities Act with respect to this Exchange Offer. This prospectus incorporates important business and financial information about us that is not contained in the registration statement and the exhibits to the registration statement. This information is available from us without charge to holders of Original Notes as specified below. You may read and copy any materials that we file with the SEC at the SEC's public reference room at its principal office at 100 F Street, N.E., Washington, D.C. 20549. You can request copies of these documents by writing to the SEC and paying a fee for the copying cost. Please call the SEC at 1-800-SEC-0330 for more information about the operation of the public reference rooms. SEC filings by us are also available at the SEC's Internet website at www.sec.gov. Reader's Digest maintains a website at www.rda.com. The information contained on our website or that can be accessed through our website is not incorporated by reference in this prospectus, and you should not consider it a part of this prospectus.

        This prospectus contains summaries, believed to be accurate in all material respects, with respect to certain documents, but reference is made to the actual documents for complete information. All such summaries are qualified in their entirety by such reference. You can request a copy of the Indenture and other agreements referred to in this prospectus and the documents incorporated by reference by requesting them in writing at the following address or by telephone from us at the following telephone number:

Investor Relations
The Reader's Digest Association, Inc.
Reader's Digest Road
Pleasantville, New York 10570-7000
Telephone: (914) 244-7446

To obtain timely delivery of any copies of any of our filings, agreements or other documents, you must make your request to us no later than                                    , 2008.

1

FORWARD-LOOKING STATEMENTS

        Portions of the information in this prospectus, including, but not limited to, those set forth under "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations", may be considered "forward-looking statements." Forward-looking statements can be identified by the use of forward-looking terminology, including words such as "prospects," "outlook," "believes," "estimates," "intends," "may," "will," "should," "anticipates," "expects" or "plans," or the negative or other variation of these or similar words, or by discussion of trends and conditions, strategy or risks and uncertainties. These forward-looking statements include all matters that are not historical facts. They relate to, without limitation, our intentions, beliefs or current expectations concerning, among other things, our results of operations, financial condition, liquidity, prospects, growth, strategies, plans, objectives and the industry in which we operate.

        Forward-looking statements are inherently subject to risks, trends and uncertainties, many of which are beyond our ability to control or predict with accuracy and some of which we might not even anticipate, because they relate to events and depend on circumstances that may or may not occur in the future. We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and the development of the industry in which we operate, may differ materially from those made in or suggested by the forward-looking statements contained in this prospectus. Although we believe that the expectations reflected in such forward-looking statements are based upon reasonable assumptions at the time made, we can give no assurance that our expectations will be achieved. In addition, even if our results of operations, financial condition and liquidity, and the development of the industry in which we operate are consistent with the forward-looking statements contained in this prospectus, those results or developments may not be indicative of results or developments in subsequent periods. Future events and actual results, financial and otherwise, may differ materially from the results discussed in the forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements.

        Important factors that may cause actual results to differ materially from forward-looking statements include, but are not limited to, the risks and uncertainties set forth in this prospectus in "Business", "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations".

        Any forward-looking statements that we make in this prospectus speak only as of the dates of such statements. We assume no obligation to update or supplement any forward-looking statements that may become untrue because of subsequent events, whether because of new information, future events or otherwise. Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance, unless expressed as such, and should only be viewed as historical data.

2

PROSPECTUS SUMMARY

The following is a summary of some of the information contained in this prospectus. It may not contain all the information that is important to you. To understand this offering fully, you should read carefully the entire prospectus, including the section entitled "Risk Factors", "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements included elsewhere in this prospectus and the notes thereto. For the purposes of this prospectus, references to "Reader's Digest," "Company," "we," "us," and "our" refer to The Reader's Digest Association, Inc., and unless the context otherwise requires, its subsidiaries and their respective predecessors in interest.

The Acquisition Transactions

        On January 23, 2007, RDA Holding Co. (a Ripplewood Holdings L.L.C. ("Ripplewood") controlled entity), WRC Acquisition Co. (a subsidiary of RDA Holding Co.) and WRC Media Inc. ("WRC Media") entered into a merger agreement that provided for WRC Acquisition Co. to merge with and into WRC Media, with WRC Media being the surviving corporation (the "WRC Media Merger"). An investment fund affiliated with Ripplewood acquired its original interest in WRC Media in 1999 and had at the time of the WRC Media Merger approximately a 46% economic interest and a majority voting interest in WRC Media. The merger consideration of $100.7 million paid to WRC Media's existing stockholders to acquire all the common stock of WRC Media at the closing of the WRC Merger on March 2, 2007 included a combination of RDA Holding Co. common stock ($80.6 million), RDA Holding Co. junior pay-in-kind preferred stock ($20.0 million) and cash ($100,000).

        On January 23, 2007, RDA Holding Co. entered into a stock acquisition agreement to acquire all the common stock of Direct Holdings U.S. Corp. ("Direct Holdings") in exchange for shares of common stock of RDA Holding Co. and net cash totaling $56.7 million (the "Direct Holdings Stock Acquisition"). An investment fund affiliated with Ripplewood acquired its original interest in Direct Holdings in December 2003 and had at the time of the Direct Holdings Stock Acquisition approximately an 84% voting and economic interest in Direct Holdings. The net consideration of $56.7 million paid at the closing of the Direct Holdings Stock Acquisition on March 2, 2007 included a combination of RDA Holding Co. common stock ($50.1 million) and net cash ($6.6 million).

        On March 2, 2007, RDA Holding Co. acquired us pursuant to a Merger Agreement dated November 16, 2006 among us, RDA Holding Co. and Doctor Acquisition Co. (a wholly owned subsidiary of RDA Holding Co.) (the "RDA Merger Agreement"). Pursuant to the RDA Merger Agreement, Doctor Acquisition Co. was merged with and into us, with The Reader's Digest Association, Inc. being the surviving corporation (the "Acquisition Transaction"). In the Acquisition Transaction, each outstanding share of our common stock (except those held in treasury) was converted into the right to receive $17.00 in cash and each outstanding share of Doctor Acquisition Co. was converted into one share of our common stock, as the surviving corporation. Upon the closing of the Acquisition Transaction, RDA Holding Co. became the owner of all of our issued and outstanding common stock.

        Prior to the consummation of the Acquisition Transaction, we were a publicly traded company listed on the New York Stock Exchange. As a result of the Acquisition Transaction, our shares ceased to be listed on the New York Stock Exchange, and we operate as a privately held company.

        Concurrently with the closing of Acquisition Transaction on March 2, 2007, RDA Holding Co. contributed all of the outstanding shares of WRC Media and Direct Holdings to us.

3

        For a description of the accounting methods used to account for the Acquisition Transaction, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Basis of Presentation."

        We report on a fiscal year that begins July 1. The year ended June 30, 2007 is our fiscal 2007. WRC Media and Direct Holdings previously reported on a fiscal year that ended on December 31 and on a fiscal year that ended on the last Saturday in June, respectively. Subsequent to March 2, 2007, both WRC Media and Direct Holdings changed their respective fiscal year ends to June 30.

Business

        We are a diverse multimedia publisher and a leading provider of information, entertainment, and education through our published magazines, books, educational products, recorded music collections and home video products. We also sell products through QSP, Inc. ("QSP"), our schools and youth fundraising company, and Books Are Fun, Ltd. ("Books Are Fun"), our display marketing business. Our business is organized and reports across three primary business segments: Reader's Digest North America, Reader's Digest International and School & Educational Services (formerly known as Consumer Business Services).

        We believe that our principal publications enjoy strong brand awareness. According to the 2006 Young & Rubicam Brand Asset Valuator study, Reader's Digest is one of the strongest publishing brands in the United States. Additionally, we have a customer database of over 100 million names worldwide to which we market our products.

        As of June 30, 2007, the end of our fiscal year, we published 90 magazines consisting of 50 distinct editions of our flagship Reader's Digest magazine and 40 other specialty magazines worldwide, including Every Day with Rachael Ray, Taste of Home, The Family Handyman, Birds and Blooms, Our Canada and Weekly Reader. Reader's Digest magazine is sold in approximately 70 countries and published in 50 editions and 21 languages. As of June 30, 2007, total global circulation for our magazines was approximately 41 million with estimated global readership of over 100 million.

        Our diverse line of books and home entertainment products, both in North America and internationally, include Reader's Digest Select Editions (formerly known as Condensed Books), general books, series books, recorded music collections and series, and home video products. Bestselling non-series books include Taste of Home Cookbook (approximately 835,000 copies sold in fiscal 2007), Extraordinary Uses for Ordinary Things (approximately 397,000 copies sold in fiscal 2007), Atlas of the World (approximately 391,000 copies sold in fiscal 2007), Discovering the Wonders of the World (approximately 232,000 copies sold in fiscal 2007), and 30 Minutes a Day to a Healthy Heart (approximately 216,000 copies sold in fiscal 2007). Our books and home entertainment products are primarily marketed and sold through direct mail, as well as through the Internet, direct response television ("DRTV"), telemarketing, package inserts, freestanding inserts, catalogs and Books Are Fun. For the fiscal year ended June 30, 2007, we sold more than 68 million books, music products and video products worldwide. We have a music collection of more than 11,000 original titles that are packaged and sold in 43 countries, and our video products are marketed in 34 countries. Our Direct Holdings subsidiary is a direct marketing business that sells recorded music compilations and video products primarily through DRTV under the Time Life brand, which Direct Holdings licenses from Time Warner.

4

        We publish education materials for the pre-K through grade 12 market in the United States through Weekly Reader magazines, books, World Almanac, and CompassLearning, businesses that were combined with RDA following the March 2, 2007 transaction. We also sell products through multiple channels including QSP, our schools and youth fundraising company, and Books Are Fun, our display marketing business. Our Internet food websites, Allrecipes.com, Tasteofhome.com and rachelraymag.com have approximately 90,000 combined recipes. Allrecipes.com, a food lifestyle community is an online cooking community where home cooks from around the world come to share, rate and download recipes and meal ideas with approximately eight million unique visitors per month.

Company Information

        We are a Delaware corporation, originally incorporated in New York in 1926, then reincorporated in Delaware in 1951. Our corporate headquarters are located at Reader's Digest Road, Pleasantville, New York 10570 and our telephone number is (914) 244-1000. Our website is located at www.rda.com. Information contained on our website is not part of this prospectus.

5

Summary of the Terms of the Exchange Offer

Background	On March 2, 2007, we completed a private placement of $600,000,000 aggregate principal amount of the Original Notes. In connection with that private placement, we entered into a registration rights agreement in which we agreed to, among other things, complete an exchange offer (the "Exchange Offer").
The Exchange Offer	We are offering to exchange our Exchange Notes which have been registered under the Securities Act of 1933, as amended (the "Securities Act") for a like principal amount of our outstanding, unregistered Original Notes. Original Notes may only be tendered in an amount equal to $2,000 in principal amount or in integral multiples of $1,000 in excess thereof. See "The Exchange Offer—Terms of the Exchange."
Resale of Exchange Notes	Based upon the position of the staff of the SEC as described in previous no-action letters, we believe that Exchange Notes issued pursuant to the Exchange Offer in exchange for Original Notes may be offered for resale, resold and otherwise transferred by you without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that:
	•	you are acquiring the Exchange Notes in the ordinary course of your business;
	•	you have not engaged in, do not intend to engage in, and have no arrangement or understanding with any person to participate in a distribution of the Exchange Notes; and
	•	you are not our "affiliate" as defined under Rule 405 of the Securities Act.
	We do not intend to apply for listing of the Exchange Notes on any securities exchange or to seek approval for quotation through an automated quotation system. Accordingly, there can be no assurance that an active market will develop upon completion of the Exchange Offer or, if developed, that such market will be sustained or as to the liquidity of any market. Each broker-dealer that receives Exchange Notes for its own account in exchange for Original Notes, where such Original Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of Exchange Notes during the 180 days after the expiration of this Exchange Offer. See "Plan of Distribution."

6

Consequences If You Do Not Exchange Your Original Notes	Original Notes that are not tendered in the Exchange Offer or are not accepted for exchange will continue to bear legends restricting their transfer. You will not be able to offer or sell such Original Notes unless:
	•	you are able to rely on an exemption from the requirements of the Securities Act; or
	•	the Original Notes are registered under the Securities Act.
	After the Exchange Offer is closed, we will no longer have an obligation to register the Original Notes, except under some limited circumstances. See "Risk Factors—If you fail to exchange your Original Notes, they will continue to be restricted securities and may become less liquid."
Expiration Date	The Exchange Offer will expire at 5:00 p.m., New York City time, on                  , 2008, unless we extend the Exchange Offer. See "The Exchange Offer—Expiration Date; Extensions; Amendments."
Issuance of Exchange Notes	We will issue Exchange Notes in exchange for Original Notes tendered and accepted in the Exchange Offer promptly following the Expiration Date. See "The Exchange Offer—Terms of the Exchange."
Certain Conditions to the Exchange Offer	The Exchange Offer is subject to certain customary conditions, which we may amend or waive. See "The Exchange Offer—Conditions to the Exchange Offer."
Special Procedures for Beneficial Holders	If you beneficially own Original Notes which are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and you wish to tender in the Exchange Offer, you should contact such registered holder promptly and instruct such person to tender on your behalf. If you wish to tender in the Exchange Offer on your own behalf, you must, prior to completing and executing the letter of transmittal and delivering your Original Notes, either arrange to have the Original Notes registered in your name or obtain a properly completed bond power from the registered holder. The transfer of registered ownership may take a considerable time. See "The Exchange Offer—Procedures for Tendering."
Withdrawal Rights	You may withdraw your tender of Original Notes at any time before the Exchange Offer expires. See "The Exchange Offer—Withdrawal of Tenders."

7

Accounting Treatment	We will not recognize any gain or loss for accounting purposes upon the completion of the Exchange Offer. The expenses of the Exchange Offer that we pay will increase our deferred financing costs in accordance with generally accepted accounting principles. See "The Exchange Offer—Accounting Treatment."
Federal Income Tax Consequences	The exchange pursuant to the Exchange Offer generally will not be a taxable event for U.S. Federal income tax purposes. See "Material United States Federal Income Tax Considerations."
Use of Proceeds	We will not receive any proceeds from the exchange or the issuance of Exchange Notes in connection with the Exchange Offer.
Exchange Agent	The Bank of New York is serving as exchange agent in connection with the Exchange Offer.

8

Summary of the Terms of the Exchange Notes

The following summary contains basic information about the Notes, and is not intended to be complete. For a more complete understanding of the Notes, please refer to the section entitled "Description of Notes" in this prospectus. Other than the restrictions on transfer and registration rights, the Exchange Notes will have the same financial terms and covenants as the Original Notes, which are as follows:

Issuer	The Reader's Digest Association, Inc.
Securities	$600.0 million aggregate principal amount of 9% Senior Subordinated Notes due February 15, 2017.
Maturity	The Notes will mature on February 15, 2017.
Interest Rate	The Notes will bear interest at an annual rate of 9%, and interest began to accrue on March 2, 2007.
Interest Payment Dates	February 15 and August 15, commencing August 15, 2007.
Guarantees	The Notes are guaranteed on a senior subordinated basis by all of our subsidiaries that guarantee our senior secured credit facility. Any domestic subsidiaries that in the future guarantee our indebtedness, including indebtedness under our senior secured credit facility, or indebtedness of any subsidiary guarantor, will also guarantee the Notes. The guarantees will be released when the guarantees of our indebtedness, including indebtedness under our senior secured credit facility, and the guarantees of indebtedness of our subsidiary guarantors are released. The guarantees of the Notes are unsecured senior subordinated obligations of our subsidiary guarantors and have the same ranking with respect to indebtedness of our subsidiary guarantors as the Notes have with respect to our indebtedness. For the twelve months ended September 30, 2007, the non-guarantor subsidiaries of Reader's Digest represented approximately 51.6% of Reader's Digest's revenue and contributed approximately $123.5 million of operating profit to Reader's Digest's operating loss of $(205.8) million, on a pro forma basis. As of September 30, 2007, the non-guarantor subsidiaries of Reader's Digest represented approximately 17.4% of Reader's Digest's total assets, and approximately 13.5% of Reader's Digest's total liabilities, including trade payables, but excluding intercompany liabilities. All of the liabilities of Reader's Digest's non-guarantor subsidiaries are structurally senior to the Notes.
Optional Redemption	We may redeem some or all of the Notes at any time prior to February 15, 2012 at a price equal to 100% of the principal amount plus accrued and unpaid interest plus a "make-whole" premium. The Notes will also be redeemable at our option, in whole or in part, at any time on or after February 15, 2012, at the redemption prices set forth in this prospectus, together with accrued and unpaid interest, if any, to the date of redemption.

9

Optional Redemption After Certain Equity Offerings	At any time prior to February 15, 2010, we may redeem up to 35% of the original principal amount of the Notes with the proceeds of one or more equity offerings by us at a redemption price of 109% of the principal amount of the Notes, together with accrued and unpaid interest, if any, to the date of redemption.
Change of Control	Upon the occurrence of a change of control, you will have the right to require us to repurchase all or a portion of your Notes at a purchase price in cash equal to 101% of the principal amount of the Notes plus accrued and unpaid interest.
	We may not be able to pay you the required price for Notes you present to us at the time of a change of control because:
	•	we may not have enough funds at that time; or
	•	the terms of our senior debt may prevent us from making such payment.
Ranking	The Notes:
	•	are our general unsecured obligations;
	•	are subordinated in right of payment to all of our existing and future senior debt, including our obligations under our senior secured credit facility;
	•	are effectively junior in right of payment to our secured debt to the extent of the value of the assets securing such debt;
	•	rank equally in right of payment with all of our existing and future senior subordinated debt;
	•	are senior in right of payment to all of our existing and future subordinated debt; and
	•	are structurally subordinated to all of the existing and future liabilities (including trade payables) of each of our subsidiaries that do not guarantee the Notes.
	As of September 30, 2007:
	•	we had $2.1 billion of total indebtedness, including the Notes and amounts outstanding under our senior secured credit facility;
	•	of the $2.1 billion of total indebtedness, $1.5 billion was ranked senior to the Notes, $600 million consisted entirely of the Notes and none was subordinated to the Notes;

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	•	we had $225 million of secured indebtedness outstanding under our $300 million senior secured credit facility, and, of our $1.3 billion secured term loan, $1.2 billion was outstanding under our term loan in the United States, and €75.3 million was outstanding under the term loan made available to one of our German subsidiaries; and
	•	our non-guarantor subsidiaries had $533.4 million of total liabilities (including trade payables, but excluding intercompany liabilities), all of which was structurally senior to the Notes.
Covenants	The Original Notes were and the Exchange Notes will be issued under the Indenture among the Issuer, the guarantors and The Bank of New York, as Trustee. The Indenture, among other things, limits our ability and the ability of our restricted subsidiaries (as defined under the heading "Description of Notes") to:
	•	incur, assume or guarantee additional indebtedness;
	•	issue redeemable stock and preferred stock;
	•	repurchase common stock;
	•	make other restricted payments, including, without limitation, paying dividends and making investments;
	•	create liens;
	•	redeem debt that is junior in right of payment to the Notes;
	•	sell or otherwise dispose of assets, including common stock of subsidiaries;
	•	enter into agreements that restrict dividends from subsidiaries;
	•	enter into mergers or consolidations;
	•	enter into transactions with affiliates; and
	•	incur debt that is junior to senior indebtedness but senior to the Notes.
	These covenants are subject to a number of important exceptions and qualifications. For more details, see "Description of Notes—Certain Covenants".
Absence of Public Market for the Notes	The Exchange Notes generally will be freely transferable but will also be new securities for which there will not initially be a market. Accordingly, there can be no assurance as to the development or liquidity of any market for the Notes.

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RISK FACTORS

Before you decide to participate in this Exchange Offer, you should carefully consider these risk factors together with all of the other information included in this prospectus, including the information contained in the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements included elsewhere in this prospectus and the notes thereto. If any of the following risks actually occurs, our business, financial condition, operating results and prospects could be adversely affected, which in turn could adversely affect our ability to service or repay the Notes.

Risks Related to our Business

If we are unable to anticipate, respond to, influence or adapt to trends in what the public finds appealing in our industry, our business will be adversely affected.

        We operate in highly competitive markets that are subject to rapid change, including changes in customer preferences. Our continued success depends on our ability to provide creative, useful and attractive ideas, information, concepts, trade publishing, music, entertainment, educational and software products and services, which appeal to a large number of consumers. In order to accomplish this, we must be able to respond quickly and effectively to changes in consumer tastes for ideas, information, concepts and products. The strength of our brand name and our business units depends in part on our ability to influence these tastes. We cannot be sure that our new ideas and content will have the appeal and garner the acceptance that they have in the past, or that we will be able to respond quickly to changes in the tastes of consumers. There are substantial uncertainties associated with our efforts to develop successful new products and services for our customers, as well as to adapt our print materials and music and video products to new technologies, including the internet and digitization. In addition, we cannot be sure that our existing ideas and content will continue to appeal to the public.

We operate in highly competitive industries and must design and price our products properly and competitively and launch new products to attract new and younger customers to augment and replenish our maturing customer base while maintaining the quality of existing products.

        We operate in highly competitive industries both in the United States and in our foreign markets. Our magazines, books, educational materials and related products compete with other mass media and many other types of leisure-time activities. In addition, each of our products faces significant competition within its particular field of product offerings. Some of our competitors have more prominent brand names, are more established in our industries in terms of larger market shares, and have greater financial and other resources than we do in some markets. In addition, other companies may enter our markets in the future. We compete on the basis of the following, among other things:

•

the variety, quality and attractiveness of our products and services;



•

the pricing of our products and services;



•

the manner in which we market and promote our products and services; and



•

the effectiveness of the distribution of our products and services and our customer service.

        Numerous well-established and smaller entrepreneurial companies produce, market and sell products that compete with the products that our businesses offer. Competition for advertising dollars in magazine operations is primarily based on advertising rates as well as editorial and aesthetic quality, the desirability of the magazine's demographic, reader response to advertisers' products and services and the effectiveness of the advertising sales staff. Our magazines compete with other magazines for subscribers and with all media, including television, radio, newspapers and the Internet, for advertising. Our Books and Home Entertainment and Books Are Fun businesses compete with companies selling

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similar products at retail outlets, through direct and display marketing and on the Internet. QSP competes with companies selling similar products through fundraising services, direct marketing, the Internet and retail outlets.

        Our success in attracting and retaining new consumers to augment and replenish our customer base depends in large part on our ability to:

•

identify customer trends and preferences;



•

develop new products across our business lines;



•

acquire and effectively manage the inventory of new products in our display marketing businesses in response to those trends and preferences; and



•

expand into new distribution channels, such as retail and Internet channels.

        The launch of new products could increase our expenses, such as paper and printing expenses, as well as distribution and editorial expenses. If we fail to launch a broadly appealing mix of new products and channels, we may not be able to attract new customers and therefore may not be able to recoup the expenses associated with the launching of such products. In addition, should our new products fail to appeal to our existing customer base, it is possible that our existing customers will seek product offerings from our competitors, which could materially and adversely affect our results of operations and financial condition.

        In addition, certain of our new products typically do not earn a profit when they are first introduced and require a period of investment thereafter. We invest significant resources to develop and market our new initiatives, but we cannot predict whether they will become profitable during the period we have projected, or at all.

        If we do not compete effectively in our markets, if customers and advertising sales do not increase as we expect, or if our advertising sales or customer base declines, our business and results of operations could be materially adversely affected.

If we fail to effectively implement our operational and strategic initiatives, our business could be materially adversely affected.

        Our future performance depends in large part upon our management team's ability to execute our strategy to position us for the future.

        There can be no assurance that we will be able to successfully implement our operational and strategic initiatives that are intended to position us for future growth or that the products we design will be accepted or adopted in the time periods assumed. We also make no assurance that investments in these initiatives will recoup their costs and/or be profitable in the future. Failure to implement this strategy may result in a material adverse effect on our financial position, results of operations and cash flows.

Our failure to meet the challenges associated with maintaining circulation levels in a cost-efficient manner could adversely affect us.

        Circulation is a significant source of our revenues, representing about 90% of total U.S. fiscal 2007 revenues for Reader's Digest and our special interest magazines. Circulation is also the principal driver of performance for our Reiman magazines, which have limited advertising revenues. Circulation revenues for our print products are affected by:

•

competition from other publications and alternative forms of media and entertainment, including network, cable and satellite television, the Internet and radio;

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•

declining consumer spending on discretionary items like magazines;



•

our ability to efficiently retain and acquire subscribers via the mail, as acquisition and postage costs increase;



•

a declining number of regular magazine buyers;



•

renewal rates; and



•

the aging demographics of the customer base for certain of our magazines.

        Sales of our magazines through subscriptions and at the newsstand may decline. As publishers compete for subscribers, subscription prices could decrease and marketing expenditures may increase. If we fail to maintain satisfactory circulation levels at satisfactory subscription rates, our business may be materially and adversely affected, which would materially and adversely affect our results of operations and financial condition.

We may not be able to achieve a proper balance between circulation rate base and advertising revenues.

        We must balance our circulation rate base goals, in particular those for the U.S. Reader's Digest magazine, with our advertising revenue objectives. This balancing is a continuous effort that varies by product and requires both effective management of the circulation rate base and the acquisition of new subscribers through cost-effective marketing methods. Because magazine subscriptions are of relatively short duration, maintaining or increasing a circulation rate base requires significant promotional expense. Historically, we have relied primarily on direct mail for our promotional efforts. Higher postage costs, including the recent increases in the United States, adversely affect our ability to retain and acquire customers. Many of our competitors rely more heavily on advertising revenues than on circulation revenues. Accordingly, it may be more cost-effective for those companies to offer discounted subscription prices in order to maintain circulation levels that permit them to generate more advertising revenues. Because we rely more heavily on circulation revenues, our ability to utilize this strategy has been limited. We cannot assure you that we will be able to retain and acquire a sufficient number of magazine subscribers in an economically efficient manner. Failure to do so could require further reductions of our circulation rate base, which could negatively affect our advertising revenues and materially and adversely affect our results of operations and financial condition.

A decline in advertising revenues could adversely affect our profitability.

        Advertising is an important source of magazine revenues. In fiscal 2007, total magazine advertising revenues constituted approximately 7% of our total revenues. A reduction in demand for advertising could result from:

•

a general decline in economic conditions;



•

a decline in the circulation of our magazines;



•

a decline in popularity of our editorial content;



•

a change in the demographic makeup of the population where our magazines are sold;



•

the activities of our competitors, including increased competition from other forms of advertising-based media, (e.g., newspapers, radio and television broadcasters, cable television, direct mail and electronic media); and



•

a decline in the amount spent on advertising in general or in particular industries such as the automotive or pharmaceutical industries.

        In addition, as the Internet continues to grow as a global medium for information, communication and commerce, advertisers are increasingly shifting advertising dollars from offline media to online

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media. We cannot assure you that we will be able to attract the same or a growing number of advertisers, which may materially and adversely affect our advertising revenues and materially and adversely affect our results of operations and financial condition.

Failure to efficiently manage our direct marketing initiatives or to protect the integrity of our customer databases could negatively affect our business.

        We use various direct marketing strategies to market our products, including direct mailings, catalogs, online marketing and telemarketing. In each case, we rely on our customer list, which is a database containing information about our current and prospective customers. We use this database to develop and implement our direct marketing campaigns. Managing the frequency of our direct marketing campaigns and delivering appropriately tailored products in such campaigns is crucial to maintaining and increasing our customer base and achieving adequate results from our direct marketing efforts. We also face the risk of unauthorized access to our database or the corruption of our database as a result of technology failure or otherwise. Enhancing and refreshing the database, maintaining the ability to utilize the information available from the database, and properly utilizing the available information are vital to the success of our business, and our failure to do so could lead to decreased sales, and could materially and adversely affect our results of operations and financial condition.

Any failure by us to manage our growing operations or to successfully integrate acquisitions and other significant transactions could harm our financial results, business and prospects.

        As part of our business strategy, we have in the past and may in the future engage in discussions with third parties regarding possible investments, acquisitions, strategic alliances, and joint ventures, and may enter into agreements relating to such transactions that will enhance our business objectives. In order to pursue this strategy successfully, we must identify suitable candidates for, and successfully complete, transactions as well as effectively integrate any such acquired companies into our operations or transition services to outsourced vendors. If we fail to identify and successfully complete transactions that further our strategic objectives, or such transactions do not result in anticipated synergies, we may be required to expend resources to develop products and technology internally, we may be unable to sustain our historical growth rates, we may be put at a competitive disadvantage or we may be adversely affected by negative market perceptions, any of which may have a material adverse effect on our results of operations, financial position or cash flows.

Acquisition risk

        Acquisitions involve numerous challenges, risks and difficulties, including:

•

difficulties in the integration of operations, technologies, products, systems and personnel of the acquired company;



•

diversion of financial and management resources from existing operations;



•

inability to generate sufficient revenue to offset acquisition costs;



•

loss of key contracts with vendors and/or contractors or renegotiation of existing contracts on less favorable terms;



•

difficulties in attracting and retaining key personnel;



•

negative impacts on employee morale and performance as a result of job changes, job eliminations and reassignments;



•

the disruption of our respective ongoing businesses;



•

possible inconsistencies in standards, controls, procedures and policies;

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•

loss of customers and failure to maintain important business relationships;



•

unanticipated incompatibility of purchasing, logistics, marketing, sales and administration methods;



•

unanticipated costs of terminating or relocating facilities and operations;



•

difficulty in determinations related to accounting policies, including those that require a high degree of judgment or complex estimation processes, including valuation and accounting for goodwill and intangible assets, stock-based compensation, and income tax matters;



•

unanticipated expenses related to such integration; and



•

the potential unknown liabilities associated with acquired businesses.

        Even if we identify suitable acquisition targets, we may be unable to complete acquisitions or obtain the necessary financing for these acquisitions on terms favorable to us, or at all. To the extent we complete an acquisition, we may be unable to realize the anticipated benefits from it because of operational factors or difficulties in integrating the acquisitions with our existing businesses.

        For all of the above reasons, we may not be able to successfully implement our acquisition strategy. Furthermore, in the event of an acquisition or investment, we may issue stock that would dilute stock ownership, incur debt that would restrict our cash flow, assume liabilities, incur large and immediate write-offs, incur unanticipated costs, divert management's attention from our existing business, experience risks associated with entering new markets, or lose key employees from the acquired entities.

        A prolonged diversion of management's attention and any delays or difficulties encountered in connection with the integration of any business that we may acquire could prevent us from realizing the expected benefits of an acquisition and could have a material and adverse effect on our results of operations and financial condition.

Internal growth and expansion risk

        Additionally, we are likely to incur additional costs if we develop new products or enter new markets where we do not currently operate, which may limit our ability to expand to, or further expand in, those areas. Our rate of expansion into new geographic areas may also be limited by:

•

our inability to raise sufficient capital;



•

competition, which could increase the costs of attracting and maintaining our customers;



•

the cost of implementation and on-going administration of newly developed products and services;



•

our inability to achieve sufficient scale of operations to cover the administration and marketing costs associated with entering new markets, and



•

demographics and population density.

        Our ability to manage our growth and compete effectively will depend, in part, on our success in addressing these demands and risks. Any failure by us to manage our growth effectively could have a material adverse effect on our business, financial condition or results of operations.

We may not be able to obtain at favorable prices the third-party products that we sell.

        Our gross margins in our Books Are Fun and QSP businesses are highly dependent on the costs to obtain the books, gifts and magazines that they sell. Although these products have been available to us on competitive terms in the past, we may not have access to these products at comparable prices in the

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future. Failure to continue to have access to products at competitive prices could adversely affect our operating margins in these businesses.

Our future new products and marketing initiatives, including channel diversification, may not be successful, which could have a material adverse effect on our financial condition and results of operations.

        Our business depends, in part, on the steady flow of new products and new marketing initiatives (such as new offers) to stimulate continued marketplace demand. Our business also depends on reducing our reliance on direct marketing, and diversifying into alternative distribution channels. We license certain of our products from third parties. The acquisition of the rights to market specific products or to use specific product names can involve a significant financial commitment. Such commitments typically take the form of license fees, prepaid royalties, and future minimum royalty and advertising payments. We rely on our licensors to provide access to content at prices that enable us to achieve adequate gross margins. We do not have long-term or exclusive relationships with all sources of content, and obtaining these licenses is dependent upon relationships with licensors that may change in the future. An inability to license content at competitive prices could materially adversely affect our ability to create new products and harm our business prospects and results of operations. While our strategy is to develop products that will contribute positively to earnings, there is no guarantee that all or any of our efforts will be successful. Sales of new products may not meet expectations, which could have a material adverse effect on our financial condition and results of operations.

        In addition, a significant portion of Direct Holdings' revenue is derived from sales of products marketed under the Time Life trademark and tradename, which are licensed from Time Warner Inc. and Time Inc. The Time Life license agreement will expire in 2013 with an automatic renewal to 2023 subject to implementation at the time of renewal of a transition plan under which Direct Holdings must convert to a new mark that makes changes to the design of the name and mark for the Time Life business, including noticeably different or varied letter font or typestyle and noticeably different colors. Although Direct Holdings primarily focuses on the direct marketing of its products, it also offers products through a retail presence in large music and video retail outlets. Direct Holdings believes that consumer awareness of the Time Life brand is an important factor in its retail sales. If Direct Holdings is unable to develop and sell products under one or more new and equally effective brand names when the Time Life license expires, or if the value of the existing trademarks is diminished in the interim, Direct Holdings' business, financial condition and results of operations could be materially adversely affected.

We may not realize our anticipated cost savings from our significant cost savings initiatives; any failure to manage costs could hamper profitability.

        The level of our expenses impacts our profitability. While we proactively attempt to manage such expenses effectively, increases in the cost of sales and marketing, staff-related expenses, investment in new products, acquisitions, and implementation of regulatory requirements, among others, may occur from time to time.

        We have identified potential annual cost savings from our becoming a private company by implementing headcount reductions and certain other expense reductions. Additionally, we have been working with a leading supply chain consulting firm to analyze our infrastructure and to identify additional cost reduction opportunities within our supply chain and maintenance, repair and operations functions. However, estimates of cost savings are inherently uncertain, and we may not be able to achieve these cost savings within the period we have projected, or at all. Our ability to successfully realize cost savings and the timing of any realization may be affected by factors such as the need to ensure continuity in our operations, contracts, regulations and/or statutes governing employee-employer relationships, our ability to renegotiate supply contracts or find alternative suppliers and other factors.

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Implementing additional supply chain and maintenance, repair and operations cost savings is also expected to require one-time costs.

        There can be no assurance that we will be able to successfully contain our expenses. Our estimates of the expenses necessary to achieve the cost savings we have identified may not prove accurate, and any increase in such expenses may affect our ability to achieve our anticipated cost savings within the period we have projected, or at all. This may result in a material adverse effect on our financial position, results of operations and cash flows.

Increases in postage and paper and other operating costs could negatively affect our results.

        Paper and postage represent significant components of our total cost to produce, distribute, and market our printed products.

        We use the U.S. Postal Service for distribution of substantially all of our magazines and many of our marketing materials. Historically, we also have relied on direct mail for a significant portion of our customer acquisition activities. As such, the continued rise in postal rates has increased our costs. In addition, in those product lines where the customer pays shipping directly, higher postal rates or other delivery charges increase the total cost of our products to our customers, which may have a negative effect on sales.

        We expect to incur postage and delivery service costs of approximately $410 million in fiscal 2008. Postal rates are dependent on the operating efficiency of the U.S. Postal Service and on legislative mandates imposed upon the U.S. Postal Service. Although we work with others in the industry and through trade organizations to encourage the U.S. Postal Service to implement efficiencies that will limit rate increases, we cannot predict with certainty the magnitude of future price changes in postage. Higher postal rates or other delivery charges usually increase the total cost to our customers, which may have a negative impact on sales. Further, we may be unable to pass such increases on to our customers.

        Paper is the principal raw material used in our business for printed products and promotional materials. We expect to incur paper costs of approximately $210 million in fiscal 2008. Paper is a commodity and its price has been subject to significant volatility. Historically, we have been able to realize favorable paper pricing through volume discounts and multi-year contracts; however, all of our paper supply contracts provide for price adjustments based on prevailing market prices. The price of paper may fluctuate significantly in the future, and changes in the market supply of or demand for paper could affect delivery times and prices. We may need to find alternative sources for paper from time to time. We cannot assure you that we will continue to have access to paper in the necessary amounts or at reasonable prices or that any increases in the cost of paper will not have a material adverse effect on our business. We cannot predict with certainty the magnitude of future price changes in paper, and we may not be able to pass such increases on to our customers.

        Our inability to absorb the impact of increases in postage and paper costs or any strategic determination not to pass on all or a portion of these increases to customers could materially and adversely affect our results of operations and financial condition.

        We also have other significant operating costs, and unanticipated increases in these costs could adversely affect our operating margins.

Our business is seasonal, and seasonal fluctuations may adversely affect our results.

        Our operating results have varied and are expected to continue to vary from quarter to quarter as a result of seasonal patterns. The sales of certain of our products in our School & Educational Services segment are significantly affected by the school year, as sales in August through December are typically the strongest, as products are shipped in connection with the start of the school year. Seasonal and

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quarterly fluctuation may have a material adverse effect on our business, financial condition or results of operations in the future.

If we fail to maintain our relationships with our authors, illustrators, salespeople, and creative talent, as well as to develop relationships with new creative talent, our business could be adversely affected.

        Our business, in particular the trade publishing, media and technology-based portions of our business, is highly dependent on maintaining strong relationships with the authors, illustrators and other creative talent responsible for the products and services that are sold to our customers. Any overall weakening of these relationships, or the failure to develop successful new relationships, could have an adverse impact on our business and financial performance.

        We also have relationships with independent salespeople and educational consultants who acquire and provide marketing and customer service functions for some of our customers, particularly in our School & Educational Services segment. These independent salespeople and educational consultants receive compensation for introducing customers to our products. The failure to maintain relationships with these independent salespeople and educational consultants would result in a loss of our revenues, which could adversely affect our business.

Our School & Educational Services segment has not performed well in recent years, and there is no assurance that our turnaround strategy will be successful.

        The revenues and operating profit generated by our School & Educational Services (formerly Consumer Business Services) segment for the last few years have been declining. Revenues in this segment declined from $525.1 million in the year ended June 30, 2004 to $415.0 million in the year ended June 30, 2007, and in the comparable period operating profit decreased $59.0 million to $0. This decline has been principally driven by Books Are Fun and, to a lesser extent, by QSP. Revenues and results at Books Are Fun decreased due to the launch of a direct competitor in 2004, the defection of a significant portion of the corporate sales force to that competitor, fewer corporate events, lower average sales per school event, escalating inventory and overhead and restructuring charges in 2006. In fiscal 2007, QSP revenues also declined primarily due to a decline in magazine volumes because of lower number of accounts, a decrease in same-school sales and lower gift volumes driven by challenges in participation in fundraising programs. Both Books Are Fun and QSP continued to experience competitive pressure for accounts, which adversely affected profit margins. Although we have devised strategies and have taken certain steps in an effort to improve the results of their businesses, we cannot assure you that our strategies will be successful, and a continued decline in this segment may adversely affect our results of operations and financial condition.

        In addition, a portion of our business in this segment is affected significantly by changes in purchasing patterns or trends in, as well as the underlying strength of, the educational, trade, entertainment and software markets. Many of our customers in these sectors purchase our products with monies received from sources of governmental funding, including federal, state and local governments. Thus, our business may be adversely affected by budgetary restraints and other reductions in educational funding at the federal or state level, as well as new legislative or regulatory actions. Our business also could be adversely affected by changes in the procurement process related to the expenditure of government funds, to which we may be unable to adapt successfully.

We are subject to government regulation; compliance with laws and regulations is complex and expensive, and any violation of the laws and regulations applicable to us could reduce our revenues and profitability and otherwise adversely affect our operating results.

        The marketing and sale of our products are subject to various laws, regulations and policies administered by U.S. federal, state and local and foreign governments in markets in which we operate

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our businesses. Several laws and regulations adopted by the Federal government have created additional administrative and compliance requirements on us. The cost of compliance may have an adverse effect on our profitability. In addition, if we do not comply adequately, we may be faced with civil, criminal and administrative penalties. Changes in these laws, regulations and policies, or in their interpretation or in enforcement priorities or activity, could increase our costs and limit the manner in which we market our products and conduct our other business operations.

        We collect information from our customers in the various markets in which we operate and we utilize that information principally for marketing and promotional purposes. Our collection, transfer and use of this information are limited by privacy and data protection laws and regulations in those jurisdictions, including the National Do Not Call Registry operated by the U.S. Federal Trade Commission, the U.S. Federal CAN-SPAM Act of 2003 and the European Data Protection Directive. Our compliance with these laws and regulations increases our operating costs, and additional laws and regulations in these areas may further increase our operating costs and adversely affect our ability to market our products effectively.

        We rely on sweepstakes as an important component of our direct marketing efforts. Legislative and regulatory developments and our agreements with state attorneys general in the United States have significantly reduced the effectiveness of sweepstakes as a marketing technique. The Deceptive Mail Prevention and Enforcement Act, enacted in 1999, mandates specific disclosures, their placement and prominence. The Multi-State Attorneys General Agreement that we signed in 2001 restricts certain promotion techniques and the use of promotional devices and requires specific disclosure language. As a result, we have increasingly tested other direct marketing techniques in an effort to diversify our overall marketing strategy in our Books and Home Entertainment business and to attract and retain new customers of this business. We cannot assure you that marketing techniques other than sweepstakes will be as effective as sweepstakes were. In our single-sales books business, we have been able to effectively bring in new customers with promotions other than sweepstakes. These names, however, currently have a lower value to us than sweepstakes-generated names. We have had limited success in using promotions, other than sweepstakes, targeting our series or music customers. If we fail to effectively utilize alternative marketing techniques in our Books and Home Entertainment business, our business may be materially and adversely affected, which could materially and adversely affect our results of operations and financial condition.

        In addition, if additional significant legislative or regulatory restrictions on direct-marketing techniques develop in our markets, we will be forced to revise our marketing practices in those markets. We cannot assure you that alternative practices would yield similar results, and the failure to do so could materially and adversely affect our results of operations and financial condition.

        Our television direct marketing programs also are significantly affected by government regulation of television advertising, particularly those regulations adopted by the Federal Communications Commission (and comparable foreign regulators). These regulations impose restrictions on, among other things, the content and format of our DRTV programs. If we are required to remove or alter the format or content of our television or telemarketing programs, our business could be harmed.

        Our failure to comply with applicable laws and regulations could result in fines, sanctions and other penalties and additional restrictions on our collection, transfer or use of personal data. These developments could materially and adversely affect our results of operations and financial condition.

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Changes in governmental regulation or legislative reform could increase our costs of doing business and adversely affect our profitability.

        Consumer, publishing and advertising laws and regulations are subject to change and differing interpretations. Changes in the political climate or in existing laws or regulations, or their interpretations, or the enactment of new laws or the issuance of new regulations could adversely affect our business by, among other things:

•

increasing our administrative and other costs;



•

forcing us to undergo a corporate restructuring;



•

limiting our ability to engage in inter-company transactions with our affiliates and subsidiaries;



•

affecting our ability to continue to serve our customers and to attract new customers;



•

forcing us to alter or restructure our relationships with vendors and contractors;



•

restricting our ability to market our products; or



•

requiring us to implement additional or different programs and systems.

        While it is not possible to predict when and whether fundamental policy changes would occur, these could include policy changes on the local, state and federal level that could fundamentally change the dynamics of our industry. Changes in public policy could materially affect our profitability, our ability to retain or grow business, or in the event of extreme circumstances, our financial condition. There can be no assurance that legislative or regulatory change will not have a material adverse effect on our business.

We face additional risks associated with significant non-U.S. operations, and we continue to expand into foreign markets.

        We currently operate in more than 70 countries. For the fiscal year ended June 30, 2007, our international segment contributed $1.1 billion to our revenues and $70 million to our operating profit. In recent years, we have entered into new countries, mostly in central and eastern Europe and we expect to continue to seek to expand our business internationally. There are many risks associated with our goals relating to our overseas operations and future expansion plans, including:

•

limitations on our resources with which to manage growth in new markets;



•

difficulties in maintaining the proper balance between a profitable pace of growth and a measure of control over the expansion of our operations that will enable us to maintain the quality of our customer lists;



•

reduced protection for intellectual property rights in some countries;



•

change in tariffs, significant unexpected duties or taxes or other adverse tax consequences;



•

economic slowdown or downturn in foreign markets;



•

transportation and supply chain disruptions and increased expenses as a result of epidemics, terrorist activity, acts of war or hostility, increased security and less-developed infrastructure;



•

political instability and civil unrest;



•

the regulatory environment, including privacy regulation, database protection and limitations on direct marketing techniques (e.g., sweepstakes);



•

unexpected unfavorable legislative or regulatory developments and inconsistent government policies; and

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•

international currency fluctuations or sudden currency revaluations.

        If we do not effectively manage the risks associated with our international operations and sales, our expansion opportunities could be limited, and our results of operations and financial condition could be materially and adversely affected.

Because we operate, and sell our products and services, in foreign countries, changes in currency exchange rates, as well as other risks and uncertainties, could adversely affect our operations and financial results.

        We operate globally through operations in various locations around the world. In fiscal 2007, we generated 42% of our revenues in markets outside of the United States. The functional currency for most of our foreign operations is the applicable local currency. In preparing our financial statements, we translate revenues and expenses in foreign countries from their local currencies into U.S. dollars using weighted average exchange rates. Accordingly, we could be adversely affected by changes in currency exchange rates. Given our inability to predict the degree of exchange rate fluctuations, we cannot estimate the effect these fluctuations may have upon future reported results or our overall financial condition, but they could materially and adversely affect our results of operations and financial condition. In addition, our business could be adversely affected by the political and economic risks attendant to conducting business in foreign countries.

Economic weakness in the United States and abroad could negatively affect our business.

        Most of our products involve discretionary spending on the part of consumers. This makes our products particularly sensitive to general economic conditions and economic cycles and trends in advertising placements. Also, we derive a portion of our revenues from the sale of advertising in our publications. Our advertising revenues are susceptible to fluctuations in economic cycles. Advertising weakness can come from any segment of the U.S. economy. For example, if pharmaceutical companies come under pressure or automotive companies have significant economic weakness, advertising sales in our magazines and websites could be affected. Sustained economic weakness in the United States or in Europe and in other markets where we generate a significant amount of our revenues could reduce consumer spending in our markets and negatively affect our business, which could materially and adversely affect our results of operations and financial condition.

We have placed emphasis on building our Internet community. Failure to fulfill this strategy could adversely affect our business prospects.

        The competitive environment in which we operate demands, and our future growth strategies incorporate, the development of our Internet and digital businesses. We believe there is a trend towards offering supplemental materials to our published products and educational materials, as well as the opportunity to renew subscriptions, increasingly in an electronic format and, in particular, over the Internet. We believe that this trend will accelerate as younger, technically savvy consumers make up a greater portion of our consumer base. In order for our Internet business to succeed, we must, among other things:

•

significantly invest time and resources in our Internet business;



•

significantly increase our online traffic and revenue;



•

attract and retain a base of frequent visitors to our websites;



•

expand the content and products we offer over our websites;



•

attract and retain talent for critical positions;



•

maintain and form relationships with strategic partners to attract more consumers;

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•

continue to develop and upgrade our technologies; and



•

bring new product features to market in a timely manner.

        We cannot assure you that we will be successful in achieving these and other necessary objectives or that our Internet business will be profitable or successful. Our failure to adapt to new technology or delivery methods, or our choice of one technological innovation over another, may have an adverse impact on our ability to compete for new customers or to meet demands of our existing customers. If we are not successful in achieving these objectives, our business, financial condition and prospects could be materially adversely affected.

The occurrence of natural or man-made disasters could disrupt the marketing and promotion and delivery of our products and services, and adversely affect our financial condition and results of operation.

        The success of our businesses is largely contingent on the availability of direct access to consumers. For example, the School & Educational Services business requires direct personal access to consumers through offices and schools for display marketing and access to schools and youth groups for fundraising activities and sales of supplemental education products. In addition, a significant portion of our business relies on postal services for delivery of products and for promotional marketing activity. As a result, any event that disrupts or limits our direct access to consumers or disrupts our ability to rely on postal services or other delivery services could materially and adversely affect our business.

        We are exposed to various risks arising out of natural disasters, including earthquakes, hurricanes, floods and tornadoes, and pandemic health events such as avian influenza, as well as man-made disasters, including acts of terrorism and military actions. The continued threat of terrorism and ongoing military actions may cause significant volatility in global financial markets, and a natural or man-made disaster could trigger an economic downturn in the areas directly or indirectly affected by the disaster. These consequences could, among other things, result in a decline in business from those areas. Disasters also could disrupt public and private infrastructure, including communications and financial services, which could disrupt our normal business operations.

        In addition, increased energy costs, strikes and other labor-related supply chain disruptions, poor postal service or disruptions to service from postal strikes could adversely affect our business. Because our business experiences high seasonal sales concentrations, the risk of a disruption from factors beyond our control is particularly acute during our peak sales periods.

        A natural or man-made disaster also could disrupt the operations of our counterparties or result in increased prices for the products and services they provide to us.

Our business may suffer if we are not able to retain or attract sufficient qualified personnel, including key managerial, creative, editorial, marketing and sales personnel globally.

        We operate in a business where there is intense competition for experienced personnel in all of our global markets. We depend on our ability to identify, recruit, hire, train, develop and retain qualified and effective personnel. Our future success depends in large part upon the continued contribution of our senior management and other key employees. A loss of a significant number of skilled managerial, creative and editorial personnel could have a negative effect on the quality of our products. Similarly, a loss of a significant number of experienced and effective sales personnel would likely result in fewer sales of our products and could materially and adversely affect our results of operations and financial condition. Our ability to identify, recruit, hire, train, develop and retain qualified and effective personnel depends on numerous factors, including factors that we cannot control, such as competition and conditions in the local employment markets in which we operate. The loss of the services of any of our senior management or other key employees could harm our business and adversely affect our ability to compete in our markets.

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Increases in sales or other taxes could reduce our revenues.

        In some markets, both domestic and international, some or all of our products are subject to local and national sales taxes and other taxes such as value-added taxes. Taxes, like delivery costs, are generally stated separately on bills, where permitted by applicable law. Higher taxes increase the total cost of our products to our customers, which may have a negative effect on the sales of our products. Higher taxes also may reduce profit margins on these products if we do not pass on the increase to our customers. In jurisdictions where applicable tax must be included in the purchase price, we may be unable to fully recover from customers the amount of any tax increase or new tax. This could materially and adversely affect our results of operations and financial condition.

We may not be able to adequately protect our intellectual property, our brand and our reputation.

        Our intellectual property, including our copyrights, trademarks, service marks, patents, and trade secrets, and all of our other intellectual property rights, are important assets. We are susceptible to unauthorized parties imitating and/or reproducing our products and infringing on our intellectual property rights. Although we rely on copyright, patent, trademark and other laws in the United States and other jurisdictions to protect our intellectual property rights, we may be unable to successfully protect them. In addition, the laws of many foreign countries do not protect intellectual property to the same extent as do the laws of the United States. Therefore, it may be more difficult to protect our intellectual property rights in some foreign jurisdictions, including new markets into which we want to expand our business. We may not be able to successfully preserve these rights in the future, and our significant proprietary rights could be challenged, circumvented, infringed or invalidated. Imitation of our products or infringement of our intellectual property rights could diminish the value of our brands or otherwise adversely affect our revenues. Policing unauthorized use of our intellectual property is difficult, and we cannot be certain that the steps we have taken will prevent misappropriation of such intellectual property rights. In addition, our business activities have in the past been alleged, and could in the future be alleged or determined to have infringed upon the intellectual property rights of another party. We could incur significant costs to protect our intellectual property rights or to defend against infringement and other claims by third parties. There can be no assurance that we would prevail in any litigation relating to our intellectual property. Litigation diverts the time and resources of management, regardless of the merits of the claim. Whether or not we are successful, we could incur significant costs by engaging in litigation, and our results of operations, financial condition and reputation could be materially and adversely affected.

        Our brand and our reputation are also important assets, as our ability to attract and retain customers is in part dependent upon the external perceptions of our company, the quality of our products and services, and our integrity. Damage to our reputation or negative publicity or perceptions about us, including by association with adverse developments in the industries in which we conduct our businesses, could cause a loss of consumer confidence in our company, as well as unfavorable regulatory scrutiny.

Significant changes in pension fund investment performance or assumptions relating to pension costs may have a material effect on the valuation of pension obligations, the funded status of pension plans and our pension cost.

        Some of our foreign pension plans are under funded. In addition, even with respect to plans that are currently over funded, our pension cost is materially affected by the discount rate used to measure pension obligations, the level of plan assets available to fund those obligations at the measurement date and the expected long-term rate of return on plan assets. Significant changes in investment performance or a change in the portfolio mix of invested assets can result in corresponding increases and decreases in the valuation of plan assets, particularly equity securities, or in a change to the expected rate of return on plan assets. A change in the discount rate would result in a significant

24

increase or decrease in the valuation of pension obligations, affecting the reported funded status of our pension plans as well as the net periodic pension cost in subsequent fiscal years. Similarly, changes in the expected return on plan assets can result in significant changes in the net periodic pension cost of subsequent fiscal years. Significant variations in pension performance could produce volatility in our reported results, and significant under funding in our pension plans could necessitate higher company contributions to those plans.

Difficulties associated with our outsourced fulfillment operations could harm our business and operating results.

        A portion of our fulfillment activities are outsourced to service providers. These activities include taking customer orders, product manufacturing, product fulfillment and product delivery. The failure of any of these service parties to perform competently may harm our business. We also rely on hardware and software systems provided by third-party vendors to perform vital functions and processes in our operations. Our inability to operate and integrate these technologies properly may negatively impact our product supply chain and may harm our business and operating results. In addition, the failure of a vendor to continue to provide services or upgrades to us may negatively impact our business and operating results.

The investors that acquired us (the "Sponsors") control us and may have conflicts of interests with us in the future.

        Investment funds associated with or designated by the Sponsors indirectly own, through their ownership in our parent company, RDA Holding Co., a substantial portion of our capital stock. As a result, the Sponsors have control over all matters requiring the approval of our stockholders, and our decisions to enter into any corporate transaction, regardless of whether outstanding creditors believe that any such transactions are in their own best interests. For example, the Sponsors could cause us to make acquisitions that increase the amount of indebtedness that is secured or that is senior to our outstanding indebtedness, or to pay dividends or sell assets, which may impair our ability to repay outstanding indebtedness. In addition, subject to applicable law, the Sponsors will be able to elect all the members of our board of directors and to control actions to be taken by us, including amendments to our organizational documents and approval of significant corporate transactions, including mergers.

        Additionally, our Sponsors are in the business of making investments in companies and may from time to time acquire and hold interests in businesses that compete directly or indirectly with us. One or more of the Sponsors may also pursue acquisition opportunities that may be complementary to our business and as a result, those acquisition opportunities may not be available to us. So long as our Sponsors continue to indirectly own, or affiliates of Ripplewood hold proxies with respect to, a significant amount of our common stock, even if such amount is less than 50%, our Sponsors will continue to be able to strongly influence or effectively control our decisions.

Risks Related to our Indebtedness

Our substantial indebtedness could adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy or in our industry, and prevent us from meeting our debt obligations.

        As a result of our acquisition on March 2, 2007, we are highly leveraged and have significant debt service obligations. At September 30, 2007, our total indebtedness was approximately $2 billion.

        Our high degree of leverage could have important consequences, including the following:

•

making it more difficult for us to make payments on our debt obligations;

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•

requiring a substantial portion of our cash flow from operations to be dedicated to the payment of principal and interest on our indebtedness, thereby reducing our ability to use our cash flow to fund our operations, capital expenditures and business opportunities;



•

restricting us from making strategic acquisitions or causing us to make non-strategic divestitures;



•

limiting our ability to obtain additional financing for working capital, capital expenditures, product development, acquisitions, debt service requirements under our outstanding debt and the Notes and general corporate or other purposes;



•

limiting our ability to plan for, or react to, changes in our business and future business opportunities and changing market conditions;



•

placing us at a competitive disadvantage compared to our competitors who are less highly leveraged;



•

exposing us to the risk of increased interest rates as certain of our borrowings are at variable rates of interest, which could increase our interest payment obligations and which could have an adverse effect on us;



•

exposing us to the risk of being unable to effectively repatriate foreign cash to service our indebtedness due to local country restrictions;



•

increasing our vulnerability to general economic and industry conditions; and



•

materially adversely affecting our business, results of operations and financial condition if we are unable to service our indebtedness.

Our subsidiaries and we may be able to incur substantial additional indebtedness in the future, which could exacerbate the risks associated with our substantial leverage.

        Our subsidiaries and we may be able to incur substantial additional indebtedness in the future, subject to the restrictions contained in our senior secured credit facilities and the Indenture relating to the Notes, including up to $200.0 million of incremental term loans. Although the agreements governing our debt instruments contain restrictions regarding our incurrence of additional indebtedness, these restrictions are subject to a number of qualifications and exceptions, and we could incur substantial indebtedness in compliance with these restrictions. If we add new indebtedness to our current debt levels, the related risks that we now face, including those described in this document, could intensify.

Our debt agreements contain restrictions that limit our flexibility in operating our business.

        Our senior secured credit facilities and the Indenture governing the Notes contain covenants that may limit our ability to engage in specified types of transactions. These covenants limit our and our subsidiaries' ability to, among other things:

•

incur additional indebtedness;



•

issue preferred stock;



•

create liens;



•

consolidate, merge, sell or otherwise dispose of all or substantially all of our assets;



•

sell certain assets, including common stock of our subsidiaries;



•

pay dividends on, repurchase, or make distributions in respect of our capital stock or make certain other restricted payments;

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•

make certain types of investments, loans, guarantees or acquisitions;



•

enter into transactions with our affiliates;



•

agree to payment restrictions affecting our subsidiaries; and



•

make capital expenditures.

Our ability to generate the funds required to service our indebtedness depends on many factors beyond our control.

        Our ability to make payments on and to refinance our indebtedness depends, in large part, upon our ability to generate cash from our operations and to manage our working capital. This can be affected by events beyond our control, including general economic, financial, competitive, legislative, regulatory and other factors, and we cannot assure you that our business will generate sufficient cash flow from operations or that future borrowings will be available to us in an amount sufficient to enable us to pay our indebtedness or to fund our other liquidity needs.

        To the extent that our operating cash flow is insufficient to meet our current debt obligations, and to the extent that we are unable to access the capital markets on terms acceptable to us, we may, among other things, decrease our business expenditures and/or increase our indebtedness under our existing credit facilities or through additional financings. In order to obtain additional financing, we may be required to refinance our existing credit facilities. Our failure to obtain any necessary refinancing or additional financing on terms and conditions that are comparably favorable or acceptable to us could materially and adversely affect our results of operations and financial condition. If we cannot service our indebtedness, we also may have to take actions such as selling assets, seeking additional equity or forgoing, reducing or delaying capital expenditures, strategic acquisitions, investments and alliances. We cannot assure you that any such actions, if necessary, could be effected on commercially reasonable terms, or at all.

A decline in our operating results or available cash could cause us to experience difficulties in complying with covenants contained in our financing agreements, which could result in our bankruptcy or liquidation.

        If we were to sustain a decline in our operating results or available cash, we could experience difficulties in complying with the covenants contained in the indenture governing the Notes or our senior secured credit facilities. In addition, under our senior secured credit facilities, we are required to achieve specified financial and operating results and to satisfy and maintain specified financial ratios and other financial condition tests. Our ability to meet those financial ratios and tests can be affected by events beyond our control, and we cannot assure you that we will meet those ratios and tests.

        A breach of any of these or other covenants in the Notes or senior secured credit facilities could result in a default under either of these agreements and by reason of cross-acceleration or cross-default provisions, our senior secured credit facilities, the Notes and any other indebtedness may then become immediately due and payable. Upon such a default, our creditors could declare all amounts outstanding to be immediately due and payable and the lenders under our senior secured credit facilities could terminate all commitments to extend further credit, which could have a material adverse effect on our results of operations and financial condition.

        If we were unable to repay amounts due under our senior secured credit facilities, the lenders under our senior secured credit facilities could proceed against the collateral granted to them to secure that indebtedness and institute foreclosure proceedings against our assets. We have pledged a significant portion of our assets as collateral under the senior secured credit agreement. If the lenders under the senior secured credit agreement accelerate the repayment of borrowings, we cannot assure you that we will have sufficient assets to repay the senior secured credit facilities, as well as our unsecured indebtedness. We could be forced into bankruptcy or liquidation.

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        If our operating performance declines, we may in the future need to obtain waivers from the required lenders under our senior secured credit agreement to avoid an event of default. We may be unable to obtain any such waiver which could result in our default under our senior secured credit agreement, and the lenders could exercise their rights, as described above, and we could be forced into bankruptcy or liquidation.

Variable rate indebtedness subjects us to the risk of higher interest rates, which could cause our debt service obligations to increase significantly.

        Certain of our borrowings, including borrowings under our senior secured credit facility, are at variable rates of interest, and, therefore, expose us to the risk of increased interest rates. If interest rates increase, our debt service obligations on our variable rate indebtedness would increase even if our outstanding indebtedness remained the same, thereby causing our net income to decrease.

        Initially, the applicable margin with respect to revolving loans under our senior secured credit facility is an annual percentage equal to (1) 1.25% for base rate loans and (2) 2.25% for Eurocurrency rate loans. The applicable margin with respect to term loans under our senior secured credit facility is an annual percentage equal to (1) 1.00% for base rate loans and (2) 2.00% for Eurocurrency rate loans. In addition, the interest rates under our senior secured credit facilities are based in part on our leverage ratio. Applicable margins with respect to revolving loans will be subject to reduction by up to 75 basis points based on our consolidated leverage ratio for base rate and Eurocurrency rate loans. In April 2007, we entered into interest rate swaps with a notional value of $750 million, involving the exchange of floating for fixed rate interest payments, to reduce interest rate volatility. In the future, we may enter into additional interest rate swaps. Each quarter point change in interest rates would result in a $1.4 million change in our annual interest expense on our term loans. Similarly, assuming all revolving loans are fully drawn, each quarter point change in interest rates would result in a $0.8 million change in annual interest expense on our revolving credit facility.

Risks Related to the Notes and the Exchange Offer

If you fail to exchange your Original Notes, they will continue to be restricted securities and may become less liquid.

        Original Notes which you do not tender or we do not accept will, following the Exchange Offer, continue to be restricted securities, and you may not offer to sell them except pursuant to an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities law. We will issue Exchange Notes in exchange for the Original Notes pursuant to the Exchange Offer only following the satisfaction of the procedures and conditions set forth in "The Exchange Offer—Procedures for Tendering." These procedures and conditions include timely receipt by the exchange agent of such Original Notes (or a confirmation of book-entry transfer) and of a properly completed and duly executed letter of transmittal (or an agent's message from The Depository Trust Company).

        Because we anticipate that most holders of Original Notes will elect to exchange their Original Notes, we expect that the liquidity of the market for any Original Notes remaining after the completion of the Exchange Offer will be substantially limited. Any Original Notes tendered and exchanged in the Exchange Offer will reduce the aggregate principal amount of the Original Notes outstanding. Following the Exchange Offer, if you do not tender your Original Notes you generally will not have any further registration rights, and your Original Notes will continue to be subject to certain transfer restrictions. Accordingly, the liquidity of the market for the Original Notes could be adversely affected.

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Your right to receive payments on the Notes is junior to the borrowings under our senior secured credit facilities and will be junior to all of our future senior indebtedness. In addition, the guarantees of the Notes are junior to the guarantors' senior indebtedness.

        The Notes rank behind all of our existing indebtedness, including borrowings under our new senior secured credit facilities and will rank behind our future senior indebtedness, and the guarantees of the Notes rank behind each guarantor's existing senior indebtedness, including guarantees of borrowings under our senior secured credit facilities and will rank behind each guarantor's future senior indebtedness except, in each case, any indebtedness that expressly provides that it ranks equal with, or is subordinated in right of payment to, the Notes or the guarantees of the Notes, as applicable. As a result, upon any distribution to our creditors or the creditors of any guarantors in a bankruptcy, liquidation or reorganization or similar proceeding relating to us or any guarantors or their respective property, the holders of our senior indebtedness and the senior indebtedness of any guarantors will be entitled to be paid in full in cash before any payment may be made with respect to the Notes or any guarantees of the Notes.

        In addition, all payments on the Notes and any guarantees of the Notes will be blocked in the event of a payment default on senior indebtedness and may be blocked for up to 179 consecutive days in the event of certain non-payment defaults on senior indebtedness.

        In the event of a bankruptcy, liquidation or reorganization or similar proceeding relating to us or any guarantors, holders of the Notes will participate with trade creditors and any guarantor's senior subordinated indebtedness in the assets remaining after we and any guarantors have paid all of their respective senior indebtedness. However, because the indenture governing the Notes requires that amounts otherwise payable to holders of the Notes in a bankruptcy or similar proceeding be paid to holders of senior indebtedness instead, holders of the Notes may receive less, ratably, than holders of trade payables in any such proceeding. In any of these cases, we and the guarantors may not have sufficient funds to pay all of our creditors and holders of Notes may receive less, ratably, than the holders of senior indebtedness.

        At September 30, 2007, the Notes were subordinated to $1.5 billion of senior indebtedness, and approximately $70 million (after giving effect to $5 million of outstanding letters of credit) was available for borrowing as additional senior indebtedness under our senior secured revolving credit facility. We will be permitted to borrow substantial additional indebtedness, including senior indebtedness, in the future under the terms of the indenture governing the Notes.

Your right to receive payments on the Notes is effectively subordinated to the rights of our existing and future secured creditors. In addition, the guarantees of the Notes are effectively subordinated to the guarantors' secured indebtedness.

        Holders of our secured indebtedness and the secured indebtedness of any guarantors will have claims that are prior to your claims as holders of the Notes to the extent of the value of the assets securing that other indebtedness. Notably, our senior secured credit facility is secured by, subject to certain exceptions, liens on substantially all of our material assets and the assets of our existing and future domestic subsidiaries. The Notes and the guarantees are effectively subordinated to all such secured indebtedness to the extent of the value of the collateral securing such indebtedness. In the event of any distribution or payment of our assets or guarantors in any foreclosure, dissolution, winding-up, liquidation, reorganization or other bankruptcy proceeding, holders of secured indebtedness will have a prior claim to the assets that constitute their collateral. Holders of the Notes will participate ratably with all holders of our unsecured indebtedness that is deemed to be of the same class as the Notes, and potentially with all of our other general creditors, based upon the respective amounts owed to each holder or creditor, in our remaining assets. In any of the foregoing events, we cannot assure you that there will be sufficient assets to pay amounts due on the Notes. As a result, holders of Notes may receive less, ratably, than holders of secured indebtedness.

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        At September 30, 2007, the aggregate amount of our secured indebtedness was $2.1 billion, and $70 million (after giving effect to $5 million of outstanding letters of credit) was available for additional borrowing under our senior secured revolving credit facility. We and the guarantors will be permitted to borrow significant additional indebtedness, including secured indebtedness, in the future under the terms of the indenture governing the Notes and our senior secured credit facilities.

The lenders under our senior secured credit facilities will have the discretion to release the guarantors under the senior secured credit agreement in a variety of circumstances, which will cause those guarantors to be released from their guarantees of the Notes.

        While any obligations under the senior secured credit facilities remain outstanding, the lenders under the senior secured credit facilities may release, subject to certain exceptions, any of the guarantors from its guarantee of the senior secured credit facilities. If a guarantor is released under the senior secured credit facilities, the guarantor will automatically be released from its guarantee of the Notes without action by, or consent of, any holder of the Notes or the trustee under the indenture governing the Notes. See "Description of Notes." You will not have a claim as a creditor against any subsidiary that is no longer a guarantor of the Notes, and the indebtedness and other liabilities, including trade payables, whether secured or unsecured, of those subsidiaries will effectively be senior to claims of noteholders.

U.S. federal and state statutes allow courts, under specific circumstances, to void the Notes and the guarantees, subordinate claims in respect of the Notes and the guarantees and require noteholders to return payments received from the issuer or the guarantors.

        The issuance of the Notes by us and the guarantees by the guarantors may be subject to review under state and federal laws if a bankruptcy, liquidation or reorganization case or a lawsuit, including in circumstances in which bankruptcy is not involved, were commenced at some future date by, or on behalf of, our unpaid creditors or the unpaid creditors of either the issuer or a guarantor. Under the federal bankruptcy laws and comparable provisions of state fraudulent transfer laws, a court may void or otherwise decline to enforce the Notes or a guarantor's guarantee, or subordinate the Notes or such guarantee to the applicable issuer's or guarantor's existing and future indebtedness. While the relevant laws may vary from state to state, a court might do so if it found that when the issuer issued the Notes or the applicable guarantor entered into its guarantee or, in some states, when payments became due under the Notes or such guarantee, the issuer or guarantor received less than reasonably equivalent value or fair consideration and either:

•

was insolvent or rendered insolvent by reason of such incurrence;



•

was engaged in a business or transaction for which the issuer's or guarantor's remaining assets constituted unreasonably small capital; or



•

intended to incur, or believed that the issuer or such guarantor would incur, debts beyond the issuer's or guarantor's ability to pay such debts as they mature.

        The court might also void the Notes or a guarantee, without regard to the above factors, if the court found that the issuer issued the Notes or the applicable guarantor entered into its guarantee with actual intent to hinder, delay or defraud its creditors. In addition, any payment by the issuer or by a guarantor pursuant to the guarantees could be voided and required to be returned to the issuer or such guarantor or to a fund for the benefit of the issuer's or such guarantor's creditors.

        A court would likely find that the issuer or a guarantor did not receive reasonably equivalent value or fair consideration for the Notes or such guarantee if the issuer or such guarantor did not substantially benefit directly or indirectly from the issuance of the Notes. The use of proceeds from the issuance of the Original Notes, which included the distribution of a substantial portion of the proceeds

30

to our then existing stockholders, could increase the risk of such a finding. If a court were to void the Notes or a guarantee, you would no longer have a claim against the issuer or the applicable guarantor. Sufficient funds to repay the Notes may not be available from other sources, including the remaining guarantors, if any. In addition, the court might direct you to repay any amounts that you already received from the issuer or any guarantor.

        The measures of insolvency for purposes of these fraudulent transfer laws will vary depending upon the law applied in any proceeding to determine whether a fraudulent transfer has occurred. Generally, however, the issuer or a guarantor would be considered insolvent if:

•

the sum of such entity's debts, including contingent liabilities, was greater than the fair saleable value of such entity's assets;



•

if the present fair saleable value of such entity's assets were less than the amount that would be required to pay such entity's probable liability on such entity's existing debts, including contingent liabilities, as they become absolute and mature; or



•

such entity could not pay such entity's debts as they become due.

        To the extent a court voids any of the Notes or guarantees as fraudulent transfers or holds any of the Notes or guarantees unenforceable for any other reason, holders of Notes would cease to have any direct claim against the issuer or the applicable guarantor. If a court were to take this action, the issuer or the applicable guarantor's assets would be applied first to satisfy our or the applicable guarantor's liabilities, if any, before any portion of the assets could be applied to the payment of the Notes.

        Each guarantee contains a provision intended to limit the guarantor's liability to the maximum amount that it could incur without causing the incurrence of obligations under its guarantee to be a fraudulent transfer. This provision may not be effective to protect the guarantees from being voided under fraudulent transfer law, or may reduce the guarantor's obligation to an amount that effectively makes the guarantee worthless.

An active trading market for the Exchange Notes may not develop.

        The Exchange Notes are a new issue of securities for which there is currently no trading market. We do not intend to apply for listing of the Exchange Notes on any securities exchange or to seek approval for quotation through any automated quotation system. Accordingly, there can be no assurance that an active market will develop upon completion of the Exchange Offer or, if it develops, that such market will be sustained or as to the liquidity of any market. If an active market does not develop or is not maintained, the market price and liquidity of the Exchange Notes may be adversely affected. In addition, the liquidity of the trading market in the Exchange Notes, if it develops, and the market price quoted for the Exchange Notes, may be adversely affected by changes in interest rates in the market for high yield securities and by changes in our financial performance or prospects, or the prospects for companies in our industry.

Future liquidity and cash flow difficulties could prevent us from repaying the Notes when due or repurchasing the Notes when we are required to do so pursuant to a change of control or otherwise.

        At final maturity of the Notes or in the event of acceleration of the Notes following an event of default, the entire outstanding principal amount of the Notes will become due and payable. In addition, if a change of control occurs, holders of the Notes may require us to make an offer to purchase the Notes at a purchase price equal to 101% of the principal amount, plus accrued but unpaid interest to the purchase date. We may not have sufficient funds or may be unable to arrange for additional financing to pay these amounts when they become due. Our senior secured credit facilities restrict our ability to repurchase Notes, including the repurchase of Notes under a change of control offer. Our failure to repay holders tendering Notes upon a change of control would result in an event of default

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under the Notes. A change of control, or an event of default under the Notes, may also result in an event of default under our senior secured credit facilities, which may result in the acceleration of the indebtedness under that facility requiring us to repay that indebtedness immediately. If a change of control were to occur, we cannot assure you that we would have sufficient funds to repay debt outstanding under the senior secured credit facilities or any other securities which we would be required to offer to purchase or that become immediately due and payable as a result. We may require additional financing from third parties to fund any such purchases, and we cannot assure you that we would be able to obtain financing on satisfactory terms or at all. In addition, certain important corporate events, such as leveraged recapitalizations that would increase the level of our indebtedness, would not constitute a change of control under the indenture governing the Notes. See "Description of Notes—Repurchase at the option of holders—Change of control."

A downgrade, suspension or withdrawal of the rating assigned by a rating agency to the Notes, if any, could cause the liquidity or market value of the Notes to decline.

        The Notes have been rated by several nationally recognized statistical ratings organizations. The Notes may in the future be rated by additional rating agencies. We cannot assure you that any rating so assigned will remain for any given period of time or that a rating will not be lowered or withdrawn entirely by a rating agency if, in that rating agency's judgment, circumstances relating to the basis of the rating, such as adverse changes in our business, so warrant. Any lowering or withdrawal of a rating by a rating agency could reduce the liquidity or market value of the Notes.

Not all of our subsidiaries guarantee the Notes, and the assets of our non-guarantor subsidiaries may not be available to make payments on the Notes.

        The guarantors of the Notes do not include all of our subsidiaries. The historical consolidated financial data included in this prospectus, however, are presented on a combined basis, including both our guarantor and non-guarantor subsidiaries. At September 30, 2007, the total liabilities of our non-guarantor subsidiaries were $533.4 million, including trade payables but excluding intercompany liabilities. In the event that any non-guarantor subsidiary becomes insolvent, liquidates, reorganizes, dissolves or otherwise winds up, holders of its indebtedness and its trade creditors generally will be entitled to payment on their claims from the assets of that subsidiary before any of those assets are made available to us. Consequently, your claims in respect of the Notes will be structurally subordinated to all of the liabilities of our non-guarantor subsidiaries, including trade payables, and the claims (if any) of any third party holders of preferred equity interests in our non-guarantor subsidiaries.

A substantial portion of our assets is held by, and a substantial portion of our income is derived from, our subsidiaries, and the senior debt of our subsidiary guarantors may restrict payment on the Notes.

        We hold a substantial portion of assets through our subsidiaries and derive a substantial portion of our operating income from our subsidiaries. We are dependent on the earnings and cash flow of our subsidiaries to meet our obligations with respect to the Notes. We cannot assure you that our subsidiaries will be able to, or be permitted to, pay to us amounts necessary to service the Notes. In certain circumstances, the indenture governing the Notes permits our subsidiary guarantors to enter into agreements that can limit our ability to receive distributions from our subsidiaries. In the event we do not receive distributions from our subsidiaries, we may be unable to make required principal and interest payments on our indebtedness, including the Notes.

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USE OF PROCEEDS

        We will not receive any proceeds from the issuance of the Exchange Notes pursuant to the Exchange Offer.

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RATIO OF EARNINGS TO FIXED CHARGES

        The ratio of earnings to fixed charges for each of the periods indicated is set forth below. For purposes of computing these ratios, earnings represent income from continuing operations before extraordinary items. Fixed charges represent interest expense, including amortization of deferred financing costs, and imputed interest on our lease commitments.

			Year Ended June 30,
	Q1 2008	Q1 2007
			2007	2006		2005	2004		2003
Ratio of Earnings to Fixed Charges	A	A	A	1.0	x	A	0.2	x	0.4	x

(A)

Due to losses in each of our first quarters ended September 30, 2007 and 2006, fiscal 2007 and fiscal 2005, the coverage ratio was less than 1:1. We would have needed to generate additional earnings of $136.4 million, $9.2 million, $144.6 million and $95.4 million, respectively, in each of these periods in order to achieve a ratio of 1:1.

On a pro forma basis after giving effect to the Acquisition Transaction and the related financing transactions entered into as if such events occurred on July 1, 2006, the ratio of earnings to fixed charges would have been less than 1:1 for fiscal 2007 due to our pro forma loss in that period. We would have needed to generate additional earnings of $307.1 million on a pro forma basis in this period in order to achieve a ratio of 1:1.

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SELECTED CONSOLIDATED AND COMBINED FINANCIAL DATA

        The following table presents our selected historical consolidated and combined financial data. The acquisition date of The Reader's Digest Association, Inc. by RDA Holding Co. was March 2, 2007. As a result, the consolidated results of The Reader's Digest Association, Inc. and its majority owned subsidiaries are included in the historical consolidated financial data only for the periods subsequent to March 2, 2007. Accordingly, our historical combined consolidated statement operation data for fiscal 2007 only includes the historical consolidated operating results for The Reader's Digest Association, Inc. for the period from March 3, 2007 to June 30, 2007.

        Prior to the acquisition of The Reader's Digest Association, Inc., investment funds affiliated with Ripplewood controlled a majority of the voting rights in both WRC Media and Direct Holdings. As a result, WRC Media is treated as the predecessor company since Ripplewood acquired its controlling ownership position in WRC Media in 1999, prior to its ownership in Direct Holdings (December 31, 2003) and The Reader's Digest Association, Inc. (March 2, 2007). Accordingly, the combined financial data prior to March 2, 2007, consist exclusively of the combined results of WRC Media and Direct Holdings for the period from January 1, 2004 to March 2, 2007. The 2003 historical financial data consist exclusively of the results of WRC Media.

								Year Ended June 30,
In millions
		Q1 2008			Q1 2007			2007			2006			2005			2004			2003
		(unaudited)			(unaudited)
Statement of Operation Data
	Revenues	$	577.8		$	94.0		$	1,076.4		$	394.1		$	442.5		$	337.1		$	176.1
Operating (loss) profit			(93.0	)		(4.6	)		(35.5	)		(13.1	)		(86.0	)(1)		7.7			12.8
Loss before discontinued operations and extraordinary items			(123.0	)		(9.5	)		(90.7	)(7)		(3.0	)(3)		(92.7	)		(40.6	)		(21.4	)
Net (loss) income		$	(123.0	)	$	(9.5	)	$	(90.7	)(7)	$	59.4	(4)(5)	$	(75.8	)(2)	$	(41.5	)	$	(21.4	)
Balance Sheet Data
Cash and cash equivalents		$	69.0		$	7.1		$	50.2		$	7.5		$	9.6		$	10.1		$	12.5
Total assets			4,489.1			225.4			4,398.6	(6)		199.2			436.6			489.8			433.8
Senior preferred stock			—			—			—			—			141.8			141.8			195.4
Long-term debt			2,123.5			26.8			1,981.4			17.9			316.6			306.1			285.7
Stockholders' equity (deficit)		$	551.9		$	(127.6	)	$	686.5		$	(115.1	)	$	(211.1	)	$	(136.5	)	$	(160.4	)

(1)

Includes WRC Media goodwill and intangible asset impairment of $50.8 and $19.3, respectively, recorded in 2005.

(2)

Includes income from discontinued operations of $8.4 related to the sale of a WRC Media subsidiary (see footnote (4) to this table) and $8.5 related to the sale of Direct Holdings' Asia business.

(3)

Includes $54.2 net gain on redemption of 15% senior preferred stock and $(16.2) loss on extinguishment of debt in connection with the July 2005 recapitalization of WRC Media. Transaction were undertaken to reduce WRC Media's financial leverage by redeeming debt securities and extinguishment of debt.

(4)

Includes gain on sale of subsidiary of $92.2 net of taxes of $(39.2) related to the WRC Media sale of its American Guidance Service, Inc. subsidiary in July 2005.

(5)

Includes extraordinary gain of $7.3 from the release of purchase contingency at Direct Holdings.

(6)

Includes goodwill and other intangibles of $2,935 related to the acquisition of The Reader's Digest Association, Inc. on March 2, 2007.

(7)

Includes $18.5 million gain on extinguishment of debt related to recapitalization in 2006.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Introduction

        The following analysis of our combined consolidated results of operations and financial condition provides information that we believe is relevant to an assessment and understanding of our combined consolidated or combined results of operations and financial condition. This discussion should be read in conjunction with the Combined Consolidated and Combined Financial Statements and related notes beginning on page F-1. This discussion contains forward-looking statements about our markets, the demand for our products and services and our future results. Actual results may differ materially from those suggested by our forward-looking statements for various reasons, including those discussed in the "Risk Factors" and "Disclosure Regarding Forward Looking Statements" sections of this prospectus. We do not have any intention or obligation to update forward-looking statements included in this prospectus. Certain amounts and percentages do not recalculate due to rounding. All references to dollars in this management's discussion and analysis are in millions, except per share data.

        Subsequent to March 2, 2007, unless indicated otherwise, references in this Management's Discussion and Analysis section to "we," "us" and "our" are to The Reader's Digest Association, Inc. and its subsidiaries, including WRC Media Inc. and Direct Holdings U.S. Corp. Prior to March 2, 2007, these references are to the combined operations of WRC Media Inc. and Direct Holdings U.S. Corp. All references to 2007, 2006, and 2005, unless otherwise indicated, are to fiscal 2007, fiscal 2006 and fiscal 2005, respectively. Our fiscal year is the period from July 1 through June 30.

Basis of Presentation

        We are a diverse multimedia publisher and a provider of information, entertainment and education through published magazines, books, educational products, recorded music collections and home video products. We sell these and other products worldwide through direct marketing and direct sales channels. Our best known trademark is our flagship brand, Reader's Digest. We also sell products through QSP, our schools and youth fundraising company, and Books Are Fun, our display marketing business.

        WRC Media Inc. is a publisher of supplemental education materials for the pre-K through 12th grade market in the United States. WRC Media's product portfolio includes a broad array of print and digital format supplemental educational materials. These include the Weekly Reader, a classroom periodical and CompassLearning's Odyssey educational software.

        Direct Holdings is a direct marketing business that sells recorded music compilations, video products and books primarily through direct response television under the Time Life brand. Music products, which account for approximately 80% of Direct Holdings' revenues, cover a wide variety of genres including Rock, Country, Christian, Classical, Easy Listening, Jazz, Blues, Soul and Christmas, while the video business offers a broad range of product categories including Comedy, Christian, Nature and Children's programming.

        On January 23, 2007, RDA Holding Co. (a Ripplewood controlled entity), WRC Acquisition Co. (a subsidiary of RDA Holding Co.) and WRC Media entered into a merger agreement that provided for WRC Acquisition Co. to merge with and into WRC Media, with WRC Media being the surviving corporation (the "WRC Media Merger"). An investment fund affiliated with Ripplewood acquired its original interest in WRC Media in 1999 and had at the time of the WRC Media Merger approximately a 46% economic interest and a majority voting interest in WRC Media. The merger consideration of $101 paid to WRC Media's existing stockholders to acquire all the common stock of WRC Media at the closing of the WRC Merger on March 2, 2007 included a combination of RDA Holding Co. common stock ($81), RDA Holding Co. junior pay-in-kind preferred stock ($20) and cash ($0.1).

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        On January 23, 2007, RDA Holding Co. entered into a stock acquisition agreement to acquire all the common stock of Direct Holdings in exchange for shares of common stock of RDA Holding Co. and net cash totaling $57 (the "Direct Holdings Stock Acquisition"). An investment fund affiliated with Ripplewood acquired its original interest in Direct Holdings in December 2003 and had at the time of the Direct Holdings Stock Acquisition approximately an 84% voting and economic interest in Direct Holdings. The net consideration of $57 paid at the closing of the Direct Holdings Stock Acquisition included a combination of RDA Holding Co. common stock ($50) and net cash ($7).

        On March 2, 2007, RDA Holding Co. acquired The Reader's Digest Association, Inc. pursuant to a Merger Agreement dated November 16, 2006 among The Reader's Digest Association, Inc., RDA Holding Co. and Doctor Acquisition Co. (a wholly owned subsidiary of RDA Holding Co.) (the "RDA Merger Agreement"). Pursuant to the RDA Merger Agreement, Doctor Acquisition Co. was merged with and into The Reader's Digest Association, Inc., with The Reader's Digest Association, Inc. being the surviving corporation (the "Acquisition Transaction"). In the Acquisition Transaction, each outstanding share of common stock of The Reader's Digest Association, Inc. (except those held in treasury) was converted into the right to receive $17.00 in cash and each outstanding share of Doctor Acquisition Co. was converted into one share of common stock of The Reader's Digest Association, Inc., as the surviving corporation. Prior to the Acquisition Transaction, The Reader's Digest Association, Inc. was a publicly traded company listed on the New York Stock Exchange. Upon the closing of the Acquisition Transaction, RDA Holding Co. became the owner of all the issued and outstanding common stock of The Reader's Digest Association, Inc., the surviving corporation of the Acquisition Transaction. Concurrently with the closing of The Reader's Digest Association, Inc. acquisition on March 2, 2007, RDA Holding Co. contributed all of the outstanding shares of WRC Media and Direct Holdings to The Reader's Digest Association, Inc.

        Prior to the acquisition of The Reader's Digest Association, Inc., investment funds affiliated with Ripplewood controlled a majority of the voting rights in both WRC Media and Direct Holdings. Because Reader's Digest was acquired by an investor group led by Ripplewood, and because Ripplewood acquired its controlling ownership position in WRC Media in 1999, prior to its ownership position in Direct Holdings and the Reader's Digest Association, Inc., WRC Media is considered the predecessor company for purposes of preparing the financial statements of the combined company following the Acquisition Transaction. Accordingly, our historical financial statements reflect only the businesses of WRC Media and Direct Holdings, which will affect the comparability of our future financial statements. The combination of WRC Media and Direct Holdings for the periods prior to March 2, 2007 was accounted for using the historical cost method prescribed in Statement of Financial Accounting Standards ("SFAS") No. 141, "Business Combinations," for a combination of entities under common control.

        The Reader's Digest Association, Inc. reports on a fiscal year that begins on July 1. The years ended June 30, 2007 and 2006 are fiscal 2007 and 2006, respectively. WRC Media and Direct holdings previously reported on a fiscal year that ended on December 31 and on a fiscal year that ended on the last Saturday in June, respectively. Subsequent to March 2, 2007, both WRC Media and Direct Holdings changed their respective fiscal year ends to June 30, which was retroactively applied to the 2006 and 2005 combined financial statements. Direct Holdings' 2006 fiscal year began on June 26, 2005 and ended on June 24, 2006 and its 2005 fiscal year began on June 24, 2004 and ended on June 25, 2005. The period from June 25, 2006 to June 30, 2006 and June 26, 2005 to June 30, 2005 is not material to the combined financial statements for 2006 and 2005, respectively.

Our Reportable Segments

        Our business is organized and reports across three business segments: Reader's Digest North America, Reader's Digest International and School & Educational Services. However, for fiscal 2007 we had not yet fully integrated the March 2007 additions of WRC Media and Direct Holdings into our

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three business segments. Therefore, these companies were operated and monitored separately for fiscal 2007. We expect to have the operations of these companies fully integrated into our historic segment structure in fiscal 2008. In addition, historically our Canadian operations were reported in our North American segment, but are expected to be reported in our International segment for fiscal 2008.

        Information regarding each segment's revenue, income or loss before taxes for each of the last three fiscal years and total assets as of the end of each of the last two fiscal years is included in "Note 15—Segments" in our combined consolidated financial statements included in this prospectus, which is incorporated by reference herein.

Effect of the Acquisition Transaction

        The acquisition of The Reader's Digest Association, Inc. by RDA Holding Co. was accounted for using the purchase method of accounting prescribed in SFAS No. 141. Accordingly, the consolidated results of The Reader's Digest Association, Inc. are included in the combined consolidated financial statements from the acquisition date on March 2, 2007 and include the pushdown of purchase consideration from RDA Holding Co. As a result, the accompanying combined financial statements of The Reader's Digest Association, Inc. and subsidiaries consist exclusively of the combined results of WRC Media and Direct Holdings for all periods prior to March 2, 2007. Accordingly, comparability of the fiscal 2007 and fiscal 2006 year ended periods is limited.

        Our significant accounting policies are more fully described under "Critical Accounting Policies" below, and in "Note 1, Organization and Summary of Significant Accounting Policies," in our Notes to Combined Consolidated Financial Statements.

Trends

Industry trends

        Our business is affected by a number of important trends in the publishing and media industries, including, but not limited to, the following:

Popularity of reader-generated content

        We are a pioneer of reader-generated content, which, along with celebrity themes, is a growing trend in the publishing industry, particularly online publishing, both internationally and in the United States. Our Reader's Digest magazine has for many years relied on readers' contributions for a portion of its content. In addition, almost all the content in our Reiman publications and Allrecipes.com, our social networking food website, comes from readers. We believe that, in addition to reducing editorial costs, our ability to utilize a significant amount of reader-generated, community-oriented content creates a bond with our customers, generates strong renewal rates, and is a unique differentiator in the print world.

International demand for consumer products and printed media

        We believe that the expansion of our international business will continue to be a significant driver of our growth. The magazine publishing market outside the United States has grown, and we continue to increase the number of countries in which we offer magazines. In the past two years, for example, we launched new businesses in Bulgaria, Kazakhstan, Serbia, Bosnia and Herzegovina, and Lithuania, while launching new editions of Reader's Digest in Romania, Slovenia and Croatia. As of June 30, 2007, we published 50 editions of Reader's Digest. The demand for magazines and other consumer products has grown more quickly in emerging markets than in more mature North American and Western European markets. Our BHE business is also important to our international strategy. As of June 30, 2007, we market our book products in 44 countries, music products in 41 countries and video products

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in 32 countries outside the United States and Canada. We believe our product-testing process and new-country selection criteria have allowed us to identify markets in which we can successfully market and sell our products.

Growth of the Internet

        The growth of the Internet is a significant trend in our businesses. The increased use of the Internet among people of all ages around the world represents an opportunity for publishers to attract subscribers, offer free content and build relationships with subscribers. The Internet is a channel for acquiring new customers that may allow us to reduce our traditional reliance on direct mail. A growing percentage of advertising expenditures in consumer magazines has migrated toward Internet editions of print media, Internet search engines and other electronic media. We have been growing our online advertising capabilities since acquiring Allrecipes.com, which is an ad-driven model, and establishing independent sales teams at each of the major online brands, such as www.rd.com. Our online focus is to extend brands of sale and to enhance customer relationships by more powerfully connecting to consumers online.

Principal Revenue factors

        We pay close attention to a number of performance and revenue measures, which vary according to the business segment and product, including:

•

Magazine metrics.  The performance of our flagship Reader's Digest magazine, our Reiman magazines and our other magazines is partly a function of:



•

circulation, which we measure against either our rate base (which is the guaranteed average circulation upon which our advertising rates are based) or, historically in the case of our Reiman magazines, the number of paid subscribers and newsstand buyers;



•

renewal rates for our magazines among existing subscribers;



•

prices of our magazines, which are partly a function of our costs;



•

the number of countries in which we offer products;



•

the number of advertising pages sold per fiscal year and the rate paid per page; and



•

advertising revenue, net of agency fees.



•

BHE metrics.  The performance of our Reader's Digest Select Editions books, our general books and music, our Young Families products and other similar products is partly a function of:



•

our active customer base;



•

the number of countries in which we offer products;



•

our response rates to direct marketing;



•

the number of new customers;



•

customer payment rates; and



•

series membership for products that are sold as series.



•

School & Educational Services metrics.  The performance of our School & Educational Services products is partly a function of:



•

for our Books Are Fun business, the products, the number of events, the average sales per event, the size of our sales force, our product margins and inventory turns; and

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•

for our QSP youth fundraising support business, the number of magazine subscriptions sold; food products and other gift products sold; average prices, same-school sales, the size of the sales force; the number of retained accounts; the number of new accounts and the level of student participation.

Cost factors

        Our business is also affected by a number of significant cost factors, some of which affect specific types of products and others that affect our business as a whole.

•

Production costs.  Production costs for our products include the cost of the physical production of our books and magazines, the cost of paper and the costs of merchandise purchased from third parties. See "Business—Production and Fulfillment."



•

Postage costs.  Historically, we have relied on direct mail for a significant portion of our customer acquisition activities. The rise in postal rates in the various markets we operate has increased our customer acquisition costs as we depend on postal services and private delivery services for the delivery of our products. Paper is the principal raw material used in our business for printed products and promotional materials. We expect to incur paper costs of approximately $210 in fiscal 2008.



•

Promotion costs.  Promotion costs are a significant cost factor in our business. We believe that our sales are directly affected by the levels of our promotional spending, including: (1) the cost of the direct mail solicitations, (2) package inserts, (3) cross-promotional activities, (4) renting and purchasing customer lists, (5) special promotions (including sweepstakes) and (6) DRTV and telemarketing.



•

Outsourced fulfillment costs.  Our costs also include the costs of fulfillment, warehousing, customer service and payment and order processing, which are generally handled by independent contractors.



•

Editorial costs.  Editorial costs include amounts we pay to our own writers and other editorial staff and third-party sources of editorial content. We maintain a central editorial repository, which permits the editors of our magazines to utilize content prepared for other magazines or regions efficiently and favorably affects our editorial costs.



•

Sales force costs.  The important costs for QSP, Books Are Fun and Taste of Home Entertaining include salaries, commissions and other related costs.



•

Restructuring costs.  In connection with the Acquisition Transaction, we have implemented several restructuring programs to strategically reposition our businesses and streamline operations. These restructuring activities principally involve reductions in headcount, contract terminations, asset dispositions or write-downs and facilities closures. These restructuring charges, as well as reversals in future periods based on changes in estimates, are summarized in the notes to our combined consolidated and combined financial statements contained elsewhere in this prospectus. See Note 4 to the combined consolidated and combined financial statements.



•

Interest Expense.  We have increased our aggregate borrowing in connection with the Acquisition Transaction. Our increased indebtedness and deferred financing costs will significantly increase our interest expense.

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Other factors

        In addition to the revenue and cost factors described above, our financial condition and results of operations are affected by a number of other factors on an ongoing basis, including the following:

•

Seasonality.  We typically experience our strongest revenue in our second fiscal quarter (the three month period ending December 31) due to purchases during the holidays. Summer and fall are the most active promotion periods in our North American segment for both our magazine and BHE businesses, in part due to the significant percentage of our sales that result from holiday gifts. In addition, as fundraising frequently is done at the beginning of the school year, the QSP business is strongest in the second fiscal quarter. We experience less pronounced seasonality for our Books Are Fun business, which is strongest in the second fiscal quarter, and weakest in the first fiscal quarter as schools are closed and corporate employees often take vacations during that quarter. Our International segment is also less seasonal, although profits do fluctuate as a function of when we time our customer acquisition mailings (generally in July and January, depressing first fiscal quarter and third fiscal quarter profits as a result), and revenue tends to be strongest in our second fiscal quarter. Weekly Reader's and CompassLearning's sales are significantly affected by the school year. For example, Weekly Reader's sales in its first, and to a lesser extent its second, fiscal quarters are typically the strongest as products are shipped in connection with the start of the school year. CompassLearning's net revenue is historically strongest in its fourth quarter. The historical strength of CompassLearning is generally attributed to the end of the school fiscal year (June 30) and the need for the schools to spend budget money prior to year-end.



•

We have identified annual cost savings from becoming a private company following the Acquisition Transaction, implementing headcount reductions and the absence of certain other expenses. We also believe there are significant cost and revenue synergies among our product affinities, including infrastructure and distribution channel synergies. Additionally, we have been working with a leading supply chain consulting firm to analyze our infrastructure in order to identify additional cost reduction opportunities within our supply chain and maintenance, repair and operations functions. On October 17, 2007, we entered into a contract with Williams Lea, a global corporate information solutions provider, which is expected to reduce our print procurement cash expenditures by an aggregate of approximately $130 over the first three years. See "Business—Production and Fulfillment" for more information.



•

Changes in working capital.  Our working capital fluctuates to enable us to manage the seasonality of our business, reflecting the timing of our peak selling period in the fall and early winter, our second fiscal quarter. During the first fiscal quarter, selling activity is seasonally low and we purchase inventory and promotion material for use in the second fiscal quarter. As a result, working capital increases and free cash flow historically has been negative. During the second fiscal quarter, selling activity typically increases and working capital typically decreases as promotional material is mailed and inventory is sold. As a result, working capital decreases and free cash flow historically has been positive. During the third and fourth fiscal quarters, working capital changes are less dramatic and free cash flow historically has been generally positive.



•

Foreign exchange rates.  Because we conduct a significant portion of our business outside the United States, our revenue and costs are affected by fluctuations in the exchange rates between the U.S. dollar and the local currencies in the foreign markets in which we operate. We cannot predict the effect of foreign currency fluctuations on our revenue and costs from period to period.

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Debt

        On March 2, 2007, we entered into a senior secured credit facility providing for a six-year senior secured $300.0 revolving credit facility and a seven-year $1,310.0 term loan. The senior secured credit facility term loan includes within the above-mentioned facilities a US $100.0 term loan tranche made available in an equivalent amount of euros to one of our German subsidiaries. Additionally, on March 2, 2007, we entered into an Indenture among us, the Guarantors (as defined therein) and The Bank of New York, as Trustee, pursuant to which we issued the Original Notes in a private offering. In connection with this offering, the entire outstanding principal amount of $390.0 under our previously existing $500.0 Five-Year Revolving Credit Agreement dated April 14, 2005 and amended April 19, 2006 (the "2005 Credit Agreement") was repaid and we also repurchased $299.9 of the $300.0 aggregate outstanding principal amount of our 6¹/2% senior unsecured notes due in 2011. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources" for additional information.

Results of Operations—Fiscal Year Ended June 30, 2007

2007 vs. 2006

Revenues

        Revenues in 2007 increased $682 to $1,076, compared with $394 in 2006. The increase in revenues is due to the acquisition of The Reader's Digest Association, Inc. on March 2, 2007. Subsequent to the acquisition, Reader's Digest Association, Inc. revenues were $687 for the period from March 3, 2007 to June 30, 2007. In connection with the purchase method of accounting prescribed in SFAS No. 141, the fair value of our unearned revenue was reduced by $196 to establish a new accounting basis as of March 2, 2007, which reduced Reader's Digest Association, Inc. revenues for the period from March 3, 2007 to June 30, 2007, by $54.

        WRC Media's revenues in 2007 increased $3 to $137, compared with $134 in 2006. The increase in revenues is mainly due to an increase in third party software sales at CompassLearning, which was partially offset by a decrease in publishing revenues. Publishing revenues decreased due to a reduction in orders for library services, a decline in the book preview program at Gareth Stevens and the discontinuance of an insert program at Weekly Reader.

        Direct Holdings' revenues in 2007 decreased $8 to $252, compared with $260 in 2006. The decrease in Direct Holdings' revenues was primarily attributable to planned reductions in unprofitable customer promotion activity in its European operations, offset by favorable results of TV, Internet and customer service promotions in the United States.

Operating Loss

        Operating loss in 2007 was $(35), an increase of $22, as compared with the 2006 operating loss of $(13). The increase in operating loss during 2007 is due to the acquisition of The Reader's Digest Association, Inc. on March 2, 2007.

        The Reader's Digest Association, Inc. operating loss was $(28) for the period from March 3, 2007 to June 30, 2007. The operating loss is impacted by: certain purchase accounting fair value adjustments of $(63) including $(54) in reduced revenue due to fair value adjustment to unearned revenue as described above; other operating charges of $(36) mainly for restructuring and corporate unallocated expenses of $(14). Reducing the loss was a one time inventory cost reduction of $7 in the School & Education Services segment, at QSP, related to certain performance and delivery issues with their chocolate supplier. The inventory cost reduction was recognized as a credit to product, distribution and editorial expenses during 2007.

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        Other operating charges of $(36) mainly consist of restructuring charges $(15) related to the integration of WRC Media's and Direct Holdings' operations; $(15) related to the restructuring of our agreement with World's Finest Chocolate ("WFC") to reduce the term of the agreement, reduce the annual minimum tonnage purchase requirements, phase out the fundraising exclusivity rights previously granted to QSP and eliminate certain employment restrictions; and $(4) related to our contract with a supply change consulting firm engaged to analyze cost reduction opportunities.

        WRC Media's reported a $0 operating profit (loss) in 2007 as compared with a 2006 operating profit of $3. The decrease in operating profit is attributed to an increase in software amortization at CompassLearning's Odyssey software educational software and lower revenues discussed above. Additionally, promotion, marketing and administrative expenses increased mainly due to deal related costs incurred in connection with the Acquisition Transaction. Such increases were offset by lower intangibles amortization due to the impairment and write-off of certain definite-lived intangibles in 2005.

        Direct Holdings' operating loss in 2007 was $(8), an improvement of $7, as compared with the 2006 operating loss of $(15). The decrease in operating loss at Direct Holdings was principally attributable to the sale of Lillian Vernon Corporation ("LVC") to an unrelated third party in May 2006. Since the third party purchaser of LVC did not assume certain LVC outstanding balances owed to Direct Holdings for prepaid fulfillment and distribution services, the then outstanding LVC net receivable of $13 was determined to be fully impaired and was written off in 2006. Additionally, in 2006, Direct Holdings also reversed a $3 accrual due to the settlement of estimated royalty payments.

Interest Expense

        Interest expense, net increased $(54) to $(79) in 2007, compared with $(25) in 2006. The increase is principally attributable to an increase in interest expense of $(53) related to the senior secured credit facility and the Notes. As of June 30, 2007, we had outstanding debt of $1,309 under the senior secured credit facility, which includes $85 outstanding under our $300.0 revolving credit facility, and $600 of the Original Notes. The increase in interest expense is also attributable to the March 2, 2007 repayment of WRC Media's previously existing debt, in which WRC Media incurred prepayment and forbearance fees of $(5) and wrote off unamortized deferred financing fees of $(3). The weighted average interest rates were 8.7% and 13.4% in 2007 and 2006, respectively.

Gain on Recapitalization at WRC Media

        In connection with the repayment of WRC Media's second-lien term loan credit agreement, WRC Media recognized a gain of $19 as accrued interest of $19 on the second-lien term loan originally recorded in connection with a troubled debt restructuring in 2006 was not required to be paid. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources" for additional information.

Income Taxes

        The 2007 income tax benefit of $5 reflects a foreign income tax provision of $13 and a domestic tax benefit of ($18). The domestic tax benefit primarily relates to the decrease in certain deferred tax liabilities for which neither a corresponding current tax payable nor a decrease in net deferred tax assets resulted. Additionally, the domestic tax provision also reflects the establishment of $13 valuation allowance on net operating loss and foreign tax credit carry forwards. The foreign income tax provision reflects the establishment of $6 of valuation allowance on certain net operating loss carry forwards since it is was more likely than not that the deferred tax assets will not be realized. The 2007 income tax benefit also includes a $3 charge of foreign withholding tax and U.S. income tax on certain unremitted foreign earnings that previously had been considered permanently reinvested.

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2006 vs. 2005

        As discussed above, our accompanying combined financial statements consist exclusively of the combined results of our predecessor entities WRC Media and Direct Holdings for all periods prior to March 2, 2007. Accordingly, our 2006 and 2005 accompanying combined financial statements only report the combined historical operating results of WRC Media and Direct Holdings.

Revenues

        Revenues in 2006 decreased $(48) to $394 compared with $442 in 2006. Direct Holdings' revenues decreased $(43) to $260 in 2006, compared with $304 in 2005. WRC Media revenues decreased $(5) to $134 in 2006, compared with $139 in 2005.

        The decrease in Direct Holdings' revenues results from volume declines in U.S. and European operations. The decrease in U.S. revenues was due to volume declines across its TV and telemarketing sales channels, which were partially offset by increased prices. European revenues decreased primarily as a result of decreased promotion activity in order to eliminate unprofitable products and sales channels.

        The decrease in WRC Media's revenues is attributable to a decrease in software and publishing revenues.

Operating Loss

        Operating loss in 2006 was $(13) a decrease in the loss of $73 as compared with the 2005 operating loss of $(86). WRC Media operating income was $2, an increase of $73 as compared to a 2005 operating loss of $(71). Direct Holdings 2006 operating loss of $(15) was flat when compared with 2005.

        The decrease in operating loss at WRC is principally driven by the $70 impairment of goodwill and intangibles at WRC Media in 2005. In 2006, there was no impairment of goodwill or intangibles at WRC Media.

        As of June 30, 2006, Direct Holdings wrote off of its LVC prepaid fulfillment and distribution services receivable of $13, $5 lower than LVC write off in 2005 of $18, and reversed a $3 accrual due to the settlement of estimated royalty payments, which were primarily offset by revenue declines as discussed above and related decreases in expenses.

Interest Expense

        Interest expense, net decreased $34 to $(25) in 2006, compared with $(59) in 2005 due to the recapitalization of debt at WRC Media in 2005. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources" for additional information. The weighted average interest rates were 13.4% and 9.8% in 2006 and 2005, respectively.

Extraordinary Gain at Direct Holdings

        In connection with its acquisition of the Time Life business in 2003, Direct Holdings agreed to pay additional contingent consideration if certain specified performance criteria, as defined, were met. Since the fair value of the liabilities acquired exceeded the fair value of the assets acquired at the acquisition date, Direct Holdings recorded an acquisition contingency of approximately $8. As of June 24, 2006, Direct Holdings did not meet the defined criteria requiring payment of additional consideration. Accordingly, Direct Holdings released the acquisition contingency of $8 by writing off the remaining net book value of fixed assets and intangible assets of $1. The remaining balance that represented

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negative goodwill of approximately $7 was recognized as an extraordinary gain in the 2006 combined statement of operations.

Discontinued Operations

        On July 22, 2005, WRC Media completed the sale of its American Guidance Service, Inc. ("AGS") subsidiary. As a result, the 2006 and 2005 combined statements of operations have been presented to reflect the operation of AGS as a discontinued operation. AGS is a publisher of testing and assessment products and supplemental instructional materials. The sale of AGS resulted in a net gain on sale of $53 after related income taxes of $39. AGS income from operations before income taxes for the period from July 1, 2005 to July 22, 2005 was $4 and $28 for 2005.

        The 2005 combined financial statement of operations also includes a discontinued operations gain from the sale of Direct Holding's Asia business of $9.

Income Taxes—Continuing Operations

        The income tax provision of $(3) recorded in 2006 primarily reflects the recording of deferred tax liabilities related to book versus tax differences on goodwill and intangibles.

        In 2005, we concluded that the deferred tax assets for both WRC Media and Direct Holdings were not realizable and required a valuation allowance except for the portion of deferred tax assets that would be utilized to reduce the gain on sale of AGS in 2006. The tax benefit recorded in 2005 of $52 primarily relates to the reversal of the valuation allowances attributable to the gain on sale of AGS.

Income Taxes—Discontinued Operations

        The income tax provision of $(41) in 2006 primarily reflects the use of net operating loss carryforwards to offset the gain recognized on the sale of AGS in 2006.

        The income tax provision of $(19) in 2005 reflects the tax on the operating results of AGS that was subsequently sold in 2006. The valuation allowance on these carryforwards had been reversed in the 2005 tax provision because it was more likely than not that the carryforwards would be realized.

Results of Operations—Quarter Ended September 30, 2007

Three-Month Period Ended September 30, 2007, Compared With Three-Month Period Ended September 30, 2006

Revenues

        Generally, our results for the first quarter of the fiscal year are our lowest in terms of revenue as our businesses prepare and invest for the second quarter peak-selling season.

        Revenues during the first quarter of fiscal 2008 increased $484 to $578, compared with $94 in the first quarter of fiscal 2007. The increase in revenues is due to the acquisition of The Reader's Digest Association, Inc. on March 2, 2007. The Reader's Digest Association, Inc. revenues were $496 during the first quarter of fiscal 2008. In connection with the purchase method of accounting prescribed in SFAS No. 141, the fair value of our unearned revenue was reduced by $196 to establish a new accounting basis as of March 2, 2007, which reduced Reader's Digest Association, Inc. revenues during the first quarter of fiscal 2008 by $43.

        WRC Media's revenues during the first quarter of 2008 decreased $6 to $29, compared with $35 during the first quarter of 2007. The decrease in WRC Media revenues is primarily attributable to the timing of publication revenues and the exiting of certain lines of business, partially offset by higher sales in the unit's educational software product line.

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        Direct Holdings' revenues for the first quarter of 2008 decreased $6 to $53, compared with $59 during the first quarter of 2007. The decrease in Direct Holdings' revenues was due to volume related declines in the U.S. of $(7) and Europe of $(1), partially offset by revenue gains in the South Pacific operations of $2. The volume related decline in the U.S. operations was primarily driven by the timing of shipments associated with the transition to new outsourced providers and the elimination of publishing and outbound telemarketing divisions.

Operating Loss

        The operating loss during the first quarter of 2008 was $(93), an increase in operating loss of $(88), as compared with the operating loss of $(5) during the first quarter of 2007. The increase in operating loss during the first quarter of 2008 is primarily due to the impact of the acquisition of The Reader's Digest Association, Inc. on March 2, 2007.

        The Reader's Digest Association, Inc. operating loss was $(81) for the first quarter of 2008. The operating loss primarily was impacted by: operating losses across The Reader's Digest Association, Inc.'s three business segments of $(14); purchase accounting fair value adjustment to unearned revenues of $(43), which reduced revenues as described above; and corporate unallocated expenses of $(23) including the amortization of intangibles of $(14).

        WRC Media reported a $(3) operating loss during the first quarter of 2008 as compared with an operating profit of $1 during the first quarter of 2007. The decline in operating results was mainly due to the timing of publication revenues as described above.

        Direct Holdings' operating loss during the first quarter of 2008 was $(9) as compared with an operating loss of $(6) during the first quarter of 2007. The increase in operating loss is mainly due to the decline in revenues described above.

Interest Expense

        Interest expense, net increased $(41) to $(46) during the first quarter of 2008, compared with $(5) during the first quarter of 2007. The increase is principally attributable to interest expense of $(46) including the amortization of deferred financing fees of $(2) related to the increase in debt incurred in connection with the Acquisition Transaction and associated with our senior secured credit facility and the Notes. As of September 30, 2007, $225.0 was outstanding under the revolving credit facility, $1,204.0 was outstanding under the term loan in the United States, €75.3 was outstanding under the term loan made available to one of our German subsidiaries, and $600.0 was outstanding under the Notes. As of September 30, 2006, WRC Media and Direct Holdings had combined outstanding borrowings of $192.4.

Income Taxes

        During the three-month periods ended September 30, 2007 and 2006, we recorded an income tax benefit of $13 and $0, respectively. The benefit recorded for the three-month period ended September 30, 2007, primarily relates to losses incurred during the quarter that are expected to offset profits in subsequent quarters in the fiscal year.

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Liquidity and Capital Resources
(includes forward-looking information)

        The consolidated statement of cash flows for the year ended June 30, 2007 is summarized below:

Cash and cash equivalents at June 30, 2006		$	7
Net change in cash due to:
	Operating activities		(176	)
	Investing activities		—
	Financing activities		217
	Effect of exchange rate fluctuations on cash and cash equivalents		2
Net change in cash and cash equivalents			43
Cash and cash equivalents at June 30, 2007		$	50

        Cash and cash equivalents increased to $50 as of June 30, 2007, compared with $7 as of June 30, 2006. The increase in cash is attributed to the proceeds of new borrowings offset by the net cash distribution to RDA Holding Co. in connection with the Acquisition Transaction. Cash flow from operations decreased to $(176) as of June 30, 2007, compared with $1 for the year ended June 20, 2006. This is primarily due to the acquisition of The Reader's Digest Association, Inc. on March 2, 2007.

        The consolidated statement of cash flows for the quarter ended September 30, 2007 is summarized below:

		Three-month period ended September 30, 2007
Cash and cash equivalents at June 30, 2007		$	50
Net change in cash due to:
	Operating activities		(126	)
	Investing activities		5
	Financing activities		137
Effect of exchange rate changes on cash and cash equivalents			3
Net change in cash and cash equivalents			19
Cash and cash equivalents at September 30, 2007		$	69

        Cash and cash equivalents increased to $69 as of September 30, 2007, compared with $50 as of June 30, 2007. The increase in cash and cash equivalents as of September 30, 2007 was principally driven by net proceeds from borrowings of $137 and proceeds for the sale of certain non-strategic assets of $10.

Borrowings—The Reader's Digest Association, Inc.

Senior Secured Credit Facility

        On March 2, 2007, we entered into a senior secured credit facility providing for a six-year senior secured $300.0 revolving credit facility and a seven-year $1,310.0 term loan. The senior secured credit facility term loan includes within the above-mentioned facilities a US$100.0 term loan tranche made available in an equivalent amount of euros to one of our German subsidiaries. Financing fees of $40.4 related to the senior secured credit facility were deferred and are amortized on a straight-line basis over the life of the agreement.

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        At June 30, 2007, $85.2 was outstanding under the revolving credit facility and $1,309.3 under the term loan. At September 30, 2007, $225 was outstanding under the revolving credit facility, $1,204 was outstanding under the term loan in the United States, €75 was outstanding under the term loan made available to one of our German subsidiaries, and $600 was outstanding under the Notes. Interest expense for the three months ended September 30, 2007 was $(46), including the amortization of deferred financing fees of $(2). The weighted average interest rate on our borrowings for the three month period ended September 30, 2007 was 7.7%.

        Borrowings under the term loan bear interest at a rate equal to an applicable margin plus, at our option, either (a) a base rate ("Base Rate") determined by reference to the higher of (1) the prime rate and (2) the federal funds rate plus 0.50% or (b) a Eurocurrency rate ("Eurocurrency Rate") determined by reference to the rate for Eurocurrency deposits for a period of one, two, three or six months or, subject to availability to the lenders, nine or twelve months, as selected by us. For Base Rate loans and Eurocurrency Rate loans, the applicable margin is 1.00% and 2.00%, respectively.

        Borrowings under the revolving credit facility bear interest at a percentage per annum equal to, at our option, either (1) the Base Rate plus 1.25% for Base Rate loans or (2) the Eurocurrency Rate plus 2.25% for Eurocurrency Rate loans. Applicable margins with respect to revolving loans will be subject to reduction by up to 0.75% based on our consolidated leverage ratio from time to time.

        We are required to pay a commitment fee for the revolving credit facility for the average daily unutilized commitments. The initial commitment fee rate is 0.375% per annum and may be reduced to 0.25% subject to our attaining certain leverage ratios.

        The senior secured credit facility generally requires us to prepay outstanding term loans upon the occurrence of certain defined events, including net cash proceeds of any incurrence of new debt (as defined), certain assets sales or dispositions (as defined) and 50% (which percentage will be reduced if our total leverage ratio is less than certain ratios) of our annual excess cash flow (as defined).

        In addition, we are required to repay the term loan in equal quarterly installments beginning June 30, 2007 (with any remainder expected to be due on March 2, 2014) in aggregate annual amounts equal to 1.0% of the initial aggregate principal amount. The principal amount outstanding under the revolving credit facility is due and payable in full at maturity, on March 2, 2013.

        All obligations under the senior secured credit facility are unconditionally guaranteed by RDA Holding Co., us and, subject to certain exceptions, each of RDA Holding Co.'s direct and indirect domestic wholly-owned subsidiaries (collectively referred to as the "Guarantors"). The loans made to our German subsidiary are also unconditionally guaranteed by its subsidiaries as well as secured by all of the stock and assets of those subsidiaries (subject to certain exceptions).

        All obligations under the senior secured credit facility, and the guarantees of those obligations, are generally secured by the following assets of the Guarantors: (i) 100% of our common stock and each of our direct and indirect domestic subsidiaries and 65% of the voting common stock and 100% of the non-voting common stock of our direct and indirect foreign subsidiaries and (ii) a security interest in substantially all our tangible and intangible assets. Subject to certain exceptions, all obligations of each non-U.S. borrower are unconditionally guaranteed by each restricted subsidiary of such borrower.

        The senior secured credit facility contains a number of covenants that, among other things, restrict, subject to certain exceptions, our ability to: (i) incur additional indebtedness or issue shares by subsidiaries, (ii) create liens on assets, (iii) engage in mergers or consolidations, (iv) sell assets, (v) pay dividends and distributions, (vi) make investments, loans or advances, (vii) repay subordinated indebtedness (including the Notes described below), (viii) make certain acquisitions, (ix) engage in certain transactions with affiliates, (x) enter into certain burdensome agreements, (xi) amend material agreements governing our subordinated indebtedness (including the Notes), and (xii) change our lines of business and (xiii) make capital expenditures.

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        In addition, the senior secured credit facility includes a financial covenant requiring us to comply with a maximum leverage ratio, as defined. The senior secured credit facility also contains certain defined customary affirmative covenants and events of default.

Derivative Instruments

        We entered into interest rate swap agreements with a notional value totaling $750.0, involving the exchange of floating-rate for fixed-rate interest payments, to reduce interest rate volatility and to comply with the interest rate provisions of our senior secured credit facility. See Note 8, Financial Instruments, to the combined consolidated financial statements included in our Annual Report for the fiscal year ended June 30, 2007 for further information. As described in Note 8, on April 19, 2007, we entered into interest rate swap agreements with a notional value totaling $750, involving the exchange of floating for fixed-rate interest payments, to reduce interest rate volatility and to comply with the interest rate hedging provisions of our senior secured credit facility. The transactions included $450 of 3-year interest rate swaps and $300 of 5-year interest rate swaps. In each case, we will receive floating-rate interest payments that offset the LIBOR component of the interest due on some of our floating-rate debt and make fixed-rate interest payments over the life of the respective interest rate swaps. The fixed interest rate under the 3-year swaps is 4.89% and the fixed interest rate under the 5-year swaps is 4.94%.

        Additionally, we evaluate whether the creditworthiness of each swap counterparty is such that default on its obligations under the swap is not probable. We also assess whether the LIBOR-based interest payments are probable of being paid under the loans at the inception and, on an ongoing basis (no less than once each quarter), during the life of each hedging relationship.

        As of September 30, 2007 the fair market value of our interest rate swaps decreased during the quarter, resulting in a loss of $(10), which is recorded net of deferred taxes of $6. This change is reported in accumulated other comprehensive loss, which is included in stockholders' equity on the September 30, 2007 balance sheet.

Notes and Indenture

        On March 2, 2007, we entered into an Indenture among us, the Guarantors (as defined therein) and The Bank of New York, as Trustee, pursuant to which we issued the Original Notes in a private offering. Financing fees of $24.8 related to the Original Notes were deferred and are amortized on a straight-line basis over the life of the agreement.

        The Notes mature on February 15, 2017. Interest on the Notes accrues at the rate of 9% per annum and is payable semi-annually in arrears on February 15 and August 15, commencing on August 15, 2007, to the holders of Notes of record on the immediately preceding February 1 and August 1. Interest on the Notes is computed on the basis of a 360-day year comprised of twelve 30-day months.

        The Notes are guaranteed on a senior subordinated basis by all of our subsidiaries that guarantee our obligations under the senior secured credit facility. Any domestic subsidiaries that in the future guarantee our indebtedness will also guarantee the Notes. The guarantees of the Notes will be released when the guarantees of our senior secured credit facility indebtedness are released.

        The guarantees of the Notes are unsecured senior subordinated obligations of our subsidiary guarantors and have the same ranking with respect to indebtedness of our subsidiary guarantors as the Notes have with respect to our indebtedness.

        We may redeem some or all of the Notes at any time prior to February 15, 2012 at a price equal to 100% of the principal amount of the Notes plus accrued and unpaid interest plus a defined

49

"make-whole" premium. The Notes are also redeemable at our option, as defined, in whole or in part, at any time on or after February 15, 2012.

        At any time prior to February 15, 2010, we may redeem, at our option, up to 35% of the original principal amount of the Notes with the proceeds of one or more equity offerings at a redemption price of 109% of the principal amount of the Notes, together with accrued and unpaid interest, if any, to the date of redemption.

        Upon the occurrence of a change of control (as defined) of The Reader's Digest Association, Inc., holders of the Notes have the right to require us to repurchase all or a portion of the Notes at a purchase price in cash equal to 101% of the principal amount of the Notes plus accrued and unpaid interest.

        The Indenture, among other things, limits our ability and the ability of our subsidiaries to: (i) incur, assume or guarantee additional indebtedness, (ii) issue redeemable stock and preferred stock, (iii) repurchase common stock, (iv) make other restricted payments, including, without limitation, paying dividends and making investments, (v) create liens, (vi) redeem debt that is junior in right of payment to the Notes, (vii) sell or otherwise dispose of assets, including common stock of subsidiaries, (viii) enter into agreements that restrict dividends from subsidiaries or (ix) enter into mergers or consolidations.

Registration Rights Agreement

        In connection with the issuance of the Original Notes, we entered into a Registration Rights Agreement, dated as of March 2, 2007. The Registration Rights Agreement provides that we and each of the Guarantors will, at our expense and for the benefit of the holders of the Original Notes, (i) file a registration statement on an appropriate registration form (an "Exchange Offer Registration Statement") with respect to a registered offer (an "Exchange Offer") to exchange the Original Notes for new notes guaranteed by the Guarantors on a senior subordinated basis, with terms substantially identical in all material respects to the Original Notes (the notes so exchanged, the "Exchange Notes") (except that the Exchange Notes will not contain terms with respect to transfer restrictions or any increase in annual interest rate) and (ii) use our reasonable best efforts to cause the Exchange Offer Registration Statement to be declared effective under the Securities Act of 1933.

        Upon an Exchange Offer Registration Statement being declared effective, we will offer the Exchange Notes (and the related guarantees) in exchange for surrender of the Original Notes.

        If the Exchange Offer is not consummated, in certain circumstances we will be required to file a shelf registration statement covering resale of the Original Notes. In addition, in certain circumstances if the Exchange Offer is not consummated on or prior to the 360th day after March 2, 2007, up to an additional 1.0% of penalty interest may accrue on the principal amount of the Original Notes outstanding.

        The Exchange Offer is being made pursuant to the provisions of the registration rights agreement with the Initial Purchasers.

2005 Credit Agreement and Senior Unsecured Notes

        On March 2, 2007, the entire outstanding principal amount of $390.0 under our $500.0 Five-Year Revolving Credit Agreement dated April 14, 2005 and amended April 19, 2006 (the "2005 Credit Agreement") was repaid and we also repurchased $299.9 of the $300.0 aggregate outstanding principal amount of our 6¹/2% senior unsecured notes due in 2011.

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Borrowings—Direct Holdings

        On May 31, 2005, Direct Holdings entered into an amended asset-backed revolving credit agreement (the "Amended CIT Credit Facility") with The CIT Group/Business Credit, Inc. ("CIT"). The Amended CIT Credit Facility provided for a maximum available credit line totaling $20. The credit line was collateralized by substantially all of the assets of Direct Holdings, including accounts receivable, inventory and equipment. The Amended CIT Credit Facility also provided for two Term Loans ("Term Loan A" and "Term Loan B") in the amount of $2.5 each and a $5 sub limit for standby letters of credit within the $20 credit line.

        In February 2006, CIT assigned Term Loan B to Citicorp North America. In March 2006, the maximum revolving credit line decreased from $20 to $15 pursuant to an Extension Agreement. New financial covenants as well as other restrictions were set forth. The Extension Agreement also waived a default associated with delivery of audited financial statements for the year ended June 30, 2005.

        On May 26, 2006, Direct Holdings entered into an Assumption and Amendment Agreement which provided for several changes to the Amended CIT Credit Facility and Extension Agreements. The Assumption and Amendment Agreement was necessary to remove consolidated covenants and provisions that were in place prior to the sale of Direct Holdings' previous sister company, Lillian Vernon Corporation. Term Loan A increased to $4 and Term Loan B increased to $12.5.

        On December 27, 2006, CIT entered into an Amendment and Waiver (the "Waiver Amendment") with Direct Holdings and certain other parties, amending the Amended CIT Credit Facility. Among other things, the Waiver Amendment provided for a waiver through December 31, 2006 relating to delivery of annual audited financial statements for the year ended June 30, 2006. It also amended certain EBITDA calculations and trailing EBITDA minimums required to be maintained by Direct Holdings.

        In connection with the Acquisition Transaction and the contribution of Direct Holdings to The Reader's Digest Association, Inc., on March 2, 2007, Direct Holdings repaid the outstanding principal and accrued interest of $30 under the Amended CIT Credit Facility (including its revolver, Term Loan A and Term Loan B).

Borrowings—WRC Media

Credit and Guaranty Agreement

        In connection with the July 2005 sale of a subsidiary and related recapitalization transactions, two of WRC Media's subsidiaries entered into the Credit and Guaranty Agreement ("First-Lien Facility"). The agreement provided for a facility consisting of a Senior Term Loan with a Tranche A and Tranche B, and a Revolving Credit Facility ("WRC Revolver"), to be secured by liens on substantially all of WRC Media's assets. The agreement also provided for a final maturity of the First-Lien Facility of July 22, 2009.

        Beginning November 20, 2006, in connection with the delivery of WRC Media's financial statements as of and for the nine-month period ended September 30, 2006, WRC Media was in default of the Credit and Guaranty Agreement because its borrowings were in excess of the permitted borrowings. At December 31, 2006, WRC Media was not in compliance with certain defined covenants, including leverage and coverage ratios. On January 23, 2007, WRC Media entered into the Forbearance and First Amendment Agreement whereby, among other provisions, WRC Media was, subject to certain terms and conditions, provided $23 in permitted borrowings. Under the terms of the Forbearance and First Amendment Agreement, subject to certain conditions including the avoidance of additional defaults, the lenders agreed not to exercise certain rights until March 31, 2007. In consideration of the execution and delivery of the Forbearance and First Amendment Agreement, WRC Media was required to pay a forbearance fee of up to $4 on the maturity date of the term loans. As noted above, WRC Media was also in default of certain financial covenants which were not waived. By virtue of these defaults, the lenders were entitled to certain remedies, including the repayment of all borrowings.

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        In connection with the Acquisition Transaction and the contribution of WRC Media to The Reader's Digest Association, Inc., on March 2, 2007, WRC Media repaid all borrowings and forbearance fees, under the First-Lien Facility and the Forbearance and First Amendment agreements, totaling $113.

Term Loan Credit Facility

        In connection with the July 22, 2005 redemption and repurchase by WRC Media of all of the shares of WRC Media's 15% Senior Preferred Stock due 2011 ("Senior Preferred Stock) and the warrants to purchase common stock of two of WRC Media's subsidiaries, WRC Media entered into a $30 Term Loan and Guaranty Agreement ("Second-Lien Term Loan Credit Agreement"), in addition to the payment of $55 and the issuance of 92,754,145 shares of WRC Media common stock to the holders of Senior Preferred Stock.

        The Second-Lien Term Loan Credit Agreement provided for similar but less restrictive covenants to those of the Credit and Guaranty Agreement. The Second-Lien Term Loan Credit Agreement was a priority loan to the Credit and Guaranty Agreement.

        SFAS No. 15, "Accounting by Debtors and Creditors for Troubled Debt Restructurings," prescribes the accounting when debt is restructured by a company. Additional guidance on the application of SFAS No. 15 is provided by EITF Issue 02-07, "Determining Whether a Debtor's Modification or Exchange of Debt Instruments is within the Scope of FASB Statement No. 15." The consensus of these pronouncements is that unless there is evidence to the contrary, when debt is restructured with consideration materially less than the carrying value of the retired debt, the provisions of SFAS No. 15 apply. Therefore, although WRC Media was in compliance with its loan covenants when the recapitalization transactions occurred in 2005, because the consideration issued to the Senior Preferred shareholders was significantly less than the Senior Preferred Stock's carrying value, the provisions of SFAS No. 15 applied. Accordingly, the difference between the carrying value of the Senior Preferred Stock and the consideration received by the Senior Preferred shareholders of $83 was reduced by the $29 of interest expected to be earned by the Second-Lien Term Loan Credit Agreement loan holders over the term of the loan. Therefore, WRC Media recognized a gain of $54 and increased the carrying value of the Second-Lien Term Loan Credit Agreement loan by $29. The net gain on recapitalization of $38 was not reduced by income taxes.

        Beginning November 20, 2006, WRC Media was in default of the Second-Lien Term Loan Credit Agreement due to the excess borrowings discussed above and the cross default provisions of the Credit and Guaranty Agreement and Second-Lien Term Loan Credit Agreement. As of December 31, 2006, WRC Media was also in default of certain financial covenants which had not been waived. By virtue of these defaults, the lenders were entitled to certain remedies, including the repayment of all borrowings.

        In connection with the Acquisition Transaction and the contribution of WRC Media to The Reader's Digest Association, Inc., on March 2, 2007, WRC Media repaid all borrowings under the Second-Lien Term Loan Credit Agreement, totaling $40.1. In connection with the repayment of the Second-Lien Term Loan Credit Agreement, WRC Media recognized a gain in other income and (expense), net on the extinguishment since accrued interest of $18.5 expected to be earned by the Second-Lien Term Loan Credit Agreement was not required to be paid.

Other Liquidity Matters

        International lines of credit and overdraft facilities totaled $43.6 at September 30, 2007, of which $0 was outstanding. The interest rates on outstanding borrowings at September 30, 2007 ranged from 5.4% to 6.5%. These lines of credit are subject to renewal annually.

        As of September 30, 2007, our $2.9 stand-by letters of credit serves as security for a real estate lease entered into by WRC Media.

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Contractual Obligations and Commitments
(includes forward-looking information)

        For information regarding debt and other obligations, including lease commitments and contingencies, see Note 7, Goodwill and Other Intangible Assets, Net; Note 12, Debt; and Note 14, Commitments and Contingencies, in our Notes to Combined Consolidated Financial Statements.

        In the normal course of business, we enter into long-term arrangements with suppliers for raw materials and merchandise and with other parties whose recordings or works we use in our products. These arrangements may contain minimum purchase requirements. We enter into these agreements to facilitate an adequate supply of materials and to enable us to develop better products for sale to our customers. The table below details our significant contractual obligations and the timing of payments due for those contracts with minimum purchase requirements.

Contractual Obligations		Less than one year		One to three years		Three to five years		More than five years
Debt obligations(1):
	Senior Secured Credit Facility	$	13	$	26	$	26	$	1,330
	Senior Notes								600
Lease commitments:
	Operating leases		31		53		43		87
Purchase commitments:
	World's Finest Chocolate(2)		49		65		—		—
	Royalty contracts		5		1		1		—
Pension and postretirement obligations(3)			65		129		130		336
Service and outsource contracts(4)			17		17		4		—
Total		$	180	$	291	$	204	$	2,353

(1)

See Note 12, Debt, in our Notes to Combined Consolidated Financial Statements for the Year Ended June 30, 2007 and Combined Statements for the Years Ended June 30, 2006 and 2005 for additional information.



(2)

In May 2007, QSP, Inc. restructured its agreement with World's Finest Chocolate to reduce the term of the agreement from December 31, 2020 to December 31, 2009, reduce our annual minimum tonnage purchase requirements for the remaining term of the agreement, phase out the fundraising exclusivity rights previously granted to QSP, Inc. (effective January 1, 2008), and eliminate certain employment restrictions. The commitments detailed above represent our minimum purchase requirements of chocolate products from fiscal 2007 until the agreement terminates at the end of calendar 2009. If the tonnage purchase requirements are not met, QSP, Inc. is subject to certain penalties as defined in the restructured agreement.



(3)

This item includes payments that are expected to be made for pension and postretirement benefits. Amounts in the "More than five years" category only include projected payments from fiscal 2013 through fiscal 2017. See Note 9, Pension Plans and Other Postretirement Benefits, in our Notes to Combined Consolidated Financial Statements for the Year Ended June 30, 2007 and Combined Statements for the Years Ended June 30, 2006 and 2005 for additional information.



(4)

This item includes a number of service contracts, such as product fulfillment agreements and information technology license and maintenance agreements. These contracts terminate at varying dates ranging from fiscal 2008 through 2011.

        On October 17, 2007, we entered into a seven year contract with Williams Lea, a global corporate information solutions provider. Under the contract, Williams Lea will deliver outsourced print procurement and marketing solutions to our operations in 19 countries across the United States and Canada, Europe, Middle East, Asia Pacific and Latin America. Williams Lea will assume the

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promotional printing operations of our direct-mail business, providing us with increased leverage and purchasing power by virtue of Williams Lea's expertise and global scale. The contract with Williams Lea is expected to reduce our print procurement cash expenditures by an aggregate of approximately $130 million over the first three years.

Critical Accounting Policies
(includes forward-looking information)

        Our significant accounting policies are more fully described in Note 1, Organization and Summary of Significant Accounting Policies, in our Notes to Combined Consolidated Financial Statements. The accounting policies described below are those that we believe are critical to an understanding of our financial statements and require management to make significant judgments. These judgments entail estimates and assumptions that are essential to determining the recorded amounts and their impact on our operating results. Due to the uncertainty inherent in these estimates and assumptions, actual results may differ. The determination of the accounting policies that are critical and the assumptions and estimates that we have made have been reviewed and discussed with the Audit Committee of our Board of Directors.

Allocation of Purchase Consideration to Goodwill

        Included in the financial statements are the purchase method of accounting adjustments related to the Acquisition Transaction, the WRC Media Merger and Direct Holdings Stock Acquisition. See Notes 2, Entities under Common Control, and Note 3, Acquisitions and Divestitures, for additional information. The cost of the Acquisition Transaction was used to establish a new accounting basis at The Reader's Digest Association, Inc. and subsidiaries, by allocating the cost of the assets acquired, including identified intangible assets totaling $1,078 and liabilities assumed at estimated fair values. The excess of the cost of the acquisition, including transactions costs, over the amounts assigned to the net liabilities assumed of $1,765 was recorded to goodwill and pushed down to the reporting units using the enterprise value.

        The purchase price paid to the holders of the common stock of WRC Media and Direct Holdings not owned by investment funds affiliated with Ripplewood (38.5% in the case of WRC Media and 15.6% in the case of Direct Holdings) in the WRC Media Merger and the Direct Holdings Stock Acquisition was also accounted for using the purchase method of accounting. Accordingly, only 38.5%, in the case of WRC Media, and 15.6%, in the case of Direct Holdings, of assets acquired and liabilities assumed have been adjusted to their fair market value, with the remaining percentage recorded at historical carrying amounts.

        The estimated fair values was determined using a number of factors, including the use of certain valuation methodologies (i.e. discounted cash flow projections, cost to reproduce or replace and market data where appropriate) and certain operational assumptions and estimates (i.e. revenue and operational growth rates). The principal factors used in the discounted cash flow analysis requiring judgment are the weighted average cost of capital and growth rate assumptions. Due to the many variables inherent in the estimation of fair value, differences in assumptions and estimates may have a material effect on the results of our future goodwill and intangible impairment tests. See Long-Lived Assets discussion below for additional information.

Revenue Recognition

        Our primary revenue recognition policies for our key products are described below.

        Magazines—Sales of our magazine subscriptions, less bad debt and return reserves are deferred and recognized as revenues proportionately, on the first day of each month, over the subscription period. Revenues from sales of magazines through the newsstand are recognized at the issue date, net

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of an allowance for returns. Advertising revenues are recorded as revenues at the time the advertisements are published, net of discounts and advertising agency commissions.

        Sponsor Fundraising Programs—Our sponsor fundraising program business, which operates principally through QSP receives its revenues net of amounts due to its sponsors. Accordingly, we present revenues net of sponsors' earnings. Sales of subscriptions to magazines published by other companies and sales of music products are recorded as revenues at the time orders are submitted to the publisher, net of bad debts and remittances to magazine and music publishers.

        Books, Display Marketing and Other Products—Revenues are recorded when title passes, net of provisions for estimated returns and bad debts. Title passes upon time of shipment or upon delivery. For our display marketing products, title passes either at the point of sale or at the time of shipment. In certain circumstances, our promotion entitles the customer to a preview period. Revenue generated by these promotions is recognized after the preview period lapses. The most significant element in our revenue recognition policy is the estimate of returns and bad debts.

        Software Products—We recognize revenue for software sales upon shipment of the product, provided collection of the receivable is probable, payment is due within one year and the fee is fixed or determinable. If an acceptance period is required, revenues are recognized upon the earlier of customer acceptance or the expiration of the acceptance period. If significant post-delivery obligations exist, revenues are deferred until no significant obligations remain. Revenue from service contracts, installation and user training is recognized as the services are performed. Software hosting services and post-contract support is recognized ratably over the term of the related contract. Included in unearned revenues is our obligation to perform under signed contracts for which payment has been made.

        Software revenues are recognized based on the residual method. We allocate the aggregate revenue from multiple element arrangements to each element based on vendor specific objective evidence. We have established vendor-specific objective evidence for installation, training and post-contract support, as we sell installation, training and post-contract customer support independent of multiple element agreements. Customers are charged standard prices for the installation, training and post-contract customer support, and these prices do not vary significantly from customer to customer.

        If we enter into a multiple element agreement where vendor-specific objective evidence of fair value for each element of the arrangement does not exist, all revenue from the arrangement is deferred until all elements of the arrangement are delivered.

Estimates of Returns and Bad Debt

        Our ability to accurately estimate returns and bad debt is critical in determining the amount of revenue to recognize. We present our revenues net of an allowance for returns and bad debts.

        We estimate returns for all products, as well as cancellations of magazine subscriptions, based on historical data, method of promotion and results of market testing for the products. Reserve levels are adjusted as actual return data is received. On a consolidated basis, our estimates of returns have not differed significantly from actual results.

        Estimates of bad debts are prepared using historical data based on the type of product and promotion and the source of customer. We review our bad debt reserves periodically to ensure they are appropriately stated. If actual results differ from our estimates, the reserve is adjusted as actual bad debt data is received. On a consolidated basis, our estimates of bad debts have not differed significantly from actual results.

        Revenues for our books and home entertainment and magazine businesses are principally driven by direct mail and, therefore, are the most sensitive to changes in payment rates and returns. Our

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School and Education Services businesses are much less susceptible to changes in payment rates and returns because the businesses in this segment collect most of their cash at the point of sale.

Inventory Valuation

        We periodically assess our inventory for obsolescence and to ensure it is recorded at the lower of cost or market value. In estimating the necessary inventory reserve, we forecast demand for products on hand and assess market conditions, including potential usage in future promotions. We also consider the shelf-life of our perishable inventory. Adjustments to inventory reserves are recorded in product, distribution and editorial expenses on the statements of operations. On a consolidated basis, our estimates of bad debts have not differed significantly from actual results. As of June 30, 2007, we have established an inventory reserve of $(64) or 25% of our gross inventory. A 10% increase in our inventory reserve at June 30, 2007 would have affected our net loss by approximately $19 in 2007.

Deferred Promotion Costs and Related Amortization

        Promotion costs for our books and home entertaining advertising costs are deferred only if certain criteria are met, including whether the future profit expected to be generated by a promotional campaign is greater than the costs deferred. Estimates of revenues and profits to be generated and of returns are made using historical data based on the type of product, method of promotion and customer targeted. As actual results for a specific promotional campaign are received, the campaign is reassessed. To the extent that capitalized costs of the campaign exceed the profit expected to be generated, the difference is expensed immediately. Amortization related to deferred promotion expenses is included in promotion, marketing and administrative expenses on the statements of operations. On a consolidated basis, our estimates have not differed significantly from actual results.

Pension Assumptions

        The calculation of pension income (expense) is based on various actuarial assumptions. We review these assumptions annually, together with actuarial consultants, to determine reasonable rates.

        During our periodic review of assumptions used in determining the net pension income (expense) to be recorded in 2007, we examined the assumed long-term rate of return on pension assets and the discount rate. Currently, the long-term rate of return on pension assets is the most significant factor in determining our net pension income (expense). The assumed long-term rate of return on pension assets represents the rate of return we expect our pension assets to earn over an extended time horizon. Accordingly, significant changes in this rate due to short-term fluctuations in market conditions are not appropriate.

        In 2007, our assumed long-term rate of return on pension assets, used to determine net pension income for our over-funded U.S. plan, was 8.5%. Based on our projections and expectations of future performance, we have not changed our long-term rate of return on pension assets for 2007. A 25 basis point decrease in the long-term rate of return on pension assets used for 2007 would have decreased net pension income by $(0.6). Because our U.S. Retirement Plan is over-funded, this would not have affected our funding strategy.

        In 2007, our assumed long-term rate of return on our international pension assets, used to determine the net pension expense, was 7.05%. Based on our projections and expectations of future performance, our long-term rate of return on international pension assets for fiscal 2008 was adjusted to 7.11%. A 25 basis point decrease in the weighted average long-term rate of return on pension assets used for 2007 would have increased net pension expense by approximately $0.3.

        The discount rate is currently not as significant an assumption in calculating the net pension income or benefit obligation for our U.S. plan because our plan is mature and includes a significant number of retirees who are currently receiving benefits. Accordingly, the period over which the

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obligation is discounted is much smaller than it would be for other employers' plans. In 2007, the discount rate used to determine the pension income for our U.S. plans was 5.50%. Our discount rate for the 2008 pension income will increase to 6.25%. A 25 basis point decrease in the discount rate used for 2007 would have decreased net pension income by $(0.1). The discount rate is matched to yield curves reflective of the cash flows of our plan and also compared to indices of high-quality long-term corporate bonds of the appropriate duration.

        For the international plans, the weighted average discount rate used to determine the pension expense was 5.07% in 2007, respectively. The weighted average discount rate projected for pension expense in 2008 is expected to increase to 5.57%. This is primarily driven by the increase in rates of high-quality long-term corporate bonds in the United Kingdom. A 25 basis point decrease in the discount rate used for 2007 would have increased net pension expense by approximately $0.1. The discount rates are generally set by reference to yields of high-quality long-term corporate bonds of the appropriate duration.

        Income and expenses associated with our pension plans are included in promotion, marketing and administrative expenses on the statements of operations. Impacts on respective countries vary depending on the nature of each individual plan.

Restructuring Charges

        Restructuring charges are recorded in accordance with SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities" or SFAS No. 112, "Employers' Accounting for Postemployment Benefits." Under SFAS No. 146, costs associated with restructuring actions, including one-time severance benefits, are only recorded once a liability has been incurred. However, the severance programs at Reader's Digest Association, Inc. generally do not qualify as one time benefits; therefore, we recognize severance amounts pursuant to SFAS No. 112 and SFAS No. 88, "Employers' Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits" (the impact of pension curtailments and settlements that are directly attributable to our restructuring actions are recorded in accordance with SFAS No. 88). Severance incurred in connection with the Acquisition Transaction are recognized in connection with purchase accounting and in accordance with EITF Issue No. 95-3 "Recognition of Liabilities in Connection with a Purchase Business Combination." Severance charges represent the cost to separate employees from our operations to streamline the organization. The separation is accomplished through a combination of voluntary and involuntary severance programs. As such, severance amounts are recorded when a termination plan is developed and approved, including the identification of positions to be separated, and when payment is probable and estimable. Other amounts related to restructuring actions, including charges to terminate contractual obligations in connection with streamlining activities, are estimated and recorded in accordance with SFAS No. 146.

        The impact of restructuring charges is recorded in other operating items, net on the statements of operations. See Note 4, Other Operating Items, Net, in our Notes to Combined Consolidated Financial Statements for further information.

Long-Lived Assets

        Goodwill and intangible assets with indefinite lives are assessed for impairment annually, or on an interim basis if indicators of impairment are present. These assessments, which require a significant level of judgment, involve management's estimates of future cash flows, market trends and other factors. If goodwill and intangibles with indefinite lives are determined to be impaired, a loss is recorded.

        Management's estimates of future cash flows take into consideration market trends and our internal projections of performance relative to other constraints, including the efficiency and

57

effectiveness of sales channels and potential changes in market penetration. External factors, such as competition and the health of regional economies, must also be considered. Although these factors are critical to assessing impairment, estimates of fair value are also sensitive to small changes in profit margins and discount rates.

        Intangible assets with finite lives must be assessed for impairment whenever changes in circumstances indicate that the assets may be impaired. We assess recoverability by comparing the asset's carrying amount to the undiscounted future net cash flows expected to be generated by the asset. To the extent the carrying value of the asset exceeds its future cash flows, an impairment loss is recorded based on the fair value of the asset. See Note 7, Goodwill and Other Intangible Assets, Net, in our Notes to Combined Consolidated Financial Statements for further information.

        In addition to the above, property, plant and equipment is reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of that asset may not be recoverable in accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." We assess recoverability by comparing the asset's carrying amount to the undiscounted future net cash flows expected to be generated by the asset. If we determine that the asset is impaired, the impairment recognized is the amount by which the carrying amount of the asset exceeds the fair value of the asset. Impairments are recorded in other operating items, net on the statements of operations. See Note 4, Other Operating Items, Net, in our Notes to Combined Consolidated Financial Statements for further information.

Income Taxes

        Income taxes are accounted for in accordance with SFAS No. 109, "Accounting for Income Taxes," which requires that deferred tax assets and liabilities be recognized, using enacted tax rates, for the effect of temporary differences between the book and tax bases of recorded assets and liabilities. Deferred tax assets, including net operating losses, are reduced by a valuation allowance if it is "more likely than not" that some portion or all of the deferred tax assets will not be realized.

        We are subject to tax in a number of locations, including many state and foreign jurisdictions. As might be expected, significant judgment is required when calculating our world-wide provision for income taxes. Because of this uncertainty, we establish consolidated tax liabilities based on an estimate of whether it is likely that additional taxes and interest will be due. In some cases, many years may elapse before an audit is completed with respect to items for which a reserve has been established. As settlements are reached, we adjust the corresponding accruals, if required, in the period in which the final determination is made. The establishment of valuation allowances is dependent on and requires significant judgment as to expected future operating results of both foreign and domestic operations.

Quantitative and Qualitative Disclosures About Market Risk
(includes forward-looking information)

        The functional currency for our foreign operations is the local currency. In the normal course of business, significantly all of the transactions of our foreign operations occur in the local currency. We purchase forward contracts to minimize the effect of fluctuating currencies on specifically identifiable transactions. These transactions were minimal in 2007 and during the first quarter of 2008. Based on our historical experience, we expect the foreign exchange gains and losses over the next year to be minimal.

        Interest expense related to our senior secured credit facility is sensitive to changes in the general level of U.S. interest rates. The senior secured credit facility includes within the above-mentioned facilities a US$100.0 term loan tranche made available in an equivalent amount of euros to one of our German subsidiaries. Borrowings under the term loan bear interest at a rate equal to an applicable margin plus, at our option, either (a) a base rate ("Base Rate") determined by reference to the higher

58

of (1) the prime rate and (2) the federal funds rate plus 0.50% or (b) a Eurocurrency rate ("Eurocurrency Rate") determined by reference to the rate for Eurocurrency deposits for a period of one, two, three or six months or, subject to availability to the lenders, nine or twelve months, as selected by us. For Base Rate loans and Eurocurrency Rate loans, the applicable margin is 1.00% and 2.00%, respectively.

        Based on our average debt outstanding under this agreement over the prior fiscal year, a 1% change in the interest rate charged on these borrowings would have affected our 2007 interest expense by $4.4. Based on our average debt outstanding under this agreement over the first quarter of 2008, a 1% change in the interest rate charged on these borrowings would have affected our interest expense during the first quarter of 2008 by $(1.9).

        We entered into interest rate swap agreements with a notional value totaling $750.0, involving the exchange of floating- for fixed rate interest payments, to reduce interest rate volatility and to comply with the interest rate provisions of our senior secured credit facility.

        Additional information is available in Note 8, Financial Instruments, in our Notes to Combined Consolidated Financial Statements.

Recent Accounting Standards
(includes forward-looking information)

        In June 2006, the FASB issued FASB Interpretation 48, "Accounting for Uncertainty in Income Taxes—an Interpretation of SFAS 109" (FIN 48). FIN 48 clarifies the accounting for income taxes by prescribing a minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. It also provides guidance on derecognition and measurement of tax positions. Disclosure requirements under this guidance will include a rollforward of the beginning and ending unrecognized tax benefits as well as specific detail related to tax uncertainties for which it is reasonably possible the amount of unrecognized tax benefit will significantly increase or decrease within a year. FIN 48 is effective for fiscal years beginning after December 15, 2006 for public companies and for fiscal years beginning after December 15, 2007 for non-public companies. We adopted FIN 48 effective October 1, 2007. See "Note 10—Income Taxes" in our Notes to Combined Consolidated Financial Statements for additional information.

        In September 2006, the FASB issued Statement of Financial Accounting Standards (SFAS) No. 157, "Fair Value Measurements" (SFAS No. 157). This Statement defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. This Statement applies under other accounting pronouncements that require or permit fair value measurements. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. We are evaluating the impact of this standard on our consolidated financial statements and the impact is not expected to be material.

        In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities. SFAS No. 159 permits entities to voluntarily choose to measure many financial assets and financial liabilities at fair value. The election is made on an instrument-by-instrument basis and is irrevocable. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. We are currently evaluating the provisions of SFAS No. 159 to determine the potential impact, if any, the adoption will have on our consolidated financial statements.

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BUSINESS

The Acquisition Transactions

        On January 23, 2007, RDA Holding Co. (a Ripplewood Holdings L.L.C. ("Ripplewood") controlled entity), WRC Acquisition Co. (a subsidiary of RDA Holding Co.) and WRC Media Inc. ("WRC Media") entered into a merger agreement that provided for WRC Acquisition Co. to merge with and into WRC Media, with WRC Media being the surviving corporation (the "WRC Media Merger"). An investment fund affiliated with Ripplewood acquired its original interest in WRC Media in 1999 and had at the time of the WRC Media Merger approximately a 46% economic interest and a majority voting interest in WRC Media. The merger consideration of $100.7 million paid to WRC Media's existing stockholders to acquire all the common stock of WRC Media at the closing of the WRC Merger on March 2, 2007 included a combination of RDA Holding Co. common stock ($80.6 million), RDA Holding Co. junior pay-in-kind preferred stock ($20.0 million) and cash ($100,000).

        On January 23, 2007, RDA Holding Co. entered into a stock acquisition agreement to acquire all the common stock of Direct Holdings U.S. Corp. ("Direct Holdings") in exchange for shares of common stock of RDA Holding Co. and net cash totaling $56.7 million (the "Direct Holdings Stock Acquisition"). An investment fund affiliated with Ripplewood acquired its original interest in Direct Holdings in December 2003 and had at the time of the Direct Holdings Stock Acquisition approximately a 84% voting and economic interest in Direct Holdings. The net consideration of $56.7 million paid at the closing of the Direct Holdings Stock Acquisition on March 2, 2007 included a combination of RDA Holding Co. common stock ($50.1 million) and net cash ($6.6 million).

        On March 2, 2007, RDA Holding Co. acquired us pursuant to a Merger Agreement dated November 16, 2006 among us, RDA Holding Co. and Doctor Acquisition Co. (a wholly owned subsidiary of RDA Holding Co.) (the "RDA Merger Agreement"). Pursuant to the RDA Merger Agreement, Doctor Acquisition Co. was merged with and into us, with The Reader's Digest Association, Inc. being the surviving corporation (the "Acquisition Transaction"). In the Acquisition Transaction, each outstanding share of our common stock (except those held in treasury) was converted into the right to receive $17.00 in cash and each outstanding share of Doctor Acquisition Co. was converted into one share of our common stock, as the surviving corporation. Upon the closing of the Acquisition Transaction, RDA Holding Co. became the owner of all of our issued and outstanding common stock.

        Prior to the consummation of the Acquisition Transaction, we were a publicly traded company listed on the New York Stock Exchange. As a result of the Acquisition Transaction, our shares ceased to be listed on the New York Stock Exchange, and we operate as a privately held company.

        Concurrently with the closing of Acquisition Transaction on March 2, 2007, RDA Holding Co. contributed all of the outstanding shares of WRC Media and Direct Holdings to us.

        For a description of the accounting methods used to account for the Acquisition Transaction, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Basis of Presentation."

        We report on a fiscal year that begins July 1. The year ended June 30, 2007 is our fiscal 2007. WRC Media and Direct Holdings previously reported on a fiscal year that ended on December 31 and on a fiscal year that ended on the last Saturday in June, respectively. Subsequent to March 2, 2007, both WRC Media and Direct Holdings changed their respective fiscal year ends to June 30.

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Overview

        We are a diverse multimedia publisher and a leading provider of information, entertainment, and education through our published magazines, books, educational products, recorded music collections and home video products. We also sell products through QSP, Inc. ("QSP"), our schools and youth fundraising company, Books Are Fun, Ltd. ("Books Are Fun"), our display marketing business. Our business is organized and reports across three primary business segments: Reader's Digest North America, Reader's Digest International and School & Educational Services (formerly known as Consumer Business Services), as discussed in more detail below under "Our Business Segments."

        We believe that our principal publications enjoy strong brand awareness. According to the 2006 Young & Rubicam Brand Asset Valuator study, Reader's Digest is one of the strongest publishing brands in the United States. Additionally, we have a customer database of over 100 million names worldwide to which we market our products.

        As of June 30, 2007, the end of our fiscal year, we published 90 magazines consisting of 50 distinct editions of our flagship Reader's Digest magazine and 40 other specialty magazines worldwide, including Every Day with Rachael Ray, Taste of Home, The Family Handyman, Birds and Blooms, Our Canada and Weekly Reader. Reader's Digest magazine is sold in approximately 70 countries and published in 50 editions and 21 languages. As of June 30, 2007, total global circulation for our magazines was approximately 41 million with estimated global readership of over 100 million.

        Our diverse line of books and home entertainment products, both in North America and internationally, include Reader's Digest Select Editions (formerly known as Condensed Books), general books, series books, recorded music collections and series, and home video products. Bestselling non-series books include Taste of Home Cookbook (approximately 835,000 copies sold in fiscal 2007), Extraordinary Uses for Ordinary Things (approximately 397,000 copies sold in fiscal 2007), Atlas of the World (approximately 391,000 copies sold in fiscal 2007), Discovering the Wonders of the World (approximately 232,000 copies sold in fiscal 2007), and 30 Minutes a Day to a Healthy Heart (approximately 216,000 copies sold in fiscal 2007). Our books and home entertainment products are primarily marketed and sold through direct mail, as well as through the Internet, direct response television ("DRTV"), telemarketing, package inserts, freestanding inserts, catalogs and Books Are Fun. For the fiscal year ended June 30, 2007, we sold more than 68 million books, music products and video products worldwide. We have a music collection of more than 11,000 original titles that are packaged and sold in 43 countries, and our video products are marketed in 34 countries. Our Direct Holdings subsidiary is a direct marketing business that sells recorded music compilations and video products primarily through DRTV under the Time Life brand, which Direct Holdings licenses from Time Warner.

        We publish education materials for the pre-K through grade 12 market in the United States through Weekly Reader magazines, books, World Almanac, and CompassLearning, businesses that were combined with RDA following the March 2, 2007 transaction. We also sell products through multiple channels including QSP, our schools and youth fundraising company, and Books Are Fun, our display marketing business. Our Internet food websites, Allrecipes.com, Tasteofhome.com and rachelraymag.com have approximately 90,000 combined recipes. Allrecipes.com, a food lifestyle community is an online cooking community where home cooks from around the world come to share, rate and download recipes and meal ideas with approximately eight million unique visitors per month.

        We are a Delaware corporation, originally incorporated in New York in 1926, then reincorporated in Delaware in 1951. Our corporate headquarters are located at Reader's Digest Road, Pleasantville, New York 10570 and our telephone number is (914) 244-1000.

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Our Strengths

        Leading global brand and unparalleled footprint.Reader's Digest magazine is one of the worlds most widely subscribed and read magazine franchises, with a circulation of over 18 million worldwide and almost 70 million readers. According to the 2006 Young & Rubicam Brand Asset Valuator study, Reader's Digest is one of the strongest publishing brands in the United States. The magazine is published in 50 editions and in 21 languages. We have developed a diversified product portfolio that includes 90 magazines, series and single-sales books and a music collection with more than 11,000 titles. We sell books and magazines in over 70 countries around the world and have a global database of more than 100 million households. We sell music products in 43 countries and video products in 34 countries.

        Extensive channels of distribution and diversified customer base.    We have multiple channels of distribution through which we serve our highly diversified customer base. We market and sell our products through direct mail (including catalogs), the Internet, DRTV, telemarketing, package inserts, freestanding inserts, display marketing and direct selling. Furthermore, our QSP division is a leading schools and youth fundraising support organization in the United States, while our Books Are Fun division is one of the largest display marketers in the United States. Our extensive customer database provides us with the ability to cross-sell by marketing our full portfolio of products to existing customers. We believe that our diversified revenue streams reduce the risk of product, marketing channel, customer and geographic revenue concentration.

        Strong operating performance in our core businesses.    During the past three years, excluding costs and amortization related to the Acquisition Transaction, our core businesses reported in our North America and International segments have experienced strong operating profit growth and margin expansion. For the three-year period ended June 30, 2007, the operating margins in our Reader's Digest North America segment have improved by 2.9%, with operating profit growing 13.1% on a compounded annual basis. Over the same period, Reader's Digest International's operating margins have expanded 0.4%, with operating profits increasing 6.9% on a compounded annual basis.

        Well-developed product portfolio targeting high-interest consumer and advertising affinities.    Our content and products target four high-interest consumer and advertising affinities: Food & Entertaining, Home & Garden, Health & Wellness, and RD Inspiration. We believe these affinities have high consumer engagement and are, therefore, attractive to advertisers. We have the leading market share in the popular food affinity magazine publishing market through our Taste of Home and Every Day with Rachael Ray titles. Our Internet food site Allrecipes.com is among the top three food lifestyle websites, and the leading social networking food site on the Internet.

        Experienced and committed leadership team.    Our current senior management team provides us with a combination of both deep-rooted and recent experience at our company, and averages over 20 years of experience in the publishing industry. Our leadership team is led by Harvey Golub, the Chairman of our Board of Directors, and Mary Berner, our President and Chief Executive Officer. Mr. Golub and Ms. Berner are among the most accomplished executives in their respective industries.

        Leading financial sponsor with publishing and direct mail experience.    Ripplewood Holdings L.L.C. ("Ripplewood") is a leading private equity firm that specializes in sponsoring companies and providing operational oversight. Ripplewood was founded in 1995 and has invested over $10 billion in a number of industries, including publishing, direct marketing, consumer products, chemicals, financial services, telecommunications and technology. Prior transactions in the direct marketing and publishing sectors include the acquisitions of Direct Holdings, WRC Media and Shaklee.

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Our Business Strategy

        We are focused on expanding our position as a leading provider of information, entertainment, and education through our magazines, books, recorded music collections, home video products and educational materials. Our business strategy concentrates on three key areas:

        (1)   Financial flexibility;

        (2)   Growth engines and value creation; and

        (3)   People and culture.

Financial Flexibility

        We are engaged in a Company-wide effort to deliver cost savings. We believe that this initiative is critical to both our short- and long-term health, as it will drive improved margins, reduce costs to strengthen the financial health of the Company, and create financial flexibility by saving funds that can be directed into other corporate needs. The goals of our expense reduction are:

•

To improve the way we do business;



•

To reduce the costs of purchased products and service; and



•

To thereby improve our return on capital.

        We currently have a high standalone cost structure. Our selling, general and administrative expense (defined as promotion, marketing and administrative expense) was approximately 53% of sales in fiscal 2007, which we believe is higher than that of many other publishers. We have identified annual cost savings from our becoming a private company, implementing headcount reductions and the absence of certain other expenses. We also believe there are significant cost and revenue synergies among our product affinities, including infrastructure and distribution channel synergies. Additionally, we have been working with a leading supply chain consulting firm to analyze our infrastructure in order to identify additional cost reduction opportunities within our supply chain and maintenance, repair and operations functions. On October 17, 2007, we entered into a seven year contract with Williams Lea, a global corporate information solutions provider, which is expected to reduce our print procurement cash expenditures by an aggregate of approximately $130 million over the first three years. See "Business—Production and Fulfillment" for more information.

Growth Engines and Value Creation

        We aim to increase our value by organizing our Company to leverage our leading businesses and brands into opportunities for growth by creating product affinities, continuing to expand internationally, and developing our channels and digital products. We anticipate that these efforts will strengthen our portfolio of companies and improve our business performance.

        In March 2007, we began to shift to an affinity-based focus in the United States, which allows us to market our portfolio of content assets around business divisions based on consumer affinity interests. By organizing around the following four affinities, we believe that we will be able to more effectively leverage our platform to both customers and advertisers in the United States:

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Food & Entertaining—We are the largest food publisher in the United States, based on magazine circulation of more than 7 million as of June 30, 2007, with several popular food magazines, cookbooks, websites and cooking events that engage consumers across a variety of media. Our key products within this affinity are the award-winning magazine Every Day with Rachael Ray; Taste of Home, the largest-circulation U.S. food magazine; related Taste of Home food magazines, cookbooks and cooking schools; Taste of Home Entertaining, our home party plan business; and Allrecipes.com.

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Home & Garden—We have several leading magazines in the Home and Garden space with total circulation of approximately 7.5 million as of June 30, 2007. Our key magazines in this affinity include The Family Handyman, the largest U.S. do-it-yourself publication with a circulation of approximately 1.1 million, Birds & Blooms, with a circulation of approximately 1.7 million, and Backyard Living, with a circulation of approximately 0.9 million. This affinity also sells home and garden-related books and merchandise.



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Health & Wellness—We are a publisher of health content, and our key products within this affinity are global health-related books such as Magic Foods for Better Blood Sugar. In addition, we have an extensive ailment database to which we periodically promote products and services.



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RD Inspiration—We publish products that inspire by celebrating the power of the individual, including our flagship title, Reader's Digest and its brand extensions, Selecciones and Reader's Digest Large Print for Easier Reading, plus trade publishing, reading series (including Select Editions) and music. Total circulation in this affinity is approximately 11 million as of June 30, 2007.

        We believe that our shift to a focus based upon consumer interest affinities within the United States allows our customers to more effectively engage with our content and products, enabling us to offer cross-platform content and advertising packages to both consumers and advertisers, to promote advertising growth across our flagship Reader's Digest magazine and special interest titles including Every Day with Rachael Ray and Taste of Home, and to build and grow our digital assets. While we believe many publishers generate more than 50% of magazine revenue from advertising, advertising represented a significantly smaller percentage of our total magazine revenue in fiscal 2007. Please see "Circulation and Advertising" below.

        In the past two years, we launched or acquired three new business concepts: Every Day with Rachael Ray magazine, Taste of Home Entertaining and Allrecipes.com. Every Day with Rachael Ray was named Advertising Age's 2006 "Launch of the Year" and, as of June 30, 2007, had increased its rate base from an initial 350,000 to approximately 1.3 million. Taste of Home Entertaining, a home party plan business, leverages the Taste of Home brand and has approximately 8,400 consultants who have held approximately 38,000 parties and sold approximately 1.0 million products in fiscal 2007. Allrecipes.com currently has 2.4 million registered members who post recipes and reviews to the website, which has approximately eight million monthly unique visitors. Allrecipes.com generates revenue from advertising sponsorship and business-to-business software licensing. In addition, in March 2007, we added Direct Holdings and WRC Media to our family of businesses.

        We anticipate investing in global expansion within our International segment by entering new countries, launching new editions of Reader's Digest magazine, and rolling out new products. After launching businesses in ten new markets in the past four fiscal years, we expect to expand into additional markets such as Turkey, Saudi Arabia and The People's Republic of China in fiscal 2008. There is a rigorous selection process to identify potential new markets that includes selecting areas for expansion that have a high literacy rate, a reliable postal system, a favorable regulatory environment and strong market test results. For the fiscal year ended June 30, 2007, the ten new markets generated approximately $47 million in revenue and $12 million in operating profit. We believe there is a significant opportunity to expand further globally.

        Our School & Educational Services segment brings together QSP, Books Are Fun, Weekly Reader Publishing Group, which publishes Weekly Reader, a learning-based classroom periodical with approximately 5.3 million U.S. subscribers throughout the United States, and CompassLearning, provider of a leading computer-based school curriculum that allows students to develop their math and English skills. We expect to expand this segment by leveraging our relationships with teachers, school administrators, parents and students. We believe that revenue synergies can be achieved by integrating

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product sales with fundraising; databases and direct marketing with field sales forces; and product-rich entities with distribution.

        We expect to expand our marketing channels worldwide, particularly expanding our digital efforts. Our digital strategy is to build online brands to amass large audiences, leveraging our brand equity and content to profitably sell advertising and magazine subscriptions and to aggressively acquire and retain customers online along all points of contact to sell more products, and do so more cost-effectively. We also expect to leverage other non-direct mail channels such as retail, display marketing and DRTV.

People and Culture

        We seek to transform our Company to create more consistent and sustainable performance that will enhance profitability and cash flow while positioning the Company for sustained long-term growth. We are committed to fostering a rapid and innovative environment, and evolving our corporate culture into a high-performance organization. To this end, we have launched a globally consistent platform to drive accountability and to enhance our performance-based culture. This platform was designed with the following objectives in mind:

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Drive accountability to all employees;



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Raise the bar on performance;



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Ensure expectations are communicated; and



•

Increase the probability of our success.

We also have a significant effort underway to upgrade talent across our entire company.

Our Business Segments

        Our business is organized and reports across three business segments: Reader's Digest North America, Reader's Digest International and School & Educational Services. However, for fiscal 2007 we had not yet fully integrated the March 2007 additions of WRC Media and Direct Holdings into our three business segments. Therefore, these companies were operated and monitored separately for fiscal 2007. We expect to have the operations of these companies fully integrated into our historic segment structure in fiscal 2008. In addition, historically our Canadian operations were reported in our North American segment, but are expected to be reported in our International segment for fiscal 2008.

        Information regarding each segment's revenue, income or loss before taxes for each of the last three fiscal years and total assets as of the end of each of the last two fiscal years is included in "Note 15—Segments" in our combined consolidated financial statements included in this prospectus, which is incorporated by reference herein.

Reader's Digest North America

        During fiscal 2007, our North American segment comprised our operations in the United States and Canada that primarily publish and market magazines, books and home entertainment products, including

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U.S. Magazines—Three editions of Reader's Digest magazine and special interest magazines such as The Family Handyman and Every Day with Rachael Ray.



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Reiman Books and Magazines—Books and 13 special interest magazines, such as Taste of Home, Country and Birds & Blooms, focusing on food, home and garden and other lifestyle topics, as well as cooking schools, catalogs and travel tours.

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U.S. Books and Home Entertainment—Select Editions books, Young Families products, series and general books, children's and trade publishing, and music and video products.



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Canada—Canadian editions of Reader's Digest magazine, BHE products and Our Canada magazine.



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Other—Taste of Home Entertaining, a home party plan business, and Allrecipes.com, an online recipe and cooking business.

        For the fiscal year ended June 30, 2007, Reader's Digest North America contributed $985 million and $110 million to our revenue and operating profit, respectively.

        The performance of Reader's Digest magazine and special interest magazines is driven primarily by circulation revenue and advertising sales. Reader's Digest North America uses various direct marketing techniques to acquire new customers in a cost-efficient manner. Many of our publications possess an innovative editorial model that makes extensive use of reader-generated content. Historically, these reader-generated magazines have not included significant advertising, and, accordingly, circulation has been the principal driver of performance in this business. However, we expect to promote advertising in these magazines in the future. The results of the U.S. and Canadian books and home entertainment businesses are driven by their new customer acquisition programs, response rates to their promotional mailings, customer payment rates and membership in their continuity series businesses. The performance of our Taste of Home Entertaining business is driven by the number of consultants, number of parties and average sales per party. The performance of our Allrecipes.com site is driven by monthly visitors, advertising, and licensing.

U.S. Magazines

        Reader's Digest Magazine.Reader's Digest is a reader-driven, general interest family magazine with an editorial mission to inform, entertain and inspire. The articles, book section and features included in Reader's Digest cover a broad range of contemporary issues and reflect a focus on the power of the individual to make a difference in their own lives and the lives of others. Commencing with its January 2008 issue, the look of Reader's Digest will be redesigned to give it a more contemporary feel and to introduce the magazine's "Life Well Shared" tagline. In addition to original articles, the United States English-language edition of Reader's Digest also contains reader-generated monthly humor columns, such as "Laugh! It's the Best Medicine" "Life in These United States" and "@Work—All In A Day's Work," and other regular features, including "Quotes," "Word Power," "Only in America," "Heroes," "Outrageous!" and "Guide."

Reader's Digest is published in several editions in the United States, including the flagship English-language edition, a Spanish-language edition titled Selecciones, and Reader's Digest Large Print for Easier Reading, as well as Braille and recorded editions.

        Selecciones.Selecciones is the Spanish-language edition of Reader's Digest that is published in the United States. It is the world's most popular magazine in a Spanish-language edition, with a circulation of approximately 375,000 as of June 30, 2007. In every issue there is a broad range of topics including useful advice, entertainment, inspiration, ways to cope with stress, the latest medical discoveries, and tips to manage time and investments.

        The Family Handyman.    We publish The Family Handyman, which provides inspiration, instructions and guidance for do-it-yourself home improvement projects. The Family Handyman has a circulation of approximately 1.1 million as of June 30, 2007. Under The Family Handyman brand, we also publish special homeowner custom publications that are used by real estate brokers.

        Every Day with Rachael Ray.Every Day with Rachael Ray is a full-size glossy magazine that features the popular author, TV food personality and talk show host Rachael Ray. The magazine offers

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smart and easy recipes, as well as practical advice on food destinations and entertaining. Every Day with Rachael Ray has a circulation of approximately 1.3 million as of June 30, 2007. The magazine featured nine issues in fiscal 2007, and has a companion website at www.rachaelraymag.com, which contains additional recipes in addition to the ones published in the magazine.

        rd.com.    The rd.com website extends the experience of reading Reader's Digest through audio, graphic, text and video enhancements, interactive discussions and reader involvement, and additional content relating to Reader's Digest. We also utilize rd.com to market our products through e-mail and the Internet, as well as to communicate with, and provide service to, our customers online.

Reiman Books and Magazines

        Reiman publishes 13 special interest magazines on food, home and garden and other lifestyle topics in addition to offering books, cooking schools, catalogs and travel tours. Reiman has an innovative editorial model that makes extensive use of reader-generated content. Historically, almost all of Reiman's publications have not accepted on-page advertising, making circulation the principal driver of performance. However, we expect to promote advertising in these magazines beginning in fiscal 2008.

        The editorial philosophy for our Reiman products includes the following core principles: (1) concentration on positive aspects of people and their lifestyles, (2) encouragement of reader involvement, (3) maintenance of low editorial costs, and (4) emphasis on product quality. Approximately 80% of the editorial content of Reiman magazines is contributed by readers.

        As of June 30, 2007, we believe that six of Reiman's magazines would have ranked in the top 100 in national circulation in the United States, with Taste of Home being the largest food magazine in the United States, based upon the most recent Audit Bureau of Circulation statistics. Reiman's strategy has included launching a number of new book annuals and magazines, as well as repurposing content for retail and trade sales through Books Are Fun, magazines and newsstand sales. Reiman has also focused on initiatives such as the re-launch of Quick Cooking as Taste of Home Simple & Delicious and is collaborating with Allrecipes.com to include content from Reiman's food publications.

        Reiman magazines.    Reiman publishes 12 bi-monthly magazines and one quarterly magazine in the United States and Canada, including Taste of Home, which is the largest-selling food magazine in the United States. Taste of Home is published six times a year and includes 68 full-color pages with more than 75 recipes in each issue. Taste of Home caters to readers who are looking for simple everyday recipes that can be created without exotic ingredients. The magazine was launched in 1993 and had approximately 3.5 million subscribers as of June 30, 2007. In addition to receiving recipes from its readers, Taste of Home also has approximately 1,000 field editors across the United States and Canada who regularly collect and send recipes to the magazine. The interactive aspect of the business model allows Taste of Home to cater to the needs of its loyal reader base and allows for a strong web presence at www.tasteofhome.com.

        Other notable Reiman magazine titles include three Taste of Home extension brand food magazines, as well as Birds & Blooms, Reminisce and Backyard Living.

        Reiman books.    Reiman also publishes books based on editorial content derived from material contributed to Reiman magazines by its readers. Reiman books are created to complement Reiman magazines and to leverage the magazines' brand equity, reader loyalty and editorial capability. Reiman principally markets annual editions of books that are mostly created from prior-year magazine content and markets single-sales products. Reiman has 13 annual book programs and two calendar programs (including one book program that was launched in fiscal 2007) that are marketed on an advanced consent basis, with customers agreeing to receive future editions of the books unless they respond to an annual prepublication notice. Reiman also publishes several popular cookbooks under the Taste of

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Home franchise. Reiman recently launched The Taste of Home Cookbook, which already has sold more than 800,000 copies.

U.S. Books and Home Entertainment

        We grouped as books and home entertainment ("BHE") products in our North American segment in fiscal 2007 Reader's Digest Select Editions, Reader's Digest Young Families, Reading Series Books, General Books, Recorded Music Collections and Series, and Adult Trade and Children's Publishing. These products are marketed and sold through direct mail and retail and also through the Internet, DRTV, telemarketing, package inserts and catalogs. Results in this business are driven by the size of the active customer base, response rates to promotional mailings and offerings, and membership in the continuity series business.

        Reader's Digest Select Editions.Reader's Digest Select Editions is a continuity series of condensed versions of current popular fiction. A condensed work reduces the length of an existing text while seeking to retain the author's style, integrity and purpose. BHE first published the Select Editions books in 1950 and currently publishes six volumes of Select Editions each year. Each Select Editions volume contains edited and condensed versions of today's bestsellers. Some popular authors who have appeared in recent Select Editions include James Patterson, Mary Higgins Clark, Nicholas Sparks, Nelson DeMille and Sue Grafton.

Select Editions are marketed primarily through direct mail to our existing customers and also promoted through offerings in Reader's Digest magazine, as well as e-mail and Internet offers.

        Reader's Digest Young Families.    Reader's Digest Young Families sells products for children up to age eight, primarily through direct mail and Internet promotions targeting new mothers and grandparents. The division's products include interactive books, such as Classics for Beginning Readers, Little Animal Adventures, Sesame Street ABCs and Read with Pooh, and videos, such as The Country Mouse and The City Mouse. Young Families sells its products principally in the United States and Canada.

        Reading Series books.    Our U.S. BHE markets open-ended reading series books. Notable titles include The World's Best Reading, Today's Best Non-Fiction, and Best Mysteries of All Time.

        General books.    General books include books that span our consumer affinity interests including cookbooks, health books, how-to and do-it-yourself books, and reference books, some of which we publish in series. BHE also publishes books on subjects such as history, travel, religion, nature, home, computers and puzzles.

        New general books are usually BHE original books, but also may be books acquired from other publishers. During the development period for an original RDA book, extensive research is conducted to prepare an appropriate marketing strategy for the book. BHE continues to examine its current marketing strategy and to identify new opportunities for growth.

        Music.    BHE releases music collections on compact discs in the United States. These releases span a broad range of musical styles, ranging from classical to pop and from local folk to relaxation music.

        BHE licenses existing recordings from major record companies and sponsors its own recordings with renowned orchestras and international and local artists, while continuing to acquire rights to master recordings. As of June 30, 2007, BHE owns a music collection of more than 11,000 original titles. BHE has digitized a major portion of these selections and now offers an increasing number of tracks through various online providers. BHE also licenses its selections to third parties for retail sales or for movie synchronization.

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        We are a member of the Recording Industry Association of America in the United States and have been recognized with 51 gold, platinum and multi-platinum certificates.

        Video.    BHE home video products reflect the interests of its global customers—travel, history, natural history and children's animated programs.

        BHE's high editorial and production standards differentiate its programs in a competitive marketplace. BHE original special interest documentaries are produced with award-winning production companies in Europe, Australia and the United States. To create programs cost effectively, BHE is developing partnerships with international broadcasters and prestigious moving-image archives.

        When original programs are filmed, the footage is archived for potential use in future productions. Additionally, BHE is responding to technological innovation by filming in high definition and by offering video products in multiple formats, including DVD.

        Reader's Digest Trade Publishing.    Trade Publishing sells books and products for both children and adults and comprises two divisions: Reader's Digest Children's Publishing and Adult Trade Publishing. Our Trade Publishing products are sold both within the United States and internationally, having been translated into 39 localized editions, and marketed in 40 other countries outside the United States and Canada.

        Reader's Digest Children's Publishing produces books, games and other products for children up to age 12 under the Reader's Digest Children's Publishing imprint. Its products are sold through retail channels as well as through its other businesses (including display marketing and catalogs) and other channels, including the Internet. The products represent such popular brands as Barbie, Disney (classic Disney and Pixar characters), Nickelodeon, Sesame Street, Fisher-Price, Marvel, Hasbro, Little Tikes and NASCAR.

        Reader's Digest Adult Trade Publishing originates books in many illustrated reference categories, including gardening, crafts, travel, do-it-yourself, history and family reference, including World Almanac Education Group, Inc. ("World Almanac"). These books are sold through retail channels, catalogs, book clubs, Books Are Fun, QSP and television. Through the adult Trade Publishing division, many illustrated reference categories, including gardening, crafts, travel, do-it-yourself, history and family reference, are sold to Reader's Digest International divisions.

Canada

        RDA's Canadian operations sell magazines and BHE products. RDA's Canadian operations have been working to build the most trusted brand with strategic partnerships in Canada. An integrated customer approach and multi-channel publishing strategy have led to a consistent performance in the region. In terms of paid circulation, Reader's Digest is the largest magazine in Canada, Our Canada is fifth largest and Selection du Reader's Digest, the French edition of Reader's Digest in Canada, is the seventh largest. Our Canadian magazine publishing company is focused on expanding through new magazines and digital growth, while establishing new partnerships and reaffirming existing relationships. Historically, including for fiscal 2007, our Canadian operations were reported in our North American segment, but are expected to be reported in our International segment for fiscal 2008.

Other initiatives

        Taste of Home Entertaining is a start-up home party plan business that markets merchandise directly to consumers. Taste of Home Entertaining was launched in May 2006 and has approximately 8,400 independent sales consultants who, in fiscal 2007, conducted approximately 38,000 home parties and sold approximately 1.0 million products that relate to entertaining in the kitchen, dining room and backyard. Other products include cookware, kitchen gadgets, cutlery, dinnerware, publications, decorations and celebrity chef Mario Batali's "The Signature Series" set of kitchen tools.

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Allrecipes.com, acquired in April 2006, is America's second-largest home cooking website, and leading social networking food website, with approximately 40,000 recipes that are created, reviewed and rated by participating home cooks. In 2007, recipes on the website were viewed approximately 540 million times, with an average of approximately eight million unique monthly visitors who have collectively viewed an average of 100 million pages per month. Females represent approximately 77% of the people who visit the website, with 70% between the ages of 25 and 54. Allrecipes.com has strong relationships with retailers and packaged goods advertisers and generates revenue from advertising sponsorships and business-to-business software licensing.

        We believe Allrecipes.com has the potential domestically and internationally to become a significant aggregator of online food content. This growth would provide us with a larger audience for our cooking-related products without increasing direct mail promotion, and we believe would provide a springboard for replicating this online model in our other affinities.

Reader's Digest International

        Our International segment during fiscal 2007 was organized across three primary regions: Western Europe, Central and Eastern Europe and Asia Pacific/Latin America. Commencing with fiscal 2008, we have re-defined these regions to consist of Europe, Canada/Latin America and Asia Pacific. In fiscal 2007, our International segment comprised our operations that publish and market magazines and BHE products in more than 70 countries outside of the United States and Canada, including:

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International Magazines;



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International Books and Home Entertainment; and



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New Products and Initiatives.

        Outside of North America, BHE sells its books in 44 countries, music products in 41 countries and video products in 32 countries. Most products and promotions are developed in the United Kingdom, France, Germany, Canada, Australia and the United States and are then adapted to other markets. For most international editions of Reader's Digest, subscriptions comprise more than 90% of circulation. Globally, Reader's Digest is published in 50 editions, which include editions published by third parties under licenses in eight countries. As with BHE products, these titles are sold primarily through direct marketing. To varying degrees, editorial content is created in local markets and housed in a central repository, enabling smaller markets to use the content developed in other markets around the world.

        On March 2, 2007, we acquired Direct Holdings, a direct marketer and retailer of music, video and book products. For fiscal 2007, we had not yet integrated the addition of Direct Holdings to our portfolio into our primary segment reporting. Therefore, the operations of Direct Holdings have been reported as a separate segment for fiscal 2007. We expect to have the operations of Direct Holdings fully integrated into our historic segment structure in fiscal 2008.

        In fiscal 2007, Reader's Digest International contributed $1.1 billion and $70 million to our revenues and operating profit, respectively.

International Magazines

        The content of and editorial procedures for the international editions of Reader's Digest are similar to those of the U.S. editions. Reader's Digest International magazines are marketed primarily through direct mail just as they are in Reader's Digest North America. Each international edition has a local editorial staff responsible for the editorial content of the edition. The mix of locally generated editorial material, material taken from U.S. editions and material taken from other international editions varies greatly among editions. In general, our larger international editions, such as those in France, Germany,

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Australia and the United Kingdom, carry more original or locally adapted material than the smaller editions.

        Globally, Reader's Digest is published in 50 editions and 21 languages. Reader's Digest International licenses the right to publish Reader's Digest to licensees in India, Italy, South Korea, Norway, South Africa, Slovenia, Croatia and Indonesia. At the end of our 2007 fiscal year, we received formal approval to publish Reader's Digest in The People's Republic of China. For most international editions of Reader's Digest, subscriptions comprise more than 90% of circulation. The balance is attributable to newsstand and other retail sales. Our international magazines are sold primarily through direct marketing. In fiscal 2007, Reader's Digest International also published two new magazines, including HealthSmart, a health and lifestyle magazine in Australia, and Our Beautiful Poland, a general interest magazine in Poland, and several other local initiatives.

        Some of Reader's Digest International's special interest magazines include Receptar, a leading Czech do-it-yourself and gardening monthly magazine, Handyman in Australia, Joy in Mexico, Young Family in Russia, and Daheim in Deutschland in Germany and Meidan Suömi in Finland, both general interest magazines.

        Reader's Digest International intends to launch new magazines in the future, including more editions of Reader's Digest magazine, special interest magazines and other initiatives through a globally coordinated development process that is already in place.

International Books and Home Entertainment

        The international element of the BHE business is similar to the U.S. business in that book, music and video products are sold using similar direct marketing techniques. Products sold within the United States, including those described in this prospectus under "Business—Our Business Segments—Reader's Digest North America—Books and Home Entertainment" also are marketed internationally.

        Books are published under a carefully orchestrated global publishing program. Product concepts are tested in a number of markets via direct mail, which leads to a publishing decision. Most titles are created in the United Kingdom, France, Germany, Australia and the United States and then adapted locally in other markets.

        BHE markets two types of series books internationally—reading series and illustrated series. These book series may be either open-ended and continuing or closed-ended, consisting of a limited number of volumes. BHE publishes reading series books in four languages and sells them in ten countries outside of the United States and Canada. Illustrated series, which are generally closed-ended, are published in six languages and sold in 11 countries. General books are published in 24 languages and sold in 44 countries outside the United States and Canada.

        BHE publishes Select Editions, its largest open-ended reading series, in 14 languages and sells them in 27 countries outside of the United States and Canada. Reader's Digest International publishes between four and six Select Editions volumes per year depending on the market. Reader's Digest International editions of Select Editions generally include some material from the United States edition or from other Reader's Digest International editions, translated and edited as appropriate. Reader's Digest International editions also may include condensed versions of locally published works with each local editorial staff determining the appropriateness of existing Select Editions works for its own local market.

        BHE promotes music collections on compact discs and cassettes in 41 countries and markets a range of video products in 32 countries, outside of the United States and Canada. Reader's Digest International original special interest documentaries are produced with award-winning production companies in Europe, North America and Australia.

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New products and initiatives

        New country expansion.    In the last four years, we have launched businesses in ten new countries, and we expect to continue to expand into several new countries in fiscal 2008 and beyond. In the past two years, we launched new businesses in Bulgaria, Kazakhstan, United Arab Emirates, Serbia, Bosnia and Lithuania, while launching new editions of Reader's Digest in Romania, Slovenia and Croatia. New country selection criteria include literacy rates, reliability of the postal system, level of interest in Western culture, customer acquisition costs and the regulatory framework. Once a country is selected, we typically offer books and promotion packages that have achieved the most success in other markets around the world as the introductory products.

        We have utilized two distinct entry strategies in our international expansion: licensing arrangements with local partners and a "go alone" strategy where we form our own subsidiary. In markets with more moderate scale, we have negotiated licensing agreements with local partners who run the business while we provide products, promotion packages, best practices and other support. These arrangements are established with limited upfront investment and are structured with revenue and profit sharing agreements. Examples of successful licensing arrangements include launches in Croatia, Slovenia, Bosnia and Herzegovina, and Serbia with local partner Mladinska Knjiga, a regional publishing house; and in Lithuania with Alma Littera.

        Markets with greater scale where we have access to customer lists are better suited for a "go alone" entry strategy. Once a market test returns the desired level of attractiveness, we invest in a small local editorial and operating staff and establish limited local infrastructure. This entry strategy has been adopted successfully in Romania, Ukraine, Kazakhstan and Bulgaria.

        Under both strategies, significant management support is given from "hub" markets, such as the Czech Republic and Russia, as well as global and regional departments.

        English language learning.    Reader's Digest International is also focused on building a scalable global English language learning business. This product benefits from our brand, direct marketing, editorial expertise and existing international platform. The first product developed was "English in Twenty Minutes a Day," a print/CD-based product. "English in Twenty Minutes a Day" has been launched in over 18 markets.

Direct Holdings

        Direct Holdings is a direct marketer and retailer of music, video and book products. Direct Holdings has an exclusive license to sell specified categories of products under the Time Life trademark pursuant to a license agreement with Time Warner Inc. and Time Inc. The ten year licensing agreement expires in 2013 with a provision for a further ten-year renewal term expiring in 2023. The license agreement is applicable to books, prerecorded music, video and audio products, educational and entertainment software, and certain related products. The Time Life brand is recognized around the world as a trusted source of high-quality music, video and book content. Direct Holdings uses the Time Life brand as a key selling point in direct response, retail and direct market channels. As of June 30, 2007, Direct Holdings' worldwide marketing database consisted of over 16 million names and included transactional, behavioral and demographic information for all Direct Holdings customers. In fiscal 2007, Direct Holdings contributed $252 million and $(8) million to our revenues and operating (loss) profit, respectively.

        Direct Holdings predominantly operates in the music genres of Rock, Country, Christian, Classical, Easy Listening, Jazz, Blues, R&B and Christmas. Time Life brand music product primarily consists of content licensed through the four major record companies (the "Majors"). Licenses are typically for a five-year term and in North America often require production volume guarantees of 25,000 units. In North America, the company generally engages one of the Majors for the production of each

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compilation through a "finished goods" deal that is inclusive of master-use royalties and manufacturing costs. Depending on the type of product and its intended distribution channel, CDs range from twelve to thirty tracks and are one- to ten-CD set configurations.

        The Time Life brand has a global footprint throughout Europe, Asia and the South Pacific. In Europe, Direct Holdings licenses the majority of its music product from major labels and some independents. Direct Holdings directly manages the payment process for manufacturing expenses, royalties and publishing copyright. The majority of the music products sold in Europe are direct adaptations of products created in the United States, while the remaining music content is sourced locally in Europe. Music products are sold through all distribution channels in which we operate.

        Direct Holdings' video product categories include Comedy, Drama, Christian, History, Nature and Children. Most video product sales are in the form of single-DVD units or multi-DVD sets. Video products are sold through all distribution channels. Direct Holdings licenses its video product from various licensors. The company typically seeks to test a concept with no further purchase commitment. If the test is successful, a national rollout is scheduled, and in some cases an advance payment is made. Products either are purchased as finished goods from licensors, or Direct Holdings duplicates the product through a low-cost, third-party relationship with a U.S. duplicator.

        For international distribution of video products, Direct Holdings almost exclusively sources content locally in Europe from various rights-holders, while for music products almost half of the content is repackaged content from the United States. In Australia, video products are licensed from a variety of sources, such as major studios, TV stations and other rights owners. Direct Holdings is a significant participant in the video market in Australia particularly for special interest series. Because there is little competition in the market, the division is able to obtain many programs that are not available in other geographies. As in Europe, most products are sourced and developed locally.

        Direct Holdings' product fulfillment is outsourced both domestically and internationally. Direct Holdings utilizes multiple channels to market its music, video and book products, including long-form (typically 30 minute "infomercials") and short-form (two minutes or less) television advertising, outbound telemarketing, direct mail, the Internet and direct sales. DRTV is the engine that drives Direct Holdings' business in the U.S. market.

        By leveraging content across multiple distribution channels and across multiple geographic markets, Direct Holdings believes it is able to efficiently generate multiple revenue streams from a single product. In addition, once a new customer is acquired, the full breadth of product offerings is available for additional sales through a targeted contact strategy intended to extract maximum value from each customer on file. Direct Holdings has expanded the sources of customer acquisition beyond television advertising to include general Internet advertising. The new sources of customers include search engine marketing, affiliate relationships and traditional advertising. Additionally, Direct Holdings is redesigning many of the promotional pages on its website to increase their selling effectiveness and is actively building a database of email addresses for prospective and existing customers.

School & Educational Services

        Our School & Educational Services segment comprises United States and Canadian operations that have unique relationships with schools, teachers and students, and provide educational resources to a variety of audiences. This segment primarily publishes and/or markets magazines, books, educational products and home entertainment products, through the following business units:

•

QSP, Inc. and Quality Service Programs, Inc. (QSP);



•

Books Are Fun, Ltd. (Books Are Fun);



•

Weekly Reader Publishing Group (Weekly Reader); and

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•

CompassLearning, Inc. (CompassLearning)

For fiscal 2007 we had not yet fully integrated operations of the March 2007 addition of WRC Media operations into our School & Educational Services segment. Therefore, WRC Media was operated and monitored separately and has been reported as a separate segment for fiscal 2007. We expect to have the operations of these companies fully integrated into our School & Educational Services segment in fiscal 2008.

        QSP is one of the leading school and youth fundraising support organizations in North America, helping schools and other youth groups launch, promote and organize fundraising campaigns that sell our magazines, other publishers' magazines and food and gift products. In addition, QSP has online fundraising capabilities targeted primarily at small, non-school accounts through a number of fundraising Internet websites, such as eFundraising.com and Fundraising.com. As of June 30, 2007, QSP had approximately 400 sales representatives who work directly with schools and youth groups on fundraising campaigns.

        Books Are Fun operates in the United States and Canada and uses independent sales representatives who sell books and gift items, including RDA books and home entertainment products, at discount prices by display marketing at schools, businesses, corporations and hospitals through book fairs and other displays. Book categories sold by Books Are Fun include bestselling novels, cookbooks, children's books and education, sports, hobbies, nature, travel and self-help titles. Non-book categories include bath and beauty products, music, videos and gift items.

        As discussed under "The Acquisition Transactions," on March 2, 2007, we combined with WRC Media, parent of Weekly Reader Publishing Group and CompassLearning and a leading publisher of supplemental education materials for the pre-K through grade 12 market in the United States. Weekly Reader's product portfolio includes a broad array of print and electronic / Internet supplemental instructional and educational materials. For fiscal 2007, we had not yet integrated the addition of WRC Media to our portfolio into our School & Educational Services segment reporting. Therefore, the operations of WRC Media have been reported as a separate segment for fiscal 2007. We expect to have the operations of WRC Media fully integrated into our School & Educational Services segment reporting in fiscal 2008.

        Over the past several years School & Educational Services has experienced declining revenue and operating profits which, were mainly driven by fewer corporate events held by Books Are Fun and lower magazine volumes at QSP. These results were associated with the competitive pressures and costs associated with recruiting and retaining members of both divisions' sales forces. During the past few years both divisions have suffered the loss of sales force personnel or independent sales representatives due to aggressive hiring tactics by a key competitor. We are working to reverse adverse business trends in our School & Educational Services segment. Over the past year, we have restructured these operations, installed new senior management, and recently begun to see some sales representatives return to Books Are Fun, as well as begun to integrate and leverage Weekly Reader and CompassLearning.

        In fiscal 2007, School & Educational Services contributed $415 million and $0 to our revenues and operating profit, respectively.

QSP

        QSP operates in the United States and is one of the largest participants in youth fundraising support. As part of these activities, QSP markets and sells subscriptions to Reader's Digest magazine, the Reiman magazines, RDA's other special interest magazines and other publishers' magazines, as well as food, gift, music and book products. QSP works directly with schools and youth groups on fundraising campaigns in which participants sell those products and the schools and youth fundraising

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organizations retain a significant amount of the proceeds. QSP derives its revenue through services rendered in connection with fundraising events. A substantial majority of QSP's sales occur during the first half of its fiscal year, coinciding with the fall school semester. QSP currently employs approximately 400 sales representatives.

        Our Canadian subsidiary, Quality Service Programs, Inc., conducts operations in Canada substantially similar to those conducted by QSP in the United States.

        Operations at QSP are supplemented by several proprietary electronic fundraising websites that provide turnkey fundraising services and significant lead generation. QSP.com uses proprietary software that enables e-mail messages to be sent on behalf of students about their school or youth group's fundraising activities to family and friends. The e-mail directs the recipients to the school or youth group's website, where they may purchase magazine subscriptions and a variety of gift and food products. Other QSP websites, eFundraising.com and fundraising.com, provide fundraising products, mainly food products, to organizations conducting fundraisers.

        Several hundred other publishers make magazine subscriptions available to QSP at competitive discounted prices, while QSP obtains music products from a large music publisher. Many of QSP's chocolate food products are obtained from World's Finest Chocolate, a leading manufacturer of chocolate products for fundraising. In May 2007, we restructured our agreement with World's Finest Chocolate, Inc. to, among other things, reduce the term of the agreement from December 31, 2020 to December 31, 2009, reduce our annual minimum tonnage purchase requirements for the remaining term of the agreement, phase out the fundraising exclusivity rights previously granted to QSP (effective January 1, 2008), and eliminate certain employment restrictions. QSP engages independent contractors to process and fulfill gift, food, magazine, music and book orders.

        The fundraising business is characterized by a high proportion of variable costs (remittance to fundraising sponsors and publishers, sales commission and cost of goods sold), low working capital requirements and virtually no capital expenditures.

Books Are Fun

        Books Are Fun, through its independent sales representatives, sells premium-quality books and gift items, including BHE products, at discount prices. Books Are Fun display-markets its products on-site at schools and businesses throughout the United States and Canada through book fairs and other displays. Book categories sold by Books Are Fun include bestselling novels, cookbooks, children's books and education, sports, hobby, nature, travel and self-help titles. Non-book categories include bath and beauty products, music, videos and gift items. Books Are Fun's products are sold by approximately 800 independent sales representatives, who service approximately 70,000 schools, 12,000 large corporations and institutions, 13,000 daycare centers and 50,000 small businesses. Since many individuals purchase these products for gift giving, Books Are Fun's sales cycle is largely seasonal and typically experiences substantial volume in the second quarter of our fiscal year.

        Books Are Fun purchases book titles, gifts and other products from approximately 300 publishers and vendors worldwide. Books Are Fun uses an extensive network of independent public warehousing facilities and carriers to store and transport products.

        Success at Books Are Fun ultimately depends on the following: (1) quality of the product line-up, (2) average sales per event, (3) the number of events held, and (4) the number and quality of the sales representatives. Consumer acceptance of Books Are Fun's product line-up is essential and a key factor in average sales per event. Therefore, Books Are Fun focuses on the product selection and development process and inventory management to maintain a fresh product offering. We are also committed to attracting and retaining talented sales representatives.

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Weekly Reader Publishing Group

        Weekly Reader Publishing Group's revenue consists primarily of subscription revenue from periodicals and revenue from sales of books including workbooks, teacher resource materials and non-fiction reference books. Weekly Reader Publishing Group's customers are primarily within the United States. In fiscal 2007, Weekly Reader Publishing Group contributed $83 million and $0 to our revenues and operating profit, respectively.

        Weekly Reader operates in six areas: periodicals, curriculum publishing, library publishing (Gareth Stevens), library wholesaling (World Almanac Education Library Services, or WAELS), licensing and custom publishing. Weekly Reader's periodicals division targets separate age groups with two segments, elementary magazines (Weekly Reader's pre-K to grade six editions with an optional science supplement Science Spin) and secondary magazines (grades six to ten), offering Current Events, READ, Writing, Current Science, Current Health 1, Current Health 2, Know Your World Extra and Career World. The curriculum publishing division publishes grade-specific workbooks, teacher reproducibles and curriculum kits. Workbooks are sold mostly through direct response channels, including catalogs and sample mailings, while teacher reproducibles are sold mostly through teacher dealers such as educational cataloguers and retail teacher stores, and curriculum kits are sold through independent sales representatives.

        Gareth Stevens's library books are sold to wholesalers and to school and public libraries through independent sales representatives, and WAELS's products are sold to libraries through direct mail, telesales and the Internet.

        The Licensing division pursues branding opportunities by licensing content to textbook publishers, database providers and other publishers, and through distribution partnerships, such as the Weekly Reader Editor's Choice featured on QVC. The Custom Publishing division publishes instructional materials paid for by corporate sponsors and not-for-profits, which are distributed to K through grade 12 students free of cost.

CompassLearning

        CompassLearning's revenue consists primarily of license revenues from software sales and consulting/teacher training services to educators on curriculum development and technology integration in the classroom, utilizing CompassLearning's software products. CompassLearning's customers are primarily within the United States. In fiscal 2007, CompassLearning contributed $54 million and $(1) million to our revenues and operating loss, respectively.

        CompassLearning, a research-based, technology learning solutions company, produces comprehensive educational assessment, curriculum, reporting and management tools for pre-K through grade 12 students, all of which are aligned to local, state and national standards. Through CompassLearning Odyssey, CompassLearning offers over 6,500 hours of standards based instruction in reading, writing, language arts, mathematics, science, social studies and project-based learning. Some of CompassLearning's products and services include online/offline formative assessment products, interactive state and national standards-based electronic curriculum, a management and reporting system for teachers, administrators and parents, professional services for teachers (integrating technology in the classroom), and technical support of CompassLearning product offerings.

        The interactive, standards-based managed assessment and curriculum help educators individualize learning on a per-student basis. Over the past 15 years, more than 16,000 schools, in over 3,000 districts, representing approximately 14% of the 114,000 schools in the United States, purchased products from CompassLearning. In addition, CompassLearning provides onsite and group seminar consulting/teacher training services to educators to facilitate curriculum development and technology integration in the classrooms using CompassLearning Odyssey products.

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Our Circulation and Advertising

        The following table shows June 30, 2007 circulation and advertising information for our portfolio of magazines:

Magazines	Paid Circulation	Advertising pages carried for the twelve months ended June 30, 2007
Reader's Digest magazine(1)	18,503,000	10,807
Reiman magazines(2)	13,825,000	29
Special interest magazines	8,531,000	2,408

(1)

In Canada and international markets, Reader's Digest magazine is published in multiple editions and languages, such as Selecciones.

(2)

Reiman magazines do not have a guaranteed circulation rate base and, in fiscal year 2007, were not audited by the Audit Bureau of Circulations, a not-for-profit organization that audits circulation in the United States and Canada. The amount indicated in the table above represents their average circulation for the year for all of Reiman's magazines.

        We currently publish eight magazines in the United States that have circulation of more than one million. Circulation generated 64% of total North America fiscal 2007 revenue for Reader's Digest and special interest magazines, and advertising generated 36% of total revenue. Circulation levels for all Reiman titles fluctuate throughout the year. The overall circulation level for Reiman titles is managed in total to maximize the profitability of the entire portfolio, which may cause year-over-year increases or decreases in the average circulation for individual titles. Substantially all of the Reiman magazines have not accepted on-page advertising and rely on subscriptions for approximately 70% of their revenue, with newsstand sales supplying the balance. However, we expect to promote advertising in these magazines beginning in fiscal 2008.

        According to the Audit Bureau of Circulations, the U.S. edition of Reader's Digest has the largest paid circulation of any U.S. magazine, other than those automatically distributed to all members of the American Association of Retired Persons. Such determination is based on the 2006 audit report issued by the Audit Bureau of Circulations. Subscriptions account for approximately 94% of the U.S. paid circulation of Reader's Digest, while single-copy sales—via newsstands, supermarkets and similar retail establishments—account for the remainder. We also sell our special interest magazines by subscription and at newsstands.

        We maintain the circulation rate base for Reader's Digest through annual subscription renewals and new subscriptions. Subscriptions are sold through a variety of direct response marketing techniques. The majority of subscriptions is typically sold between July and December of each fiscal year. Subscribers to Reader's Digest may cancel their subscriptions at any time and may request a refund for any unused balance of the subscription price. We have announced that we intend to reduce our rate base in the United States from 10 million to 8 million effective as of January 1, 2008.

        We believe that many international editions of Reader's Digest have among the largest paid circulation for monthly magazines both in the individual countries and in the regions in which they are published. For most international editions of Reader's Digest, subscriptions comprise more than 90% of circulation. The balance is attributable to newsstand and other retail sales. Approximately 79% of total international fiscal 2007 revenue for Reader's Digest was generated by circulation revenue and 21% by advertising revenue.

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        The U.S. editions and the larger international editions of Reader's Digest offer advertisers different regional editions, major market editions and demographic editions. These editions, which usually contain the same editorial material, permit advertisers to concentrate their advertising in specific markets or to target specific audiences. We sell advertising in multiple Reader's Digest editions worldwide principally through an internal advertising sales force and offer discounts for placing advertisements in more than one edition.

Production and Fulfillment

        On October 17, 2007, we entered into a seven year contract with Williams Lea, a global corporate information solutions provider. Under the contract, Williams Lea will deliver outsourced print procurement and marketing solutions to our operations in 19 countries across the United States and Canada, Europe, Middle East, Asia Pacific and Latin America. Williams Lea has assumed the promotional printing operations of our direct-mail business, providing us with increased leverage and purchasing power by virtue of Williams Lea's expertise and global scale. The contract with Williams Lea is expected to reduce our print procurement cash expenditures by an aggregate of approximately $130 million over the first three years.

Magazines

        We utilize independent contractors and vendors to print all editions of Reader's Digest and our special interest magazines. An exclusive contract that we have with a U.S. printer to print the U.S. editions of Reader's Digest is scheduled to expire in October 2011. Two printers print Reiman magazines under contracts expiring in 2008.

        Lightweight coated and uncoated papers are the principal raw materials used in the production of Reader's Digest, Reiman and special interest magazines. We believe that market purchases will continue to provide an adequate supply of paper for future needs and that, in any event, alternative sources are available at competitive prices. A variety of factors affect paper prices, including demand, capacity, pulp supply and general economic conditions.

        We have agreements with a single independent contractor to handle order and payment processing for Reader's Digest, Reiman magazines and our U.S. special interest magazines. These agreements expire in December 2012. The same contractor also handles these matters for most of our BHE operations.

        Subscription copies of the U.S. edition of Reader's Digest, the special interest magazines and the Reiman magazines are delivered through the United States Postal Service as "periodicals" class mail. Subscription copies of international editions of Reader's Digest are delivered through the postal service in each country of publication.

        In the United States, a distribution network handles newsstand and other retail distribution. We also have contracted in each country with a newsstand magazine distributor for the distribution of Reader's Digest.

        In Europe, we have several multi-country agreements with independent contractors as well as in-country independent contractors to handle fulfillment, warehousing, customer service and payment and order processing, while two primary printing companies assist with the printing of Reader's Digest magazine.

        We believe that, generally, there is an adequate supply of alternative production and fulfillment services available at competitive prices should the need arise. We have contingency plans to minimize recovery time should our current contractors be unable to meet our production and fulfillment requirements. Nevertheless, significant short-term disruption could occur.

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Book and Home Entertainment products

        We utilize independent contractors and vendors to print and bind the various editions of Select Editions and have an agreement through December 2007, and currently being re-negotiated, with a printing company to print the English-language Select Editions distributed in the United States and Canada. All other direct mail books in North America are printed through an agreement with one printing company that expires in February 2009. We have a U.S.-based manufacturing contract for entertainment products that expires in December 2007 pending the completion of negotiations regarding a global contract for this business. The European operations use several manufacturing companies for the production of books. The majority of home entertainment products are produced throughout Europe by three major manufacturers. On a global basis, we have contracts through April 2008 with three printers for conventional books printed in China.

        Paper is the principal raw material necessary for production of Select Editions, series books and general books. We have a non-exclusive annual purchasing agreement with one of the major paper companies to provide paper for all editions of Select Editions. We purchase paper for series books and general books for each printing, and we believe that our existing contractual arrangements and other available sources of paper provide an adequate supply of paper at competitive prices. Independent contractors are used to acquire some of the necessary raw materials to manufacture music and video products.

        Independent contractors are hired to handle our fulfillment, warehousing, customer service and payment processing. We have an agreement with a single independent contractor expiring in December 2012 to handle order and payment processing for most of the U.S. BHE business. In addition, in July 2006, we entered into a four-year contract with a single fulfillment company to handle warehousing and fulfillment for the United States direct mail business units. Our printers or suppliers generally package and deliver our products directly to the postal service.

        We believe that, generally, there is an adequate supply of alternative production and fulfillment services available at competitive prices should the need arise. Nevertheless, significant short-term disruption could occur, and contingency plans are in place to minimize recovery time should current contractors be unable to meet production and fulfillment requirements.

Educational Products

        Our printed educational products are printed and bound by third parties with whom we have contracts or to whom we issue purchase orders on a project-by-project basis. We believe that outside printing and binding services at competitive prices are available. Currently, due to product idiosyncrasies and printing industry specialization, different vendors are used as necessary to maximize printing efficiency. Most pre-press production, typesetting, layout and design functions are conducted in-house. Non-print products, such as CD-ROMs produced by Weekly Reader Custom Publishing or CompassLearning are replicated by third parties. Most of WAELS's products are acquired as finished goods from third parties and re-sold to end users. Weekly Reader's Gareth Stevens's and WAELS's book products are distributed to customers from a company-owned warehouse.

        The principal raw materials used in our educational products are paper and ink. We purchase paper from both suppliers and printers directly based on pricing and, to a lesser extent, availability, and Gareth Stevens and Weekly Reader purchase finished goods including paper components from the printers of their publications. Ink used by publications is provided by their respective printers and included in the cost of print production. Both the paper and ink used are commodity products that are affected by demand, capacity and economic conditions. We believe that adequate sources of supply are, and will continue to be, available to fulfill our requirements.

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        Order processing, customer service, cash application and collection, and fulfillment functions are currently performed at separate locations for each of Weekly Reader's educational operations.

Marketing

        We sell magazine subscriptions, Select Editions, series books, general books, music and video products and certain other products principally through direct mail solicitations to households on our customer lists, as well as to customer lists that we rent or purchase from third parties. BHE product offers and many international magazine subscription offers are often accompanied by sweepstakes entries and, in some cases, premium merchandise offers. Our direct marketing policy allows customers to return any book or home entertainment product, either before or after payment, and to receive a refund of the amount paid. We believe that our returned goods policy is essential to our reputation, and that it elicits a greater number of orders. Sales of BHE products are seasonal, as more consumers respond in the fall and winter months (particularly before Christmas) than during the rest of the year.

        While most copies of general books are sold through initial promotional single-offer mailings, additional copies are also sold through other channels including catalog, package inserts and the Internet. General books are distributed for retail sale in stores through independent distributors and Books Are Fun.

        Reiman markets most of its books through direct mail and cross-promotion on its magazines. Reiman sells its books by offering a free preview period during which customers agree to examine the book before purchasing it. If they do not wish to purchase the book, they can return it without further obligation. In addition, Reiman markets magazines principally through direct mail, package inserts, the Internet and cross-promotion of titles within its magazine group. It markets products to its customer database, which as of June 30, 2007, includes approximately 47 million current and former customers, combined with selective rental of outside customer lists. Reiman test markets new magazine ideas and titles, which rely on reader-submitted editorial content, with current subscribers of its own magazines and with selected readers from outside lists.

        As part of our growth strategy and efforts to better manage our distribution and customer acquisition costs, we are increasing sales of our products through direct sales channels other than direct mail. These other distribution channels include QSP, Books Are Fun, DRTV, package inserts, freestanding inserts, telemarketing, the Internet, display marketing and other direct sales. Reader's Digest magazine and other magazine publications, including Reiman, obtain and renew the vast majority of their subscribers in the United States through non-sweepstakes promotions.

        We rely on strong promotion packages to maximize response rates and drive product sales. These promotion packages are created and tested primarily in five countries (the United Kingdom, France, Germany, the United States and Canada) and then adapted to other countries around the world. Promotion flow has strengthened considerably over the past five years. In recent years, we have become considerably more efficient in developing promotion packages, and now conduct fewer tests to design an effective package. As a result, our Reader's Digest International segment has improved response rates by using more new promotions and fewer old promotion packages.

        We offer sweepstakes in our promotional mailings to promote the sale of BHE products in the United States. Prizes totaled about $2.6 million for the 2007 edition of the sweepstakes. Generally, each international subsidiary sponsors its own sweepstakes. The mechanics of the sweepstakes vary from jurisdiction to jurisdiction, depending upon local law.

        From time to time, we are involved in legal, regulatory and investigative proceedings concerning sweepstakes and other direct marketing practices. Also, from time to time, jurisdictions in which we do business enact more restrictive laws or regulations governing direct marketing and data protection and privacy. Although some of these proceedings have negatively affected our direct marketing business, we

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do not believe that any current proceedings or currently proposed laws and regulations will have a material adverse effect on our direct marketing business.

        In 2001, we entered into a voluntary comprehensive agreement with attorneys general for 32 U.S. states (and subsequently with four additional states) and the District of Columbia regarding standards for direct mail sweepstakes promotions. Pursuant to the agreement, we are promoting consumer education and have adopted standards for promotions in the United States similar to those agreed to by other direct marketing and publishing companies.

        We are subject to postal rate increases, which affect our product deliveries, promotional mailings and billings. Postage is one of the largest expenses in our promotional and billing activities, and increases in the postal rate are factored into our pricing strategies and operating plans. Higher postal rates or other delivery charges usually increase the total cost to our customers, which may have a negative effect on sales. As a result, we may strategically determine the extent, if any, to which we will pass these cost increases on to our customers. In many countries, we actively develop and maintain good working relationships with the postal authorities in an effort to obtain better rates and services.

        We rely on postal delivery service for timely delivery of most products and promotional mailings. In the United States and most international markets, delivery service is generally satisfactory. Some international jurisdictions, however, experience periodic work stoppages in postal delivery service or less than adequate postal efficiency.

        In some states in the United States and in some international jurisdictions, some or all of our products are subject to sales tax or value-added tax. Taxes, like delivery costs, are generally stated separately on bills, where permitted by applicable law. Higher taxes increase the total cost to our customers, which may have a negative effect on sales. In jurisdictions where applicable tax must be included in the purchase price, we may be unable to fully recover from customers the amount of any tax increase or new tax.

Information Technology and Customer Database Enhancement

        The size and quality of our databases of current and prospective customers in the countries where we operate contribute significantly to our business. We constantly strive to improve our customer databases. Our U.S. databases of more than 75 million households as of June 30, 2007, represent over half the total number of households in the country. As of June 30, 2007, our international databases included a total of almost 55 million households. We continue to make significant investments in our database management and related information technology to improve operating efficiencies, to increase the level of service provided to customers and to facilitate globalization of operations.

        The United States and some international jurisdictions, particularly in Europe, have data protection laws or regulations that prohibit or limit exchanging the type of information that we maintain. Some jurisdictions also prohibit the retention of information, other than certain basic facts, about non-current customers. Although these regulations may hinder the ability to collect, retain and use customer information, we believe that current laws and regulations do not prevent us from engaging in activities necessary to operate our current businesses.

Competition and Trademarks

        We own or have rights to trademarks, service marks and tradenames that we use in conjunction with the operation of our business worldwide, including, without limitation, the following: "Reader's Digest," the "Pegasus" logo, "QSP," "Books Are Fun," "Taste of Home," "Allrecipes," "Weekly Reader," "World Almanac," "Reader's Digest Select Editions" and the names of many of our magazines, websites, features and other products. We also own or have the rights to copyrights that protect the content of our products. Direct Holdings IP L.L.C., a wholly owned subsidiary of Direct

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Holdings U.S. Corp., licenses the "Time Life" trademark and tradename from Time Warner Inc. and Time Inc. We also license intellectual property from third parties for use in our products, including several entities in the Disney group.

        We believe that the name recognition, reputation and image that we have developed in our markets significantly enhance customer response to our direct marketing sales promotions. For these reasons, trademarks are important to our business, and we aggressively defend our trademarks. Solely for convenience, the trademarks, service marks and tradenames referred to in this prospectus are without the ® and ™ symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensors to these trademarks, service marks and tradenames.

        Although Reader's Digest magazine is a well-established institution in the publishing industry, it competes with other magazines for subscribers and with magazines and all other media, including television, radio and the Internet, for advertising. Reader's Digest, Reiman magazines and the special interest magazines compete with other magazines of similar respective genres for readers and advertising.

        We believe that our company names, image and reputation, as well as the quality of our customer databases, provide a significant competitive advantage over many other direct markets. However, BHE, QSP and Books Are Fun compete with companies selling similar products at retail as well as by direct marketing through various channels, including fundraising services, direct marketing, display marketing, retail and the Internet. Because tests show that consumer responses to direct marketing promotions can be adversely affected by the overall volume of direct marketing promotions, we also compete with all other direct marketers, regardless of whether their products are similar to our products. Our BHE businesses compete principally on the basis of direct marketing customer service, product popularity and price.

Employees

        As of June 30, 2007, we employed approximately 5,000 people worldwide (approximately 3,100 in the United States and 1,900 in our international subsidiaries). We believe that our employee relations are generally satisfactory.

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PROPERTIES

        The table below shows our headquarters and other properties that we own or lease. These locations house our executive, administrative, editorial, advertising sales and operational offices and warehouse and other facilities.

Location	Area (sq. ft.)
Westchester County, NY	269,209 leased
Greendale, WI	153,000 owned
Fairfield, IA	103,570 owned
New York, NY	151,937 leased
Various U.S. Cities	557,514 leased
International	203,072 owned; 754,501 leased

        We believe that our current facilities, together with expansions and upgrades of facilities presently underway or planned, are adequate to meet our present and reasonably foreseeable needs. We also believe that adequate space will be available to replace any leases that expire in the near future.

LEGAL PROCEEDINGS

        We are defendants in various lawsuits and claims arising in the regular course of business. Based on the opinions of management and counsel for these matters, we believe that recoveries, if any, by plaintiffs and claimants would not materially affect our financial position or results of operations.

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MANAGEMENT

Information Concerning Our Directors

        The following is information about our directors as of June 30, 2007.

Name	Age	Current Position with Company	Director of Company Since
Mary G. Berner	48	CEO and Director	2007
Timothy C. Collins	50	Director	2007
Harvey Golub	68	Chairman of the Board	2007
Andrew S. B. Knight	67	Director	2007
Andrew R. Lack	60	Director	2007
Eric Schrier	55	Director	2006
Stephen T. Shapiro	39	Director	2007
Harris Williams	37	Director	2007

        Biographical information concerning the director nominees is set forth below.

Mary G. Berner has served as our Chief Executive Officer and Director since the consummation of the Acquisition Transaction in March 2007. From November 1999 until January 2006, Ms. Berner led Fairchild Publications, Inc., first as President and CEO and then as President of Fairchild and an officer of Condé Nast when Fairchild became a division of Condé Nast Publications, Inc. in September 2005.

Timothy C. Collins has served as our Director since the consummation of the Acquisition Transaction in March 2007. Mr. Collins founded Ripplewood, in 1995 and has been CEO and Senior Managing Director since its inception. Prior to founding Ripplewood, Mr. Collins managed the New York office of Onex Corporation, a Toronto-based investment company, from 1990 to 1995. Prior to Onex Corporation, Mr. Collins was a Vice President at Lazard Frères & Company from 1984 to 1990. Previously, he worked from 1981 to 1984 with the management consulting firm of Booz, Allen & Hamilton, specializing in strategic and operational issues of major industrial and financial firms. Mr. Collins is also the Chief Executive Officer of RHJ International SA. Mr. Collins currently also serves as a director of Commercial International Bank, RSC Equipment Rental and RHJ International, each of which is publicly traded.

Harvey Golub has served as the Chairman of our Board of Directors since the consummation of the Acquisition Transaction in March 2007. Mr. Golub joined American Express in 1984 as President and CEO of IDS Financial Services (now known as Ameriprise Financial). In 1990, he was named Vice Chairman of American Express and elected a member of the company's Board of Directors. He was named President of American Express in July 1991 and elected CEO of American Express in January 1993 and Chairman of the Board in August 1993. Mr. Golub retired as CEO and Chairman of American Express in January 2001. Prior to joining IDS Financial Services, Mr. Golub was a senior partner with McKinsey & Co. Currently, Mr. Golub is the Executive Chairman of Ripplewood, as well as the Non-Executive Chairman of the Board of Campbell Soup Company. He also serves on the boards of Dow Jones & Company, Lincoln Center for the Performing Arts, the New York Presbyterian Hospital and the American Enterprise Institute, and as a member of the Advisory Boards of CGI International and Miller Buckfire & Co., LLC.

Andrew S. B. Knight has served as our Director since the consummation of the Acquisition Transaction in March 2007. Mr. Knight has served as a non-executive Director of RIT Capital Partners, a U.K.-based private investment firm, since 1996. Mr. Knight is also a director of News Corporation and Templeton Emerging Markets Investment Trust PLC. He is a former editor of The Economist and served as Chief Executive of the Telegraph group, Chairman of News International and Deputy Chairman of Home Counties Newspapers Holdings PLC until its acquisition by Eastern Counties

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Newspapers. He is a past Chairman of the Shipston Home Nursing and Jerwood charities, and founder of the SMA Trust to further research into spinal muscular atrophy.

Andrew R. Lack has served as our Director since the consummation of the Acquisition Transaction in March 2007. Mr. Lack is the Chairman of the Board of Sony BMG Music Entertainment. Mr. Lack also serves on the Board of Directors for MGM Holdings, Inc. From August 2004 to February 2006, Mr. Lack served as CEO of Sony BMG Music Entertainment, where he oversaw all operations of the global recorded music company. From January 2003 to August 2004, he served as Chairman and Chief Executive Officer of Sony Music Entertainment. Previously, Mr. Lack served as President and Chief Operating Officer of NBC. During his tenure with NBC, he oversaw Entertainment, News, including MSNBC and CNBC, NBC Stations, Sales, and Broadcast & Network Operations. From 1993 to 2001, Mr. Lack was the president of NBC News, where he transformed the News division into one of the most-watched news organizations. Before joining NBC, Mr. Lack spent much of his television career at CBS News, where his broadcasts earned numerous honors, including 16 Emmy Awards and 4 Alfred I. DuPont-Columbia University Journalism Awards.

Eric Schrier has served as our Director since January 2006. He served as our President and Chief Executive Officer from January 2006 to March 2007, and the President for our North America segment from February 2003 to January 2006. Mr. Schrier served as our Senior Vice President and Global Editor-in-Chief from January 2000, when he joined Reader's Digest, until January 2006.

Stephen T. Shapiro has served as our Director since the consummation of the Acquisition Transaction in March 2007. Mr. Shapiro is a founding partner of GoldenTree Asset Management and a member of its Investment Committee. Prior to joining GoldenTree, Mr. Shapiro was a Managing Director in the High Yield Group at CIBC World Markets, where he was most recently Head of Media and Telecommunications Research. Prior to its acquisition by CIBC World Markets in 1995, Mr. Shapiro was a research analyst with The Argosy Group L.P. Before joining The Argosy Group L.P., Mr. Shapiro was a bankruptcy attorney with Stroock & Stroock & Lavan. Mr. Shapiro is a graduate of The University of Pennsylvania Law School and graduated with Honors from the University of Pennsylvania College of Arts & Sciences with a major in modern diplomatic history.

Harris Williams has served as our Director since the consummation of the Acquisition Transaction in March 2007. Mr. Williams is a Managing Director at Ripplewood focused on the Media and Healthcare sectors. Prior to joining Ripplewood, Mr. Williams was in the investment banking division of Credit Suisse primarily focused on mergers and acquisitions and leveraged buyouts. While at Credit Suisse, Mr. Williams executed transactions across a range of industries including Aerospace, Automotive, Healthcare, Media, Oil & Gas, Real Estate and Technology. Mr. Williams also serves on the boards of the New York Children's Museum of the Arts and the Reader's Digest Foundation. Mr. Williams has an MBA from the Wharton School at the University of Pennsylvania and graduated as the top scholar from the Boston University School of Management with a BS in Business Administration.

        The stockholders' agreement dated January 23, 2007, among RDA Holding Co. and RDA Investors I, LLC ("Ripplewood Fund I"), RDA Investors II, LLC ("Ripplewood Fund II") and RDA Investors III, LLC ("Ripplewood Fund III" and, together with Ripplewood Fund I and Ripplewood Fund II, the "Ripplewood Funds"), J. Rothschild Group (Guernsey) Ltd., GoldenTree Asset Management, LP. and the other stockholders of RDA Holding Co. (the "Stockholders' Agreement") contains agreement among the parties with respect to the election of our Directors. Under the terms of the Stockholders' Agreement, the Ripplewood Funds set the size of our Board as they deem appropriate, and are entitled to propose the appointment of all our Directors, including the Chairman of the Board and independent Directors. Ripplewood has agreed that one director shall be designated by J. Rothschild Group (Guernsey) Ltd. and one director shall be designated by Golden Tree Asset Management, LP, subject to continuing stock ownership requirements. The Stockholders' Agreement requires that at least one Director be "independent" for purposes of Rule 10A-3 promulgated under

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the Securities Exchange Act of 1934, as amended. Each party to the Stockholders' Agreement agrees to take all action necessary to effect the appointment to the Board of each Director appointee of Ripplewood.

Information Concerning Our Executive Officers

        Biographical information concerning Mary A. Berner, our Chief Executive Officer, who also serves as a director, is set forth above under the caption "Information Concerning Our Directors." Biographical information concerning our remaining executive officers as of June 30, 2007 is set forth below.

William Adler, 55, has served as our Vice President, Global Communications since 2003. Prior to that, he served as our Senior Director, Global Communications since 2002. Mr. Adler joined Reader's Digest in July 1999 as Director, Corporate Communications.

Alyce Alston, 43, has served as our President, Home & Garden and Health & Wellness since March 2007. Prior to that, she was Chief Executive Officer of De Beers North America since March 2005. Ms. Alston joined De Beers after serving for five years with Fairchild Publications / Condé Nast Publications, where she was Group Publisher and Vice President of W, W Jewelry and Vitals magazines.

Michael Brennan, 60, has served as our President, RD Europe and Chief Executive Officer of Direct Holdings U.S. Corp. since July 2007. Prior to that, he served as President, Latin America/Asia-Pacific, a position he held since 1998.

Jean Clifton, 46, has served as our Senior Vice President and Chief Financial Officer since September 2007. From July 2006 until August 2007 she acted as a management consultant/owner of Platinum Strategic Partners, L.L.C., an advisory services and investment company. Ms. Clifton spent 20 years with Journal Register Company in Trenton, N.J., most recently serving as President and Chief Operating Officer, from June 2005 until July 2006. She served as Executive Vice President, Chief Financial Officer and Treasurer of Journal Register Company from October 1989 through May 2005, and as a member of its Board of Directors since 1989.

Eva Dillon, 50, has served as our President and Group Publisher, Reader's Digest, Selecciones and RD Large Print since April 2007. Prior to joining us, she served with Condé Nast as Vice President and Publisher of Cookie magazine from 2005 to April 2007. Prior to that, she worked for Fairchild Publications as its Vice President and Publisher of Jane magazine from 1995 to 2005.

Michael Geltzeiler, 48, has served as our President, School of Educational Services since March 2007. Mr. Geltzeiler joined us as Senior Vice President and Chief Financial Officer in September 2001. In August 2004, Mr. Geltzeiler's responsibilities were expanded to include oversight of Global Operations and Information Technology.

Suzanne Grimes, 48, has served as our President, Food and Entertaining since March 2007. Prior to joining us, she worked for Condé Nast Media Group as its Senior Vice President, Corporate Sales from August 2004 to March 2007. She was Vice President and Publisher of Glamour magazine from April 2001 to April 2004.

Paul Heath, 47, has served as our President, RD Asia-Pacific since July 2007. He joined Reader's Digest in December 2001 as Managing Director of Australia and New Zealand. Prior to that he was with Gateway Computers where he was Vice President and Managing Director for the U.K. and Ireland, and previously Australia and New Zealand.

Jodi Kahn, 44, has served as our President, Digital Business since she joined us in July 2006. From 1991 to 2006, she worked for Time Warner, Inc., serving as its Vice President, Business Strategy for Time Inc. Interactive from 1999 to 2003. From 2004 to 2006, Ms. Kahn served as Publisher of TIME for Kids.

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Emma Lawson, 46, has served as our Senior Vice, President, Global Marketing and Publishing since July 2007. Prior to that, she was our Vice President, Global Marketing and Publishing from June 2003 to June 2007. Ms. Lawson served as our Vice President, Global Publisher—General Books and Illustrated Series from August 1999 to June 2003.

Andrea C. Martin, 47, has served as our President, RD Canada & Latin America since July 2007. Prior to that, she held various positions with our Canadian subsidiary including President and CEO from 2004 to 2007, Vice President Marketing and Home & Entertainment Publishing from 2003-2004 and Vice President Marketing Product Lines from 2001 to 2003.

Andrea Newborn, 44, has served as our Vice President and General Counsel since March 2007, and as our Secretary since July 2007. Ms. Newborn joined us in 1991, and served as our Vice President and Associate General Counsel since 2000. Ms. Newborn also is a member of the Board and Secretary of Reader's Digest Partners for Sight Foundation.

Albert Perruzza, 60, has served as our Senior Vice President Global Operations & Business Redesign since 1999. He joined our company in 1972.

Jeffrey Spar, 42, has served as our Senior Vice President and Chief Information Officer since July 2002. He joined us in November 1998, where he served as our Vice President and Chief Information Officer until July 2002.

Dawn Zier, 42, has served as our President, North American Consumer Marketing since August 2005. From December 2005 to March 2007, she oversaw our Canadian subsidiary. Ms. Zier was Vice President, Consumer Marketing, U.S. Magazines from February 2001 to August 2005. In July 2003, General Manager, Reading Series was added to her duties and in August 2005, she was given responsibility for our Books and Home Entertainment division. Ms. Zier joined Reader's Digest in February 1992. She is active in the industry and currently serves as co-chair of the Magazine Director's Advisory Committee for the Audit Bureau of Circulations.

Code of Ethics

        We have adopted a code of ethics, called The Reader's Digest Association, Inc. Ethical, Legal and Business Conduct Policies, which applies to all our employees, including our Chief Executive Officer, Chief Financial Officer, principal accounting officer and controller. A copy of our code of ethics is available on our corporate website at www.rda.com under the title "Code of Conduct" in the "Company Information" section. A free copy of our code of ethics may be requested from:

The Reader's Digest Association, Inc.
Corporate Secretary
Reader's Digest Road
Pleasantville, NY 10570

        If we make any substantive amendments to, or a waiver from, a provision of The Reader's Digest Association, Inc. Ethical, Legal and Business Conduct Policies that applies to our Chief Executive Officer, Chief Financial Officer, principal accounting officer or controller, we will disclose the nature of the amendment or waiver on our website at www.rda.com or in a report on Form 8-K.

The Audit Committee

        The current members of our Audit Committee are Andrew S. B. Knight, Andrew R. Lack, Steven T. Shapiro and Harris Williams. The Audit Committee operates pursuant to a charter approved by the Audit Committee and the Board.

        The Board of Directors is satisfied that each member of our Audit Committee has sufficient expertise and business and financial experience necessary to perform his duties on our Audit Committee effectively. No one member of our Audit Committee has been determined by our Board of Directors to qualify as an "audit committee financial expert" within the meaning of regulations adopted by the Securities and Exchange Commission.

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EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

        On March 2, 2007, we entered into a definitive merger agreement under which the Sponsors acquired all our outstanding common shares (the "Acquisition Transaction"). In connection with the Acquisition Transaction, the composition of our executive management and Board of Directors experienced significant change.

        The analysis discussed below relates to pre-Acquisition Transaction compensation philosophy and programs and to post-Acquisition Transaction compensation philosophy and programs where changes have occurred. Prior to the Acquisition Transaction, we were a publicly held company with an independent Compensation Committee. Post-Acquisition Transaction, we are a privately held company. For the balance of fiscal 2007, our executive compensation programs remained in place with the exception of equity and equity-based programs which were terminated as a result of the Acquisition Transaction.

        Upon the consummation of the Acquisition Transaction, our new Board of Directors terminated our Chief Executive Officer, Eric Schrier, and appointed a new Chief Executive Officer, Mary Berner. Following her appointment, Ms. Berner made senior management changes. Also, effective as of December 31, 2006, our former Chairman, Thomas Ryder, retired as our director and as Chairman of the Board and from all remaining officer and fiduciary positions with us and continued as a full-time employee and Special Advisor to the Chief Executive Officer. Effective upon the Acquisition Transaction, Mr. Ryder retired from Reader's Digest. In accordance with the SEC disclosure requirements, this analysis covers both our current and former CEO, our Principal Financial Officer and the next three highest paid executive officers with us as of the fiscal year-end (collectively, the "Named Executive Officers"), and two additional individuals who would have been Named Executive Officers if it were not for the fact that they were not executive officers at the end of the fiscal year (Mr. Ryder and our former Senior Vice President and General Counsel, Michael Brizel).

Our Executive Compensation Philosophy

        Our executive compensation program is designed to offer market competitive compensation opportunities, which are tied to individual and corporate performance. Our compensation philosophy is designed to provide a total compensation package that will enable us to:

•

Attract, motivate and retain high caliber executive talent critical to our success;



•

Reward our executive officers for attaining desired levels of company financial performance; and



•

Promote stock ownership to foster commonality of interests between executives and shareholders (both our public shareholders pre-Acquisition Transaction and our private shareholders post-Acquisition Transaction).

        We are committed to placing a majority of total executive compensation at risk by linking incentives to achievement of financial, operational and strategic goals that will ultimately create shareholder value. In addition, the program recognizes and rewards exceptional individual contributions. Our Compensation Committee monitors our compensation programs and, from time to time, as necessary, the Committee may modify our programs to ensure alignment with our business strategy.

Program Oversight

        Our Compensation Committee is responsible for overseeing our executive compensation philosophy, structure, policies, programs and practices.

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        Prior to the Acquisition Transaction, the Compensation Committee had responsibility for administering employee benefit plans; recommending the amount and form of any contribution to The Employee Ownership Plan and the 401(k) Partnership of The Reader's Digest Association, Inc.; reviewing and approving the compensation levels and programs for officers and key personnel and determining their incentive compensation; approving annual and long-term incentive plan design, performance goals, aggregate costs, certification of the achievement of performance goals and funding (i.e. aggregate payout) of major incentive programs; establishing corporate goals relevant to the Chief Executive Officer's compensation, evaluating the Chief Executive Officer's performance and recommending the appropriate level of CEO compensation to the Governance Committee. Following the Acquisition Transaction, the Compensation Committee retained the majority of these responsibilities, including responsibility for reviewing and approving all aspects of compensation and benefits arrangements for the Chief Executive Officer as well as all aspects of compensation and benefits arrangements intended primarily for our executive officers. They are also responsible for approving annual and long-term incentive plan design, performance goals, aggregate costs, certification of achievement of performance goals and funding (i.e. aggregate payout) of major incentive programs.

Role of the Compensation Consultant

        The Compensation Committee has the authority to engage consultants or other such advisors as the committee deems necessary to carry out its duties. In 2007, Mercer Human Resource Consulting continued to serve as the independent consultants to our Compensation Committee prior to the Acquisition Transaction. Mercer's role was to keep the Committee abreast of market trends and opportunities as well as to benchmark company performance and pay levels versus the competitive group of companies to which we compare ourselves as well as from which we recruit our top talent. Mercer advised the Compensation Committee on compensation matters including the selection of our peer companies for performance and pay purposes, the individual components of the executive compensation program that will drive our objectives, and the determination of the appropriate levels of pay for both fixed and variable components within the program. Following the Acquisition Transaction, Mercer Human Resource Consulting provided independent advice and counsel to both the new Compensation Committee and our new Chief Executive Officer, Mary Berner, on the design of the long-term incentive program introduced in fiscal 2008.

Role of Management

        In addition to outside consultants, the Committee relies on CEO and management input and expertise to help determine compensation program design as well as target and payout recommendations for executive officers. The CEO makes compensation recommendations for executive officers based on market and other data points provided by internal executive compensation experts in the human resources department as well as performance against established goals for each of our executive compensation plans (see below for additional details). The CEO also helps define business strategy upon which compensation plans are designed.

Setting Executive Compensation

Competitive Data

        The Compensation Committee annually determines the appropriate combination of cash and equity-based compensation for our Named Executive Officers, by reviewing the competitiveness of our executive compensation program in relation to selected comparable companies, or our "peer group."

        The group used to benchmark our executive level compensation is composed of eight publicly traded companies in the media/publishing industry. The companies range in size from $286 million to $6.3 billion in revenue. Although these companies may not include the same portfolio of businesses as

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Reader's Digest, in general, they do represent the publicly traded companies that have one or more businesses for which we compete for talent. The peer group of companies includes the following: McGraw-Hill Companies; Scholastic Corporation; Dow Jones & Company; American Greetings Corporation; Meredith Corporation; Primedia Inc.; Gemstar TV Guide International; and Martha Stewart Living.

        While we utilize this peer group to provide us with competitive data points for pay and performance purposes, we do not rely solely on this information. Following the Acquisition Transaction, several of our executives have come from privately held media/publishing companies, many of which place more emphasis on shorter term compensation (i.e. base and annual bonus) rather than on longer term compensation (e.g. equity). Other executives come from outside the media/publishing industry. As a result, we supplement the above peer group data with a broader comparator group that includes our eight peer companies described above as well as seven additional companies that operate in the media/publishing industry, including R.R. Donnelley and Sons, Co., Gannett Co., Tribune Co., New York Times Co., E. W. Scripps Co., Knight Ridder (recently acquired by McClatchy Co.), and Belo Corp. We also consider other survey data from other sources, including the Towers Perrin Media Executive Compensation survey (which includes many of the companies listed above) and other general industry survey data sources.

        We strive to compensate our executives at the median for total annual cash compensation (i.e. base pay and annual bonus) and at the 65th percentile or higher for long-term pay when corporate performance is at or above targeted performance levels. However, it is possible that an individual executive officer's target compensation opportunity may fall outside of the target competitive position, because we also take into consideration the size and scope of the role, level of responsibility, experience, leadership capabilities, success in achieving business objectives of each executive officer, as well as internal pay equity.

Executive Compensation Program Components

        The principal components of our executive compensation program are:

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Base salary



•

Annual bonus



•

Long-term incentives, and



•

Other compensation and benefits, including retirement and other benefits, deferred compensation, perquisites, severance and change-in-control plans

        For our Named Executive Officers in fiscal 2007:

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Pay at risk ranged from 63% to 85% of target total direct compensation;



•

Short-term incentives ranged from 20% to 28% of target total direct compensation; and



•

Long-term incentives ranged from 44% to 66% of target total direct compensation.

        Together, these components reinforce both shorter and longer term business objectives and are reviewed at least annually with the Compensation Committee.

Base Salary

        Competitive salaries are essential to recruiting and retaining key executive talent. Base salaries for our executive officers are generally targeted at the 50th percentile of the market and take into account the scope and responsibility of the position relative to other positions outside and within the company as well as the individual executive officer's performance and experience. Salaries are reviewed annually

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by the Committee to ensure that they remain competitive and that any increases continue to be in line with the scope and impact of the position. Base salaries are intended to comprise less weight than the variable component of the executive officers' total compensation and are not intended to be the driver of compensation growth for the executive.

        Our CEO makes recommendations to the Compensation Committee for subsequent year base salary levels for executive officers, other than himself or herself, taking into consideration company and unit (i.e. business unit or corporate staff function) performance in the previous year, the performance of each executive officer in achieving his or her annual objectives, changes in responsibilities, and competitive data from the peer group and other survey sources on pay levels and salary increase budgets.

        Based on this data, at a meeting held in the first quarter of each fiscal year, the Compensation Committee considers and approves subsequent year salary levels (through the next first fiscal quarter) for all executive officers, including our CEO. In August 2006 (fiscal 2007), the Compensation Committee reviewed and approved the base salary increase recommendations put forth by our pre-Acquisition Transaction CEO, Eric Schrier, for the executive officers in place at that time. Our U.S. salary increase budget for fiscal 2007 was 3% of all base salaries (as of June 1, 2006). This was determined using salary increase budget survey data for our geographical region and for the media/publishing industry, taking into consideration the increased cost to the company. Overall, the salary increases for the executive officers, including the Named Executive Officers, did not exceed our salary increase budget of 3.0%. Mr. Schrier did not receive a salary increase for fiscal 2007 because he was promoted to the CEO position in January 2006. Our pre-Acquisition Transaction Chairman, Thomas Ryder, did not receive a salary increase because of his impending retirement.

Named Executive Officer	Fiscal 2006 Salary		Percent Increase	Fiscal 2007 Salary
T. Ryder	$	820,000	0%	$	820,000
E. Schrier	$	700,000	0%	$	700,000
T. Gardner	$	550,000	1.8%	$	560,000
M. Geltzeiler	$	450,000	2.2%	$	460,000
M. Brizel	$	325,000	4.6%	$	340,000
D. Zier	$	330,000	3.0%	$	340,000
A. Perruzza	$	350,000	3.0%	$	360,500

        Ms. Berner was hired as our CEO upon the consummation of the Acquisition Transaction. Ms. Berner's fiscal 2007 salary is $500,000 (prorated), in accordance with the terms of her Employment Agreement, dated March 1, 2007.

Annual Bonus

        In line with our strategy of rewarding performance, a meaningful part of our executive compensation philosophy is the payment of cash bonuses to our executive officers based on an annual evaluation of company, unit and individual performance. Generally, annual incentive bonuses for our executive officers are awarded under our Management Incentive Compensation Plan and Senior Management Incentive Plan (collectively referred to as the "MIP"). Annual incentives are designed to reinforce our risk/reward orientation, and to focus participants on achieving key performance objectives that support our business strategy. For pool funding purposes, the upside potential—up to 200% of aggregate incentive targets—can be attained if performance goals are substantially outperformed. The downside risk is that no bonuses will be funded if threshold goals are not achieved. Individual awards are discretionary, can range from 0%—200% of targeted levels and are determined based upon a review of individual performance against annual goals, which include financial, operational and strategic management objectives. The sum of all awards must be within the limitations of the pool.

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        In July or August each year the Compensation Committee approves the MIP design for the current fiscal year and establishes the performance goal and pool funding scale(s), as applicable. The Compensation Committee also approves each executive officer's target bonus under the MIP or other annual incentive plan, which is the amount each executive may receive if performance goals and objectives are met. The target bonuses are intended to create an incentive for our executive officers to achieve the objectives established by the Compensation Committee. After the completion of the fiscal year, generally in August, the Compensation Committee approves the funding of the bonus pool(s) under the MIP, thereby approving the total amount paid out under the MIP. Also in August, the Compensation Committee approves the actual awards for the executive officers.

        Each Named Executive Officer has a target annual cash bonus amount that is deemed commensurate with his or her position and level of responsibility with us. Based on these criteria, the Named Executive Officers' (other than our current and former CEO and the former Chairman) target annual bonuses ranged from 57% to 80% of base salary, and the target annual bonuses for the former CEO (Mr. Schrier) and former Chairman (Mr. Ryder) were 120% and 122% of salary, respectively, for fiscal 2007. The former CEO's and Chairman's targets were a higher percentage of salary because the majority of their total direct compensation was at risk and based on company performance. For Ms. Berner, our current CEO, her bonus opportunity of up to 400% of base salary was set in accordance with the terms of her Employment Agreement. Prorated changes to an executive's annual target bonus level can occur during the year if there are changes in the executive's salary grade level that warrant a target change.

        To incentivize and reward results within the direct control of the executives managing business units, for fiscal 2007, the vast majority of each business unit's bonus pool funding was based on business unit performance. Although we want to incentivize and reward results within the direct control of executives, we are ultimately one company with businesses that are interlinked, and therefore, we believe it is important to tie a portion of funding to overall company performance. Each business unit's bonus pool funding was determined using a formulaic approach that took into account a combination of company operating income results and business unit operating income results versus budgeted goals, with the remainder of each business unit's pool determined based on the CEO's assessment of business unit performance against relevant strategic goals. Business unit strategic goals included quantitative revenue and cash flow goals and other measurable strategic imperatives that we believe are indicative of the future success of the business. The strategic goals were agreed to by the CEO and the business unit leader in the first quarter of the fiscal year.

        For corporate staff functions, the vast majority of each staff function's fiscal 2007 bonus pool was based on company operating income results versus the budgeted goal (and applying the formula), with the remainder of each staff function's pool determined based on the CEO's assessment of each function's overall performance and results against strategic goals. Corporate staff function strategic goals were defined as measurable strategic priorities for the function that were agreed to by the CEO and the functional leader in the first quarter of the fiscal year.

        Actual pool funding for business unit executive officers was based 40% on achievement of the company operating profit goal and 60% on business unit performance. For corporate staff function executive officers, 60% of the pool was funded based on company operating profit achievement and 40% on the function's strategic goal achievement.

        In August of 2006, the Compensation Committee approved the company's fiscal 2007 operating profit goal of $179 million and pool funding scale, and each business unit's operating profit goal and pool funding scale. The threshold varied by unit, but was generally in the range of 80%-90% of goal with a corresponding funding of approximately 30% of the pool. Business unit operating profit goals were set based on difficult yet achievable goals. Each business unit's operating profit goal was above the prior year's actual operating profit achievement. The increase in each unit's goal varied depending

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on the life stage of the business. Over the prior five fiscal years, achievement of the company operating income goal ranged from 75% to 100% and the corresponding company pool funding ranged from 46% to 100%, with an average pool funding of 71%.

        Under the MIP for fiscal 2007, "Operating Income" was defined as reported operating income excluding foreign exchange variations between actual and budget (currency neutral), special charges or any other extraordinary items approved by the Committee, non-cash impairment of goodwill or intangibles not contemplated in the budget and acquisitions and divestitures not contemplated at the time of budget.

        At the end of the fiscal year, after reviewing performance for fiscal 2007 against the established objectives, the post-Acquisition Compensation Committee approved the funding of each business unit's and corporate staff function's bonus pool between the threshold and target levels provided for under the MIP. Unit funding varied depending on actual unit performance. Overall, we paid out 47% of the total MIP bonus pool at target. The below target funding is due to the shortfalls in a number of our businesses.

        In August 2007, Ms. Berner recommended an award for each executive officer consistent with the pool funding of his or her unit, and the Compensation Committee approved the CEO's recommended awards for each executive officer. These awards varied significantly by individual due to the different levels of performance across businesses and functions.

        For fiscal 2007, the post-transaction Compensation Committee authorized additional money totaling approximately $900,000 to be paid to specified individuals to recognize outstanding work on key corporate priorities on top of regular job responsibilities. Only one Named Executive Officer, Mr. Perruzza, received an additional bonus in the amount of $69,300 for his contribution in fiscal 2007.

        For fiscal 2008, our MIP has been modified to more closely align it with our new corporate strategy and direction. Under the new plan, a single bonus pool for the company will be funded based on actual company EBITDA results considering qualitative factors related to how those EBITDA results were achieved. This corporate bonus pool will be allocated to business units based on an assessment of business unit actual EBIT results and the quality of those results, and for corporate staff functions, based on how each function contributed to the corporate EBITDA results.

        Following the Acquisition Transaction, Mary Berner was appointed CEO. In accordance with her Employment Agreement, she is eligible for an annual guaranteed bonus in the amount of $500,000, which for fiscal 2007 was prorated (for the period from November 1, 2006 through June 30, 2007). She is also eligible for an annual performance bonus in an amount of up to 400% of base salary based on overall company EBITDA performance. For fiscal 2007, actual company EBITDA performance was below the $287 million target. As a result, Ms. Berner was paid $666,667, the minimum amount guaranteed for fiscal 2007 under her Employment Agreement.

Long-Term Incentives

        Our long-term incentive program is designed to drive company performance in the long-term and to provide a vital link between the long-term results achieved for our shareholders and the rewards provided to our executive officers. Those members of our management whom we deem to be instrumental for effectuating the vision for our future and implementing our strategy are eligible to participate in our long-term incentive program.

        The principal vehicles that we used to distribute long-term incentive compensation to our officers prior to the Acquisition Transaction consisted of stock options and performance-based restricted stock units (PBRSUs). For executive officers, the long-term incentive award opportunity was targeted at approximately the 65th percentile of competitive levels discussed below. The program supported aligning executives' interests with shareholders by delivering potential value to the executive through

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stock options while the PBRSUs delivered cash to executives to reward multi-year earnings per share performance. Executive officers only realized value through stock options if there was stock price appreciation, and through PBRSUs based on the extent to which the company achieved its earnings per share targets. Generally, we grant our long-term incentives in August of each year, following the release of our full-year financial results for the previous year.

        In April 2006, prior to the start of fiscal 2007, incentive target guidelines for stock options and PBRSUs, based on level or position, were established for each executive officer using a blend of salary band data from two survey sources, the Towers Perrin Media Executive Compensation Survey and the Mercer Long-Term Incentive and Equity Survey. Prior to the Acquisition Transaction, the targeted incentive value awarded through the long-term incentive program was delivered 50% in stock options and 50% in PBRSUs.

        Stock options had always been a core element of the long-term incentive program as they align executive interests with shareholder interests. The options were scheduled to vest 25% per year over four years and had a ten-year term. If an executive voluntarily left the company, all unexercised options were forfeited, except in the case of retirement where options outstanding more than one year became vested and the individual had three years from retirement to exercise his or her options. In the case of involuntary termination, the individual had three months from the date of termination to exercise his or her vested options.

        The PBRSUs were a multi-year incentive tied to the achievement of our earnings per share goal and the value of our Common Stock. Each PBRSU represented the right to receive the cash value of one share of our common stock at the end of a pre-determined performance cycle. The number of PBRSUs delivered to an executive was equal to the incentive target divided by the average closing stock price of our common stock for the 20 trading days prior to the beginning of such performance cycle.

        In fiscal 2007, we began the 2007-2009 cycle. One half of the PBRSUs granted for the 2007-2009 cycle were scheduled to be earned based upon our performance against a two-year cumulative earnings per share goal of $1.99 based on a 9.5% compound annual growth rate, and one half of the PBRSUs were scheduled to be earned based on our performance against a three-year cumulative earnings per share goal of $3.13 based on a 9.3% CAGR. The number of PBRSUs earned by participants could range from 0% - 175% of target, depending on actual earnings per share results versus the two-and three-year cumulative earnings per share goals. Actual awards were scheduled to be paid in cash based on the average closing price of a share of our Common Stock on the New York Stock Exchange over the last year of the performance period and amounts could not exceed 200% of the grant date value of the PBRSUs. In the event an individual was terminated, all outstanding PBRSUs were forfeited and cancelled.

        For purposes of the PBRSUs, "earnings per share" was defined as reported earnings per share excluding special charges or any extraordinary items approved by the Committee, non-cash impairment of goodwill or intangibles not contemplated in the budget, and acquisitions and divestitures not completed at the time of budget.

        Eric Schrier, our CEO prior to the consummation of the Acquisition Transaction, recommended the actual 2007 stock option and 2007-2009 PBRSU target awards for each executive officer (other than for himself and Chairman Ryder). Using the target guideline for each executive officer, a stock option pool and a PBRSU pool were created for Mr. Schrier to allocate to the executive officers. Generally the Named Executive Officers received an award in line with their guideline. For stock options, the awards ranged from 98% to 117% of target guideline, and for the PBRSUs, the awards ranged from 93% to 106% of target guideline. Mr. Schrier also recommended a special one-time time-based restricted stock unit award for six executive officers to retain and motivate his new senior management team.

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        On August 11, 2006, the Compensation Committee approved Mr. Schrier's recommended awards for the executive officers, determined the stock option and PBRSU awards for Chairman Ryder and CEO Schrier and in addition approved a 70% increase to each participant's 2007-2009 PBRSU target to address retention concerns related to the fact that there was no probability of a payout under the outstanding 2006-2008 PBRSU cycle and the 2005-2007 PBRSU cycle was projected to payout significantly below target. The Compensation Committee also granted time-based restricted stock units to CEO Schrier to motivate, retain and align his interests with those of his senior management team. The strike price for the stock options granted was the Fair Market Value (defined as the average of the high and low stock price) of the stock price on August 11, 2006, the date of grant.

Equity Awards—Terms and Conditions

        The terms and conditions of outstanding awards of stock options and restricted stock granted to Named Executive Officers prior to August 2006 provide generally that those awards become immediately vested upon a change-in-control. In August 2006, the Compensation Committee approved terms and conditions for the fiscal 2007 awards whereby such awards would no longer immediately vest upon a change-in-control, but a second event would need to occur in order for vesting to accelerate. The following summarizes the terms and conditions of the awards granted in fiscal 2007.

        The terms and conditions of the stock options and time-based restricted stock units granted to Named Executive Officers in August 2006 provide generally that those awards vest following both a change-in-control of Reader's Digest and the occurrence of any of the applicable triggering events within two years after the change-in-control.

        The terms and conditions of outstanding PBRSUs granted in August 2006 to Named Executive Officers provide generally that, following a change-in-control of Reader's Digest and upon the occurrence of any of the applicable triggering events within two years after a change-in-control, those awards will vest (100% of the units will vest in the case of the 2005-2007 and 2006-2008 cycles and 59% of units for the 2007-2009 cycle) as follows: (a) as if the applicable performance goals had been achieved at target (100%), with the payment prorated for the number of months completed in the performance period at the time of the triggering event or (b) in such greater amount as the Compensation and Nominating Committee shall determine if at least half of the performance period will have been completed at the time of the triggering event.

        The applicable triggering events are (a) a termination of employment by Reader's Digest, a designated subsidiary of Reader's Digest or the surviving entity without cause, (b) a termination of employment by the participant with good reason or (c) any failure by Reader's Digest (or the surviving entity) to replace the outstanding award with an award of substantially the same type that also has equivalent value and terms and conditions (except for certain equitable adjustments to reflect changes in the underlying Reader's Digest Common Stock) where the shares of Reader's Digest (or the surviving entity) underlying the replacement award are shares of common stock traded on a national securities exchange or on the over-the-counter market as reported on NASDAQ.

        The Acquisition Transaction was considered a change-in-control under the terms of all outstanding equity awards and, for the August 2006 grants, also constituted a triggering event, which resulted in the accelerated vesting of all stock options, restricted stock, time-based restricted stock units and PBRSUs in accordance with the terms and conditions of each award. Generally, individuals received cash for their stock options with an exercise price below $17.015 (all other stock options were cancelled), for each restricted share and time-based restricted stock unit at $17.00 and for each PBRSU at $17.00 with the payment prorated for the number of months completed in the cycle. See the Option Exercises and Stock Vested table for detail of the payouts received by each named Executive Officer as a result of the change-in-control.

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        Grants of long-term incentive awards delivered in the form of stock options, restricted stock and a multi-year cash incentive plan were made in fiscal 2008. These grants will be reported in the fiscal 2008 Compensation Discussion and Analysis.

Other Compensation and Benefits

        The following briefly describes the principal compensation and benefits, other than salary and annual and long-term incentive compensation that the executive officers are entitled to receive.

Retirement Benefits

        In addition to being eligible to participate in Reader's Digest's 401(k) plan, the Executive officers participate in the Qualified Retirement Plan, the Excess Benefit Retirement Plan (which provides benefits in excess of the limits under the Internal Revenue Code of 1986, as amended (the "Internal Revenue Code")) and, where eligible, the retiree health care program. These plans are available to executive officers on the same terms that are offered to all other eligible company employees in the U.S.

        Effective July 1, 1992, Reader's Digest adopted The Reader's Digest Executive Retirement Plan (the "1992 Executive Retirement Plan"). Mr. Ryder was the last remaining active participant in the 1992 Executive Retirement Plan. Mr. Ryder will commence receiving the benefits that he is eligible for in accordance with this plan in October of 2007 as a result of his retirement from the company on March 2, 2007.

        Effective October 1, 1999, Reader's Digest adopted The Reader's Digest Association, Inc. Executive Cash Balance Retirement Plan (the "1999 Executive Retirement Plan"). Mr. Geltzeiler is the last remaining active participant in the 1999 Executive Retirement Plan. Mr. Schrier and Mr. Gardner ceased employment with the company during fiscal 2007 and will commence receiving the benefits that they are eligible for in accordance with the terms of the 1999 Executive Retirement Plan in January of 2008.

        Both plans were established to help the company recruit and retain key talent. Benefit levels for the 1999 Executive Retirement Plan were set based on benchmark data from specific media/publishing industry companies, general industry data from the William M. Mercer Survey on Non-Qualified Executive Retirement Plans as well as a survey prepared by Buck Consultants indicating prevalence and income replacement levels of benefit of non-qualified executive pension arrangements. No new participants have entered the plans since the Acquisition Transaction on March 2, 2007.

        Mr. Perruzza has a supplemental executive retirement plan agreement ("SERP") that was entered into in the 1980s. Under this arrangement, Mr. Perruzza agreed to defer a portion of his annual bonuses for up to 5 years in exchange for specified retirement benefits for a guaranteed 15 year period.

        Additional details on the retirement plans are found in the footnotes to the Pension Benefits and Deferred Compensation tables.

Other Employee Benefits

        Executive officers are eligible for our medical, dental, life insurance and disability plans on the same terms as all other employees.

Deferred Compensation

        The company offers certain U.S. executives the opportunity to defer all or a portion of their bonus under the Reader's Digest Deferred Compensation Plan. The company does not contribute to the

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deferred compensation plan, which was established to enable executives to defer receipt of payment and thus taxes on bonuses earned.

        Under the deferred compensation plan, executive officers are eligible to defer receipt of any annual incentive bonus payment under the MIP and the payment of any PBRSU award. Under the deferred compensation plan, executive officers can defer payments until January of a designated year not later than attainment of age 50, or until the January following the year of retirement or other termination of employment. Awards deferred under the deferred compensation plan remain part of the general assets of Reader's Digest and are not segregated into separate accounts or trusts. Interest is accrued at the prime rate of leading banks, as reported in The Wall Street Journal for the last day of each calendar quarter and is compounded each September 30.

        Eligible individuals were allowed to make deferral elections for the 2007 annual bonus and the 2007-2009 PBRSU cycle that would only take effect if the merger was not completed.

        Each participant in the deferred compensation plan had, to the extent permitted under Code Section 409A, the option to elect prior to December 31, 2006 to receive his or her account balance in a lump sum payment upon the later of June 30, 2007 or completion of the merger, in either case, provided that the merger was completed. Five of the current (and past) executive officers elected to receive such lump sum payment. Only one Named Executive Officer, Mr. Perruzza, elected to receive such payment. These payments were made on July 13, 2007.

Perquisites

        The executive officers are eligible for financial planning benefits and services provided by an outside service provider, and a flexible perquisite account under Reader's Digest's "FlexNet Program." These benefits are designed to support senior executives in the areas of financial fitness, health and personal fitness, family life and education. The calendar year financial planning benefits range in annual value from $5,650 to $17,500, and the value of the annual, calendar year, flexible perquisite accounts range from $12,500 to $33,500, depending on the executive's level of responsibility. The FlexNet Program allows for reimbursement of various types of expenses, examples of which include, but are not limited to, health club membership, personal computer, will and estate planning services. Amounts associated with perquisites are footnoted in the Summary Compensation Table.

        Ms. Berner is also entitled to the use of a car service when traveling between New York, NY and our Pleasantville, NY office.

Severance Arrangements

        We provide severance benefits to our executive officers because we believe that such benefits are essential to recruiting and retaining qualified executive officers. We believe the right to severance benefits provides our executive officers the assurance of security if their employment is terminated for reasons beyond their control. Most of our executive officers are entitled to severance benefits in the event of termination of employment under specified circumstances.

        Certain executive officers participate in our Income Continuation Plans. These plans provide financial and other benefits to executives who are terminated as a result of a change-in-control. When a change-in-control is contemplated, executive officers may face an uncertain future with us after the change-in-control. We believe that change-in-control severance benefits alleviate the anxiety created by this uncertainty and allow our executive officers to provide the most effective management during a period when a change-in-control is contemplated without being distracted by these attendant anxieties. No new participants have become participants in the Plans since the Acquisition Transaction on March 2, 2007.

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        The material terms of our severance benefits for our named executive officers are described in the narrative section under the caption "Potential Payments upon Termination or Change-in-Control" in this prospectus.

Employment and Related Agreements

Mary Berner—Employment Agreement

        In order to induce her to accept the position of CEO and in connection with the consummation of the Acquisition Transaction, we entered into an employment agreement with Ms. Berner dated as of March 1, 2007. This agreement details the terms of Ms. Berner's employment with us, including compensation-related matters and termination payments. The agreement is in effect for a five-year period beginning March 1, 2007, and automatically renews for successive one-year terms unless either Ms. Berner or we provide 60 days advance notice of her or our intention not to renew.

        The agreement provides that Ms. Berner is eligible for a $500,000 initial base salary which is subject to review by the Board for increases. She is also eligible for an annual guaranteed bonus of $500,000 and an annual performance bonus in an amount up to 400% of her base salary, based on performance against specified objective performance criteria. These bonuses are paid at the time that bonuses are paid to our other senior executives.

        Pursuant to the agreement, in fiscal 2008, Ms. Berner was granted three percent of the outstanding shares of common stock of RDA Holding Company at an exercise price equal to the fair market value on the date of grant and restricted stock units with an initial value of $2,000,000.

        Ms. Berner is entitled to participate in our benefit plans and programs available to senior management and to the use of a car service when traveling between New York, NY and our Pleasantville, NY office. In addition, we are obligated to pay legal fees in conjunction with the negotiation and any revisions of Ms. Berner's employment agreement.

        The employment agreement also provides for severance in the event Ms. Berner's employment is terminated prior to the expiration of the agreement by her for "good reason" or by us except for "cause". The severance benefits are detailed in the Termination Table footnotes.

        Payment of the severance benefits are contingent upon a one-year non-competition and non-solicitation agreement during the one-year period following termination and nondisclosure of confidential information. In the event Ms Berner's employment terminates due to the expiration of the term, we must pay Ms. Berner $1,000,000 for the one year non-competition and non-solicitation agreement.

Mr. Geltzeiler—Waiver and Non-Competition Agreement

        Following the Acquisition Transaction, we entered into an agreement with Michael Geltzeiler dated March 20, 2007, in order to induce him to remain with our company in the role of President of our School & Educational Services segment. In accordance with the terms of the agreement, Mr. Geltzeiler received a $1,200,000 payment in consideration for his waiver of participation in the 2001 and 2006 Income Continuation Plans and any other company severance plans, and cancellation of his Termination Agreement.

        In addition, Mr. Geltzeiler received a $240,000 credit to his Executive Retirement Plan account along with nine years of additional service credit for purposes of determining vesting, and a $1,300,000 payment in exchange for his entering into a non-competition and non-solicitation agreement.

        Management and the Compensation Committee believe it was in our best interest to enter into the 24-month (following termination) non-competition agreement which protects us against Mr. Geltzeiler working for any one of 14 companies which are deemed to be competitors of at least one of our major

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business segments. We believe that as our former CFO, Mr. Geltzeiler's knowledge of the intricacies of each of our businesses, if used to compete, could be detrimental to us during this crucial time. The amounts that Mr. Geltzeiler received are reflected in the applicable compensation tables herein.

Stock Ownership / Retention Guidelines

        Prior to the Acquisition Transaction, our Board of Directors believed that our executive officers should have a significant financial stake in the company so that their interests would be aligned with those of our stockholders. To that end, the Board adopted stock ownership guidelines that stated the Board's expectation that each executive officer should own, within five years of becoming an executive officer, shares of our common stock having an aggregate value that meets or exceeds a specified multiple of the executive's base salary. The guidelines provided for an ownership multiple of five times base salary for the CEO; one and one half or two times base salary for the other Named Executive Officers depending on grade level; and similar or lower ownership multiples for other executive officers.

        All but three executive officers employed prior to the Acquisition Transaction owned stock having the aggregate value required under the stock ownership guidelines. Two Named Executive Officers, Mr. Schrier and Ms. Zier, and one other executive officer did not meet the stock ownership requirements. Each of these executive officers had until 2011 to comply with the stock ownership requirement. Following the Acquisition Transaction, these stock ownership guidelines no longer apply.

Tax and Accounting Implications

        The pre-Acquisition Transaction Compensation Committee believed that it was desirable for executive compensation to be deductible for federal income tax purposes, but only to the extent that achieving deductibility was practicable, consistent with Reader's Digest's overall compensation objectives, and in the best interests of Reader's Digest and its shareholders. Accordingly, the Compensation Committee retained the discretion to provide non-deductible compensation. Following the Acquisition Transaction, we are no longer subject to Internal Revenue Code Section 162(m), since it applies only to publicly traded companies.

        Beginning on July 1, 2006, we began accounting for stock-based payments in accordance with the requirements of FASB Statement 123(R).

        To satisfy Regulation 409A of the Internal Revenue Code, all affected plans, agreements and policies will be modified in order to comply with the new regulation by December 31, 2008. We have been acting in good faith and administering our plans, agreements and policies to comply with the regulation.

Compensation Committee Report

        The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with management. Based on its review and discussion with management, the Compensation Committee recommended to the Board of Directors, and the Board has approved, that the Compensation Discussion and Analysis be included in this prospectus.

Submitted by
The Compensation Committee of The Reader's Digest Association, Inc.
Harvey Golub, Chairperson
Timothy C. Collins
Andrew R. Lack

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Summary Compensation

        The following Summary Compensation Table sets forth the cash and non-cash compensation awarded to, earned by, or paid to our Chief Executive Officer and the Named Executive Officers for the fiscal year ended June 30, 2007.

2007 Summary Compensation Table

Name and Principal Position	Year	Salary ($)(5)		Bonus ($)			Stock Awards ($)(8)		Option Awards ($)(8)		Non-Equity Incentive Plan Compensation			Change in Pension Value and Deferred Compensation ($)(11)		All Other Compensation ($)			Total ($)
Mary Berner President & CEO(1)	2007	$	173,076	$	333,333	(6)		—		—	$	666,667	(9)		—	$	92,559	(12)	$	1,265,635
Michael Geltzeiler SVP, CFO & President School & Educational Services(2)	2007	$	458,846				$	1,507,904	$	559,733	$	262,000	(10)	$	64,712	$	2,927,640	(13)	$	5,780,835
Thomas Gardner(3) EVP, President International	2007	$	548,077				$	1,778,397	$	740,753				$	149,100	$	5,996,446	(14)	$	9,212,773
Dawn Zier President, NA Consumer Marketing	2007	$	338,846				$	627,859	$	245,099	$	92,600	(10)	$	51,652	$	20,934	(15)	$	1,376,990
Albert Perruzza SVP, Global Operations & Business Redesign	2007	$	359,288	$	69,300	(7)	$	560,827	$	138,698	$	161,700	(10)	$	235,490	$	32,516	(16)	$	1,557,819
Eric Schrier Former President & CEO(4)	2007	$	484,615				$	3,282,162	$	1,527,171				$	114,530	$	9,334,690	(17)	$	14,743,169
Thomas Ryder Former Chairman	2007	$	404,615				$	2,710,795	$	99,897	$	255,000	(10)	$	188,004	$	4,101,473	(18)	$	7,759,784
Michael Brizel Former SVP, General Counsel	2007	$	240,192				$	849,383	$	250,591				$	105,730	$	2,879,277	(19)	$	4,325,173

(1)

Appointed President & CEO of the Company on March 2, 2007.

(2)

Appointed President of our School & Educational Services segment on March 30, 2007.

(3)

Ceased employment with the Company effective July 1, 2007.

(4)

Served as President & CEO of the Company through March 1, 2007.

(5)

Compensation is reviewed in the first quarter of each fiscal year and salary increases, if any, are subject to approval by our Compensation Committee. Salary amounts in this table reflect the actual base salary payments made in fiscal 2007.

(6)

Reflects guaranteed bonus (prorated for November 2006 through June 2007).

(7)

Reflects additional bonus awarded to Mr. Perruzza to recognize the work done on key corporate priorities in addition to his regular job responsibilities.

(8)

Stock, Stock-Based and Option Awards reflect PBRSUs, time-based restricted stock units, restricted stock and stock option grants, for which Reader's Digest recorded compensation expense in 2007. In accordance with SFAS No. 123R, "Share-Based Payment", the compensation expense reflected is for stock, stock-based or option grants made in fiscal 2007 and prior. The 2007 compensation expense for stock, stock-based and option awards also includes expense associated with the acceleration of these awards in connection with change-in-control provisions of our compensation plans on March 2, 2007.

(9)

Reflects annual performance bonus earned for 2007 performance in accordance with Ms. Berner's Employment Agreement with the Company dated as of March 1, 2007.

(10)

Reflects compensation earned for 2007 performance under the annual Management Incentive Plan (discussed in the annual bonus portion of this Compensation Discussion and Analysis section).

(11)

Represents the annual increase in the actuarial present value of accumulated pension benefits and above-market earnings on non-qualified deferred compensation.

(12)

The following is included in All Other Compensation for Ms. Berner:

(a)

401(k) company matching contribution.

(b)

Reimbursement for car service between home and office.

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(c)

Payment of Ms. Berner's legal fees in connection the negotiation of her Employment Agreement, in accordance with the terms of her Employment Agreement, of $82,511.

(13)

The following is included in All Other Compensation for Mr. Geltzeiler:

(a)

Flexible perquisite account ("FlexNet") reimbursement of $25,804 (the FlexNet Program allows for reimbursement of various types of expenses, examples of which include, but are not limited to, health club membership, personal computer, and will and estate planning services).

(b)

Payment of $1,200,000, in consideration and exchange for waiving all rights to any future severance payments or other benefits under any severance agreement (including the 2001 and 2006 Income Continuation Plan and Termination Agreement) or policy.

(c)

Payment of $1,300,000, in exchange for a 24-month non-compete agreement and a 12-month non-solicitation agreement following termination of employment.

(d)

401(k) company matching contribution.

(e)

Executive Cash Balance Plan company contribution of $395,236.

(14)

The following is included in All Other Compensation for Mr. Gardner:

(a)

FlexNet reimbursement of $21,315.

(b)

Financial planning benefit of $10,242.

(c)

General Insurance credit.

(d)

Payments made in accordance with his termination under the 2001 Income Continuation Plan (made in July 2007): Lump sum severance payment in the amount of $3,783,000, lump sum payment in lieu of medical and dental benefits of $38,712 and gross-up payment in the amount of $2,006,364.

(e)

401(k) company matching contribution.

(f)

Executive Cash Balance Plan company contribution of $128,200.

(15)

The following is included in All Other Compensation for Ms. Zier:

(a)

FlexNet reimbursement of $16,232.

(b)

401(k) company matching contribution.

(16)

The following is included in All Other Compensation for Mr. Perruzza:

(a)

FlexNet reimbursement of $25,403.

(b)

401(k) company matching contribution.

(c)

Company paid expense for executive physical.

(17)

The following is included in All Other Compensation for Mr. Schrier:

(a)

FlexNet reimbursement of $37,278.

(b)

Financial planning benefit of $10,297.

(c)

Payments made in accordance with his termination under the 2001 Income Continuation Plan (made in July 2007): Lump sum severance payment in the amount of $5,678,055, lump sum payment in lieu of medical and dental benefits of $38,712 and gross-up payment in the amount of $3,408,217.01.

(d)

401(k) company matching contribution.

(e)

Executive Cash Balance Plan company contribution of $155,532.

(18)

The following is included in All Other Compensation for Mr. Ryder:

(a)

FlexNet reimbursement of $67,000.

(b)

Financial planning benefit of $17,780.

(c)

Severance payments made in accordance with the third amendment to his Employment Agreement in the amount of $4,000,000 (actual payment made September 4, 2007 in accordance with IRS Section 409A).

(d)

401(k) company matching contribution.

(e)

Company paid expense for executive physical.

(f)

General insurance credit of $8,593.

(19)

The following is included in All Other Compensation for Mr. Brizel:

(a)

FlexNet reimbursement of $21,759.

(b)

Financial planning benefit.

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(c)

Payments made in accordance with his termination under the 2001 Income Continuation Plan (made in July 2007): Lump sum severance payment in the amount of $1,835,397, lump sum payment in lieu of medical and dental benefits of $37,731 and gross-up payment in the amount of $969,360.



(d)

401(k) company matching contribution.

Grants of Plan-Based Awards

        The following table provides information about the equity and non-equity awards granted to our Named Executive Officers in 2007. The non-equity awards section depicts the annual bonus plan (SMIP); the equity awards section outlines the performance-based RSUs (PBRSUs), the time-based restricted stock units and the stock options granted in 2007.

        As described in the Option Exercises and Stock Vested Table, all of the awards detailed below were cashed out upon the consummation of the Acquisition Transaction.

Grants of Plan-Based Awards Table

								All Other Stock Awards: Number of Shares of Stock or Units (#)(3)	All Other Option Awards: Number of Securities Underlying Options (#)(4)
		Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1)			Estimated Future Payouts Under Equity Incentive Plan Awards(2)						Great Date Fair Value of Stock and Option Awards ($)
										Exercise or Base Price of Option Awards ($/Sh)
Name		Threshold ($)			Threshold (#)
	Grant Date		Target ($)	Maximum ($)		Target (#)	Maximum (#)
Mary Berner		666,667	—	1,400,000	—	—	—	—	—	—		—
Michael Geltzeiler	8/11/2006 8/11/2006 8/11/2006	0	350,000	700,000	34,325	68,649	120,136	33,000	65,000	12.045	$	826,877 397,485 221,994
Thomas Gardner	8/11/2006 8/11/2006 8/11/2006	0	450,000	900,000	37,445	74,890	131,058	40,000	80,000	12.045		902,050 481,800 273,223
Dawn Zier	8/11/2006 8/11/2006 8/11/2006	0	193,000	386,000	14,666	29,332	51,331	24,000	25,000	12.045		353,304 289,080 85,382
Albert Pernuzza	8/11/2006 8/11/2006	0	231,000	462,000	18,723	37,445	65,529		35,000	12.045		451,025 119,525
Eric Schrier	8/11/2006 8/11/2006 8/11/2006	0	840,000	1,680,000	106,094	212,188	371,329	60,000	230,000	12.045		2,555,804 722,700 785,517
Thomas Ryder	8/11/2006	0	500,000	1,000,000	18,723	37,445	65,529					451,025
Michael Brizel	8/11/2006 8/11/2006 8/11/2006	0	205,000	410,000	15,602	31,204	54,607	24,000	30,000	12.045		375,852 289,080 102,459

(1)

With the exception of Ms. Berner, these columns reflect the possible value of the payout for each named executive officer under the 2007 Senior Management Incentive Program ("SMIP") if threshold, target or maximum goals are achieved. The SMIP performance goals are comprised of a combination of corporate and operating unit goals. These awards are 100% performance driven and are completely at-risk. As shown in the Summary Compensation Table, the awards ranged from 48% of target to 75% of target. Ms. Berner's 2007 bonus was determined in accordance with her employment agreement (See "Compensation Discussion and Analysis—Employment and Related Agreements—Mary Berner—Employment Agreement" for additional information regarding Ms. Berner's employment agreement.) Her bonus was based on EBITDA performance for 2007 versus established goals.

(2)

These columns show the PBRSUs granted to each named executive officer under the 2005 Key Employee Long-Term Incentive Plan. The number of units earned is based 50% on cumulative EPS over the fiscal 2007-2008 period and 50% based on cumulative EPS over the fiscal 2007-2009 period. Payout is then determined by the average closing stock price over the last year of the performance period (2009). Payout can range from 0–175% of target.

(3)

This column represents the number of time-based restricted stock units (RSUs) granted to each Named Executive Officer. The vesting schedule for these RSUs was 50% after 2 years and 50% after 3 years.

(4)

This column depicts the number of non performance-based stock options granted to each Named Executive Officer. The vesting schedule is 25% per year and the exercise price is the Fair Market Value on the grant date defined as the average of high and low stock price on the grant date (which was higher than the closing price on that date). The grant date was the date the Compensation Committee approved the option grants.

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Outstanding Equity Awards at Fiscal Year-End

        As a result of the automatic vesting and tender of all equity awards in connection with the consummation of the Acquisition Transaction, there were no equity awards outstanding at the end of fiscal year 2007.

Option Exercises and Stock Vested

        The following table sets forth the number of shares acquired and value received upon option exercises during fiscal year 2007 and the value of other stock awards that vested during fiscal year 2007. Upon the consummation of the Acquisition Transaction, which was deemed a change-in-control and constituted a triggering event under the terms and conditions of our equity plans, the following occurred: (1) all outstanding stock options vested, and those with an exercise price above $17.015 were cashed out (an individual received the difference between the strike price of his option and $17.015); (2) all restricted shares vested and were cashed out at $17.00 per share; (3) all PBRSUs granted for the 2005-2007 and 2006-2008 cycles vested as if the applicable performance goals had been achieved at target (100%), with the payment prorated for the number of months completed in the performance period and based on a $17.00 stock price; and (4) 59% of the PBRSUs granted for the 2007-2009 cycles vested as if the applicable performance goals had been achieved at target (100%), with the payment prorated for the number of months completed in the performance period and based on a $17.00 stock price.

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Option Exercises and Stock Vesting Table

	Option Awards		Stock Awards(3)
Name	Number of Shares Acquired on Exercise (1)(#)	Value Realized on Exercise ($)(1)	Number of Shares Acquired on Vesting (#)	Value Realized on Vesting ($)
Mary Berner	—	—	—	—
Michael Geltzeiler(2)	237,000	641,340	74,101 15,000 33,000 36,394	1,259,714 255,000 561,000 499,924
Thomas Gardner(3)	310,100	849,291	84,215 21,666 40,000 41,394	1,431,649 368,322 680,000 569,549
Dawn Zier(4)	106,500	271,855	11,989 9,666 24,000 13,593	203,811 164,322 408,000 187,395
Albert Perruzza(5)	170,000	429,150	43,106 11,666 34,728	732,799 198,322 476,725
Eric Schrier(6)	576,200	1,801,592	176,294 26,666 60,000 51,327	2,997,002 453,322 1,020,000 706,150
Thomas Ryder(7)	804,000	1,465,630	238,366 71,666 115,985	4,052,214 1,218,322 1,597,935
Michael Brizel(8)	120,000	318,988	34,074 8,667 24,000 25,962	579,258 147,339 408,000 356,374

(1)

Reflects the number of stock options that were cashed out upon the completion of the Acquisition Transaction in March 2007 and the cash value received. There were no other stock option exercises by executive officers.

(2)

Mr. Geltzeiler received cash upon the merger for his stock options with an exercise price below $17.015 (any options above this price were cancelled) for his outstanding 15,000 restricted shares and for his outstanding 33,000 RSUs. He received cash for his outstanding PBRSUs; for the 2005–2007 cycle, all 31,238 targets units vested (in accordance with the 2001 Income Continuation Plan) and were cashed out at $17.00 for a total of $531,046; for the 2006–2008 cycle, all 31,612 units vested (in accordance with the 2001 Income continuation Plan) and were cashed out at $17.00 for a total of $537,404; for the 2007-2009 cycle, 59% of the units vested and the payment was prorated for the number of months completed in the cycle (in accordance with the terms and conditions of the award) resulting in 11,251 units vested for a payment of $191,264. He also had 36,394 restricted shares vest in July of 2006 in accordance with their regular vesting schedule.

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(3)

Mr. Gardner received cash upon the merger for his stock options with an exercise price below $17.015 (any options above this price were cancelled) for his outstanding 21,666 restricted shares and for his outstanding 40,000 RSUs. He received cash for his outstanding PBRSUs; for the 2005–2007 cycle, all 36,686 targets units vested (in accordance with the 2001 Income Continuation Plan) and were cashed out at $17.00 for a total of $623,662; for the 2006–2008 cycle, all 35,255 units vested (in accordance with the 2001 Income continuation Plan) and were cashed out at $17.00 for a total of $599,335; for the 2007–2009 cycle, 59% of the units vested and the payment was prorated for the number of months completed in the cycle (in accordance with the terms and conditions of the award) resulting in 12,274 units vested for a payment of $208,652. He also had 41,394 restricted shares vest in July of 2006 in accordance with their regular vesting schedule.

(4)

Ms. Zier received cash upon the merger for her stock options with an exercise price below $17.015 (any options above this price were cancelled) for her outstanding 9,666 restricted shares and for her outstanding 24,000 RSUs. She received cash for her outstanding PBRSUs; for the 2006–2008 cycle, the units vested and the payment was prorated for the number of months completed in the cycle (in accordance with the terms and conditions of the award) resulting in 7,182 units vested for a payment of $122,088; for the 2007–2009 cycle, 59% of the units vested and the payment was prorated for the number of months completed in the cycle (in accordance with the terms and conditions of the award) resulting in 4,807 units vested for a payment of $81,722. She also had 13,593 restricted shares vest in July of 2006 in accordance with their regular vesting schedule.

(5)

Mr. Perruzza received cash upon the merger for his stock options with an exercise price below $17.015 (any options above this price were cancelled) and for his outstanding 11,666 restricted shares. He received cash for his outstanding PBRSUs; for the 2005–2007 cycle, all 19,342 targets units vested (in accordance with the 2001 Income continuation Plan) and were cashed out at $17.00 for a total of $328,814; for the 2006–2008 cycle, all 17,627 units vested (in accordance with the 2001 Income Continuation Plan) and were cashed out at $17.00 for a total of $299,659; for the 2007–2009 cycle, 59% of the units vested and the payment was prorated for the number of months completed in the cycle (in accordance with the terms and conditions of the award) resulting in 6,137 units vested for a payment of $104,326. He also had 34,728 restricted shares vest in July of 2006 in accordance with their regular vesting schedule.

(6)

Mr. Schrier received cash upon the merger for his stock options with an exercise price below $17.015 (any options above this price were cancelled), for his outstanding 26,666 restricted shares and for his outstanding 60,000 RSUs. He received cash for his outstanding PBRSUs; for the 2005–2007 cycle, all 63,959 targets units vested (in accordance with the 2001 Income continuation Plan) and were cashed out at $17.00 for a total of $1,807,303; for the 2006–2008 cycle, all 77,560 units vested (in accordance with the 2001 Income Continuation Plan) and were cashed out at $17.00 for a total of $1,318,520; for the 2007–2009 cycle, 59% of the units vested and the payment was prorated for the number of months completed in the cycle (in accordance with the terms and conditions of the award) resulting in 34,775 units vested for a payment of $591,179. He also had 51,327 restricted shares vest in July of 2006 in accordance with their regular vesting schedule.

(7)

Mr. Ryder received cash upon the merger for his stock options with an exercise price below $17.015 (any options above this price were cancelled) and for his outstanding 71,666 restricted shares. He received cash for his outstanding PBRSUs; for the 2005–2007 cycle, all 113,153 targets units vested (in accordance with the 2001 Income Continuation Plan) and were cashed out at $17.00 for a total of $1,923,601; for the 2006–2008 cycle, all 103,120 units vested (in accordance with the 2001 Income continuation Plan) and were cashed out at $17.00 for a total of $1,753,040; for the 2007–2009 cycle, 59% of the units vested resulting in 22,093 units vested (in accordance with the terms and conditions of the award) for a payment of $375,573. He also had 115,985 restricted shares vest in July of 2006 in accordance with their regular vesting schedule.

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(8)

Mr. Brizel received cash upon the merger for his stock options with an exercise price below $17.015 (any options above this price were cancelled), for his outstanding 8,667 restricted shares and for his outstanding 24,000 RSUs. He received cash for his outstanding PBRSUs; for the 2005–2007 cycle, all 15,152 targets units vested (in accordance with the 2001 Income Continuation Plan) and were cashed out at $17.00 for a total of $257,584; for the 2006–2008 cycle, all 13,808 units vested (in accordance with the 2001 Income continuation Plan) and were cashed out at $17.00 for a total of $234,736; for the 2007–2009 cycle, 59% of the units vested and the payment was prorated for the number of months completed in the cycle (in accordance with the terms and conditions of the award) resulting in 5,114 units vested for a payment of $86,938. He also had 25,962 restricted shares vest in July of 2006 in accordance with their regular vesting schedule.

Pension Benefits

Name	Plan Name	Number of Years of Credited Service ($)	Present Value of Accumulated Benefit ($)		Payments During Last Fiscal Year ($)
Mary Berner
Michael Geltzeiler	Retirement Plan	5.75	$	88,843
	Excess Plan	5.75	$	83,681
	Total		$	172,524
Thomas Gardner	Retirement Plan	15.33		232,486
	Excess Plan	15.33		217,358
	Total			449,844
Dawn Zier	Retirement Plan	15.33		121,489
	Excess Plan	15.33		21,506
	Total			142,995
Albert Perruzza	Retirement Plan	34.67	$	972,479
	Excess Plan	34.67		499,836
	SERP	n/a		635,602
	Total			2,107,917
Eric Schrier	Retirement Plan	7.17		156,784
	Excess Plan	7.17		0	213,542
	Total			156,784	213,542
Thomas Ryder	Retirement Plan	8.92		0	251,270
	Excess Plan	8.67		792,569	0
	Executive Retention Plan	8.67		5,952,439	0
	Total			6,745,008	251,270
Michael Brizel	Retirement Plan	17.67		0	275,216
	Excess Plan	17.67		0	81,621
	Total			0	356,837

        Retirement Plan and Excess Plan.    The following describes our Retirement Plan and Excess Plan as the provisions relate to a majority of employees, including all of the Named Executive Officers. Different provisions may apply to employees of other locations of the Company.

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        The Retirement Plan is a tax-qualified cash balance plan for our employees. The Excess Plan is a nonqualified cash balance plan that provides for the benefit that would have applied in the Retirement Plan if the IRS pay and benefit limitations for tax-qualified plans did not apply. The IRS pay limit for tax-qualified plans was $220,000 for 2006.

        The cash balance formula was established on July 1, 1999. Participants in the plans on July 1, 1999 were credited with an opening balance based on the present value of their prior plan accrued benefit, plus an enhancement for participants age 39 and older. Participants are credited monthly with a base credit equal to their monthly base pay times the following percentages for the majority of cash balance participants, including all of the Named Executive Officers:

Age	% of Base Pay
<30	3	%
30–34	4	%
35–39	5	%
40–44	6	%
45–49	8	%
50–54	10	%
55+	12	%

        Accounts grow monthly with interest credits that are based on the yield for 1-year treasury securities plus 1%. Participants are vested in their entire account balance after 5 years of service. Participants as of June 30, 2003 are 100% vested in their June 30, 2003 accrued benefit.

        Upon termination, participants in the Retirement Plan can receive either their full account balance, or the balance can remain in the plan where it will continue to grow with interest credits until retirement. Participants may elect to receive their Retirement Plan as an annuity or lump sum payment. The lump sum payment is based on their account balance. At termination, if the participant is over age 55 and meets the Rule of 70 (age plus service is 70 or more), then the participant's annuity is increased by 30% at age 55, grading down 3% at age 64. Mr. Perruzza is the only Named Executive Officer with a Retirement Plan account balance on June 30, 2007 that is over age 55 and meets the Rule of 70.

        Participants in the Excess Plan receive a full lump sum distribution of their vested benefit following termination.

        SERP.    SERP agreements were made with certain executives in the 1980's to pay individually specified retirement benefits for a guaranteed 15 year period. In most agreements, the executives agreed to defer a portion of their annual bonuses for up to 5 years in exchange for the retirement benefits. Mr. Perruzza's agreement will provide him with $85,200 per year at age 65 for 15 years.

        The executive is vested in his benefits when he has deferred the agreed upon bonuses. Executives can retire as early as age 55. The benefits are reduced by 3% for each year by which retirement precedes age 65. Mr. Perruzza is eligible for early retirement. On death in service, the lump sum death benefit is $750,000.

        Executive Retirement Plan.    As of June 30, 2007, Mr. Ryder was the only Named Executive Officer eligible for the Executive Retirement Plan. No new executives are eligible for the plan.

        Under this plan, a participant retiring on or after his normal retirement date is entitled to an annual pension determined as:

(1)

3% of Retirement Salary for each of the first 15 years of credited service, plus 1% of Retirement Salary for each of the next 20 years of credited service less



(2)

(a)    Reader's Digest Retirement Plan Benefit;

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(b)

Reader's Digest Excess Plan Benefit;



(c)

SERP Agreement Benefit to the extent provided by Employer Contributions; and



(d)

Annualized benefit from company's contribution to the qualified profit sharing plan in excess of 6% of Retirement Salary, accumulated at 8%.

        Retirement Salary is the average of the highest three consecutive years out of the last ten years of base salary and management incentive bonus.

        Credited Service is defined in the Retirement Plan. Participants at grade level 21 and higher earn an additional year of credited service for each year of service after 4 full years of credited service to the extent the participant's age at date of hire exceeds 45 and only to the extent credited service is less than 20 years.

        A participant is eligible for normal retirement after attainment of age 65. No benefits are provided upon termination prior to meeting the eligibility for early retirement. Early retirement is permitted if the participant has attained age 55, and the participant's age plus years of service equals at least 65. Early retirement benefits are reduced 5% for each year retirement precedes age 62. Mr. Ryder is eligible for early retirement.

Nonqualified Defined Contribution and Other Nonqualified Deferred Compensation Plans

        The table below outlines each Named Executive Officer's non-qualified deferred compensation.

Name	Executive Contributions in Last Fiscal Year ($)	Registrant Contributions in Last Fiscal Year ($)		Aggregate Earnings in Last Fiscal Year ($)		Aggregate Withdrawals/ Distributions ($)		Aggregate Balance at Last Fiscal Year End ($)
Mary Berner	0	0		0		0		0
Michael Geltzeiler	0	395,236	(1)	52,220	(2)	0		450,456	(3)
Thomas Gardner	0	128,200	(1)	348,969	(4)	0		3,341,206	(5)
Dawn Zier	0	0		0		0		0
Albert Perruzza	0	0		49,970	(6)	0		655,130	(7)
Eric Schrier	0	155,532	(1)	136,747	(2)	0		845,051	(3)
Thomas Ryder	0	0		0		0		0
Michael Brizel	0	0		2,815	(6)	71,721	(8)	0

(1)

Reflects employer contributions to the Executive Cash Balance Plan.

(2)

Reflects Executive Cash Balance Plan earnings.

(3)

Reflects Executive Cash Balance Plan account balance at fiscal year end.

(4)

Reflects Executive Cash Balance Plan earnings and interest earned on account balance under the Deferred Compensation Plan. Under the Deferred Compensation Plan, interest is accrued at the prime rate of leading banks, as reported in The Wall Street Journal for the last day of each calendar quarter and is compounded each September 30.

(5)

Mr. Gardner ceased employment on July 1, 2007. He will begin to receive payments in January 2008 of his account balance under the Deferred Compensation Plan, in accordance with elections made under the plan, and under the Executive Cash Balance Plan.

(6)

Reflects interest earned on account balance under the Deferred Compensation Plan. Under the Deferred Compensation Plan, interest is accrued at the prime rate of leading banks, as reported in The Wall Street Journal for the last day of each calendar quarter and is compounded each September 30.

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(7)

Mr. Perruzza received payment in July 2007 of his account balance under the Deferred Compensation Plan. Prior to December 31, 2006, he elected to receive his account balance in a lump sum payment upon the later of June 30, 2007 or completion of the merger, in either case, provided that the merger was completed.

(8)

Mr. Brizel received payment in January 2007, in accordance with elections made under the Deferred Compensation Plan.

Executive Cash Balance Plan

        The Executive Cash Balance Plan is a nonqualified defined contribution plan established on October 1, 1999 for executives at grade levels 21 and higher, subject to the approval by the CEO. An opening balance as of October 1, 1999 was credited to the participants who had been in the Executive Retirement Plan based on the present value of their Executive Retirement Plan benefits, enhanced if the participant was age 39 or older but younger than 55 as of October 1, 1999. Our Board of Directors may, at its discretion, provide a new participant with an opening balance.

        The plan will contribute to a participant's account an annual base credit equal to 20% of earnings less the annual credit they receive from the Retirement Plan and Excess Plan. Earnings for this plan include base pay and any Management Incentive Bonus earned for a year. Accounts grow based on the return of a hypothetical investment portfolio directed by the participant. Participants can allocate their investment portfolio among the mutual funds available under the Reader's Digest Association 401(k) plan. Prior to the sale of Reader's Digest, 50% of the participant's account balance was invested in Reader's Digest stock. Participants can change their allocation monthly to be effective as of the first day of the following month.

        Our common stock had a 24% return from July 1, 2006 until the Acquisition Transaction. The available mutual funds had rates of return from July 1, 2006 to June 30, 2007 as follows:

Explorer	17	%
International Growth	29	%
Prime Money Market	5	%
PrimeCap	21	%
Total Bond Market	6	%
Vanguard S&P 500 Index	20	%
Wellington	18	%
Windsor II	24	%

        Participants are vested in their account balance according to a graded schedule, where they are 50% vested after 5 years of service and are vested an additional 10% for each year of service until 10 years, when they are 100% vested. Upon termination, participants will receive their vested account balance payable over a 10-year period. Their balance will continue to grow with interest until it is fully distributed. The Plan does not permit employee deferrals.

Potential Payments upon Termination or Change-in-Control

        The tables below reflect the amount of compensation payable to each of the Named Executive Officers, excluding Messrs. Schrier, Gardner, Brizel, and Ryder, in the event of termination of such executive's employment under various termination scenarios. The amounts shown assume that such termination was effective as of June 30, 2007, and thus includes amounts earned through such time and are estimates of the amounts which would be paid out to the executives upon their termination. The actual amounts to be paid out, if any, can only be determined at the time of such executive's separation from the Company.

        For Messrs. Schrier, Gardner, Brizel, and Ryder, the amounts shown in each of their respective tables reflect the actual severance payment made by the Company in connection with their termination of employment.

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Mary Berner, President and Chief Executive Officer

Termination Payment	Voluntary Resignation/ Retirement(1)		Death			Disability(8)			Termination for Cause(9)		Termination Without Cause or for Good Reason Not in Connection with a Change-in- Control(10)			Termination Without Cause or for Good Reason in Connection with a Change-in- Control(10)
Severance	$	0	$	0		$	0		$	0	$	2,000,000	(4)	$	2,000,000	(4)
Bonus	$	0	$	666,667	(3)	$	666,667	(3)	$	0	$	666,667	(5)	$	666,667	(5)
Qualified Retirement Plan(2)	$	0	$	0		$	0		$	0	$	0		$	0
Excess Plan(2)	$	0	$	0		$	0		$	0	$	0		$	0
Other Benefits	$	0	$	0		$	0		$	0	$	12,905	(6)	$	12,905	(6)
Gross-Up on Excise Taxes		n/a		n/a			n/a		$	0		n/a		$	544,893	(7)
Payment of Equity	$	0	$	0		$	0		$	0	$	0		$	0
Total Value of Payments	$	0	$	666,667		$	666,667		$	0	$	2,679,572		$	3,224,465

(1)

Ms. Berner is not currently eligible for retirement. The amounts shown reflect a voluntary resignation.

(2)

As of June 30, 2007, Ms. Berner was not a participant in the Qualified Retirement Plan or the Excess Plan. She will become a participant upon completion of one year's service.

(3)

Under the terms of her Employment Agreement, Ms. Berner is entitled to receive a pro-rata annual bonus for the year of termination based on the Company's actual results, paid when annual bonuses are ordinarily paid. As of June 30, 2007, Ms. Berner was eligible for an annual performance bonus of up to 400% of her salary. The amount shown reflects Ms. Berner's actual fiscal 2007 performance bonus.

(4)

Under the terms of her employment agreement, Ms. Berner is entitled to receive a severance payment equal to two times the sum of her (a) base salary and (b) guaranteed bonus, paid in a lump sum.

(5)

Under the terms of her employment agreement, Ms. Berner is entitled to receive a pro-rata bonus.

(6)

Reflects the value of additional benefits under the terms of Ms Berner's employment agreement. Ms. Berner would receive $12,905, equal to the Company-paid portion of medical, dental and life insurance benefits for one year following the date of termination, paid in a lump sum.

(7)

Ms. Berner's employment agreement provides that in the event it is determined that (a) any payment, benefit or distribution by us for the benefit of Ms. Berner would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code (which relates to payments that are contingent on a change in ownership or effective control of, or the ownership of a substantial portion of the assets of, a corporation) or (b) any interest or penalties are incurred by Ms. Berner with respect to such excise tax, Ms. Berner shall be entitled to receive an additional gross-up payment in an amount equal to the sum of the excise tax on any payment and the gross-up payment. Ms. Berner's employment agreement also provides that in the event it is determined that any cash payment, benefit or distribution by us for the benefit of Ms. Berner would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code, the cash amounts payable upon termination will be reduced by the amount necessary so that the receipt of the cash payment would not give rise to any excise tax, so long as the reduced payment would not be less that 90% of the original cash payment. This provision would not result in any tax reimbursement payment to Ms. Berner. As of June 30, 2007, we were a privately held company and, therefore, in accordance with her employment agreement, Ms. Berner would be entitled to a limited gross-up on the excise tax only. This amount is reflected in the termination table.

(8)

Under the terms of Ms. Berner's employment agreement, "Disability" is defined as being physically or mentally incapable for six consecutive months to perform the material duties under the employment agreement. Any disagreement as to whether a Disability exists will be determined in writing by a qualified independent physician mutually acceptable to Ms. Berner and us.

(9)

Under the terms of Ms. Berner's employment agreement, "Cause" is defined as: (a) Ms. Berner's willful failure to substantially perform her duties under her employment agreement (other than due to physical or mental illness) after written notice of such failure; (b) her 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) her willful material breach of certain provisions of her employment agreement if uncured promptly following her receipt of written notice of such breach; (d) her willful material violation of our material written policies that has a detrimental impact on us and that, to the extent curable, is uncured by Ms. Berner promptly following her receipt of written notice of

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such breach; (e) her fraud or embezzlement with respect to us; (f) her misappropriation or misuse of funds or property belonging to us that is done in bad faith and is more than de minimis in nature; (g) her use of illegal drugs that interferes with the performance of her duties under her employment agreement; or (h) her gross misconduct, whether or not done in connection with employment, other than an act done in the good faith belief that it was in our best interests, that materially adversely affects our business or reputation, our subsidiaries or affiliates.

(10)

Under the terms of Ms. Berner's employment agreement, "Good Reason" is defined as (A) any diminution in Ms. Berner's title or position or a material diminution in her duties, authorities or responsibilities; (B) the assignment to Ms. Berner of duties inconsistent with her position; (C) our material and uncured breach of Ms. Berner's employment agreement; (D) any reduction of Ms. Berner's base salary, guaranteed bonus or annual bonus opportunity; (E) the transfer or relocation of Ms. Berner'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 Ms. Berner to our board of directors (if we are not public) or to nominate her for election to our board (if we are public), or (G) our failure to effectively assign Ms. Berner's employment agreement, as applicable, upon our sale or merger.

Michael Geltzeiler, Former Chief Financial Officer and
President, School & Educational Services

Termination Payment	Voluntary Resignation/ Retirement(1)		Death			Disability(7)			Termination for Cause		Termination Without Cause Not in Connection with a Change-in- Control			Termination Wihout Cause in Connection with a Change-in- Control
Severance	$	0	$	0		$	0		$	0	$	0	(5)	$	0	(5)
Bonus	$	0	$	262,500	(4)	$	262,500	(4)	$	0	$	0	(5)	$	0	(5)
Qualified Retirement Plan(2)	$	96,186	$	96,186		$	96,186		$	96,186	$	96,186		$	96,186
Excess Plan(2)	$	88,261	$	88,261		$	88,261		$	88,261	$	88,261		$	88,261
Executive Cash Balance Plan(3)	$	447,249	$	447,249		$	447,249		$	0	$	447,249		$	447,249
Other Benefits	$	0	$	0		$	0		$	0	$	0	(5)	$	0	(5)
Gross-Up on Excise Taxes		n/a		n/a			n/a			n/a		n/a		$	0	(5)
Payment of Equity	$	0	$	0		$	0		$	0	$	0		$	0	(6)
Total Value of Payments	$	631,696	$	894,196		$	894,196		$	184,447	$	631,696		$	631,696

(1)

Mr. Geltzeiler is not currently eligible for retirement. The amounts shown reflect a voluntary resignation.

(2)

Reflects account balance as of June 30, 2007. Mr. Geltzeiler is fully vested.

(3)

Reflects account balance as of June 30, 2007. Pursuant to the terms of an agreement between Mr. Geltzeiler and us dated March 20, 2007, a contribution of $240,000 was made to his Executive Cash Balance Plan account as of March 31, 2007, and he became 100% vested in his March 31, 2007 Executive Cash Balance Plan account balance. Mr. Geltzeiler would forfeit his Executive Cash Balance Plan Account if he is terminated for Cause in the future.

(4)

Under the terms of our Management Incentive Plan ("MIP"), Mr. Geltzeiler would be eligible for a pro-rata bonus. The amount shown reflects Mr. Geltzeiler's actual fiscal 2007 MIP bonus award.

(5)

Mr. Geltzeiler waived all rights to any future severance and other benefits under the 2001 and 2006 Income Continuation Plans, his Termination Agreement and any of our other policies or plans in exchange for a $1,200,000 payment made in March 2007 in accordance with the terms of an agreement between Mr. Geltzeiler and us dated March 20, 2007.

(6)

Accelerated payments of $2,539,209 were made on March 13, 2007, in connection with the change-in-control resulting from the consummation of the Acquisition Transaction, of $463,495 for stock options, $255,000 for restricted stock, $1,259,714 for PBRSUs and $561,000 for time-based RSUs.

(7)

Disability generally is defined as an illness, injury or disease, including mental or emotional illness, that prevents the employee from performing his or her occupation, or any comparable occupation for which he or she is reasonably qualified, for a period of six months. Accrual of retirement benefits would continue, and retirement payments would be made, following 30 months of Disability.

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Dawn Zier, President, North American Consumer Marketing

Termination Payment	Voluntary Resignation/ Retirement(1)		Death			Disability(12)			Termination for Cause		Termination Without Cause or for Good Reason Not in Connection with a Change-in- Control(13)			Termination Without Cause or Constructive Termination in Connection with a Change-in- Control(14)
Severance	$	0	$	0		$	0		$	0	$	533,000	(4)	$	1,066,000	(7)
Bonus	$	0	$	92,600	(3)	$	92,600	(3)	$	0	$	193,000	(5)	$	193,000	(8)
Qualified Retirement Plan(2)	$	132,644	$	132,644		$	132,644		$	132,644	$	132,644		$	132,644
Excess Plan(2)	$	23,163	$	23,163		$	23,163		$	23,163	$	23,163		$	23,163
Other Benefits	$	0	$	0		$	0		$	0	$	47,568	(6)	$	60,137	(9)
Gross-Up on Excise Taxes		n/a		n/a			n/a			n/a		n/a		$	604,904	(10)
Payment of Equity	$	0	$	0		$	0		$	0	$	0		$	0	(11)
Total Value of Payments	$	155,807	$	248,407		$	248,407		$	155,807	$	929,375		$	2,079,848

(1)

Ms. Zier is not currently eligible for retirement. The amounts shown reflect a voluntary resignation.

(2)

Reflects account balance as of June 30, 2007. Ms. Zier is fully vested.

(3)

Under the terms of our MIP, Ms. Zier would be eligible for a pro-rata bonus. The amount shown reflects Ms. Zier's actual fiscal 2007 MIP bonus award.

(4)

Under the terms of Ms. Zier's Termination Agreement, she would receive the following payments for the one-year period following the date of termination: (a) her highest annual base salary in effect at any time during the 12-month period immediately prior to the date of termination, plus (b) the higher of (i) the highest amount paid to her under the Annual Incentive Plan during the three plan years most recently ended prior to the date of termination or (ii) her annual target bonus award, if any, under the Annual Incentive Plan for the fiscal year in which the date of termination occurs. These payments would be made in equal installments on a bi-weekly basis, commencing upon the date of termination.

(5)

Under the terms of Ms. Zier's Termination Agreement, she would receive a pro-rata target bonus paid in a lump sum following the date of termination.

(6)

Reflects the value of additional benefits under Ms. Zier's Termination Agreement. Ms. Zier would receive $12,568, equal to the Company-paid portion of medical, dental and life insurance benefits for the one-year severance period paid in a lump sum following the date of termination and the value of outplacement benefit of $35,000.

(7)

Under the terms of our 2006 Income Continuation Plan, Ms. Zier would receive severance in an amount equal to two times her annual base salary plus a Severance Bonus Amount, paid in a lump sum. The "Severance Bonus Amount" is defined as the higher of (A) Ms. Zier's annual target bonus under the Incentive Compensation Plan in the fiscal year in which her termination date occurs and (B) the average of the three (3) annual cash bonuses earned by Ms. Zier under the Incentive Compensation Plan during the five-year period immediately preceding the fiscal year in which her termination date occurs.

(8)

Under the terms of the 2006 Income Continuation Plan, Ms. Zier would receive a pro-rata Severance Bonus Amount which, on June 30, 2007, would equal her target bonus for fiscal 2007, paid in a lump sum.

(9)

Reflects the value of additional benefits under the 2006 Income Continuation Plan. Ms. Zier would receive $25,137, which equals the Company-paid portion of medical, dental and life insurance benefits for the two year severance period following the date of termination, paid in a lump sum, plus the value of outplacement benefit of $35,000.

(10)

Reflects estimated gross-up payment related to the Internal Revenue Code Section 280G excise tax that would be made to tax authorities on behalf of Ms. Zier under the terms of the 2006 Income Continuation Plan.

(11)

Accelerated payments of $969,953 were made on March 13, 2007 of $193,820 for stock options, $164,322 for restricted stock, $203,811 for PBRSUs and $408,000 for time-based RSUs in connection with the change-in-control resulting from the consummation of the Acquisition Transaction.

(12)

Disability is defined as set forth in footnote 7 to Mr. Geltzeiler's termination table.

112

(13)

With respect to Ms. Zier, "Good Reason" under the 2006 Income Continuation Plan is defined as the occurrence of either of the following without her express written consent: (a) our reduction of Ms. Zier's annual base salary or annual target bonus opportunity under our MIP or SMIP, as applicable (each, as applicable, the "Annual Incentive Plan"), unless such reduction is part of and consistent with a management-wide or Company-wide cost cutting program, and then only if the percentage of such reduction is no greater than that of the other management personnel; or (b) a relocation to an office located anywhere other than within seventy-five (75) miles of Ms. Zier's current primary office, except for required travel on Company business to an extent substantially consistent with her then current business travel obligations.

(14)

With respect to Ms. Zier, "Constructive Termination" under the 2006 Income Continuation Plan is defined as the occurrence of any of the following events, without the written consent of Ms. Zier: (a) the assignment of any duties inconsistent in any respect with her position, duties, responsibilities and authority immediately prior to the change-in-control, or an adverse and material change or a substantial diminution in her authority, reporting responsibilities, titles or offices as in effect immediately prior to the change-in-control, or the removal from or failure to re-elect Ms. Zier to any such position or office; provided that termination of her employment for Cause (as defined in note 13), death, Total Disability (as defined in our Long-term Disability Plan) or mandatory retirement pursuant to our retirement policy does not constitute a Constructive Termination event; (b) a reduction in Ms. Zier's base salary; (c) a reduction in Ms. Zier's target incentive opportunities under our MIP or SMIP, as applicable, or our 1994, 2002 and 2005 Key Employee Long-term Incentive Plans (the "KELTIPs"); (d) our relocation of Ms. Zier to an office located anywhere other than within seventy-five (75) miles of her primary office immediately prior to the change-in-control, except for required business travel to an extent substantially consistent with her business travel obligations immediately prior to the Change-in-control; (e) our failure to continue in effect any of our employee benefit plans or fringe benefit programs in which Ms. Zier participates that, by itself or in the aggregate, is material to a participant's total compensation and benefits, unless there shall have been instituted a replacement or substitute plan or fringe benefit program providing comparable benefits or compensation providing comparable value; (f) our failure to permit Ms. Zier to participate in any new or additional compensation, incentive, employee benefit or fringe benefit plan or program that is made generally available to our senior management, if such plan or program would be material to her total compensation and benefits.

Albert Perruzza, Senior Vice President, Global Operations & Business Redesign

Termination Payment	Voluntary Resignation/ Retirement(1)			Death			Disability(13)			Termination for Cause		Termination Without Cause or for Good Reason Not in Connection with a Change-in-Control(14)			Termination Without Cause or Constructive Termination in Connection with a Change-in-Control(15)
Severance	$	0		$	0		$	0		$	0	$	1,183,000	(5)	$	1,774,500	(8)
Bonus	$	161,700	(4)	$	161,700	(4)	$	161,700	(4)	$	0	$	231,000	(6)	$	231,000	(9)
Qualified Retirement Plan(2)	$	1,014,918		$	1,014,918		$	1,014,918		$	1,014,918	$	1,014,918		$	1,014,918
Excess Plan(2)	$	508,193		$	508,193		$	508,193		$	508,193	$	508,193		$	508,193
SERP(3)	$	733,101		$	750,000		$	733,101		$	733,101	$	733,101		$	733,101
Other Benefits	$	0		$	0		$	0		$	0	$	60,154	(7)	$	137,621	(10)
Gross-Up on Excise Taxes		n/a			n/a			n/a			n/a		n/a		$	949,895	(11)
Payment of Equity	$	0		$	0		$	0		$	0	$	0		$	0	(12)
Total Value of Payments	$	2,417,912		$	2,434,811		$	2,417,912		$	2,256,212	$	3,730,366		$	5,349,228

(1)

Mr. Perruzza is currently eligible for retirement. The amounts shown reflect retirement.

(2)

Reflects account balance as of June 30, 2007. Mr. Perruzza is fully vested.

(3)

For termination other than death, the amount shown above is the present value of Mr. Perruzza's SERP benefit commencing July 1, 2007 and payable for 15 years. The SERP death benefit is a single sum payment of $750,000.

(4)

Under the terms of our MIP, Mr. Perruzza would be eligible for a pro-rata bonus. The amount shown is Mr. Perruzza's actual fiscal 2007 MIP bonus award.

(5)

Under the terms of Mr. Perruzza's Termination Agreement, he would receive for the two-year period following the date of termination, similar payments as those described for Ms. Zier.

(6)

Under the terms of Mr. Perruzza's Termination Agreement, he would receive a pro-rata target bonus paid in a lump sum following the date of termination.

113

(7)

Reflects the value of additional benefits under Mr. Perruzza's Termination Agreement. Mr. Perruzza would receive $25,154, equal to the Company-paid portion of medical, dental and life insurance benefits for the two year severance period paid in a lump sum following the date of termination and the value of outplacement benefit of $35,000.

(8)

Under the terms of our 2001 Income Continuation Plan, Mr. Perruzza would receive severance in an amount equal to three times his annual base salary plus a Severance Bonus Amount (as defined in footnote 7 to Ms. Zier's termination table), paid in a lump sum.

(9)

Under the terms of the 2001 Income Continuation Plan, Mr. Perruzza would receive a pro-rata Severance Bonus Amount which, on June 30, 2007 would equal his target bonus for fiscal 2007, paid in a lump sum.

(10)

Reflects the value of additional benefits under the 2001 Income Continuation Plan. Mr. Perruzza would receive a lump sum payment of $64,890 which represents 1.5 times the contribution credit that would have been made to Mr. Perruzza's Cash Balance account (assuming he would have remained an employee for one year and that his base salary and age were the same as of the date of termination), $37,731 equal to the Company-paid portion of medical, dental and life insurance benefits for the three year severance period, paid in a lump sum following the date of termination, and the value of outplacement benefit of $35,000.

(11)

Reflects estimated gross-up payment related to the Internal Revenue Code Section 280G excise tax that would be made to tax authorities on behalf of Mr. Perruzza under the terms of the 2001 Income Continuation Plan.

(12)

Accelerated payments of $931,121 were made on March 13, 2007, of $198,322 for restricted stock and $732,799 for PBRSUs in connection with the change-in-control resulting from the consummation of the Acquisition Transaction.

(13)

Disability is defined as set forth in footnote 7 to Mr. Geltzeiler's termination table.

(14)

With respect to Mr. Perruzza, "Good Reason" under the 2001 Income Continuation Plan has a definition similar to that defined in footnote 13 to Ms. Zier's termination table.

(15)

With respect to Mr. Perruzza, "Constructive Termination" under the 2001 Income Continuation Plan has a definition similar to that defined in footnote 14 to Ms. Zier's termination table.

Eric Schrier, Former President and Chief Executive Officer(1)

Termination Payment	Voluntary Resignation/ Retirement	Death	Disability	Termination for Cause	Termination Without Cause or for Good Reason Not in Connection with a Change-in-Control	Termination Without Cause or Constructive Termination in Connection with a Change-in-Control
Severance	n/a	n/a	n/a	n/a	n/a	$	5,082,000	(2)
Bonus	n/a	n/a	n/a	n/a	n/a	$	596,055	(3)
Qualified Retirement Plan	n/a	n/a	n/a	n/a	n/a	$	156,784	(4)
Excess Plan	n/a	n/a	n/a	n/a	n/a	$	213,542	(5)
Executive Cash Balance Plan	n/a	n/a	n/a	n/a	n/a	$	845,051	(6)
Other Benefits	n/a	n/a	n/a	n/a	n/a	$	535,712	(7)
Gross-Up on Excise Taxes	n/a	n/a	n/a	n/a	n/a	$	3,407,864	(8)
Payment of Equity	n/a	n/a	n/a	n/a	n/a	$	5,956,506	(9)
Total Value of Payments	n/a	n/a	n/a	n/a	n/a	$	16,793,514

(1)

Mr. Schrier's termination date was March 16, 2007, and he received benefits in accordance with the terms of our 2001 Income Continuation Plan.

(2)

Under the terms of the 2001 Income Continuation Plan, Mr. Schrier received severance in an amount equal to three times his annual base salary plus a Severance Bonus Amount (as defined in footnote 7 to Ms. Zier's termination table), paid in a lump sum.

(3)

Under the terms of the 2001 Income Continuation Plan, Mr. Schrier received a pro-rata Severance Bonus Amount which was equal to his pro-rata target bonus for fiscal 2007, paid in a lump sum on March 26, 2007.

(4)

Reflects the account balance as of June 30, 2007. Mr. Schrier received a lump sum payment in October 2007 based on his actual account balance at that time.

(5)

Reflects the Excess Plan payment that was paid to Mr. Schrier in April 2007 as a single lump sum payment.

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(6)

The Executive Cash Balance Plan benefit shown above represents Mr. Schrier's account balance as of June 30, 2007. The balance will be paid out in 10 annual installments beginning in January 2008. Mr. Schrier became 100% vested in March 2007 under the terms of the 2001 Income Continuation Plan.

(7)

Reflects actual payments of additional benefits under the 2001 Income Continuation Plan. Mr. Schrier received a lump sum payment of $462,000 on March 26, 2007, which represents 1.5 times the contribution credits that would have been made to Mr. Schrier's Executive Cash Balance Plan account, a lump sum payment on March 26, 2007 of $38,712 equal to the Company-paid portion of medical, dental and life insurance benefits for the three year severance period; and the value of outplacement benefit of $35,000.

(8)

Reflects actual gross-up payment related to the Internal Revenue Code Section 280G excise tax made to tax authorities on behalf of Mr. Schrier under the terms of the 2001 Income Continuation Plan.

(9)

Reflects accelerated payments made on March 13, 2007 of $1,486,182 for stock options, $455,322 for restricted stock, $2,997,002 for PBRSUs and $1,020,000 for time-based RSUs, in connection with the change-in-control resulting from the consummation of the Acquisition Transaction.

Thomas Gardner, Former Executive Vice President and President, International(1)

Termination Payment	Voluntary Resignation/ Retirement	Death	Disability	Termination for Cause	Termination Without Cause or for Good Reason Not in Connection with a Change-in-Control	Termination Without Cause or Constructive Termination in Connection with a Change-in-Control
Severance	n/a	n/a	n/a	n/a	n/a	$	3,030,000	(2)
Bonus	n/a	n/a	n/a	n/a	n/a	$	450,000	(3)
Qualified Retirement Plan	n/a	n/a	n/a	n/a	n/a	$	232,486	(4)
Excess Plan	n/a	n/a	n/a	n/a	n/a	$	217,358	(5)
Executive Cash Balance Plan	n/a	n/a	n/a	n/a	n/a	$	893,298	(6)
Other Benefits	n/a	n/a	n/a	n/a	n/a	$	376,712	(7)
Gross-Up on Excise Taxes	n/a	n/a	n/a	n/a	n/a	$	2,006,364	(8)
Payment of Equity	n/a	n/a	n/a	n/a	n/a	$	3,076,464	(9)
Total Value of Payments	n/a	n/a	n/a	n/a	n/a	$	10,282,682

(1)

Mr. Gardner's termination date was June 30, 2007, and he received benefits in accordance with the 2001 Income Continuation Plan.

(2)

Under the terms of the 2001 Income Continuation Plan, Mr. Gardner received severance in an amount equal to three times his annual base salary plus a Severance Bonus Amount (as defined in footnote 7 to Ms. Zier's termination table), paid in a lump sum.

(3)

Under the terms of the 2001 Income Continuation Plan, Mr. Gardner received a pro-rata Severance Bonus Amount which was equal to his pro-rata target bonus for fiscal 2007, paid in a lump sum on July 10, 2007.

(4)

Reflects the account balance as of June 30, 2007. Mr. Gardner received a lump sum payment in September 2007 based on his actual account balance at that time.

(5)

Reflects the Excess Plan payment that was paid to Mr. Gardner in July 2007 as a single lump sum payment.

(6)

The Executive Cash Balance Plan benefit shown above represents Mr. Gardner's account balance as of June 30, 2007. The balance will be paid out in 10 annual installments beginning in January 2008. Mr. Gardner became 100% vested in this benefit upon his termination under the 2001 Income Continuation Plan.

(7)

Reflects actual payments of additional benefits under the 2001 Income Continuation Plan. Mr. Gardner received a lump sum payment of $303,000 on July 10, 2007, which represents 1.5 times the contribution credits that would have been made to Mr. Gardner's Executive Cash Balance Plan account, a lump sum payment on July 10, 2007 of $38,712 equal to the Company-paid portion of medical, dental and life insurance benefits for the three year severance, and the value of outplacement benefit of $35,000.

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(8)

Reflects actual gross-up payment related to the Internal Revenue Code Section 280G excise tax made to tax authorities on behalf of Mr. Gardner under the terms of the 2001 Income Continuation Plan.

(9)

Reflects accelerated payments made on March 13, 2007 of $596,493 for stock options, $368,322 for restricted stock, $1,431,649 for PBRSUs and $680,000 for time-based RSUs, in connection with the change-in-control resulting from the consummation of the Acquisition Transaction.

Michael Brizel, Former Senior Vice President and General Counsel(1)

Termination Payment	Voluntary Resignation/ Retirement	Death	Disability	Termination for Cause	Termination Without Cause or for Good Reason Not in Connection with a Change-in-Control	Termination Without Cause or Constructive Termination in Connection with a Change-in-Control
Severance	n/a	n/a	n/a	n/a	n/a	$	1,686,000	(2)
Bonus	n/a	n/a	n/a	n/a	n/a	$	149,397	(3)
Qualified Retirement Plan	n/a	n/a	n/a	n/a	n/a	$	275,216	(4)
Excess Plan	n/a	n/a	n/a	n/a	n/a	$	81,621	(4)
Other Benefits	n/a	n/a	n/a	n/a	n/a	$	123,731	(5)
Gross-Up on Excise Taxes	n/a	n/a	n/a	n/a	n/a	$	969,231	(6)
Payment of Equity	n/a	n/a	n/a	n/a	n/a	$	1,348,609	(7)
Total Value of Payments	n/a	n/a	n/a	n/a	n/a	$	4,633,805

(1)

Mr. Brizel's termination date was March 23, 2007, and he received benefits in accordance with the 2001 Income Continuation Plan.

(2)

Under the terms of the 2001 Income Continuation Plan, Mr. Brizel received severance in an amount equal to three times his annual base salary plus a Severance Bonus Amount (as defined in footnote 7 to Ms. Zier's termination table), paid in a lump sum.

(3)

Under the terms of the 2001 Income Continuation Plan, Mr. Brizel received a pro-rata Severance Bonus Amount which was equal to his pro-rata target bonus for the fiscal 2007, paid in a lump sum on April 2, 2007.

(4)

Reflects the Qualified Retirement Plan and Excess Plan payments that were paid to Mr. Brizel in June 2007 in separate lump sum payments.

(5)

Reflects actual payments of additional benefits under the 2001 Income Continuation Plan. Mr. Brizel received a lump sum payment of $51,000 on April 2, 2007, which represents 1.5 times the credit that would have been made to Mr. Brizel's Cash Balance account, a lump sum payment on April 2, 2007 of $37,731 equal to the Company-paid portion of medical, dental and life insurance benefits for the three year severance period, and the value of outplacement benefit of $35,000.

(6)

Reflects actual gross-up payment related to the Internal Revenue Code Section 280G excise tax made to tax authorities on behalf of Mr. Brizel under the terms of the 2001 Income Continuation Plan.

(7)

Reflects accelerated payments made on March 13, 2007 of $214,013 for stock options, $147,339 for restricted stock, $579, 258 for PBRSUs and $408,000 for time-based RSUs, in connection with the change-in-control resulting from the consummation of the Acquisition Transaction.

116

Thomas Ryder, Former Chairman(1)

Termination Payment	Voluntary Resignation/ Retirement	Death	Disability	Termination for Cause	Termination Without Cause or for Good Reason Not in Connection with a Change-in- Control	Termination Without Cause or Constructive Termination in Connection with a Change-in- Control
Severance	n/a	n/a	n/a	n/a	n/a	$	4,000,000	(2)
Bonus	n/a	n/a	n/a	n/a	n/a	$	255,000	(3)
Qualified Retirement Plan	n/a	n/a	n/a	n/a	n/a	$	251,270	(4)
Excess Plan	n/a	n/a	n/a	n/a	n/a	$	792,569	(5)
Executive Retirement Plan	n/a	n/a	n/a	n/a	n/a	$	5,952,439	(6)
Other Benefits	n/a	n/a	n/a	n/a	n/a	$	0
Gross-Up on Excise Taxes	n/a	n/a	n/a	n/a	n/a	$	0
Payment of Equity	n/a	n/a	n/a	n/a	n/a	$	4,052,214	(7)
Total Value of Payments	n/a	n/a	n/a	n/a	n/a	$	15,303,492

(1)

Mr. Ryder's termination date was March 2, 2007 and he received benefits in accordance with the Third Amendment to his Employment Agreement dated November 15, 2006. The Third Amendment provided that changes in the terms of Mr. Ryder's employment related to changes in employment status will not constitute "Good Reason" or termination without "Cause" under that Employment Agreement. The Third Amendment specified the following compensation and benefits for Mr. Ryder:

•

Base Salary—$5,000 per month;



•

Annual Incentive Compensation—Fiscal 2007 target opportunity of $500,000, (for the first six months of fiscal 2007, i.e. through December 31, 2006);



•

Other Incentive Compensation—Mr. Ryder is not eligible for new incentive awards, annual, long-term or otherwise, provided, however, that he will continue to vest in any outstanding awards during his employment term;



•

Severance Payment—$4,000,000 if a change-in-control of RDA occurs prior to June 30, 2007; conditioned upon Mr. Ryder's executing a release of claims against us;



•

Benefits—Continuation of current health and welfare benefits through the employment term. Mr. Ryder will be entitled to receive his retirement benefits, as provided in his employment agreement.

(2)

Under the terms of the Third Amendment to Mr. Ryder's Employment Agreement, he received a lump sum severance payment of $4,000,000 on September 4, 2007.

(3)

Under the terms of the Third Amendment to Mr. Ryder's Employment Agreement, he was eligible for an annual bonus payment under the MIP. Mr. Ryder received a lump sum payment of $255,000 on August 31, 2007 based on the overall corporate results for fiscal 2007.

(4)

Reflects the Qualified Retirement Plan benefit that was paid to Mr. Ryder in June 2007 as a single lump sum payment.

(5)

Reflects the Excess Plan benefit that was paid to Mr. Ryder in October 2007 as a lump sum payment.

(6)

Amount shown represents the present value of Mr. Ryder's retirement benefit, which was paid in October 2007 as a 50% Joint & Survivor annuity of $497,781 per year. Mr. Ryder also received a one-time payment of $252,335 representing annuity payments retroactive to April 2007.

(7)

Reflects accelerated payments made on March 13, 2007 of $4,052,214 for PBRSUs, in connection with the change-in-control resulting from the consummation of the Acquisition Transaction.

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Director Compensation

        Upon consummation of the Acquisition Transaction, all of our directors then in office resigned from the Board and were replaced by seven directors who are appointed by the Sponsors. In March 2007, our new Chief Executive Officer, Mary G. Berner, joined the Board.

        The general policy of the Board prior to the consummation of the Acquisition Transaction was that compensation program for non-employee directors should be composed of a mix of cash and equity-based compensation. We do not pay employee directors for Board service in addition to their regular employee compensation. Our director compensation program is administered on a calendar year basis, and therefore fiscal 2007 director compensation represents one-half of calendar year 2006 compensation and one-half of calendar year 2007 compensation. The Compensation Committee has the primary responsibility for reviewing and considering any revisions to director compensation. The Board reviews the Compensation Committee's recommendations and determines the amount of director compensation.

        During calendar year 2006, the directors were compensated pursuant to the following schedule:

Annual Retainer	$18,000 (for Directors whose term began prior to April 1, 1998) $40,000 (for Directors whose term began on or after April 1, 1998)
Committee Chairman fee per year:     1. Audit Committee Chair     2. All other Committee Chairs	$20,000 $15,000
Audit Committee Member fee per year	$10,000
Other Committee Member fee per year (excluding Audit and Corporate Governance Committees)	$5,000
Common Stock per year	Equivalent to $20,000
Deferred Common Stock(1)	Equivalent to $50,000 (for Directors whose term began prior to April 1, 1998) Equivalent to $60,000 (for Directors whose term began on or after April 1, 1998)

(1)

Deferred Common Stock is the right to receive shares of our common stock on the first trading day of the calendar year after termination of the Director's service on the Board or in annual installments thereafter, as elected by the Director.

        In addition, each individual who became a non-employee Director prior to April 1, 1998 and who serves as a non-employee Director for more than five years will, upon retirement from the Board, continue to receive annual compensation in the amount of $32,000.

        Under our Deferred Compensation Plan for Non-Employee Directors, non-employee Directors are eligible to defer payment of 50%, 75% or 100% of their cash, stock and deferred stock compensation for certain established deferral periods. Deferred cash compensation is credited to an unfunded account for each participant, on which interest accrues at a rate determined by a committee of Directors. Payment of the deferred cash amounts or deferred stock will be made, at the election of the

118

participant, in a lump sum or in annual installments of from one to 10 years. We expect to amend the plan as appropriate to comply with Section 409A of the Internal Revenue Code.

        Effective as of February 12, 2007, our director compensation program was amended to provide that, with respect to the first calendar quarter of 2007, (A) all non-employee directors whose term began prior to April 1, 1998, would receive a grant of shares of common stock valued at $17,500, and (B) all non-employee directors whose term began after April 1, 1998, would receive a grant of shares of common stock valued at $20,000. In addition, for the 2007 calendar year, we did not make grants of deferred stock to our non-employee directors.

        Effective upon the consummation of the Acquisition Transaction, all prior Director compensation arrangements were terminated. Commencing March 2, 2007, our Directors are no longer compensated for their services as members of our Board of Directors, except that each of Messrs. Knight and Lack (1) are entitled to an annual cash retainer of $100,000, payable quarterly in arrears, and (2) received an initial grant of options to acquire 50,000 shares of RDA Holding Co. common stock, at an exercise price of $10 per share, with such options to vest as to 12,500 shares on each of the first four anniversaries of March 2, 2007, subject to their continued services as our directors as of the vesting date. We do not pay director fees to our employee directors, who currently consist of Mary A. Berner.

        The following table shows the total compensation paid to our non-employee directors in fiscal 2007.

Director Summary Compensation

Pre-Acquisition Transaction Directors

Name	Fees Earned or Paid in Cash ($)(1)	Stock Awards ($)		Option Awards ($)	Non-Equity Incentive Plan Compensation ($)	Change in Pension Value and Nonqualified Deferred Compensation Earnings		All Other Compensation ($)		Total ($)
Jonathan B. Bulkeley	45,000	59,577(2	)(3)	0	0	0		0		104,577
Herman Cain	33,750	59,577(2	)(3)	0	0	0		0		93,327
Lee Caudill	33,750	59,577(2	)(4)	0	0	0		0		93,327
Walter Isaacson	33,750	59,577(2	)(3)	0	0	0		0		93,327
William E. Mayer	37,500	59,577(2	)(3)	0	0	0		100,000	(6)	197,077
John T. Reid	37,500	59,577(2	)(3)	0	0	0		0		97,077
Lawrence R. Ricciardi	47,500	59,577(2	)(3)	0	0	0		100,000	(6)	207,077
William J. White	32,250	52,130(2	)(5)	0	0	0	(7)	8,000		92,380
Ed Zschau	43,750	59,577(2	)(3)	0	0	0		0		103,327

(1)

Represents the total cash delivered or earned by each Director in fiscal 2007. Since our director compensation program is administered on a calendar year basis, the fiscal 2007 fees earned represent one-half of the calendar year 2006 annual cash retainer and any other chairperson/committee member fees (paid quarterly), as well as the cash retainer and any other chairperson/committee member fees paid in calendar year 2007. Each of these individuals ceased to be a member of our Board of Directors in March 2007 following the consummation of the Acquisition Transaction.

(2)

Represents the total stock expense accrued in fiscal 2007. Since our director compensation program is administered on a calendar year basis, the fiscal 2007 expense consists of one half of the calendar year 2006 stock grant expense (granted on January 3, 2006) and one half of the calendar year deferred stock grant expense (granted on January 3, 2006) for each Director, as well

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as the accelerated expense accrued related to the calendar year 2007 stock grant (granted in February 2007).

(3)

Reflects expense recognized relating to 50% of the 2006 calendar year stock grant (1,300 shares granted on 1/3/2006), 50% of the 2006 calendar year deferred stock grant (3,900 shares granted on 1/3/2006), and 100% of the 2007 calendar year stock grant (1,200 shares granted on 2/13/2007).

(4)

Reflects expense recognized relating to 50% of the 2006 calendar year deferred stock grant (5,200 shares granted on 1/3/2006), and 100% of the 2007 calendar year stock grant (1,200 shares granted on 2/13/2007).

(5)

Reflects expense recognized relating to 50% of the 2006 calendar year stock grant (1,300 shares granted on 1/3/2006), 50% of the 2006 calendar year deferred stock grant (3,250 shares granted on 1/3/2006), and 100% of the 2007 calendar year stock grant (1,050 shares granted on 2/13/2007).

(6)

Reflects a cash award approved by our Board of Directors on November 15, 2006, as compensation for the devotion of significant time and the provision of significant services in connection with the evaluation of the Acquisition Transaction and other potential business combinations, and the negotiation of the RDA Merger Agreement and related documents.

(7)

The change in the present value of Mr. White's pension benefit is ($7,946).

Post-Acquisition Transaction Directors

Name	Fees Earned or Paid in Cash ($)(1)	Stock Awards ($)	Option Awards ($)	Non-Equity Incentive Plan Compensation ($)	Change in Pension Value and Nonqualified Deferred Compensation Earnings	All Other Compensation ($)	Total ($)
Timothy C. Collins	0	0	0	0	0	0	0
Harvey Golub	0	0	0	0	0	0	0
Andrew S. B. Knight	33,333	0	0	0	0	0	33,333
Andrew R. Lack	33,333	0	0	0	0	0	33,333
Eric Schrier	0	0	0	0	0	0	0
Stephen T. Shapiro	0	0	0	0	0	0	0
Harris Williams	0	0	0	0	0	0	0

Compensation Committee Interlocks and Insider Participation

        Our Compensation Committee is currently comprised of Messrs. Collins, Golub and Lack, who were each appointed to the Compensation Committee in May 2007 in connection with the Acquisition Transaction. None of these individuals has been at any time an officer or employee of our Company. During 2007, we had no compensation committee "interlocks"—meaning that it was not the case that an executive officer of ours served as a director or member of the compensation committee of another entity and an executive officer of the other entity served as a director or member of our Compensation Committee.

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SECURITY OWNERSHIP

Equity Compensation Plan Information

        There are no compensation plans under which our common stock is authorized for issuance. The following table contains certain information as of June 30, 2007 with respect to our 2007 Management Incentive Plan under which shares of common stock in RDA Holding Co. are authorized for issuance.

Plan Category	Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights	Weighted-Average Exercise Price Of Outstanding Options, Warrants And Rights	Number Of Securities Remaining Available For Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected In Column (a))
	(a)	(b)	(c)
Equity compensation plans approved by security holders	0	0	0
Equity compensation plans not approved by security holders	0	0	0
Total	0	0	0

Security Ownership of Certain Beneficial Owners and Management

        All of our outstanding common stock is directly owned by RDA Holding Co., and no other person has a direct beneficial ownership interest in our common stock The following table presents information regarding beneficial ownership of the equity securities of RDA Holding Co. as of June 30, 2007 by each person who is known by us to beneficially own more than 5% of the equity securities of RDA Holding Co., by each of our directors, by each of the Named Executive Officers, and by all of our directors and executive officers as a group. The percentage of beneficial ownership for these stockholders is calculated based on 59,640,620 shares of common stock of RDA Holding Co. outstanding as of June 30, 2007. Other than beneficial ownership information relating to our executive officers, the beneficial ownership information set forth below was provided by or on behalf of our directors and our Sponsors, and we have not independently verified the accuracy or completeness of the information so provided. Notwithstanding the beneficial ownership of the common stock of RDA Holding Co. presented below, the Stockholders' Agreement of RDA Holding Co. governs the exercise of our stockholders' voting and other rights. See "Certain Relationships and Related Transactions, and Director Independence—Stockholders' Agreement."

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Name of Beneficial Owner	Amount and Nature of Beneficial Ownership(1)	Percent of Class(1)
Principal Stockholders
Affiliates of Ripplewood Holdings L.L.C.(2)	59,640,620	100
C.V. Starr & Co., Inc.(3)	4,000,000	6.7
Golden Tree Asset Management, LP and related funds(4)	7,000,000	11.7
J. Rothschild Group (Guernsey) Ltd.(5)	6,000,000	10.1
Current Directors
Mary G. Berner, Chief Executive Officer and Director	0	—
Timothy C. Collins, Director(6)	0	—
Harvey Golub, Chairman of the Board(7)	0	—
Andrew S. B. Knight, Director(5)	0	—
Andrew R. Lack, Director	0	—
Eric Schrier, Director	0	—
Stephen T. Shapiro, Director and Former Executive Officer(4)	0	—
Harris Williams, Director(8)	0	—
Named Executive Officers Who Are Not Directors(9)
Michael Geltzeiler, President, School of Educational Services	0	—
Thomas Gardner, Former Executive Officer	0	—
Dawn Zier, President, North American Consumer Marketing	0	—
Albert Perruzza, SVP Global Operations & Business Redesign	0	—
Thomas Ryder, Former Executive Officer	0	—
Michael Brizel, Former Executive Officer	0	—
All directors and executive officers as a group (24 persons)(6)(7)(8)(10)	0	—

(1)

Except as otherwise noted below, we believe that all shares are owned beneficially by the individual listed with sole voting and/or investment power. Pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as amended, a person has beneficial ownership of any securities as to which such person, directly or indirectly, through any contract, arrangement, undertaking, relationship or otherwise has or shares voting power and/or investment power or as to which such person has the right to acquire such voting and/or investment power within 60 days. The percentage of beneficial ownership by a person as of a particular date is calculated by dividing the number of shares beneficially owned by such person by the sum of the number of shares outstanding as of such date and the number of unissued shares as to which such person has the right to acquire voting and/or investment power within 60 days. Unless otherwise indicated, the number of shares shown includes outstanding shares of common stock owned as of June 30, 2007 by the person indicated. There are no outstanding rights to acquire securities or voting and/or investment power.

(2)

Includes (i) 10,827,681 shares of common stock of RDA Holding Co. held by RDA Investors I, LLC, whose sole member is Ripplewood Partners II, L.P.; (ii) 5,962,419 shares of common stock of RDA Holding Co. held by RDA Investors II, LLC, whose manager is Ripplewood Partners II GP, L.P.; (iii) 6,200,100 shares of common stock of RDA Holding Co. held by RDA Investors III, LLC, whose manager is Ripplewood Partners II GP, L.P.; (iv) 3,546,468 shares of common stock of RDA Holding Co. held by LVC Acquisition, L.L.C., whose sole member is Ripplewood Partners II, L.P.; (v) 1,464,946 shares of common stock of RDA Holding Co. held by LVC Acquisition II, L.L.C., whose members are Ripplewood Partners II Parallel Fund, L.P., Ripplewood Partners II Offshore Parallel Fund, L.P., and RP II RHJ Co-Investment Fund, L.P.; and (vi) 4,928,896 shares of common stock of RDA Holding Co. held by EAC III, L.L.C., whose

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managing member is EAC IV, L.L.C. The amounts listed above in this note represent in the aggregate 55.3% of the shares of common stock of RDA Holding Co. In addition, pursuant to the Stockholders' Agreement of RDA Holding Co., Ripplewood has the power to vote the common stock of all of the other stockholders of RDA Holding Co. under certain circumstances, including the remaining 44.7% of the shares of common stock of RDA Holding Co. not held by the affiliates of Ripplewood listed above. See "Certain Relationships and Related Transactions, and Director Independence—Stockholders' Agreement." Thus, pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, Ripplewood may be deemed to beneficially own 100% of the common stock of RDA Holding Co. Messrs. Collins and Golub may be deemed to share beneficial ownership of any shares beneficially owned or deemed to be beneficially owned by Ripplewood, but expressly disclaim all such beneficial ownership. Mr. Williams is a Managing Director of Ripplewood, but does not have investment or voting control over the shares beneficially owned by Ripplewood. For a description of material relationships between Ripplewood and us over the last three years, see "Certain Relationships and Related Transactions, and Director Independence." The address of each of the Ripplewood investment funds is c/o Ripplewood Holdings, LLC, 1 Rockefeller Plaza, 32nd Floor, New York, NY 10020.

(3)

The address of C.V. Starr & Co., Inc. is 399 Park Avenue, New York, NY 10022.

(4)

Mr. Shapiro, our director, is a founding partner and a director of GoldenTree Asset Management, LP. The beneficial ownership of GoldenTree Asset Management, LP includes (i) 3,885,935 shares of common stock of RDA Holding Co. held by GoldenTree Master Fund, Ltd., for whom investment and voting decisions are made by GoldenTree Asset Management, LP; (ii) 949,360 shares of common stock of RDA Holding Co. held by GoldenTree Master Fund II, Ltd., for whom investment and voting decisions are made by GoldenTree Asset Management, LP; (iii) 203,940 shares of common stock of RDA Holding Co. held by Citi GoldenTree, Ltd., for whom investment and voting decisions are made by GoldenTree Asset Management, LP; (iv) 151,665 shares of common stock of RDA Holding Co. held by GPC LVII, LLC, for whom investment and voting decisions are made by GoldenTree Asset Management, LP; (v) 950,175 shares of common stock of RDA Holding Co. held by GoldenTree Credit Opportunities Financing I, Ltd., for whom investment and voting decisions are made by GoldenTree Asset Management, LP; (vi) 702,100 shares of common stock of RDA Holding Co. held by GoldenTree MultiStrategy Financing, Ltd., for whom investment and voting decisions are made by GoldenTree Asset Management, LP; and (vii) 156,825 shares of common stock of RDA Holding Co. held by GoldenTree European Select Opportunities Master, LP, for whom investment and voting decisions are made by GoldenTree Asset Management UK LLP. The address of each of the GoldenTree investment funds is c/o GoldenTree Asset Management, LP 300 Park Avenue, 21st Floor, New York, NY 10022.

(5)

Mr. Knight, our director, is a director of J. Rothschild Group (Guernsey) Ltd. The address of J. Rothschild Group (Guernsey) Ltd. is 15 St. James' Place, London, SW1A 1NP, England.

(6)

Mr. Collins, our director, is the Founder, CEO and Senior Managing Director of Ripplewood. Amounts disclosed for Mr. Collins do not include the amounts disclosed in the table next to "Affiliates of Ripplewood Holdings L.L.C." Mr. Collins expressly disclaims beneficial ownership of any shares of common stock owned directly or indirectly by the Ripplewood investment funds.

(7)

Mr. Golub, our Chairman of the Board, is the Executive Chairman of Ripplewood. Amounts disclosed for Mr. Golub do not include the amounts disclosed in the table next to "Affiliates of Ripplewood Holdings L.L.C." Mr. Golub expressly disclaims beneficial ownership of any shares of common stock owned directly or indirectly by the Ripplewood investment funds.

(8)

Mr. Williams, our director, is a Managing Director of Ripplewood. Amounts disclosed for Mr. Williams do not include the amounts disclosed in the table next to "Affiliates of Ripplewood

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Holdings L.L.C." Mr. Williams expressly disclaims beneficial ownership of any shares of common stock owned directly or indirectly by the Ripplewood investment funds.

(9)

Unless otherwise indicated, the beneficial ownership of any named person does not exceed, in the aggregate, one percent of the outstanding equity securities of RDA Holding Co. on June 30, 2007.

(10)

Excluding shares beneficially owned by Messrs. Collins, Golub and Williams, there were no shares of RDA Holding Co. common stock beneficially owned by all 24 directors and officers as a group. See notes (6), (7) and (8).

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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

Review and Approval of Related Party Transactions

        Pursuant to our Ethical, Legal and Business Conduct Policies, our employees (including our Named Executive Officers) who have any financial interests in other entities where such involvement is or may appear to cause a conflict of interest situation are required to report to us the conflict. If the conflict is considered material, the situation will be reviewed by the Audit Committee to determine whether a conflict exists or will exist, and if so, what action should be taken to resolve the conflict or potential conflict. We do not have any written standards for approving related party transactions.

Relationship with Ripplewood

        The Sponsors beneficially own 100% of our common equity. We entered into the following agreements with affiliates of Ripplewood:

Stockholders' Agreement

        On January 23, 2007, RDA Holding Co. entered into a Stockholders' Agreement with RDA Investors I, LLC, RDA Investors II, LLC, RDA Investors III LLC (together with RDA Investors I, LLC and RDA Investors II, LLC, the "Ripplewood Funds" or "Ripplewood"), J. Rothschild Group (Guernsey) Ltd., GoldenTree Asset Management, LP. and the other stockholders of RDA Holding Co. The Stockholders' Agreement contains, among other items:

•

restrictions on the transfer of shares of common stock by any stockholder without Ripplewood's consent;



•

rights of first offer granted to Ripplewood to purchase our common stock, which any stockholder proposes to transfer, at the price and under all other material terms and conditions on which that stockholder first proposed to transfer its common stock;



•

preemptive rights granted to the stockholders to purchase equity securities issued by RDA Holding Co. or its affiliates in the amounts required to maintain their percentage ownership;



•

rights of the stockholders to participate in certain transfers of common stock by any stockholder;



•

rights of the stockholders to receive financial information; and



•

rights of Ripplewood to vote by irrevocable proxy all stockholder common stock (other than in connection with certain significant corporate actions or affiliate transactions).

        In addition, under the terms of the Stockholders' Agreement, Ripplewood sets the size of our board of directors as it deems appropriate, and is entitled to propose the appointment of all of our directors, including the Chairman of the Board and independent directors. Ripplewood has agreed that one director shall be designated by J. Rothschild Group (Guernsey) Ltd. and one director shall be designated by Golden Tree Asset Management, LP, subject to continuing stock ownership requirements. The Stockholders' Agreement requires that at least one director be "independent" for purposes of Rule 10A-3 promulgated under the Securities Exchange Act of 1934, as amended. Each party to the Stockholders' Agreement agrees to take all action necessary to effect the appointment to the board of each director appointee of Ripplewood.

Management Services Agreement

        On January 23, 2007, in connection with the Acquisition Transaction, we entered into a management services agreement (the "Management Services Agreement") with RDA Holding Co., and the Ripplewood Funds, J. Rothschild Group (Guernsey) Ltd., and GoldenTree Asset Management, LP, pursuant to which the Ripplewood Funds, J. Rothschild Group (Guernsey) Ltd., and GoldenTree Asset

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Management, LP (together the "Service Providers"), will be entitled to receive a management fee of $7.5 million (the "Management Fee") paid quarterly each January 1, April 1, July 1 and October 1, commencing April 1, 2007, paid pro rata in accordance with the percentage listed for each Service Provider in the management services agreement.

        The Management Services Agreement has a term of seven years. Upon a public offering of RDA Holding Co. or a change of control of RDA Holding Co., the Management Services Agreement will terminate, and the Service Providers will be entitled to the net present value of the remaining payments under the Management Services Agreement. In addition to the Management Fee, RDA Holding Co. will pay (or cause us to pay) directly, or reimburse, the Service Providers for their out-of-pocket expenses, which include reasonable out-of-pocket costs and expenses incurred by the Service Providers in connection with the services rendered under the Management Services Agreement.

        The Management Services Agreement also provides that, to the extent that RDA Holding Co. requests services other than management services from a Service Provider, RDA Holding Co. and such Service Provider may negotiate mutually agreed upon fees and expenses to be paid by RDA Holding Co. for such other services, and such other services will be deemed to be provided under the Management Services Agreement. The Management Services Agreement will include customary exculpatory and indemnification provisions in favor of the Service Providers.

        During the fiscal year ended June 30, 2007, we incurred management fees of $2.5 million from the Service Providers under the Management Services Agreement.

Transaction Fee Agreement

        Upon consummation of the Acquisition Transaction on March 2, 2007, RDA Holding Co. entered into a transaction fee agreement with Ripplewood pursuant to which Ripplewood received an aggregate transaction fee of $25.0 million in cash.

PIK preferred stock

        In connection with the Acquisition Transaction, certain of the Sponsors also acquired preferred stock in our parent company, RDA Holding Co. RDA Holding Co. was the issuer of these securities.

The WRC Media and Direct Holdings Acquisitions

        As discussed under "Business—The Acquisition Transactions" above, concurrent with the closing of Acquisition Transaction on March 2, 2007, RDA Holding Co. contributed all of the outstanding shares of WRC Media and Direct Holdings to us.

Director Independence

        We are not a listed issuer, but have evaluated the independence of our Board of Directors and committee members using the independence standards of the New York Stock Exchange. Our Board has determined that Timothy C. Collins, Harvey Golub, Andrew Knight, Andrew Lack, Steven T. Shapiro and Harris Williams are independent directors within the meaning of the rules of the New York Stock Exchange.

        Messrs. Knight, Lack, Shapiro and Williams are members of our Audit Committee. Messrs. Shapiro and Williams are not independent for purposes of Audit Committee membership within the meaning of the rules of the New York Stock Exchange because of their affiliations with the Sponsors.

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THE EXCHANGE OFFER

Purpose of the Exchange Offer

        In connection with the sale of the Original Notes, we entered into a registration rights agreement with the Initial Purchasers (as defined in "Description of Notes—Certain Definitions"), under which we agreed to use our reasonable best efforts to file and have declared effective a registration statement under the Securities Act relating to the Exchange Offer.

        We are making the Exchange Offer in reliance on the position of the SEC as set forth in certain no-action letters. However, we have not sought our own no-action letter. Based upon these interpretations by the SEC, we believe that a holder of Exchange Notes, but not a holder who is our "affiliate" within the meaning of Rule 405 of the Securities Act, who exchanges Original Notes for Exchange Notes in the Exchange Offer generally may offer the Exchange Notes for resale, sell the Exchange Notes and otherwise transfer the Exchange Notes without further registration under the Securities Act and without delivery of a prospectus that satisfies the requirements of Section 10 of the Securities Act. This does not apply, however, to a holder who is our "affiliate" within the meaning of Rule 405 of the Securities Act. We also believe that a holder may offer, sell or transfer the Exchange Notes only if the holder acquires the Exchange Notes in the ordinary course of its business and is not participating, does not intend to participate and has no arrangement or understanding with any person to participate in a distribution of the Exchange Notes.

        Any holder of the Original Notes using the Exchange Offer to participate in a distribution of Exchange Notes cannot rely on the no-action letters referred to above. Any broker-dealer who holds Original Notes acquired for its own account as a result of market-making activities or other trading activities and who receives Exchange Notes in exchange for such Original Notes pursuant to the Exchange Offer may be a statutory underwriter and must deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such Exchange Notes.

        Each broker-dealer that receives Exchange Notes for its own account in exchange for Original Notes, where such Original Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Notes received in exchange for Original Notes where such Original Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities. The letter of transmittal states that by acknowledging and delivering a prospectus, a broker-dealer will not be considered to admit that it is an "underwriter" within the meaning of the Securities Act. We have agreed that for a period of not less than 180 days after the expiration date for the Exchange Offer, we will make this prospectus available to broker-dealers for use in connection with any such resale. See "Plan of Distribution."

        Except as described above, this prospectus may not be used for an offer to resell, resale or other transfer of Exchange Notes.

        The Exchange Offer is not being made to, nor will we accept tenders for exchange from, holders of Original Notes in any jurisdiction in which the Exchange Offer or the acceptance of it would not be in compliance with the securities or blue sky laws of such jurisdiction.

Terms of the Exchange

        Upon the terms and subject to the conditions of the Exchange Offer, we will accept any and all Original Notes validly tendered prior to 5:00 p.m., New York time, on the expiration date for the Exchange Offer. Promptly after the expiration date (unless extended as described in this prospectus), we will issue an aggregate principal amount of up to $600.0 million of Exchange Notes and guarantees related thereto for a like principal amount of outstanding Original Notes and guarantees related

127

thereto tendered and accepted in connection with the Exchange Offer. The Exchange Notes issued in connection with the Exchange Offer will be delivered on the earliest practicable date following the expiration date. Holders may tender some or all of their Original Notes in connection with the Exchange Offer, but only in an amount equal to $2,000 principal amount or in integral multiples of $1,000 in excess thereof. The terms of the Exchange Notes will be identical in all material respects to the terms of the Original Notes, except that the Exchange Notes will have been registered under the Securities Act and will be issued free from any covenant regarding registration, including the payment of Additional Interest upon a failure to file or have declared effective an Exchange Offer registration statement or to complete the Exchange Offer by certain dates, except that, in certain limited circumstances, Additional Interest may accrue on the Exchange Notes. The Exchange Notes will evidence the same debt as the Original Notes and will be issued under the same indenture and entitled to the same benefits under that indenture as the Original Notes being exchanged. As of the date of this prospectus, $600.0 million in aggregate principal amount of the Original Notes is outstanding.

        In connection with the issuance of the Original Notes, we arranged for the Original Notes purchased by qualified institutional buyers and those sold in reliance on Regulation S under the Securities Act to be issued and transferable in book-entry form through the facilities of The Depository Trust Company ("DTC"), acting as depositary. Except as described under "Description of the Notes—Book-Entry Settlement and Clearance—Certificated Notes," Exchange Notes will be issued in the form of a Global Note registered in the name of DTC or its nominee and each beneficial owner's interest in it will be transferable in book-entry form through DTC. See "Description of the Notes—Book-Entry Settlement and Clearance."

        Holders of Original Notes do not have any appraisal or dissenters' rights in connection with the Exchange Offer. Original Notes which are not tendered for exchange or are tendered but not accepted in connection with the Exchange Offer will remain outstanding and be entitled to the benefits of the indenture under which they were issued, but certain registration and other rights under the registration rights agreement will terminate and holders of the Original Notes will generally not be entitled to any registration rights under the registration rights agreement. See "—Consequences of Failures to Properly Tender Original Notes in the Exchange Offer."

        We shall be considered to have accepted validly tendered Original Notes if and when we have given oral or written notice to the exchange agent. The exchange agent will act as agent for the tendering holders for the purposes of receiving the Exchange Notes from us.

        If any tendered Original Notes are not accepted for exchange because of an invalid tender, the occurrence of certain other events described in this prospectus or otherwise, we will return the Original Notes, without expense, to the tendering holder promptly after the expiration date for the Exchange Offer.

        Holders who tender Original Notes will not be required to pay brokerage commissions or fees or, subject to the instructions in the letter of transmittal, transfer taxes on exchange of Original Notes in connection with the Exchange Offer. We will pay all charges and expenses, other than certain applicable taxes described below, in connection with the Exchange Offer. See "—Fees and Expenses."

Expiration Date; Extensions; Amendments

        The expiration date for the Exchange Offer is 5:00 p.m., New York City time, on                        , 2008, unless extended by us in our sole discretion, in which case the term "expiration date" shall mean the latest date and time to which the Exchange Offer is extended.

        We reserve the right, in our sole discretion:

•

to delay accepting any Original Notes, to extend the Exchange Offer or to terminate the Exchange Offer if, in our reasonable judgment, any of the conditions described below shall not

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have been satisfied, by giving oral or written notice of the delay, extension or termination to the exchange agent, or

•

to amend the terms of the Exchange Offer in any manner.

        If we amend the Exchange Offer in a manner that we consider material, we will disclose such amendment by means of a prospectus supplement, and we will extend the Exchange Offer for a period of five to ten business days.

        If we determine to extend, amend or terminate the Exchange Offer, we will publicly announce this determination by making a timely release through an appropriate news agency.

Interest on the Exchange Notes

        The Exchange Notes will bear interest at the rate of 9% per annum from the most recent date to which interest on the Original Notes has been paid. Interest will be payable semiannually in arrears on February 15 and August 15 of each year.

Conditions to the Exchange Offer

        Notwithstanding any other term of the Exchange Offer, we will not be required to accept for exchange, or to exchange any Exchange Notes for, any Original Notes and may terminate the Exchange Offer as provided in this prospectus before the acceptance of the Original Notes, if prior to the expiration date:

•

any action or proceeding is instituted or threatened in any court or by or before any governmental agency relating to the Exchange Offer which, in our reasonable judgment, might materially impair the contemplated benefits of the Exchange Offer to us, or any material adverse development has occurred in any existing action or proceeding relating to us or any of our subsidiaries;



•

any change, or any development involving a prospective change, in our business or financial affairs or any of our subsidiaries has occurred which, in our reasonable judgment, might materially impair our ability to proceed with the Exchange Offer or materially impair the contemplated benefits of the Exchange Offer to us;



•

any law, statute, rule or regulation is proposed, adopted or enacted which in our reasonable judgment might materially impair our ability to proceed with the Exchange Offer; or



•

any governmental approval has not been obtained, which approval we, in our reasonable discretion, consider necessary for the completion of the Exchange Offer as contemplated by this prospectus.

        The conditions listed above are for our sole benefit and may be asserted by us regardless of the circumstances giving rise to any of these conditions. We may waive these conditions in our reasonable discretion in whole or in part at any time and from time to time prior to the expiration date. The failure by us at any time to exercise any of the above rights shall not be considered a waiver of such right, and such right shall be considered an ongoing right which may be asserted at any time and from time to time.

        If we determine in our reasonable discretion that any of the conditions are not satisfied, we may:

•

refuse to accept any Original Notes and return all tendered Original Notes to the tendering holders;

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•

extend the Exchange Offer and retain all Original Notes tendered before the expiration of the Exchange Offer, subject, however, to the rights of holders to withdraw those Original Notes (See "—Withdrawal of Tenders" below); or



•

waive unsatisfied conditions relating to the Exchange Offer and accept all properly tendered Original Notes which have not been withdrawn.

Procedures for Tendering

        Unless the tender is being made in book-entry form, to tender in the Exchange Offer, a holder must:

•

complete, sign and date the letter of transmittal, or a facsimile of it;



•

have the signatures guaranteed if required by the letter of transmittal; and



•

mail or otherwise deliver the signed letter of transmittal or the signed facsimile, the Original Notes and any other required documents to the exchange agent prior to 5:00 p.m., New York City time, on the expiration date.

        Any financial institution that is a participant in DTC's Book-Entry Transfer Facility system may make book-entry delivery of the Original Notes by causing DTC to transfer the Original Notes into the exchange agent's account. To validly tender Original Notes through DTC, the financial institution that is a participant in DTC will electronically transmit its acceptance through the Automated Tender Offer Program. DTC will then edit and verify the acceptance, execute a book-entry transfer of the tendered Original Notes into the applicable account of the exchange agent at DTC and then send to the exchange agent confirmation of such book-entry transfer. The confirmation of such book-entry transfer will include an agent's message stating that DTC has received an express acknowledgment from the participant in DTC tendering the Original Notes that the participant has received and agrees to be bound by the terms of the letter of transmittal and that we may enforce the terms of the letter of transmittal against the participant. A tender of Original Notes through a book-entry transfer into the exchange agent's account will only be effective if an agent's message or the letter of transmittal (or facsimile) with any required signature guarantees and any other required documents are transmitted to and received or confirmed by the exchange agent at the address set forth below under the caption "—Exchange Agent", prior to 5:00 p.m., New York City time, on the expiration date unless the guaranteed delivery procedures described below under the caption "—Guaranteed Delivery Procedures" are complied with. Delivery of documents to DTC in accordance with its procedures does not constitute delivery to the exchange agent.

        The tender by a holder of Original Notes will constitute an agreement between us and the holder in accordance with the terms and subject to the conditions set forth in this prospectus and in the letter of transmittal.

        The method of delivery of Original Notes and the letter of transmittal and all other required documents to the exchange agent is at the election and risk of the holders. Instead of delivery by mail, we recommend that holders use an overnight or hand delivery service. In all cases, holders should allow sufficient time to assure delivery to the exchange agent before the expiration date. No letter of transmittal or Original Notes should be sent to us. Holders may request their respective brokers, dealers, commercial banks, trust companies or nominees to effect the tenders for such holders.

        Any beneficial owner whose Original Notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and who wishes to tender should contact the registered holder promptly and instruct such registered holder to tender on behalf of the beneficial owner. If the beneficial owner wishes to tender on that owner's own behalf, the owner must, prior to completing and executing the letter of transmittal and delivery of such owner's Original Notes, either

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make appropriate arrangements to register ownership of the Original Notes in the owners' name or obtain a properly completed bond power from the registered holder. The transfer of registered ownership may take considerable time.

        Signature on a letter of transmittal or a notice of withdrawal must be guaranteed by an eligible guarantor institution within the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, unless the Original Notes tendered pursuant thereto are tendered:

•

by a registered holder who has not completed the box entitled "Special Issuance Instructions" or "Special Delivery Instructions" on the letter of transmittal; or



•

for the account of an eligible guarantor institution.

        In the event that signatures on a letter or transmittal or a notice of withdrawal, as the case may be, are required to be guaranteed, such guarantee must be by:

•

a member firm of a registered national securities exchange or of the National Association of Securities Dealers, Inc.;



•

a commercial bank or trust company having an office or correspondent in the United States; or



•

an "eligible guarantor institution" within the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934.

        If the letter of transmittal is signed by a person other than the registered holder of any Original Notes, the Original Notes must be endorsed by the registered holder or accompanied by a properly completed bond power, in each case signed or endorsed in blank by the registered holder.

        If the letter of transmittal or any Original Notes or bond powers are signed or endorsed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing and, unless waived by us, submit evidence satisfactory to us of their authority to act in that capacity with the letter of transmittal.

        We will determine all questions as to the validity, form, eligibility (including time of receipt) and acceptance and withdrawal of tendered Original Notes in our sole discretion. We reserve the absolute right to reject any and all Original Notes not properly tendered or any Original Notes whose acceptance by us would, in the opinion of our counsel, be unlawful. We also reserve the right to waive any defects, irregularities or conditions of tender as to any particular Original Notes either before or after the expiration date. Our interpretation of the terms and conditions of the Exchange Offer (including the instructions in the letter of transmittal) will be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of Original Notes must be cured within a time period we will determine. Although we intend to request the exchange agent to notify holders of defects or irregularities relating to tenders of Original Notes, neither we, the exchange agent nor any other person will have any duty or incur any liability for failure to give such notification. Tenders of Original Notes will not be considered to have been made until such defects or irregularities have been cured or waived. Any Original Notes received by the exchange agent that are not properly tendered and as to which the defects or irregularities have not been cured or waived will be returned by the exchange agent to the tendering holders, unless otherwise provided in the letter of transmittal, promptly following the expiration date.

        In addition, we reserve the right, as set forth above under the caption "—Conditions to the Exchange Offer," to terminate the Exchange Offer.

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        By tendering, each holder represents to us, among other things, that:

•

it has full power and authority to tender, sell, assign and transfer the Original Notes it is tendering and that we will acquire good and unencumbered title thereto, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claim when the same are accepted by us;



•

the Exchange Notes acquired in connection with the Exchange Offer are being obtained in the ordinary course of business of the person receiving the Exchange Notes;



•

at the time of commencement of the Exchange Offer it had no arrangement with any person to participate in a distribution of such Exchange Notes;



•

it is not an "affiliate" (as defined in Rule 405 under the Securities Act) of Reader's Digest; and



•

if the holder is a broker-dealer, that it is not engaged in, and does not intend to engage in, a distribution of the Exchange Notes, and that it will receive Exchange Notes for its own account in exchange for Original Notes that were acquired by such broker-dealer as a result of market-making activities or other trading activities and that it will be required to acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. See "Plan of Distribution."

Guaranteed Delivery Procedures

        A holder who wishes to tender its Original Notes and:

•

whose Original Notes are not immediately available;



•

who cannot deliver the holder's Original Notes, the letter of transmittal or any other required documents to the exchange agent prior to the expiration date; or



•

who cannot complete the procedures for book-entry transfer before the expiration date;



•

may effect a tender if:



•

the tender is made through an eligible guarantor institution;



•

before the expiration date, the exchange agent receives from the eligible guarantor institution:



(i)

a properly completed and duly executed notice of guaranteed delivery by facsimile transmission, mail or hand delivery,



(ii)

the name and address of the holder, and



(iii)

the certificate number(s) of the Original Notes, if any, and the principal amount of Original Notes tendered, stating that the tender is being made and guaranteeing that, within three New York Stock Exchange trading days after the expiration date, (a) the certificate(s) representing the Original Notes (or a confirmation of book-entry transfer) and (b) a letter of transmittal (or facsimile thereof) with respect to such Original Notes, properly completed and duly executed, with any required signature guarantees, and any other documents required by the letter of transmittal or, in lieu thereof, an agent's message from DTC, will be deposited by the eligible guarantor institution with the exchange agent; and



•

the exchange agent receives, within three New York Stock Exchange trading days after the expiration date, (i) the certificate(s) representing all tendered Original Notes (or a confirmation of book-entry transfer) and (ii) a letter of transmittal (or facsimile thereof) with respect to such Original Notes, properly completed and duly executed, with any required signature guarantees, and all other documents required by the letter of transmittal or, in lieu thereof, an agent's message from DTC.

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Withdrawal of Tenders

        Except as otherwise provided herein, tenders of Original Notes may be withdrawn at any time prior to 5:00 p.m., New York City time, on the expiration date.

        To withdraw a tender of Original Notes in connection with the Exchange Offer, a written or facsimile transmission notice of withdrawal must be received by the exchange agent at its address set forth herein prior to 5:00 p.m., New York City time, on the expiration date. Any such notice of withdrawal must:

•

specify the name of the person who deposited the Original Notes to be withdrawn;



•

identify the Original Notes to be withdrawn (including the certificate number(s), if any, and principal amount of such Original Notes);



•

be signed by the depositor in the same manner as the original signature on the letter of transmittal by which such Original Notes were tendered (including any required signature guarantees) or be accompanied by documents of transfer sufficient to have the trustee register the transfer of such Original Notes into the name of the person withdrawing the tender; and



•

specify the name in which any such Original Notes are to be registered, if different from that of the depositor.

        If Original Notes have been tendered pursuant to the procedure for book-entry transfer, any notice of withdrawal must specify the name and number of the account at DTC to be credited with the withdrawn Original Notes or otherwise comply with DTC's procedures. We will determine all questions as to the validity, form and eligibility (including time of receipt) of such withdrawal notices. Any Original Notes so withdrawn will be considered not to have been validly tendered for purposes of the Exchange Offer, and no Exchange Notes will be issued unless the Original Notes withdrawn are validly re-tendered. Any Original Notes which have been tendered but which are not accepted for exchange or which are withdrawn will be returned to the holder without cost to such holder promptly after withdrawal, rejection of tender or termination of the Exchange Offer. Properly withdrawn Original Notes may be re-tendered by following one of the procedures described above under "—Procedures for Tendering" at any time prior to the expiration date.

Exchange Agent

        The Bank of New York has been appointed as exchange agent in connection with the Exchange Offer. Questions and requests for assistance, as well as requests for additional copies of this prospectus or of the letter of transmittal, should be directed to the exchange agent at its offices at The Bank of New York, Corporate Trust Operations, Reorganization Unit, 101 Barclay Street—Floor 7 East, New York, New York 10286. The exchange agent's telephone number is (212) 815-3738 and facsimile number is (212) 298-1915.

Fees and Expenses

        We will not make any payment to brokers, dealers or others soliciting acceptances of the Exchange Offer. We will pay certain other expenses to be incurred in connection with the Exchange Offer, including the fees and expenses of the exchange agent and certain accounting and legal fees.

        Holders who tender their Original Notes for exchange generally will not be obligated to pay transfer taxes. If, however:

•

Exchange Notes are to be delivered to, or issued in the name of, any person other than the registered holder of the Original Notes tendered;

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•

tendered Original Notes are registered in the name of any person other than the person signing the letter of transmittal; or



•

a transfer tax is imposed for any reason other than the exchange of Original Notes in connection with the Exchange Offer;

then the amount of any such transfer taxes (whether imposed on the registered holder or any other persons) will be payable by the tendering holder. If satisfactory evidence of payment of such taxes or exemption from them is not submitted with the letter of transmittal, the amount of such transfer taxes will be billed directly to the tendering holder.

Accounting Treatment

        The Exchange Notes will be recorded at the same carrying value as the Original Notes as reflected in our accounting records on the date of the exchange. Accordingly, we will not recognize any gain or loss for accounting purposes upon the completion of the Exchange Offer. The expenses of the Exchange Offer that we pay will increase our deferred financing costs in accordance with generally accepted accounting principles.

Consequences of Failures to Properly Tender Original Notes in the Exchange Offer

        Issuance of the Exchange Notes in exchange for the Original Notes under the Exchange Offer will be made only after timely receipt by the exchange agent of a properly completed and duly executed letter of transmittal (or an agent's message from DTC) and the certificate(s) representing such Original Notes (or confirmation of book-entry transfer), and all other required documents. Therefore, holders of the Original Notes desiring to tender such Original Notes in exchange for Exchange Notes should allow sufficient time to ensure timely delivery. We are under no duty to give notification of defects or irregularities of tenders of Original Notes for exchange. Original Notes that are not tendered or that are tendered but not accepted by us will, following completion of the Exchange Offer, continue to be subject to the existing restrictions upon transfer thereof under the Securities Act, and, upon completion of the Exchange Offer, certain registration rights under the registration rights agreement will terminate.

        In the event the Exchange Offer is completed, we generally will not be required to register the remaining Original Notes, subject to limited exceptions. Remaining Original Notes will continue to be subject to the following restrictions on transfer:

•

the remaining Original Notes may be resold only if registered pursuant to the Securities Act, if any exemption from registration is available, or if neither such registration nor such exemption is required by law; and



•

the remaining Original Notes will bear a legend restricting transfer in the absence of registration or an exemption.

We do not currently anticipate that we will register the remaining Original Notes under the Securities Act. To the extent that Original Notes are tendered and accepted in connection with the Exchange Offer, any trading market for remaining Original Notes could be adversely affected. See "Risk Factors—Risks Related to the Notes and the Exchange Offer—If you fail to exchange your Original Notes, they will continue to be restricted securities and may become less liquid."

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DESCRIPTION OF NOTES

General

        Certain terms used in this description are defined under the subheading "Certain Definitions." In this description, the terms "we," "our", "us" and "Issuer" each refer to The Reader's Digest Association, Inc. and not to any of its Subsidiaries.

        We issued the Original Notes under an Indenture dated as of March 2, 2007, among ourselves, the Guarantors and The Bank of New York, as Trustee, in a private transaction not subject to the registration requirements of the Securities Act. The Exchange Notes will be issued under the Indenture and will be identical in all material respects to the Original Notes, except that the Exchange Notes will have been registered under the Securities Act and will be free of any obligation regarding registration, including the payment of Additional Interest upon failure to file or have declared effective an Exchange Offer registration statement or to consummate an Exchange Offer by certain dates, except that, in certain limited circumstances, Additional Interest may accrue on the Exchange Notes. Unless specifically stated to the contrary, the following description by reference to the term "Notes" applies equally to the Exchange Notes and the Original Notes. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended.

        The following description is only a summary of the material provisions of the Indenture, does not purport to be complete and is qualified in its entirety by reference to the provisions of the Indenture, including the definitions therein of certain terms used below. We urge you to read the Indenture because it, not this description, will define your rights as Holders of the Notes. A copy of the Indenture is available as set forth under "—Additional Information." Certain defined terms used in this description but not defined below under "—Certain Definitions" have the meanings assigned to them in the Indenture.

        The registered Holder of a Note will be treated as the owner of it for all purposes. Only registered Holders will have rights under the Indenture.

        References in this description to Additional Interest refer to rights which may accrue with respect to the Original Notes under the Registration Rights Agreement. The Exchange Notes will not be entitled to any Additional Interest (other than any Additional Interest which may have accrued with respect to the Original Notes prior to the consummation of this Exchange Offer, and, in certain limited circumstances, Additional Interest that may accrue on the Exchange Notes).

Brief description of Notes and the Guarantees

The Notes

        The Notes:

•

are general unsecured senior subordinated obligations of Reader's Digest;



•

are initially guaranteed on an unsecured senior subordinated basis by each Restricted Subsidiary that guarantees the Senior Credit Facility;



•

are subordinated in right of payment to all existing and future Senior Indebtedness (including the Senior Credit Facility) of Reader's Digest;



•

are pari passu in right of payment with any existing and future senior subordinated indebtedness of Reader's Digest;



•

are effectively subordinated to all secured Indebtedness of Reader's Digest (including the Senior Credit Facility); and

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•

are senior in right of payment to any future Subordinated Indebtedness (as defined with respect to the Notes) of Reader's Digest.

The Guarantees

        The Guarantors, as primary obligors and not merely as sureties, jointly and severally irrevocably and unconditionally guarantee, on an unsecured senior subordinated basis, the performance and full and punctual payment when due, whether at maturity, by acceleration or otherwise, of all of our obligations under the Indenture and the Notes, whether for payment of principal of, premium, if any, or interest on or Additional Interest in respect of the Notes, expenses, indemnification or otherwise, on the terms set forth in the Indenture.

        The Restricted Subsidiaries that guarantee the Senior Credit Facility guarantee the Notes. Each of the Guarantees of the Notes:

•

is a general unsecured senior subordinated obligation of each Guarantor;



•

is subordinated in right of payment to all existing and future Senior Indebtedness (including the guarantee of the Senior Credit Facility) of each such entity;



•

is pari passu in right of payment with any existing and future senior subordinated indebtedness of each such entity; and



•

is effectively subordinated to all Secured Indebtedness (including the guarantee of the Senior Credit Facility) of each such entity.

        The Notes are structurally subordinated to Indebtedness of Subsidiaries of the Issuer that do not guarantee the Notes.

        Not all of our Subsidiaries guarantee the Notes. In the event of a bankruptcy, liquidation or reorganization of any of these non-guarantor Subsidiaries, the non-guarantor Subsidiaries will pay the holders of their debt, their preferred stockholders and their trade creditors before they will be able to distribute any of their assets to us. None of our Foreign Subsidiaries, Domestic Subsidiaries substantially all of whose assets consist of Voting Stock of one or more Foreign Subsidiaries, or non-Wholly-Owned Subsidiaries (subject to certain limited exceptions such as in the event that such non-Wholly-Owned Subsidiary guarantees debt issued in a capital markets transaction) guarantee the Notes. For the twelve months ended September 30, 2007, the non-guarantor subsidiaries of Reader's Digest represented approximately 51.6% of Reader's Digest's revenue and contributed approximately $123.5 million of operating profit to Reader's Digest's operating loss of $(205.8) million, on a pro forma basis. As of September 30, 2007, the non-guarantor subsidiaries of Reader's Digest represented approximately 17.4% of Reader's Digest's total assets, and approximately 13.5% of Reader's Digest's total liabilities, including trade payables, but excluding intercompany liabilities. All of the liabilities of Reader's Digest's non-guarantor subsidiaries were structurally senior to the notes.

        The obligations of each Guarantor under its Guarantee are limited as necessary to prevent the Guarantees from constituting a fraudulent conveyance under applicable law.

        Any entity that makes a payment under its Guarantee is entitled upon payment in full of all guaranteed obligations under the Indenture to a contribution from each other Guarantor in an amount equal to such other Guarantor's pro rata portion of such payment based on the respective net assets of all the Guarantors at the time of such payment determined in accordance with GAAP.

        If a Guarantee were rendered voidable, it could be subordinated by a court to all other indebtedness (including guarantees and other contingent liabilities) of the Guarantor, and, depending on the amount of such indebtedness, a Guarantor's liability on its Guarantee could be reduced to zero. See "Risk factors—Risks related to the Notes and the Exchange Offer—U.S. federal and state statutes

136

allow courts, under specific circumstances, to void the notes and the guarantees, subordinate claims in respect of the notes and the guarantees and require noteholders to return payments received from the issuer or the guarantors."

        Each Guarantee by a Guarantor provides by its terms that it will be automatically and unconditionally released and discharged upon:

        (1)   (a) any sale, exchange or transfer (by merger or otherwise) of the Capital Stock of such Guarantor (including any sale, exchange or transfer), after which the applicable Guarantor is no longer a Restricted Subsidiary or all or substantially all the assets of such Guarantor which sale, exchange or transfer is made in compliance with the applicable provisions of the Indenture;

        (b)   the release or discharge of such Guarantor from its guarantee of Indebtedness of the Issuer and the Guarantors under the Senior Credit Facility (including by reason of the termination of the Senior Credit Facility) or the guarantee that resulted in the obligation of such Guarantor to guarantee the Notes, if such Guarantor would not then otherwise be required to guarantee the Notes pursuant to the Indenture (and treating any guarantees of such Guarantor that remain outstanding as incurred at least 30 days prior to such release or discharge), except a discharge or release by or as a result of payment under such guarantee; provided, that if such Person has incurred any Indebtedness or issued any Preferred Stock or Disqualified Stock in reliance on its status as a Guarantor under the covenant "—Certain Covenants—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock," such Guarantor's obligations under such Indebtedness, Disqualified Stock or Preferred Stock, as the case may be, so incurred are satisfied in full and discharged or are otherwise permitted to be incurred under "—Certain Covenants—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock";

        (c)   the proper designation of any Restricted Subsidiary that is a Guarantor as an Unrestricted Subsidiary; or

        (d)   the Issuer exercising its legal defeasance option or covenant defeasance option as described under "—Legal Defeasance and Covenant Defeasance" or the Issuer's obligations under the Indenture being discharged in accordance with the terms of the Indenture; and

        (2)   such Guarantor delivering to the Trustee an Officer's Certificate and an Opinion of Counsel, each stating that all conditions precedent provided for in the Indenture relating to such transaction have been complied with.

Ranking

Senior Indebtedness versus the Notes

        The payment of the principal of, premium, if any, and interest on the Notes and the payment of any Guarantee is subordinate in right of payment to the prior payment in cash in full of all Senior Indebtedness of the Issuer or the relevant Guarantor, as the case may be, including the obligations of the Issuer and such Guarantor under the Senior Credit Facility.

        The Notes are subordinated in right of payment to all of the Issuer's and the Guarantor's existing and future Senior Indebtedness and effectively subordinated to all of the Issuer's and the Guarantor's existing and future Secured Indebtedness to the extent of the value of the assets securing such Indebtedness. As of September 30, 2007, we had $1.5 billion of Senior Indebtedness (all of which was Secured Indebtedness under the Senior Credit Facility). As of that same date, we also had an additional $70 million available for additional borrowings under the Senior Credit Facility (after giving effect to $5 million of outstanding letters of credit), all of which would be Secured Indebtedness if borrowed.

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        Although the Indenture contains limitations on the amount of additional Indebtedness that we and the Guarantors may incur, under certain circumstances the amount of such Indebtedness could be substantial, and, in any case, such Indebtedness may be Senior Indebtedness. See "—Certain Covenants—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock."

Other Senior Subordinated Indebtedness versus the Notes

        Only Indebtedness of the Issuer or a Guarantor that is Senior Indebtedness ranks senior to the Notes or the relevant Guarantee in accordance with the provisions of the Indenture. The Notes and each Guarantee in all respects rank pari passu with all other Senior Subordinated Indebtedness of the Issuer and the relevant Guarantor, respectively.

        We have agreed in the Indenture that the Issuer and the Guarantors will not incur any Indebtedness that is subordinate or junior in right of payment to the Senior Indebtedness of such Person, unless such Indebtedness is Senior Subordinated Indebtedness of the applicable Person or is expressly subordinated in right of payment to Senior Subordinated Indebtedness of such Person. The Indenture does not treat (i) unsecured Indebtedness as subordinated or junior to Secured Indebtedness merely because it is unsecured or (ii) Senior Indebtedness as subordinated or junior to any other Senior Indebtedness merely because it has a junior priority with respect to the same collateral.

Subordination of the Notes

        Neither the Issuer nor any Guarantor is permitted to pay principal of, premium, if any, or interest on the Notes (or pay any other obligations relating to the Notes, including Additional Interest, fees, costs, expenses, indemnities and rescission or damage claims) or make any deposit pursuant to the provisions described under "—Legal defeasance and covenant defeasance" or "—Satisfaction and discharge" below, and may not purchase, redeem or otherwise retire any Notes (collectively, "pay the notes") (except in the form of Permitted Junior Securities), if either of the following occurs (a "Payment Default"):

        (1)   any Obligation on any Designated Senior Indebtedness of the Issuer is not paid in full in cash when due (after giving effect to any applicable grace period); or

        (2)   any other default on Designated Senior Indebtedness of the Issuer occurs and the maturity of such Designated Senior Indebtedness is accelerated in accordance with its terms, unless, in either case, the Payment Default has been cured or waived and any such acceleration has been rescinded or such Designated Senior Indebtedness has been paid in full in cash. Regardless of the foregoing, the Issuer is permitted to pay the Notes if the Issuer and the Trustee receive written notice approving such payment from the Representatives of all Designated Senior Indebtedness with respect to which the Payment Default has occurred and is continuing.

        During the continuance of any default (other than a Payment Default) (a "Non-Payment Default") with respect to any Designated Senior Indebtedness pursuant to which the maturity thereof may be accelerated without further notice (except such notice as may be required to effect such acceleration) or the expiration of any applicable grace periods, the Issuer is not permitted to pay the Notes (except in the form of Permitted Junior Securities) for a period (a "Payment Blockage Period") commencing upon the receipt by the Trustee (with a copy to the Issuer) of written notice (a "Blockage Notice") of such Non-Payment Default from the Representative of such Designated Senior Indebtedness specifying an election to effect a Payment Blockage Period and ending 179 days thereafter. The Payment Blockage Period will end earlier if such Payment Blockage Period is terminated:

        (1)   by written notice to the Trustee and the Issuer from the Person or Persons who gave such Blockage Notice;

138

        (2)   because the default giving rise to such Blockage Notice is cured, waived or otherwise no longer continuing; or

        (3)   because such Designated Senior Indebtedness has been discharged or repaid in full in cash.

Notwithstanding the provisions described above, unless the holders of such Designated Senior Indebtedness or the Representative of such Designated Senior Indebtedness have accelerated the maturity of such Designated Senior Indebtedness, the Issuer and related Guarantors are permitted to resume paying the Notes after the end of such Payment Blockage Period (including any missed payments). The Notes shall not be subject to more than one Payment Blockage Period in any consecutive 360-day period, irrespective of the number of defaults with respect to Designated Senior Indebtedness during such period; provided that if any Blockage Notice is delivered to the Trustee by or on behalf of the holders of Designated Senior Indebtedness of the Issuer (other than the holders of Indebtedness under the Senior Credit Facility), a Representative of holders of Indebtedness under the Senior Credit Facility may give another Blockage Notice within such period. However, in no event may the total number of days during which any Payment Blockage Period or Periods on the Notes is in effect exceed 179 days in the aggregate during any consecutive 360-day period, and there must be at least 181 days during any consecutive 360-day period during which no Payment Blockage Period is in effect. Notwithstanding the foregoing, however, no default that existed or was continuing on the date of delivery of any Blockage Notice to the Trustee will be, or be made, the basis for a subsequent Blockage Notice unless such default has been cured or waived for a period of not less than 90 consecutive days (it being acknowledged that any subsequent action, or any breach of any financial covenants during the period after the date of delivery of a Blockage Notice, that, in either case, would give rise to a Non-Payment Default pursuant to any provisions under which a Non-Payment Default previously existed or was continuing shall constitute a new Non-Payment Default for this purpose).

        In connection with the Notes, in the event of any payment or distribution of the assets of the Issuer upon a total or partial liquidation or dissolution or reorganization of or similar proceeding relating to the Issuer or its property:

        (1)   the holders of Senior Indebtedness of the Issuer are entitled to receive payment in full in cash of such Senior Indebtedness before the Holders of the Notes are entitled to receive any payment;

        (2)   until the Senior Indebtedness of the Issuer is paid in full in cash, any payment or distribution to which Holders of the Notes would be entitled but for the subordination provisions of the Indenture will be made to holders of such Senior Indebtedness as their interests may appear, except that Holders of Notes may receive Permitted Junior Securities; and

        (3)   if a distribution is made to Holders of the Notes that, due to the subordination provisions, should not have been made to them, such Holders of the Notes are required to hold it in trust for the holders of Senior Indebtedness of the Issuer and pay it over to them as their interests may appear.

        The subordination and payment blockage provisions described above do not prevent a Default from occurring under the Indenture upon the failure of the Issuer to pay interest or principal with respect to the Notes when due by their terms. If payment of the Notes is accelerated because of an Event of Default, the Issuer must promptly notify the holders of Designated Senior Indebtedness or the Representative of such Designated Senior Indebtedness of the acceleration. If any Designated Senior Indebtedness of the Issuer is outstanding, neither the Issuer nor any Guarantor may pay the Notes until five Business Days after the Representatives of all the issuers of such Designated Senior Indebtedness receive notice of such acceleration and, thereafter, may pay the Notes only if the Indenture otherwise permits payment at that time. So long as there shall remain outstanding any Senior

139

Indebtedness under the Senior Credit Facility, a Blockage Notice may be given only by the administrative agent thereunder unless otherwise agreed to in writing by the requisite lenders named therein.

        Each Guarantor's obligations under its Guarantee are senior subordinated obligations of that Guarantor. As such, the rights of Holders to receive payment pursuant to such Guarantee are subordinated in right of payment to the rights of holders of Senior Indebtedness of such Guarantor. The terms of the subordination and payment blockage provisions described above with respect to the Issuer's obligations under the Notes apply equally to the obligations of such Guarantor under its Guarantee.

        A Holder, by its acceptance of Notes, agrees to be bound by such provisions and authorizes and expressly directs the Trustee, on its behalf, to take such action as may be necessary or appropriate to effectuate the subordination provided for in the Indenture and appoints the Trustee its attorney-in-fact for such purpose.

        By reason of the subordination provisions contained in the Indenture, in the event of a liquidation or insolvency proceeding, creditors of the Issuer or a Guarantor who are holders of Senior Indebtedness of the Issuer or such Guarantor, as the case may be, may recover more, ratably, than the Holders of the Notes, and creditors who are not holders of Senior Indebtedness may recover less, ratably, than holders of Senior Indebtedness and may recover more, ratably, than the Holders of the Notes.

        The terms of the subordination provisions described above do not apply to payments from money or the proceeds of Government Securities held in trust by the Trustee for the payment of principal of and interest on the Notes pursuant to the provisions described under "—Legal defeasance and covenant defeasance" or "—Satisfaction and discharge," if the foregoing subordination provisions were not violated at the time the applicable amounts were deposited in trust pursuant to such provisions.

Paying Agent and Registrar for the Notes

        The Issuer must maintain one or more paying agents for the Notes in the Borough of Manhattan, The City of New York. The paying agent for the Notes is the Trustee.

        The Issuer must also maintain a registrar with offices in the Borough of Manhattan, The City of New York. The registrar is the Trustee. The registrar must maintain a register reflecting ownership of the Notes outstanding from time to time and must make payments on and facilitate transfer of Notes on behalf of the Issuer.

        The Issuer may change the paying agents or the registrars without prior notice to the Holders. The Issuer or any of its Subsidiaries may act as a paying agent or registrar.

Transfer and Exchange

        A Holder may transfer or exchange Notes in accordance with the Indenture. The registrar and the Trustee may require a Holder to furnish appropriate endorsements and transfer documents in connection with a transfer of Notes. Holders are required to pay all taxes due on transfer. The Issuer is not required to transfer or exchange any Note selected for redemption. Also, the Issuer is not required to transfer or exchange any Note for a period of 15 days before a selection of Notes to be redeemed.

Principal, Maturity and Interest

        We issued $600,000,000 aggregate principal amount of Notes on March 2, 2007. The Notes will mature on February 15, 2017. Subject to compliance with the covenant described below under the caption "—Certain Covenants—Limitation on Incurrence of Indebtedness and Issuance of Disqualified

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Stock and Preferred Stock," the Issuer may issue additional Notes from time to time under the Indenture ("Additional Notes"). The Notes and any Additional Notes subsequently issued under the Indenture are treated as a single class for all purposes under the Indenture, including waivers, amendments, redemptions and offers to purchase. Unless the context requires otherwise, references to "Notes" for all purposes of the Indenture and this "Description of Notes" include any Additional Notes that are actually issued. We will issue Notes in denominations of $2,000 and integral multiples of $1,000 in excess thereof.

        Interest on the Notes accrues at the rate of 9% per annum and is payable semi-annually in arrears on February 15 and August 15, having commenced on August 15, 2007, to the Holders of Notes of record on the immediately preceding February 1 and August 1. Interest on the Notes accrues from the most recent date to which interest has been paid or, if no interest has been paid, from and including the Issue Date. Interest on the Notes is computed on the basis of a 360-day year comprised of twelve 30-day months.

        Principal of, premium, if any, and interest on the Notes will be payable at the office or agency of the Issuer maintained for such purpose within the City and State of New York or, at the option of the Issuer, payment of interest may be made by check mailed to the Holders of the Notes at their respective addresses set forth in the register of Holders; provided that all payments of principal, premium, if any, and interest with respect to the Notes represented by one or more global notes registered in the name of or held by DTC or its nominee will be made by wire transfer of immediately available funds to the accounts specified by the Holder or Holders thereof. Until otherwise designated by the Issuer, the Issuer's office or agency in New York will be the office of the Trustee maintained for such purpose.

Mandatory Redemption; Offers to Purchase; Open Market Purchases

        We are not required to make any mandatory redemption or sinking fund payments with respect to the Notes. However, under certain circumstances, we may be required to offer to purchase Notes as described under the caption "—Repurchase at the option of holders." We may at any time and from time to time purchase Notes in the open market or otherwise.

Optional Redemption

        Except as set forth below, we are not entitled to redeem the Notes at our option prior to February 15, 2012.

        At any time prior to February 15, 2012 we may redeem all or a part of the Notes, upon not less than 30 nor more than 60 days' prior notice mailed by first-class mail to the registered address of each Holder or otherwise in accordance with the procedures of DTC, at a redemption price equal to 100% of the principal amount of Notes redeemed plus the Applicable Premium as of, and accrued and unpaid interest and Additional Interest, if any, to the date of redemption (the "Redemption Date"), subject to the rights of Holders on the relevant record date to receive interest due on the relevant interest payment date.

        On and after February 15, 2012, we may redeem the Notes, in whole or in part, upon notice as described under the heading "—Selection and notice" at the redemption prices (expressed as percentages of principal amount of the Notes to be redeemed) set forth below, plus accrued and unpaid interest thereon and Additional Interest, if any, to the applicable Redemption Date, subject to the right of Holders of record on the relevant record date to receive interest due on the relevant

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interest payment date, if redeemed during the twelve-month period beginning on February 15 of each of the years indicated below:

Year	Percentage
2012	104.500	%
2013	103.000	%
2014	101.500	%
2015 and thereafter	100.000	%

        In addition, until February 15, 2010, we may, at our option, redeem up to 35% of the aggregate principal amount of Notes issued by us at a redemption price equal to 109% of the aggregate principal amount thereof, plus accrued and unpaid interest thereon and Additional Interest, if any, to the applicable Redemption Date, subject to the right of Holders of Notes of record on the relevant record date to receive interest due on the relevant interest payment date, with the net cash proceeds of one or more Equity Offerings; provided that at least 65% of the sum of the original aggregate principal amount of Notes issued under the Indenture and the original aggregate principal amount any Additional Notes that are Notes issued under the Indenture after the Issue Date remains outstanding immediately after the occurrence of each such redemption; provided further that each such redemption occurs within 90 days of the date of closing of each such Equity Offering.

        Any notice of redemption upon any Equity Offering may be given prior to the completion of such Equity Offering, and any such redemption or notice may, at our discretion, be subject to one or more conditions precedent, including, but not limited to, completion of the related Equity Offering.

        If we redeem less than all of the outstanding Notes, the Trustee shall select the Notes to be purchased in the manner described under "—Selection and notice."

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Repurchase at the Option of Holders

Change of Control

        The Notes provide that if a Change of Control occurs, unless the Issuer has previously or concurrently mailed a redemption notice with respect to all the outstanding Notes as described under "Optional Redemption," the Issuer will make an offer to purchase all of the Notes pursuant to the offer described below (the "Change of Control Offer") at a price in cash (the "Change of Control Payment") equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest and Additional Interest, if any, to the date of purchase, subject to the right of Holders of the Notes of record on the relevant record date to receive interest due on the relevant interest payment date. Within 30 days following any Change of Control, the Issuer will send notice of such Change of Control Offer by first-class mail, with a copy to the Trustee, to each Holder of Notes to the address of such Holder appearing in the security register with a copy to the Trustee, or otherwise in accordance with the procedures of DTC, with the following information:

        (1)   that a Change of Control Offer is being made pursuant to the covenant entitled "Change of Control" and that all Notes properly tendered pursuant to such Change of Control Offer will be accepted for payment by the Issuer;

        (2)   the purchase price and the purchase date, which will be no earlier than 30 days nor later than 60 days from the date such notice is mailed (the "Change of Control Payment Date");

        (3)   that any Note not properly tendered will remain outstanding and continue to accrue interest;

        (4)   that unless the Issuer defaults in the payment of the Change of Control Payment, all Notes accepted for payment pursuant to the Change of Control Offer will cease to accrue interest on the Change of Control Payment Date;

        (5)   that Holders electing to have any Notes purchased pursuant to a Change of Control Offer will be required to surrender such Notes, with the form entitled "Option of Holder to Elect Purchase" on the reverse of such Notes completed, to the paying agent specified in the notice at the address specified in the notice prior to the close of business on the third Business Day preceding the Change of Control Payment Date;

        (6)   that Holders will be entitled to withdraw their tendered Notes and their election to require the Issuer to purchase such Notes; provided that the paying agent receives, not later than the close of business on the 30th day following the date of the Change of Control notice, a telegram, facsimile transmission or letter setting forth the name of the Holder of the Notes, the principal amount of Notes tendered for purchase, and a statement that such Holder is withdrawing its tendered Notes and its election to have such Notes purchased;

        (7)   that if the Issuer is redeeming less than all of the Notes, the Holders of the remaining Notes will be issued new Notes and such new Notes will be equal in principal amount to the unpurchased portion of the Notes surrendered. The unpurchased portion of the Notes must be equal to $2,000 or an integral multiple of $1,000 in excess thereof; and

        (8)   the other instructions, as determined by us, consistent with the covenant described hereunder, that a Holder must follow.

        The Issuer will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws or regulations are applicable in connection with the repurchase of Notes pursuant to a Change of Control Offer. To the extent that the provisions of any securities laws or regulations conflict with the provisions of the Indenture, the Issuer

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will comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations described in the Indenture by virtue thereof.

        On the Change of Control Payment Date, the Issuer will, to the extent permitted by law,

        (1)   accept for payment all Notes issued by it or portions thereof properly tendered pursuant to the Change of Control Offer;

        (2)   deposit with the paying agent an amount equal to the aggregate Change of Control Payment in respect of all Notes or portions thereof so tendered; and

        (3)   deliver, or cause to be delivered, to the Trustee for cancellation the Notes so accepted together with an Officer's Certificate to the Trustee stating that such Notes or portions thereof have been tendered to and purchased by the Issuer.

        The Senior Credit Facility limits, and future credit agreements or other agreements relating to Senior Indebtedness to which the Issuer becomes a party may prohibit or limit, the Issuer from purchasing any Notes as a result of a Change of Control. In the event a Change of Control occurs at a time when the Issuer is prohibited from purchasing the Notes, the Issuer could seek the consent of its lenders to permit the purchase of the Notes or could attempt to refinance the borrowings that contain such prohibition. If the Issuer does not obtain such consent or repay such borrowings, the Issuer will remain prohibited from purchasing the Notes. In such case, the Issuer's failure to purchase tendered Notes would constitute an Event of Default under the Indenture. If, as a result thereof, a default occurs with respect to any Senior Indebtedness, the subordination provisions in the Indenture would restrict payments to the Holders of Notes under certain circumstances. The Senior Credit Facility provides that certain change of control events with respect to the Issuer constitute a default thereunder (including a Change of Control under the Indenture). If we experience a change of control that triggers a default under our Senior Credit Facility, we could seek a waiver of such default or seek to refinance our Senior Credit Facility. In the event we do not obtain such a waiver or refinance the Senior Credit Facility, such default could result in amounts outstanding under our Senior Credit Facility being declared due and payable.

        Our ability to pay cash to the Holders of Notes following the occurrence of a Change of Control may be limited by our then-existing financial resources. Therefore, sufficient funds may not be available when necessary to make any required repurchases.

        The Change of Control purchase feature of the Notes may in certain circumstances make more difficult or discourage a sale or takeover of us and, thus, the removal of incumbent management. The Change of Control purchase feature is a result of negotiations between the Initial Purchasers and us. We have no present intention to engage in a transaction involving a Change of Control, although it is possible that we could decide to do so in the future. Subject to the limitations discussed below, we could, in the future, enter into certain transactions, including acquisitions, refinancings or other recapitalizations, that would not constitute a Change of Control under the Indenture but that could increase the amount of Indebtedness outstanding at such time or otherwise affect our capital structure or credit ratings. Restrictions on our ability to incur additional Indebtedness are contained in the covenants described under "—Certain Covenants—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock" and "—Certain Covenants—Liens". Such restrictions in the Indenture can be waived only with the consent of the Holders of a majority in principal amount of the Notes then outstanding. Except for the limitations contained in such covenants, however, the Indenture does not contain any covenants or provisions that may afford Holders of the Notes protection in the event of a highly leveraged transaction.

        The Issuer is not required to make a Change of Control Offer following a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in

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compliance with the requirements set forth in the Indenture applicable to a Change of Control Offer made by us and purchases all Notes validly tendered and not withdrawn under such Change of Control Offer. Notwithstanding anything to the contrary herein, a Change of Control Offer may be made, in advance of a Change of Control, conditional upon such Change of Control, if a definitive agreement is in place for the Change of Control at the time of the making of the Change of Control Offer.

        The definition of "Change of Control" includes a disposition of all or substantially all of the assets of the Issuer to any Person. Although there is a limited body of case law interpreting the phrase "substantially all," there is no precise established definition of the phrase under applicable law. Accordingly, in certain circumstances there may be a degree of uncertainty as to whether a particular transaction would involve a disposition of "all or substantially all" of the assets of the Issuer. As a result, it may be unclear as to whether a Change of Control has occurred and whether a Holder of Notes may require the Issuer to make an offer to repurchase the Notes as described above.

        The provisions under the Indenture relating to the Issuer's obligation to make an offer to repurchase the Notes as a result of a Change of Control may be waived or modified with the written consent of the Holders of a majority in principal amount of the Notes.

Asset Sales

        The Indenture provides that the Issuer will not, and will not permit any of its Restricted Subsidiaries to, cause, make or suffer to exist an Asset Sale, unless:

        (1)   the Issuer or a Restricted Subsidiary, as the case may be, receives consideration at the time of such Asset Sale at least equal to the fair market value (as determined in good faith by the Issuer) of the assets sold or otherwise disposed of; and

        (2)   except in the case of a Permitted Asset Swap, at least 75% of the consideration therefor received by the Issuer or a Restricted Subsidiary, as the case may be, is in the form of cash or Cash Equivalents; provided that the amount of:

        (a)   any liabilities (as shown on the Issuer's or a Restricted Subsidiary's most recent balance sheet) of the Issuer or such Restricted Subsidiary, other than liabilities that are by their terms subordinated to the Notes or the Guarantees, that are assumed by the transferee of any such assets and for which the Issuer and all of its Restricted Subsidiaries have been validly released by all creditors in writing,

        (b)   any notes, securities or other obligations received by the Issuer or a Restricted Subsidiary from such transferee that are converted by the Issuer or such Restricted Subsidiary into cash (to the extent of the cash received) within 180 days following the closing of such Asset Sale, and

        (c)   any Designated Non-cash Consideration received by the Issuer or a Restricted Subsidiary in such Asset Sale having an aggregate fair market value (as determined in good faith by the Issuer), taken together with all other Designated Non-cash Consideration received pursuant to this clause (c) that is at that time outstanding, not to exceed the greater of (x) $75.0 million and (y) 4.5% of Total Tangible Assets at the time of the receipt of such Designated Non-cash Consideration, with the fair market value of each item of Designated Non-cash Consideration being measured at the time received and without giving effect to subsequent changes in value, shall be deemed to be cash for purposes of this provision and for no other purpose.

        Within 360 days after the receipt of any Net Proceeds of any Asset Sale, the Issuer or such Restricted Subsidiary, at its option, may apply the Net Proceeds from such Asset Sale,

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        (1)   to permanently reduce:

        (a)   Obligations under Senior Indebtedness and, in the case of revolving Obligations, to correspondingly reduce commitments with respect thereto,

        (b)   Obligations under Senior Subordinated Indebtedness (and, in the case of revolving Obligations, to correspondingly reduce commitments with respect thereto), including Obligations under the Notes; provided that if the Issuer or a Restricted Subsidiary shall reduce Obligations under Senior Subordinated Indebtedness other than the Notes, the Issuer shall equally and ratably reduce Obligations under the Notes as provided under "—Optional Redemption," through open-market purchases (to the extent such purchases are at or above 100% of the principal amount thereof) or by making an offer (in accordance with the procedures set forth below for an Asset Sale Offer) to all Holders of Notes to purchase their Notes at 100% of the principal amount thereof, plus the amount of accrued but unpaid interest, if any, on the amount of Notes that would otherwise be prepaid, or

        (c)   Indebtedness of a Restricted Subsidiary that is not a Guarantor, other than Indebtedness owed to the Issuer or another Restricted Subsidiary,

        (2)   to make (a) an Investment in any one or more businesses that is a Similar Business; provided that if such Investment is in the form of the acquisition of Capital Stock, such acquisition results in the Issuer or another of its Restricted Subsidiaries, as the case may be, owning an amount of the Capital Stock of such business such that it constitutes a Restricted Subsidiary, (b) capital expenditures used or useful in a Similar Business or (c) acquisitions of other assets used or useful in a Similar Business, or

        (3)   to make an Investment in (a) any one or more businesses; provided that if such Investment is in the form of the acquisition of Capital Stock, such acquisition results in the Issuer or another of its Restricted Subsidiaries, as the case may be, owning an amount of the Capital Stock of such business such that it constitutes a Restricted Subsidiary, (b) properties or (c) acquisitions of other assets that, in each of (a), (b) and (c), replace the businesses, properties and/or assets that are the subject of such Asset Sale;

provided that, in the case of clauses (2) and (3) above, a binding commitment shall be treated as a permitted application of the Net Proceeds from the date of such commitment so long as the Issuer, or such other Restricted Subsidiary enters into such commitment with the good faith expectation that such Net Proceeds will be applied to satisfy such commitment within 360 days of such commitment (an "Acceptable Commitment") and, in the event any Acceptable Commitment is later cancelled or terminated for any reason before the Net Proceeds are applied in connection therewith, the Issuer or such Restricted Subsidiary enters into another Acceptable Commitment (a "Second Commitment") within 180 days of such cancellation or termination; provided, further, that if any Second Commitment is later cancelled or terminated for any reason before such Net Proceeds are applied, then such Net Proceeds shall constitute Excess Proceeds.

        Any Net Proceeds from the Asset Sale that are not invested or applied as provided and within the time period set forth in the first sentence of the preceding paragraph will be deemed to constitute "Excess Proceeds." When the aggregate amount of Excess Proceeds exceeds $20.0 million, the Issuer shall make an offer to all Holders of the Notes and, if required by the terms of any Indebtedness that is pari passu with the Notes ("Pari Passu Indebtedness"), to the holders of such Pari Passu Indebtedness (an "Asset Sale Offer"), to purchase the maximum aggregate principal amount of the Notes and such Pari Passu Indebtedness that is a minimum of $2,000 or an integral multiple of $1,000 in excess thereof that may be purchased out of the Excess Proceeds at an offer price in cash in an amount equal to 100% of the principal amount thereof, plus accrued and unpaid interest and Additional Interest, if any, to the date fixed for the closing of such offer, in accordance with the procedures set forth in the

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Indenture. The Issuer will commence an Asset Sale Offer with respect to Excess Proceeds within ten Business Days after the date that Excess Proceeds exceed $20.0 million by mailing (or otherwise communicating in accordance with the procedures of DTC) the notice required pursuant to the terms of the Indenture, with a copy to the Trustee.

        To the extent that the aggregate amount of Notes and such Pari Passu Indebtedness tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the Issuer may use any remaining Excess Proceeds for any purpose, subject to other covenants contained in the Indenture. If the aggregate principal amount of Notes or the Pari Passu Indebtedness surrendered by such holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select the Notes and such Pari Passu Indebtedness to be purchased on a pro rata basis based on the accreted value or principal amount of the Notes or such Pari Passu Indebtedness tendered. Upon completion of any such Asset Sale Offer, the amount of Excess Proceeds shall be reset at zero. Additionally, the Issuer may, at its option, make an Asset Sale Offer using proceeds from any Asset Sale at any time after consummation of such Asset Sale; provided that such Asset Sale Offer shall be in an aggregate amount of not less than $10 million. Upon consummation of such Asset Sale Offer, any Net Proceeds not required to be used to purchase Notes shall not be deemed Excess Proceeds.

        Pending the final application of any Net Proceeds pursuant to this covenant, the holder of such Net Proceeds may apply such Net Proceeds temporarily to reduce Indebtedness outstanding under a revolving credit facility or otherwise invest such Net Proceeds in any manner not prohibited by the Indenture.

        The Issuer will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws or regulations are applicable in connection with the repurchase of the Notes pursuant to an Asset Sale Offer. To the extent that the provisions of any securities laws or regulations conflict with the provisions of the Indenture, the Issuer will comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations described in the Indenture by virtue thereof.

        The Senior Credit Facility limits, and future credit agreements or other agreements relating to Senior Indebtedness to which the Issuer becomes a party may prohibit or limit, the Issuer from purchasing any Notes pursuant to this Asset Sales covenant. In the event the Issuer is prohibited from purchasing the Notes, the Issuer could seek the consent of its lenders to the purchase of the Notes or could attempt to refinance the borrowings that contain such prohibition. If the Issuer does not obtain such consent or repay such borrowings, it will remain prohibited from purchasing the Notes. In such case, the Issuer's failure to purchase tendered Notes would constitute an Event of Default under the Indenture. If, as a result thereof, a default occurs with respect to any Senior Indebtedness, the subordination provisions in the Indenture would restrict payments to the Holders of the Notes under certain circumstances.

Selection and Notice

        If the Issuer is redeeming less than all of the Notes issued by it at any time, the Trustee will select the Notes to be redeemed (a) if the Notes are listed on any national securities exchange, in compliance with the requirements of the principal national securities exchange on which the Notes are listed or (b) on a pro rata basis, by lot or by such other method as the Trustee shall deem fair and appropriate in accordance with the procedures of DTC.

        Notices of purchase or redemption shall be mailed by first-class mail, postage prepaid, at least 30 but not more than 60 days before the purchase or Redemption Date to each Holder of Notes at such Holder's registered address or otherwise in accordance with the procedures of DTC, except that redemption notices may be mailed more than 60 days prior to a Redemption Date if the notice is

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issued in connection with a defeasance of the Notes or a satisfaction and discharge of the Indenture. If any Note is to be purchased or redeemed in part only, any notice of purchase or redemption that relates to such Note shall state the portion of the principal amount thereof that has been or is to be purchased or redeemed.

        The Issuer will issue a new Note in a principal amount equal to the unredeemed portion of the original Note in the name of the Holder upon cancellation of the original Note. Notes called for redemption become due on the date fixed for redemption. On and after the Redemption Date, interest ceases to accrue on Notes or portions thereof called for redemption.

Certain Covenants

        Set forth below are summaries of certain covenants contained in the Indenture.

Limitation on Restricted Payments

        The Issuer will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly:

        (I)   declare or pay any dividend or make any payment or distribution on account of the Issuer's, or any of its Restricted Subsidiaries' Equity Interests, including any dividend or distribution payable in connection with any merger or consolidation other than:

        (a)   dividends or distributions by the Issuer payable solely in Equity Interests (other than Disqualified Stock) of the Issuer; or

        (b)   dividends or distributions by a Restricted Subsidiary so long as, in the case of any dividend or distribution payable on or in respect of any class or series of securities issued by a Restricted Subsidiary other than a Wholly-Owned Subsidiary, the Issuer or a Restricted Subsidiary receives at least its pro rata share of such dividend or distribution in accordance with its Equity Interests in such class or series of securities;

        (II)  purchase, redeem, defease or otherwise acquire or retire for value any Equity Interests of the Issuer or any direct or indirect parent of the Issuer, including in connection with any merger or consolidation;

        (III) make any principal payment on, or redeem, repurchase, defease or otherwise acquire or retire for value in each case, prior to any scheduled repayment, sinking fund payment or maturity, any Subordinated Indebtedness, other than:

        (a)   Indebtedness permitted under clauses (6) and (7) of the covenant described under "Certain Covenants—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock"; or

        (b)   the purchase, repurchase or other acquisition of Subordinated Indebtedness purchased in anticipation of satisfying a sinking fund obligation, principal installment or final maturity, in each case due within one year of the date of purchase, repurchase or acquisition; or

        (IV) make any Restricted Investment

(all such payments and other actions set forth in clauses (I) through (IV) above (other than any exception thereto) being collectively referred to as "Restricted Payments"), unless, at the time of and after giving effect to such Restricted Payment:

        (1)   no Default shall have occurred and be continuing or would occur as a consequence thereof;

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        (2)   immediately after giving effect to such transaction on a pro forma basis, the Issuer could incur $1.00 of additional Indebtedness under the provisions of the first paragraph of the covenant described under "Certain Covenants—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock"; and

        (3)   such Restricted Payment, together with the aggregate amount of all other Restricted Payments made by the Issuer and its Restricted Subsidiaries after the Issue Date (including Restricted Payments permitted by clauses (1), (2) (with respect to the payment of dividends on Refunding Capital Stock (as defined below) pursuant to clause (b) thereof only), (5),(6)(c), (9) and (13) of the next succeeding paragraph, but excluding all other Restricted Payments permitted by the next succeeding paragraph), is less than the sum of (without duplication):

        (a)   the sum of (1) 100% of EBITDA of the Issuer (with Reader's Digest treated as the predecessor to the Issuer for all periods prior to the Issue Date) for the period (taken as one accounting period) from January 1, 2007 to the end of the Issuer's most recently ended fiscal quarter for which internal financial statements are available at the time of such Restricted Payment, or, in the case such EBITDA for such period is a deficit, minus 100% of such deficit, minus (2) 140% of Consolidated Interest Expense of the Issuer for such period; plus

        (b)   100% of the aggregate net cash proceeds and the fair market value, as determined in good faith by the Issuer, of marketable securities or other property received by the Issuer since immediately after the Issue Date (other than net cash proceeds to the extent such net cash proceeds have been used to incur Indebtedness, Disqualified Stock or Preferred Stock pursuant to clause (11)(a) of the second paragraph of "Certain Covenants—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock" and other than cash proceeds and marketable securities received from Equity Offerings to the extent used to redeem Notes in compliance with the provisions set forth under the fourth paragraph of the caption "—Optional Redemption") from the issue or sale of:

        (i)    (A) Equity Interests of the Issuer, including Treasury Capital Stock (as defined below), but excluding cash proceeds and the fair market value, as determined in good faith by the Issuer, of marketable securities or other property received from the sale of:

        (x)   Equity Interests to members of management, directors or consultants of the Issuer, any direct or indirect parent entity of the Issuer and the Issuer's Subsidiaries after the Issue Date to the extent such amounts have been applied to Restricted Payments made in accordance with clause (4) of the next succeeding paragraph; and

        (y)   Designated Preferred Stock; and

        (B)  to the extent such net cash proceeds are actually contributed to the Issuer, Equity Interests of the Issuer's direct or indirect parent entities (excluding contributions of the proceeds from the sale of Designated Preferred Stock of such entities or contributions to the extent such amounts have been applied to Restricted Payments made in accordance with clause (4) of the next succeeding paragraph); or

        (ii)   debt securities of the Issuer that have been converted into or exchanged for such Equity Interests of the Issuer (other than debt securities that have been converted or exchanged for Disqualified Stock or Designated Preferred Stock);

provided, however, that this clause (b) shall not include the proceeds from (W) Refunding Capital Stock (as defined below), (X) Equity Interests or convertible debt securities of the Issuer sold to a Restricted Subsidiary or to an employee stock ownership plan or any trust established by the Issuer or any of its Subsidiaries, as the case may be, (Y) Disqualified Stock

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or debt securities that have been converted into or exchanged for Disqualified Stock or (Z) Excluded Contributions; plus

        (c)   100% of the aggregate amount of cash and the fair market value, as determined in good faith by the Issuer, of marketable securities or other property contributed to the capital of the Issuer following the Issue Date (other than (i) net cash proceeds to the extent such net cash proceeds have been used to incur Indebtedness, Disqualified Stock or Preferred Stock pursuant to clause (11)(a) of the second paragraph of "Certain Covenants—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock," (ii) cash proceeds and marketable securities received from Equity Offerings to the extent used to redeem Notes in compliance with the provisions set forth under the fourth paragraph of the caption "Optional redemption," (iii) cash and the fair market value of marketable securities or property contributed in exchange for Disqualified Stock or Designated Preferred Stock, (iv) by a Restricted Subsidiary and (v) from any Excluded Contributions); plus

        (d)   100% of the aggregate amount received in cash and the fair market value, as determined in good faith by the Issuer, of marketable securities or other property received by means of:

        (i)    the sale or other disposition (other than to the Issuer or a Restricted Subsidiary or to an employee stock ownership plan or any trust established by the Issuer or any of its Subsidiaries) of Restricted Investments made by the Issuer or its Restricted Subsidiaries and repurchases and redemptions of such Restricted Investments from the Issuer or its Restricted Subsidiaries and repayments of loans or advances and releases of guarantees that constitute Restricted Investments by the Issuer or its Restricted Subsidiaries, in each case after the Issue Date; or

        (ii)   the sale (other than to the Issuer or a Restricted Subsidiary) of the stock of an Unrestricted Subsidiary or a distribution from an Unrestricted Subsidiary (other than in each case to the extent the Investment in such Unrestricted Subsidiary was made by the Issuer or a Restricted Subsidiary pursuant to clause (7) of the next succeeding paragraph or to the extent such Investment constituted a Permitted Investment) or a dividend from an Unrestricted Subsidiary after the Issue Date; plus

        (e)   in the case of the redesignation of an Unrestricted Subsidiary as a Restricted Subsidiary after the Issue Date, the fair market value of the Investment in such Unrestricted Subsidiary, as determined by the Issuer in good faith (or if such fair market value exceeds $50.0 million, in writing by an Independent Financial Advisor), at the time of the redesignation of such Unrestricted Subsidiary as a Restricted Subsidiary other than to the extent the Investment in such Unrestricted Subsidiary was made by the Issuer or a Restricted Subsidiary pursuant to clause (7) of the next succeeding paragraph or to the extent such Investment constituted a Permitted Investment.

The foregoing provisions will not prohibit:

        (1)   the payment of any dividend within 60 days after the date of declaration thereof, if at the date of declaration such payment would have complied with the provisions of the Indenture;

        (2)   (a) the redemption, repurchase, retirement or other acquisition of any Equity Interests ("Treasury Capital Stock") or Subordinated Indebtedness of the Issuer or any Equity Interests of any direct or indirect parent entity of the Issuer, in exchange for, or out of the proceeds of the substantially concurrent sale (other than to a Restricted Subsidiary or the Issuer or to an employee stock ownership plan or any trust established by the Issuer or any of its Subsidiaries) of, Equity Interests of the Issuer or any direct or indirect parent entity of the Issuer to the extent contributed

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to the Issuer (in each case, other than any Disqualified Stock) ("Refunding Capital Stock") and (b) if immediately prior to the retirement of Treasury Capital Stock, the declaration and payment of dividends thereon was permitted under clause (6)(a) or (b) of this paragraph, the declaration and payment of dividends on the Refunding Capital Stock (other than Refunding Capital Stock the proceeds of which were used to redeem, repurchase, retire or otherwise acquire any Equity Interests of any direct or indirect parent entity of the Issuer) in an aggregate amount per year no greater than the aggregate amount of dividends per annum that were declarable and payable on such Treasury Capital Stock immediately prior to such retirement;

        (3)   the redemption, repurchase or other acquisition or retirement of Subordinated Indebtedness of the Issuer or a Guarantor made in exchange for, or out of the proceeds of the substantially concurrent sale of, new Indebtedness of the Issuer or a Guarantor, as the case may be, which is incurred in compliance with "Certain Covenants—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock," so long as:

        (a)   the principal amount (or accreted value) of such new Indebtedness does not exceed the principal amount of (or accreted value, if applicable), plus any accrued and unpaid interest on, the Subordinated Indebtedness being so redeemed, repurchased, acquired or retired for value, plus the amount of any reasonable, as determined in good faith by the Issuer, premium (including reasonable, as determined in good faith by the Issuer, tender premiums), defeasance costs and any reasonable, as determined in good faith by the Issuer, fees and expenses incurred in connection with the issuance of such new Indebtedness;

        (b)   such new Indebtedness is subordinated to the Notes or the applicable Guarantee at least to the same extent as such Subordinated Indebtedness so purchased, exchanged, redeemed, repurchased, acquired or retired for value;

        (c)   such new Indebtedness has a final scheduled maturity date equal to or later than the final scheduled maturity date of the Subordinated Indebtedness being so purchased, exchanged, redeemed, repurchased, acquired or retired for value; and

        (d)   such new Indebtedness has a Weighted Average Life to Maturity equal to or greater than the remaining Weighted Average Life to Maturity of the Subordinated Indebtedness being so purchased, exchanged, redeemed, repurchased, acquired or retired for value;

        (4)   a Restricted Payment to pay for the repurchase, retirement or other acquisition or retirement for value of Equity Interests (other than Disqualified Stock) of the Issuer or any of its direct or indirect parent companies held by any future, present or former employee, director or consultant of the Issuer, any of its Subsidiaries or any of its direct or indirect parent companies pursuant to any management equity plan or stock option plan or any other management or employee benefit plan or agreement; provided, however, that the aggregate Restricted Payments made under this clause (4) do not exceed $15.0 million in any fiscal year; provided, further, that such amount in any calendar year may be increased by an amount not to exceed:

        (a)   the cash proceeds from the sale of Equity Interests (other than Disqualified Stock) of the Issuer and, to the extent contributed to the Issuer, Equity Interests of any of the Issuer's direct or indirect parent companies, in each case to members of management, directors or consultants of the Issuer, any of its Subsidiaries or any of its direct or indirect parent companies that occurs after the Issue Date, to the extent the cash proceeds from the sale of such Equity Interests have not otherwise been applied to the payment of Restricted Payments by virtue of clause (3) of the preceding paragraph and to the extent such contribution is not an Excluded Contribution; plus

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        (b)   the cash proceeds of key man life insurance policies received by the Issuer or its Restricted Subsidiaries after the Issue Date; less

        (c)   the amount of any Restricted Payments previously made with the cash proceeds described in clauses (a) and (b) of this clause (4);

and provided, further, that cancellation of Indebtedness owing to the Issuer or any Restricted Subsidiary from members of management of the Issuer, any of the Issuer's direct or indirect parent companies or any of the Issuer's Restricted Subsidiaries in connection with a repurchase of Equity Interests of the Issuer or any of its direct or indirect parent companies will not be deemed to constitute a Restricted Payment for purposes of this covenant or any other provision of the Indenture, provided, further, that the aggregate amount of Restricted Payments made pursuant to this clause (4) shall not exceed $50.0 million in the aggregate;

        (5)   the declaration and payment of dividends to holders of any class or series of Disqualified Stock of the Issuer or any of its Restricted Subsidiaries issued in accordance with the covenant described under "—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock";

        (6)   (a) the declaration and payment of dividends to holders of any class or series of Designated Preferred Stock (other than Disqualified Stock) issued by the Issuer after the Issue Date; provided that the amount of dividends paid pursuant to this clause (a) shall not exceed the aggregate amount of cash actually received by the Issuer from the sale of such Designated Preferred Stock;

        (b)   the declaration and payment of dividends to a direct or indirect parent entity of the Issuer, the proceeds of which will be used to fund the payment of dividends to holders of any class or series of Designated Preferred Stock (other than Disqualified Stock) of such parent entity issued after the Issue Date; provided that the amount of dividends paid pursuant to this clause (b) shall not exceed the aggregate amount of cash actually contributed to the Issuer from the sale of such Designated Preferred Stock; or

        (c)   the declaration and payment of dividends on Refunding Capital Stock that is Preferred Stock in excess of the dividends declarable and payable thereon pursuant to clause (2) of this paragraph;

provided, however, that in the case of each of (a), (b) and (c) of this clause (6), that for the most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date of issuance of such Designated Preferred Stock or the declaration of such dividends on Refunding Capital Stock that is Preferred Stock, after giving effect to such issuance or declaration on a pro forma basis, the Issuer would be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Consolidated Leverage Ratio test in the first paragraph of the covenant described under "—Limitation on incurrence and issuance of disqualified stock and preferred stock";

        (7)   Investments in Unrestricted Subsidiaries having an aggregate fair market value, taken together with all other Investments made pursuant to this clause (7) that are at the time outstanding, without giving effect to the sale of an Unrestricted Subsidiary to the extent the proceeds of such sale do not consist of cash or marketable securities, not to exceed $25.0 million (with the fair market value of each outstanding Investment being measured at the time made and without giving effect to subsequent changes in value);

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        (8)   repurchases of Equity Interests deemed to occur upon exercise of stock options, warrants or other rights to purchase Equity Interests if such Equity Interests represent a portion of the exercise price of such options, warrants or other rights to purchase Equity Interests;

        (9)   (a) the declaration and payment of regular quarterly dividends on the Existing Issuer Preferred Stock and (b) the declaration and payment of dividends on the Issuer's common stock (or the payment of dividends to any direct or indirect parent entity to fund a payment of dividends on such entity's common stock), following consummation of the first public offering of the Issuer's common stock or the common stock of any of its direct or indirect parent entities after the Issue Date, of up to 6% per annum of the net cash proceeds received by or contributed to the Issuer in or from any such public offering, other than public offerings with respect to the Issuer's or any of its direct or indirect parent entities' common stock registered on Form S-4 or Form S-8 and other than any public sale constituting an Excluded Contribution;

        (10) Restricted Payments that are made with Excluded Contributions;

        (11) other Restricted Payments in an aggregate amount which, when taken together with all other Restricted Payments made pursuant to this clause (11) (as reduced by the amount of capital returned from any such Restricted Payments that constituted Restricted Investments in the form of cash and Cash Equivalents (exclusive of items reflected in Consolidated Net Income)), not to exceed $50.0 million;

        (12) any Restricted Payment (i) used to fund the Transactions and the fees and expenses related thereto or (ii) owed to Affiliates but, in the case of clause (ii), only to the extent permitted by the covenant described under "Certain Covenants—Transactions with Affiliates";

        (13) the repurchase, redemption or other acquisition or retirement for value of any Subordinated Indebtedness pursuant to provisions similar to those described under the captions "Repurchase at the option of holders—Change of Control" and "Repurchase at the Option of Holders—Asset Sales"; provided that a Change of Control Offer or Asset Sale Offer, as applicable, has been made and all Notes tendered by Holders in connection with such Change of Control Offer or Asset Sale Offer, as applicable, have been repurchased, redeemed or acquired for value;

        (14) the declaration and payment of dividends by the Issuer to, or the making of loans to, any direct or indirect parent in amounts required for any direct or indirect parent companies to pay, in each case without duplication,

        (a)   franchise taxes and other fees, taxes and expenses required to maintain their corporate existence;

        (b)   foreign, federal, state and local income taxes, to the extent such income taxes are attributable to the income of the Issuer and its Restricted Subsidiaries and, to the extent of the amount actually received from its Unrestricted Subsidiaries, in amounts required to pay such taxes to the extent attributable to the income of such Unrestricted Subsidiaries; provided that in each case the amount of such payments in any fiscal year does not exceed the amount that the Issuer and its Restricted Subsidiaries would be required to pay in respect of foreign, federal, state and local taxes for such fiscal year were the Issuer, its Restricted Subsidiaries and its Unrestricted Subsidiaries (to the extent described above) to pay such taxes separately from any such parent entity;

        (c)   customary salary, bonus and other benefits payable to officers and employees of any direct or indirect parent entity of the Issuer to the extent such salaries, bonuses and other benefits are attributable to the ownership or operation of the Issuer and its Restricted Subsidiaries;

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        (d)   general corporate operating and overhead costs and expenses of any direct or indirect parent entity of the Issuer to the extent such costs and expenses are attributable to the ownership or operation of the Issuer and its Restricted Subsidiaries, including, without limitation, in respect of director fees and expenses, insurance, administrative, legal and accounting services provided by third parties and other costs and expenses, including all costs and expenses with respect to filings with the SEC and any indemnification claims made by directors or officers of any direct or indirect parent attributable to the ownership or operation of the Issuer and its Restricted Subsidiaries;

        (e)   fees and expenses other than to Affiliates of the Issuer related to any unsuccessful equity or debt offering or other financing transaction of such parent entity; and

        (15) the distribution, by dividend or otherwise, of shares of Capital Stock of, or Indebtedness owed to the Issuer or a Restricted Subsidiary by, Unrestricted Subsidiaries (other than Unrestricted Subsidiaries, the primary assets of which are cash and/or Cash Equivalents); and

        (16) the payment by the Company or its Restricted Subsidiaries of any amounts required to be paid in connection with the exercise of appraisal rights by holders of the Existing Issuer Preferred Stock arising as a result of the Transactions;

provided, however, that at the time of, and after giving effect to, any Restricted Payment permitted under clauses (7), (11) and (15), no Default shall have occurred and be continuing or would occur as a consequence thereof.

        The amount of all Restricted Payments (other than cash) will be the fair market value on the date of the Restricted Payment of the assets or securities proposed to be transferred or issued by the Issuer or such Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair market value of any assets or securities that are required to be valued by this covenant will be determined in good faith by the Issuer. The Issuer's determination must be based upon an opinion or appraisal issued by an Independent Financial Advisor if the fair market value exceeds $50.0 million.

        As of the Issue Date, all of the Issuer's Subsidiaries will be Restricted Subsidiaries. The Issuer will not permit any Unrestricted Subsidiary to become a Restricted Subsidiary except pursuant to the last sentence of the definition of "Unrestricted Subsidiary." For purposes of designating any Restricted Subsidiary as an Unrestricted Subsidiary, all outstanding Investments by the Issuer and its Restricted Subsidiaries (except to the extent repaid) in the Subsidiary so designated will be deemed to be Restricted Payments in an amount determined as set forth in the last sentence of the definition of "Investment." Such designation will be permitted only if a Restricted Payment in such amount would be permitted at such time, whether pursuant to the first paragraph of this covenant or under clause (7), (10) or (11) of the second paragraph of this covenant, or pursuant to the definition of "Permitted Investments," and if such Subsidiary otherwise meets the definition of an Unrestricted Subsidiary. Unrestricted Subsidiaries will not be subject to any of the restrictive covenants set forth in the Indenture.

Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock

        The Issuer will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable, contingently or otherwise (collectively, "incur" and collectively, an "incurrence") with respect to any Indebtedness (including Acquired Indebtedness), and the Issuer will not issue any shares of Disqualified Stock and will not permit any Restricted Subsidiary to issue any shares of Disqualified Stock or Preferred Stock; provided, however, that the Issuer may incur Indebtedness (including Acquired Indebtedness) or issue shares of Disqualified Stock, and any of its Restricted Subsidiaries may incur Indebtedness (including Acquired Indebtedness), issue shares of Disqualified Stock and issue shares of Preferred Stock, if the

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Consolidated Leverage Ratio on a consolidated basis for the Issuer and its Restricted Subsidiaries' most recently ended four fiscal quarters for which internal financial statements are available immediately preceding the date on which such additional Indebtedness is incurred or such Disqualified Stock or Preferred Stock is issued shall not be greater than 7.5 to 1.00, determined on a pro forma basis (including a pro forma application of the net proceeds therefrom), as if the additional Indebtedness had been incurred, or the Disqualified Stock or Preferred Stock had been issued, as the case may be, and the application of proceeds therefrom had occurred at the beginning of such four-quarter period; provided, further, that Restricted Subsidiaries that are not Guarantors may not incur Indebtedness or issue Disqualified Stock or Preferred Stock if, after giving pro forma effect to such incurrence or issuance (including a pro forma application of the net proceeds therefrom), more than an aggregate of the greater of (x) $50.0 million and (y) 3.0% of Total Tangible Assets of Indebtedness or Disqualified Stock or Preferred Stock of Restricted Subsidiaries that are not Guarantors would be outstanding pursuant to this paragraph and clauses (11) and (17) below at such time.

        The foregoing limitations will not apply to:

        (1)   the incurrence of (A) Indebtedness under Credit Facilities by the Issuer or any of the Guarantors and the issuance and creation of letters of credit and bankers' acceptances thereunder (with letters of credit and bankers' acceptances being deemed to have a principal amount equal to the face amount thereof) and (B) Indebtedness under Credit Facilities of Foreign Subsidiaries in an aggregate principal amount not to exceed $400.0 million; provided that the aggregate principal amount of Indebtedness Incurred under clauses (A) and (B) outstanding at any one time shall not exceed $1,710.0 million less the sum of all principal payments with respect to such Indebtedness made pursuant to clause (1)(a) of the second paragraph under "—Repurchase at the Option of Holders—Asset Sales" in satisfaction of the requirements of such covenant;

        (2)   the incurrence by the Issuer and any Guarantor of Indebtedness represented by the Notes (including any Guarantee) (other than any Additional Notes) and any Exchange Notes (including any Guarantee thereof);

        (3)   Indebtedness of the Issuer and its Restricted Subsidiaries in existence on the Issue Date (other than Indebtedness described in clauses (1) and (2));

        (4)   Indebtedness incurred by the Issuer or any of its Restricted Subsidiaries in respect of letters of credit, bank guarantees, bankers' acceptances or similar instruments issued or created in the ordinary course of business, including in respect of workers' compensation claims, health, disability or other employee benefits or property, casualty or liability insurance or self-insurance or other Indebtedness with respect to reimbursement-type obligations regarding workers' compensation claims; provided, however, that any reimbursement obligations in respect thereof are reimbursed within 30 days following the incurrence thereof;

        (5)   Indebtedness arising from agreements of the Issuer or its Restricted Subsidiaries providing for indemnification, adjustment of purchase price or similar obligations, in each case incurred or assumed in connection with the disposition of any business, assets or a Subsidiary, other than guarantees of Indebtedness incurred by any Person acquiring all or any portion of such business, assets or a Subsidiary for the purpose of financing such acquisition; provided, however, that

        (a)   such Indebtedness is not reflected on the balance sheet of the Issuer, or any of its Restricted Subsidiaries (contingent obligations referred to in a footnote to financial statements and not otherwise reflected on the balance sheet will not be deemed to be reflected on such balance sheet for purposes of this clause (5)(a)); and

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        (b)   the maximum assumable liability in respect of all such Indebtedness shall at no time exceed the gross proceeds including non-cash proceeds (the fair market value of such non-cash proceeds being measured at the time received and without giving effect to any subsequent changes in value) actually received by the Issuer and its Restricted Subsidiaries in connection with such disposition;

        (6)   Indebtedness of the Issuer to a Restricted Subsidiary; provided that any such Indebtedness owing to a Restricted Subsidiary that is not a Guarantor is expressly subordinated in right of payment to the Notes; provided, further, that any subsequent issuance or transfer of any Capital Stock or any other event which results in any Restricted Subsidiary ceasing to be a Restricted Subsidiary or any other subsequent transfer of any such Indebtedness (except to the Issuer or another Restricted Subsidiary) shall be deemed, in each case, to be an incurrence of such Indebtedness not permitted by this clause;

        (7)   Indebtedness of a Restricted Subsidiary to the Issuer or another Restricted Subsidiary; provided that if a Guarantor incurs such Indebtedness to a Restricted Subsidiary that is not a Guarantor, such Indebtedness is expressly subordinated in right of payment to the Guarantee of the Notes of such Guarantor; provided, further, that any subsequent transfer of any such Indebtedness (except to the Issuer or another Restricted Subsidiary), directly or through the disposition of the Restricted Subsidiary holding such Indebtedness, shall be deemed, in each case, to be an incurrence of such Indebtedness not permitted by this clause;

        (8)   shares of Preferred Stock of a Restricted Subsidiary issued to the Issuer or another Restricted Subsidiary; provided that any subsequent issuance or transfer of any Capital Stock or any other event which results in any such Restricted Subsidiary ceasing to be a Restricted Subsidiary or any other subsequent transfer of any such shares of Preferred Stock (except to the Issuer or another of its Restricted Subsidiaries) shall be deemed in each case to be an issuance of such shares of Preferred Stock not permitted by this clause;

        (9)   Hedging Obligations (excluding Hedging Obligations entered into for speculative purposes) for the purpose of hedging interest rate risk with respect to any Indebtedness permitted to be incurred pursuant to "Certain Covenants—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock," exchange rate risk or commodity pricing risk;

        (10) obligations in respect of performance, bid, appeal and surety bonds and completion guarantees provided by the Issuer or any of its Restricted Subsidiaries in the ordinary course of business;

        (11) (a) Indebtedness or Disqualified Stock of the Issuer and Indebtedness, Disqualified Stock or Preferred Stock of any Restricted Subsidiary equal to 100% of the net cash proceeds received by the Issuer since immediately after the Issue Date from the issue or sale of Equity Interests of the Issuer or cash contributed to the capital of the Issuer (in each case, other than Excluded Contributions or proceeds of Disqualified Stock or Designated Preferred Stock or sales of Equity Interests to the Issuer or any of its Subsidiaries or to an employee stock ownership plan or any trust established by the Issuer or any of its Subsidiaries) as determined in accordance with clauses (3)(b) and (3)(c) of the first paragraph of "Certain Covenants—Limitation on Restricted Payments" to the extent such net cash proceeds or cash have not been applied pursuant to such clauses to make Restricted Payments or to make other Investments, payments or exchanges pursuant to the second paragraph of "Certain Covenants—Limitation on Restricted Payments" or to make Permitted Investments (other than Permitted Investments specified in clauses (1) and (3) of the definition thereof) and (b) Indebtedness or Disqualified Stock of the Issuer and Indebtedness, Disqualified Stock or Preferred Stock of any Restricted Subsidiary not otherwise permitted hereunder in an aggregate principal amount or liquidation preference, which when aggregated with the principal amount and liquidation preference of all other Indebtedness,

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Disqualified Stock and Preferred Stock then outstanding and incurred pursuant to this clause (11)(b), does not at any one time outstanding exceed $100.0 million (it being understood that any Indebtedness, Disqualified Stock or Preferred Stock incurred pursuant to this clause (11)(b) shall cease to be deemed incurred or outstanding for purposes of this clause (11)(b) but shall be deemed incurred for the purposes of the first paragraph of this covenant from and after the first date on which the Issuer or such Restricted Subsidiary could have incurred such Indebtedness, Disqualified Stock or Preferred Stock under the first paragraph of this covenant without reliance on this clause (11)(b));

        (12) the incurrence or issuance by the Issuer or any Restricted Subsidiary of Indebtedness, Disqualified Stock or Preferred Stock which serves to refund or refinance any Indebtedness, Disqualified Stock or Preferred Stock incurred as permitted under the first paragraph of this covenant and clauses (2), (3) and (11)(a) above, this clause (12) and clause (13) below or any Indebtedness, Disqualified Stock or Preferred Stock issued to so refund or refinance such Indebtedness, Disqualified Stock or Preferred Stock, including additional Indebtedness, Disqualified Stock or Preferred Stock incurred to pay premiums (including reasonable, as determined in good faith by the Issuer, tender premiums), defeasance costs, accrued interest and fees and expenses in connection therewith (the "Refinancing Indebtedness") prior to its respective maturity; provided, however, that such Refinancing Indebtedness:

        (a)   has a Weighted Average Life to Maturity at the time such Refinancing Indebtedness is incurred which is not less than the remaining Weighted Average Life to Maturity of the Indebtedness, Disqualified Stock or Preferred Stock being refunded or refinanced,

        (b)   to the extent such Refinancing Indebtedness refinances (i) Indebtedness subordinated or pari passu to the Notes or any Guarantee thereof, such Refinancing Indebtedness is subordinated or pari passu to the Notes or the Guarantee at least to the same extent as the Indebtedness being refinanced or refunded or (ii) Disqualified Stock or Preferred Stock, such Refinancing Indebtedness must be Disqualified Stock or Preferred Stock, respectively, and

        (c)   shall not include:

        (i)    Indebtedness, Disqualified Stock or Preferred Stock of a Subsidiary of the Issuer that is not a Guarantor that refinances Indebtedness, Disqualified Stock or Preferred Stock of the Issuer or a Guarantor; or

        (ii)   Indebtedness, Disqualified Stock or Preferred Stock of the Issuer or a Restricted Subsidiary that refinances Indebtedness, Disqualified Stock or Preferred Stock of an Unrestricted Subsidiary;

        (d)   shall not be in a principal amount in excess of the principal amount of, premium (including reasonable, as determined in good faith by the Issuer, tender premium and defeasance costs), if any, accrued interest on, and related fees and expenses of the Indebtedness being refunded or refinanced; and

        (e)   shall not have a stated maturity date prior to the stated maturity of the Indebtedness being refunded or refinanced; and provided, further, that subclause  (a) of this clause (12) will not apply to any refunding or refinancing of any Indebtedness outstanding under any Senior Indebtedness;

        (13) Indebtedness, Disqualified Stock or Preferred Stock of Persons (other than Indebtedness, Disqualified Stock or Preferred Stock incurred in anticipation of such acquisition or merger) that are acquired by the Issuer or any Restricted Subsidiary or merged into the Issuer or a Restricted Subsidiary in accordance with the terms of the Indenture; provided that after giving effect to such acquisition or merger, either

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        (a)   the Issuer would be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Consolidated Leverage Ratio test set forth in the first sentence of this covenant, or

        (b)   the Consolidated Leverage Ratio of the Issuer and the Restricted Subsidiaries is lower than immediately prior to such acquisition or merger;

        (14) Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument drawn against insufficient funds in the ordinary course of business; provided that such Indebtedness is extinguished within two Business Days of its incurrence;

        (15) Indebtedness of the Issuer or any of its Restricted Subsidiaries supported by a letter of credit issued pursuant to any Credit Facility, in a principal amount not in excess of the stated amount of such letter of credit;

        (16) (a) any guarantee by the Issuer or a Restricted Subsidiary of Indebtedness or other obligations of any Restricted Subsidiary so long as the incurrence of such Indebtedness incurred by such Restricted Subsidiary is permitted under the terms of the Indenture, or

        (b)   any guarantee by a Restricted Subsidiary of Indebtedness of the Issuer; provided that such guarantee is incurred in accordance with the covenant described below under "Certain Covenants—Additional Subsidiary Guarantees";

        (17) Indebtedness (including Capitalized Lease Obligations), Disqualified Stock or Preferred Stock of the Issuer or a Restricted Subsidiary incurred to finance the purchase, lease or improvement of any property or equipment, whether through the direct purchase of such property or equipment or the purchase of Capital Stock of any Person owning such property or equipment (but no other material assets), and any Indebtedness, Disqualified Stock or Preferred Stock of a Restricted Subsidiary which serves to refund or refinance any Indebtedness, Disqualified Stock or Preferred Stock incurred pursuant to this clause (17), in a principal amount not to exceed the greater of (x) $25.0 million and (y) 1.5% of Total Tangible Assets in the aggregate at any one time outstanding together with all other Indebtedness, Disqualified Stock and/or Preferred Stock issued under this clause (17) (it being understood that any Indebtedness, Disqualified Stock or Preferred Stock incurred pursuant to this clause (17) shall cease to be deemed incurred or outstanding for purposes of this clause (17) but shall be deemed incurred for the purpose of the first paragraph of this covenant from and after the first date on which such Restricted Subsidiary could have incurred such Indebtedness, Disqualified Stock or Preferred Stock under the first paragraph of this covenant without reliance on this clause (17));

        (18) Indebtedness of the Issuer or any of its Restricted Subsidiaries consisting of (i) the financing of insurance premiums or (ii) take-or-pay obligations contained in supply arrangements in each case, incurred in the ordinary course of business;

        (19) Indebtedness consisting of Indebtedness issued by the Issuer or any of its Restricted Subsidiaries to current or former officers, directors and employees thereof, their respective estates, spouses or former spouses, in each case to finance the purchase or redemption of Equity Interests of the Issuer or any direct or indirect parent company of the Issuer to the extent described in clause (4) of the second paragraph under the caption "—Limitation on Restricted Payments"; and

        (20) Indebtedness of Foreign Subsidiaries of the Issuer in an aggregate principal amount not to exceed at any one time outstanding (and together with any other Indebtedness incurred under this clause (20)) of $50.0 million (it being understood that any Indebtedness incurred pursuant to this clause (20) shall cease to be deemed incurred or outstanding for purposes of this clause (20) but shall be deemed incurred for the purposes of the first paragraph of this covenant from and

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after the first date on which the Issuer or such Foreign Subsidiary could have incurred such indebtedness under the first paragraph of this covenant without reliance on this clause (20)).

        For purposes of determining compliance with this covenant:

        (1)   in the event that an item of Indebtedness, Disqualified Stock or Preferred Stock (or any portion thereof) meets the criteria of more than one of the categories of permitted Indebtedness, Disqualified Stock or Preferred Stock described in clauses (1) through (20) above or is entitled to be incurred pursuant to the first paragraph of this covenant, the Issuer, in its sole discretion, may classify or reclassify such item of Indebtedness, Disqualified Stock or Preferred Stock (or any portion thereof) and will only be required to include the amount and type of such Indebtedness, Disqualified Stock or Preferred Stock in one of the above clauses; provided that all Indebtedness outstanding under the Credit Facilities on the Issue Date will be treated as incurred on the Issue Date under clause (1) of the preceding paragraph and such amounts outstanding under clause (1) on the Issue Date may not be later reclassified; and

        (2)   at the time of incurrence, the Issuer will be entitled to divide and classify an item of Indebtedness in more than one of the types of Indebtedness described in the first and second paragraphs above.

        Accrual of interest, the accretion of accreted value and the payment of interest in the form of additional Indebtedness, Disqualified Stock or Preferred Stock of the same class will not be deemed to be an incurrence of Indebtedness, Disqualified Stock or Preferred Stock for purposes of this covenant. The amount of any Indebtedness outstanding as of any date shall be (i) the accreted value thereof in the case of any Indebtedness issued with original issue discount and (ii) the principal amount or liquidation preference thereof, in the case of any other Indebtedness. The principal amount of any Disqualified Stock of the Issuer or a Restricted Subsidiary, or Preferred Stock of a Restricted Subsidiary, will be equal to the greater of the maximum mandatory redemption or repurchase price (not including, in either case, any redemption or repurchase premium) or the liquidation preference thereof.

        For purposes of determining compliance with any U.S. dollar-denominated restriction on the incurrence of Indebtedness, the U.S. dollar-equivalent principal amount of Indebtedness denominated in a foreign currency shall be calculated based on the relevant currency exchange rate in effect on the date such Indebtedness was incurred, in the case of term debt, or first committed, in the case of revolving credit debt; provided that if such Indebtedness is incurred to refinance other Indebtedness denominated in a foreign currency, and such refinancing would cause the applicable U.S. dollar denominated restriction to be exceeded if calculated at the relevant currency exchange rate in effect on the date of such refinancing, such U.S. dollar-denominated restriction shall be deemed not to have been exceeded so long as the principal amount of such refinancing Indebtedness does not exceed the principal amount of such Indebtedness being refinanced.

        The principal amount of any Indebtedness incurred to refinance other Indebtedness, if incurred in a different currency from the Indebtedness being refinanced, shall be calculated based on the currency exchange rate applicable to the currencies in which such respective Indebtedness is denominated that is in effect on the date of such refinancing.

Limitation on Layering

        The Indenture provides that the Issuer will not, and will not permit any Guarantor to, directly or indirectly, incur any Indebtedness (including Acquired Indebtedness) that is subordinate in right of

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payment to any Senior Indebtedness of the Issuer or such Guarantor, as the case may be, unless such Indebtedness is either:

        (1)   equal in right of payment with the Notes or such Guarantor's Guarantee of the Notes, as the case may be; or

        (2)   expressly subordinated in right of payment to the Notes or such Guarantor's Guarantee of the Notes, as the case may be.

        The Indenture does not treat (1) unsecured Indebtedness as subordinated or junior to Secured Indebtedness merely because it is unsecured or (2) Senior Indebtedness as subordinated or junior to any other Senior Indebtedness merely because it has a junior priority with respect to the same collateral.

Liens

        The Issuer will not, and will not permit any Guarantor to, directly or indirectly, create, incur, assume or suffer to exist any Lien (except Permitted Liens) that secures obligations under any Indebtedness ranking pari passu with or subordinated to the Notes or any related Guarantee, on any asset or property of the Issuer or any Guarantor, or any income or profits therefrom, or assign or convey any right to receive income therefrom, unless:

        (1)   in the case of Liens securing Subordinated Indebtedness, the Notes and related Guarantees are secured by a Lien on such property, assets or proceeds that is senior in priority to such Liens; or

        (2)   in all other cases, the Notes and the Guarantees are equally and ratably secured or are secured by a Lien on such property assets or proceeds that is senior in priority to such Liens.

        Any Lien created for the benefit of holders of the Notes pursuant to this covenant shall be deemed automatically and unconditionally released and discharged upon the release and discharge of each of the Liens described in clauses (1) and (2) above.

Merger, Consolidation or Sale of All or Substantially All Assets

        The Issuer may not consolidate or merge with or into or wind up into (whether or not the Issuer is the surviving corporation), or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties and assets, in one or more related transactions, to any Person unless:

        (1)   the Issuer is the surviving corporation or the Person formed by or surviving any such consolidation or merger (if other than the Issuer) or to which such sale, assignment, transfer, lease, conveyance or other disposition will have been made is a corporation organized or existing under the laws of the jurisdiction of organization of the Issuer or the laws of the United States, any state thereof, the District of Columbia, or any territory thereof (such Person, as the case may be, being herein called the "Successor Company");

        (2)   the Successor Company, if other than the Issuer, expressly assumes all the obligations of the Issuer under the Notes and the Indenture pursuant to a supplemental indenture or other documents or instruments in form reasonably satisfactory to the Trustee;

        (3)   immediately after such transaction, no Default exists;

        (4)   immediately after giving pro forma effect to such transaction and any related financing transactions, as if such transactions had occurred at the beginning of the applicable four-quarter period,

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        (a)   the Successor Company would be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Consolidated Leverage Ratio test set forth in the first sentence of the covenant described under "Certain Covenants—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock," or

        (b)   the Consolidated Leverage Ratio for the Successor Company, the Issuer and its Restricted Subsidiaries would be less than such ratio for the Issuer and its Restricted Subsidiaries immediately prior to such transaction;

        (5)   each Guarantor, unless it is the other party to the transactions described above, shall have by supplemental indenture confirmed that its Guarantee shall apply to such Person's obligations under the Indenture, the Notes and the Registration Rights Agreement; and

        (6)   the Issuer shall have delivered to the Trustee an Officer's Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer and such supplemental indentures, if any, comply with the Indenture.

        The Successor Company will succeed to, and be substituted for the Issuer, as the case may be, under the Indenture, the Guarantees and the Notes, as applicable, except that in the case of a lease of all or substantially all of its assets, the predecessor will not be released from the obligation to pay principal of and interest on the Notes. Notwithstanding the foregoing clauses (3) and (4),

        (1)   any Restricted Subsidiary may consolidate with or merge into or transfer all or part of its properties and assets to the Issuer, and

        (2)   the Issuer may merge with an Affiliate of the Issuer, as the case may be, solely for the purpose of reincorporating the Issuer in a State of the United States, the District of Columbia or any territory of the United States, so long as the amount of Indebtedness, Disqualified Stock and Preferred Stock of the Issuer and its Restricted Subsidiaries is not increased thereby.

        Subject to certain limitations described in the Indenture governing release of a Guarantee upon the sale, disposition or transfer of a guarantor, no Guarantor will, and the Issuer will not permit any Guarantor to, consolidate or merge with or into or wind up into (whether or not the Issuer or Guarantor is the surviving corporation), or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets, in one or more related transactions, to any Person unless:

        (1)   (a) such Guarantor is the surviving corporation or the Person formed by or surviving any such consolidation or merger (if other than such Guarantor) or to which such sale, assignment, transfer, lease, conveyance or other disposition will have been made is a corporation, partnership, limited partnership, limited liability company or trust organized or existing under the laws of the jurisdiction of organization of such Guarantor, as the case may be, or the laws of the United States, any state thereof, the District of Columbia, or any territory thereof (such Guarantor or such Person, as the case may be, being herein called the "Successor Person");

        (b)   the Successor Person, if other than such Guarantor, expressly assumes all the obligations of such Guarantor under the Indenture and such Guarantor's related Guarantee pursuant to a supplemental indenture or other documents or instruments in form reasonably satisfactory to the Trustee;

        (c)   immediately after such transaction, no Default exists; and

        (d)   the Issuer shall have delivered to the Trustee an Officer's Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer and such supplemental indenture, if any, comply with the Indenture; or

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        (2)   if the transaction constitutes an Asset Sale, such transaction is made in compliance with the covenant described under "—Repurchase at the Option of Holders—Asset Sales."

        Subject to certain limitations described in the Indenture, the Successor Person will succeed to, and be substituted for, such Guarantor under the Indenture and such Guarantor's Guarantee. Notwithstanding the foregoing, any Guarantor may merge into or transfer all or part of its properties and assets to another Guarantor or the Issuer or merge with a Restricted Subsidiary of the Issuer solely for the purpose of reincorporating the Guarantor in a State of the United States, the District of Columbia or any territory of the United States, as long as the amount of Indebtedness, Preferred Stock and Disqualified Stock of such Guarantor is not increased thereby.

        A Guarantee by a Guarantor shall provide by its terms that it shall be automatically and unconditionally released and discharged upon any sale, exchange or transfer (by merger or otherwise) of the Capital Stock of such Guarantor (including any sale, exchange or transfer), after which the applicable Guarantor is no longer a Restricted Subsidiary or all or substantially all the assets of such Guarantor, which sale, exchange or transfer is made in compliance with the applicable provisions of the Indenture.

        For purposes of this covenant, the sale, lease, conveyance, assignment, transfer or other disposition of all or substantially all of the properties and assets of one or more Subsidiaries of the Issuer, which properties and assets, if held by the Issuer instead of such Subsidiaries, would constitute all or substantially all of the properties and assets of the Issuer on a consolidated basis, shall be deemed to be the transfer of all or substantially all of the properties and assets of the Issuer.

        Although there is a limited body of case law interpreting the phrase "substantially all," there is no precise established definition of the phrase under applicable law. Accordingly, in certain circumstances there may be a degree of uncertainty as to whether a particular transaction would involve "all or substantially all" of the property or assets of a Person.

Transactions with Affiliates

        The Issuer will not, and will not permit any of its Restricted Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into or make or amend any transaction, contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate of the Issuer (each of the foregoing, an "Affiliate Transaction") involving aggregate payments or consideration in excess of $10.0 million, unless:

        (1)   such Affiliate Transaction is on terms that are not materially less favorable to the Issuer or its relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction by the Issuer or such Restricted Subsidiary with an unrelated Person on an arm's-length basis; and

        (2)   the Issuer delivers to the Trustee with respect to any Affiliate Transaction or series of related Affiliate Transactions (a) involving aggregate payments or consideration in excess of $15.0 million, a resolution adopted by the majority of the board of directors of the Issuer approving such Affiliate Transaction and set forth in an Officer's Certificate certifying that such Affiliate Transaction complies with clause (1) above and (b) involving aggregate payments or consideration in excess of $50.0 million, an opinion as to the fairness to the holders of such Affiliate Transaction from a financial point of view issued by an Independent Financial Advisor.

        The foregoing provisions will not apply to the following:

        (1)   transactions between or among the Issuer or any of its Restricted Subsidiaries;

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        (2)   Restricted Payments permitted by the provisions of the Indenture described above under the covenant "Certain Covenants—Limitation on Restricted Payments" (other than clause (7) of the second paragraph thereof) and the definition of "Permitted Investments" (other than pursuant to clause (3) thereof);

        (3)   the payment of management, consulting, monitoring and advisory fees and related expenses and termination fees pursuant to the Sponsor Management Agreement not to exceed the amount set forth in the Sponsor Management Agreement as in effect on the Issue Date or any amendment thereto (so long as any such amendment is not disadvantageous to the Holders in the good faith judgment of the board of directors of the Issuer when taken as a whole as compared to the Sponsor Management Agreement as in effect on the Issue Date);

        (4)   the payment of customary compensation, benefits and reimbursement of reasonable out-of-pocket costs to, and indemnities provided for the benefit of, officers, directors, employees or consultants of the Issuer, any of its direct or indirect parent companies or any of its Restricted Subsidiaries;

        (5)   transactions in which the Issuer or any of its Restricted Subsidiaries, as the case may be, delivers to the Trustee a letter from an Independent Financial Advisor stating that such transaction is fair to the Issuer or such Restricted Subsidiary from a financial point of view or stating that the terms are not materially less favorable to the Issuer or its relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction by the Issuer or such Restricted Subsidiary with an unrelated Person on an arm's-length basis;

        (6)   any agreement as in effect as of the Issue Date, or any amendment thereto (so long as any such amendment is not disadvantageous to the Holders in any material respect in the good faith judgment of the board of directors of the Issuer when taken as a whole as compared to the applicable agreement as in effect on the Issue Date);

        (7)   the existence of, or the performance by the Issuer or any of its Restricted Subsidiaries of its obligations under the terms of, any stockholders agreement (including any registration rights agreement or purchase agreement related thereto) to which it is a party as of the Issue Date and any similar agreements which it may enter into thereafter; provided, however, that the existence of, or the performance by the Issuer or any of its Restricted Subsidiaries of obligations under any future amendment to any such existing agreement or under any similar agreement entered into after the Issue Date shall only be permitted by this clause (7) to the extent that the terms of any such amendment or new agreement are not otherwise disadvantageous to the Holders in the good faith judgment of the board of directors of the Issuer when taken as a whole;

        (8)   the Transactions and the payment of all fees and expenses related to the Transactions, in each case as disclosed in this prospectus;

        (9)   any agreement between any Person and an Affiliate of such Person existing at the time such Person is acquired by or merged into the Issuer or a Restricted Subsidiary; provided, that such agreement was not entered into contemplation of such acquisition or merger, or any amendment thereto (so long as any such amendment is not disadvantageous to the Holders in the good faith judgment of the board of directors of the Issuer when taken as a whole as compared to the applicable agreement as in effect on the date of such acquisition or merger);

        (10) transactions with customers, clients, suppliers, joint venture partners, authors or purchasers or sellers of goods or services, in each case in the ordinary course of business and otherwise in compliance with the terms of the Indenture which are fair to the Issuer and its Restricted Subsidiaries, in the reasonable determination of the board of directors of the Issuer or the senior management thereof, or are on terms at least as favorable as would reasonably have been obtained at such time from an unaffiliated party;

        (11) the issuance of Equity Interests (other than Disqualified Stock) of the Issuer to any Affiliate;

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        (12) payments by the Issuer or any of its Restricted Subsidiaries to any of the Investors made for any financial advisory, financing, underwriting or placement services or in respect of other investment banking activities, including, without limitation, in connection with acquisitions or divestitures which payments are approved by a majority of the board of directors of the Issuer in good faith;

        (13) payments or loans (or cancellation of loans) to employees or consultants of the Issuer, any of its direct or indirect parent companies or any of its Restricted Subsidiaries and employment agreements, stock option plans and other similar arrangements with such employees or consultants which, in each case, are approved by the Issuer in good faith; and

        (14) investments by the Investors in securities of the Issuer so long as (i) the investment is being offered generally to other investors on the same or more favorable terms and (ii) the investment constitutes less than 5% of the proposed or outstanding issue amount of such class of securities.

Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries

        The Issuer will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any consensual encumbrance or consensual restriction on the ability of any such Restricted Subsidiary to:

        (1)   (a) pay dividends or make any other distributions to the Issuer or any of its Restricted Subsidiaries on its Capital Stock or with respect to any other interest or participation in, or measured by, its profits, or

        (b)   pay any Indebtedness owed to the Issuer or any of its Restricted Subsidiaries;

        (2)   make loans or advances to the Issuer or any of its Restricted Subsidiaries; or

        (3)   sell, lease or transfer any of its properties or assets to the Issuer or any of its Restricted Subsidiaries, except (in each case) for such encumbrances or restrictions existing under or by reason of:

        (a)   contractual encumbrances or restrictions in effect on the Issue Date, including pursuant to the Senior Credit Facility and the related documentation;

        (b)   the Indenture and the Notes;

        (c)   purchase money obligations for property acquired in the ordinary course of business permitted by the covenant described under "Certain Covenants—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock" that impose restrictions of the nature referred to in clause (3) above on the property so acquired;

        (d)   applicable law or any applicable rule, regulation or order;

        (e)   any agreement or other instrument of a Person acquired by the Issuer or any of its Restricted Subsidiaries in existence at the time of such acquisition (but not created in contemplation thereof), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person and its Subsidiaries, or the property or assets of the Person and its Subsidiaries, so acquired;

        (f)    contracts for the sale of assets, including customary restrictions with respect to a Subsidiary of the Issuer pursuant to an agreement that has been entered into for the sale or disposition of all or substantially all of the Capital Stock or assets of such Subsidiary;

        (g)   Secured Indebtedness otherwise permitted to be incurred pursuant to the covenants described under "Certain Covenants—Limitation on Incurrence of Indebtedness and Issuance

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of Disqualified Stock and Preferred Stock" and "Certain Covenants—Liens" that limit the right of the debtor to dispose of the assets securing such Indebtedness;

        (h)   restrictions on cash or other deposits or net worth imposed by customers under contracts entered into in the ordinary course of business;

        (i)    other Indebtedness, Disqualified Stock or Preferred Stock of any Restricted Subsidiary that is a Guarantor, Foreign Subsidiaries, or provided that such encumbrances or restrictions will not materially affect the Issuer's ability to make anticipated principal and interest payments on the Notes (as determined in good faith by the Board of Directors of the Issuer), other domestic Restricted Subsidiaries of the Issuer that are not Guarantors, in each case permitted to be incurred subsequent to the Issue Date pursuant to the provisions of the covenant described under "Certain Covenants—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock";

        (j)    customary provisions in joint venture agreements and other similar agreements relating solely to such joint venture;

        (k)   customary provisions contained in leases or licenses of intellectual property and other agreements, in each case entered into in the ordinary course of business; and

        (l)    any encumbrances or restrictions of the type referred to in clauses (1), (2) and (3) above imposed by any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings of the contracts, instruments or obligations referred to in clauses (a) through (k) above; provided that such amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings are, in the good faith judgment of the Issuer, no more restrictive with respect to such encumbrance and other restrictions taken as a whole than those prior to such amendment, modification, restatement, renewal, increase, supplement, refunding, replacement or refinancing.

Additional Subsidiary Guarantees

        The Issuer will not permit any of its Wholly-Owned Subsidiaries that are Restricted Subsidiaries (and non-Wholly-Owned Subsidiaries if such non-Wholly-Owned Subsidiaries guarantee other capital markets debt securities), other than a Guarantor, to guarantee the payment of any Indebtedness of the Issuer or any other Guarantor unless:

        (1)   such Restricted Subsidiary within 30 days executes and delivers a supplemental indenture to the Indenture providing for a Guarantee by such Restricted Subsidiary, except that with respect to a guarantee of Indebtedness of the Issuer or any Guarantor:

        (a)   if the Notes or such Guarantor's Guarantee of the Notes is subordinated in right of payment to such Indebtedness, the Guarantee under the supplemental indenture shall be subordinated to such Restricted Subsidiary's guarantee with respect to such Indebtedness substantially to the same extent as the Notes or the Guarantee of the Notes are subordinated to such Indebtedness; and

        (b)   if such Indebtedness is by its express terms subordinated in right of payment to the Notes or such Guarantor's Guarantee of the Notes, any such guarantee by such Restricted Subsidiary with respect to such Indebtedness shall be subordinated in right of payment to the Guarantee of the Notes pursuant to the supplemental indenture substantially to the same extent as such Indebtedness is subordinated to the Notes or the Guarantor's Guarantee of the Notes;

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        (2)   such Restricted Subsidiary waives, and will not in any manner whatsoever claim or take the benefit or advantage of, any rights of reimbursement, indemnity or subrogation or any other rights against the Issuer or any other Restricted Subsidiary as a result of any payment by such Restricted Subsidiary under its Guarantee; and

        (3)   such Restricted Subsidiary shall deliver to the Trustee an Opinion of Counsel to the effect that:

        (a)   such Guarantee has been duly executed and authorized; and

        (b)   such Guarantee constitutes a valid, binding and enforceable obligation of such Restricted Subsidiary, except insofar as enforcement thereof may be limited by bankruptcy, insolvency or similar laws (including, without limitation, all laws relating to fraudulent transfers) and except insofar as enforcement thereof is subject to general principles of equity;

provided that this covenant shall not be applicable to (x) any guarantee of any Restricted Subsidiary that existed at the time such Person became a Restricted Subsidiary and was not incurred in connection with, or in contemplation of, such Person becoming a Restricted Subsidiary (y) a Guarantee by a Foreign Subsidiary of Indebtedness of a Foreign Subsidiary.

        Each Guarantee will be limited to an amount not to exceed the maximum amount that can be guaranteed by that Restricted Subsidiary without rendering the Guarantee, as it relates to such Restricted Subsidiary, voidable under applicable law relating to fraudulent conveyance or fraudulent transfer or similar laws affecting the rights of creditors generally.

        Each Guarantee shall be released in accordance with the provisions of the Indenture described under "—Guarantees."

Payments for Consent

        The Issuer will not, and will not permit any of its Subsidiaries to, directly or indirectly, pay or cause to be paid any consideration to or for the benefit of any holder of Notes for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of the Indenture or the Notes unless such consideration is offered to be paid and is paid to all holders of the Notes that consent, waive or agree to amend in the time frame set forth in the solicitation documents relating to such consent, waiver or agreement.

Reports and Other Information

        Notwithstanding that the Issuer may not be subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act or otherwise report on an annual and quarterly basis on forms provided for such annual and quarterly reporting pursuant to rules and regulations promulgated by the SEC, the Indenture requires the Issuer to file with the SEC (and make available to the Trustee and the Holders of the Notes (without exhibits), without cost to any Holder, within 15 days after it files them with the SEC), from and after the Issue Date,

        (1)   within 90 days (or any other time period then in effect under the rules and regulations of the Exchange Act with respect to the filing of a Form 10-K by a non-accelerated filer) after the end of each fiscal year, annual reports on Form 10-K, or any successor or comparable form, containing the information required to be contained therein for a non-accelerated filer, or required in such successor or comparable form;

        (2)   within 45 days after the end of each of the first three fiscal quarters of each fiscal year, reports on Form 10-Q, or any successor or comparable form, containing the information required to be contained therein, or required in such successor or comparable form; and

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        (3)   promptly from time to time after the occurrence of an event required to be therein reported, current reports on Form 8-K, or any successor or comparable form; and

        (4)   any other information, documents and other reports that the Issuer would be required to file with the SEC if it were subject to Section 13 or 15(d) of the Exchange Act,

in each case in a manner that complies in all material respects with the requirements specified in such form; provided that (1) the Issuer shall not be so obligated to file such reports with the SEC if the SEC does not permit such filing, in which event the Issuer will make available such information to prospective purchasers of Notes, in addition to providing such information to the Trustee and the Holders of the Notes, in each case within 15 days after the time the Issuer would be required to file such information with the SEC if it were subject to Section 13 or 15(d) of the Exchange Act, which obligation to provide such information may be satisfied by posting such information on its website within the time periods specified by this covenant, and (2) that with respect to the periods ended March 31, 2007 and June 30, 2007, such reports (A) need only be filed within 90 days (in the case of the quarterly report for the period ended March 31, 2007) or 120 days (in the case of the annual report for the fiscal year ended June 30, 2007), (B) for any period prior to the Issue Date for which financial information is being disclosed need only contain financial information of the Issuer, WRC Media and Direct Holdings that is substantially consistent, as determined in good faith by the issuer, with the financial information contained in this prospectus and (C) need only be posted by the Issuer on its website within the time periods specified by this covenant and not filed with the SEC. In addition, to the extent not satisfied by the foregoing, the Issuer will agree that, for so long as any Notes are outstanding, it will furnish to Holders and to securities analysts and prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.

        In the event that any direct or indirect parent entity of the Issuer becomes a Guarantor of the Notes, the Indenture will permit the Issuer to satisfy its obligations in this covenant with respect to financial information relating to the Issuer by furnishing financial information relating to such parent; provided that the same is accompanied by consolidating information that explains in reasonable detail, as determined in good faith by the Issuer, the differences between the information relating to such parent, on the one hand, and the information relating to the Issuer and its Restricted Subsidiaries on a standalone basis, on the other hand.

        If the Issuer has designated any of its Subsidiaries as Unrestricted Subsidiaries and such Unrestricted Subsidiaries, either individually or collectively, would otherwise have been a Significant Subsidiary, then the quarterly and annual financial information required by the preceding paragraphs shall include a reasonably detailed, as determined in good faith by senior management of the Issuer, unaudited presentation, either on the face of the financial statements or in the footnotes to the financial statements or in "Management's Discussion and Analysis of Financial Condition and Results of Operations," of the financial condition and results of operations of the Issuer and the Restricted Subsidiaries of the Issuer separate from the financial condition and results of operations of the Unrestricted Subsidiaries.

        Prior to the commencement of the Exchange Offer or the effectiveness of the shelf registration statement described in the Registration Rights Agreement, the foregoing requirements may be satisfied by (1) the filing with the SEC of the Exchange Offer registration statement or shelf registration statement (or any other similar registration statement), and any amendments thereto, with such financial information that satisfies Regulation S-X under the Securities Act or (2) posting reports that would be required to be filed substantially in the form required by the SEC on the Issuer's website (or that of any of its parent entities), subject to exceptions consistent with the presentation of financial information in this prospectus.

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Events of Default and Remedies

        The Indenture provides that each of the following is an "Event of Default":

        (1)   default in payment when due and payable, upon redemption, acceleration or otherwise, of principal of, or premium, if any, on the Notes (whether or not prohibited by the subordination provisions of the Indenture);

        (2)   default for 30 days or more in the payment when due of interest or Additional Interest on or with respect to the Notes (whether or not prohibited by the subordination provisions of the Indenture);

        (3)   failure by the Issuer or any Guarantor for 60 days after receipt of written notice given by the Trustee or the Holders of not less 25% in principal amount of the Notes to comply with any of its obligations, covenants or agreements (other than a default referred to in clauses (1) and (2) above) contained in the Indenture or the Notes (except that in the case of a default with respect to the "—Merger, Consolidation or Sale of All or Substantially All Assets" covenant, such default will constitute an Event of Default with such notice requirement but without such passage of time requirement);

        (4)   default under any mortgage, indenture or instrument under which there is issued or by which there is secured or evidenced any Indebtedness for money borrowed by the Issuer or any of its Restricted Subsidiaries or the payment of which is guaranteed by the Issuer or any of its Restricted Subsidiaries, other than Indebtedness owed to the Issuer or a Restricted Subsidiary, whether such Indebtedness or guarantee now exists or is created after the issuance of the Notes, if both:

        (a)   such default either results from the failure to pay any principal of such Indebtedness at its stated final maturity (after giving effect to any applicable grace periods) or relates to an obligation other than the obligation to pay principal of any such Indebtedness at its stated final maturity and results in the holder or holders of such Indebtedness causing such Indebtedness to become due prior to its stated maturity; and

        (b)   the principal amount of such Indebtedness, together with the principal amount of any other such Indebtedness in default for failure to pay principal at stated final maturity (after giving effect to any applicable grace periods), or the maturity of which has been so accelerated, aggregate $25.0 million (or its foreign currency equivalent) or more at any one time outstanding;

        (5)   failure by the Issuer or any Significant Subsidiary or any group of Subsidiaries that, taken together as of the date of the most recent audited financial statements of the Issuer, would constitute a Significant Subsidiary to pay final judgments aggregating in excess of $25.0 million (or its foreign currency equivalent), which final judgments remain unpaid, undischarged and unstayed for a period of more than 60 days after such judgment becomes final, and in the event such judgment is covered by insurance, an enforcement proceeding has been commenced by any creditor upon such judgment or decree which is not promptly stayed;

        (6)   certain events of bankruptcy or insolvency with respect to the Issuer or any Significant Subsidiary or any group of Subsidiaries that, taken together as of the date of the most recent audited financial statements of the Issuer, would constitute a Significant Subsidiary; or

        (7)   the Guarantee of any Significant Subsidiary or any group of Subsidiaries that, taken together as of the date of the most recent audited financial statements of the Issuer, would constitute a Significant Subsidiary shall for any reason cease to be in full force and effect or be declared null and void or any responsible officer of any Guarantor that is a Significant Subsidiary, as the case may be, denies that it has any further liability under its Guarantee or gives notice to

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such effect, other than by reason of the termination of the Indenture or the release of any such Guarantee in accordance with the Indenture.

        If any Event of Default (other than of a type specified in clause (6) above) occurs and is continuing under the Indenture, the Trustee or the Holders of at least 25% in principal amount of the then total outstanding Notes may declare the principal, premium, if any, interest and any other monetary obligations on all the then outstanding Notes to be due and payable immediately; provided, however, that so long as any Indebtedness permitted to be incurred under the Indenture as part of the Senior Credit Facility shall be outstanding, no such acceleration shall be effective until the earlier of:

        (1)   acceleration of any such Indebtedness under the Senior Credit Facility; or

        (2)   five Business Days after the giving of written notice of such acceleration to the Issuer and the administrative agent under the Senior Credit Facility.

        Upon the effectiveness of such declaration, such principal and interest will be due and payable immediately. Notwithstanding the foregoing, in the case of an Event of Default arising under clause (6) of the first paragraph of this section, all outstanding Notes will become due and payable without further action or notice. The Indenture provides that the Trustee may withhold from the Holders notice of any continuing Default, except a Default relating to the payment of principal, premium, if any, or interest, if it determines that withholding notice is in their interest. In addition, the Trustee shall have no obligation to accelerate the Notes if in the best judgment of the Trustee acceleration is not in the best interest of the Holders of the Notes.

        The Indenture provides that the Holders of a majority in aggregate principal amount of the then outstanding Notes by notice to the Trustee may on behalf of the Holders of all of the Notes waive any existing Default and its consequences under the Indenture except a continuing Default in the payment of interest on, premium, if any, or the principal of any Note held by a non-consenting Holder. In the event of any Event of Default specified in clause (4) above, such Event of Default and all consequences thereof (excluding any resulting payment default, other than as a result of acceleration of the Notes) shall be annulled, waived and rescinded, automatically and without any action by the Trustee or the Holders, if within 20 days after such Event of Default arose:

        (1)   the Indebtedness or guarantee that is the basis for such Event of Default has been discharged; or

        (2)   holders thereof have rescinded or waived the acceleration, notice or action (as the case may be) giving rise to such Event of Default; or

        (3)   the default that is the basis for such Event of Default has been cured.

        The Indenture provides that, at any time after a declaration of acceleration with respect to the Notes, the Holders of a majority in principal amount of the Notes may rescind and cancel such declaration and its consequences:

        (1)   if the rescission would not conflict with any judgment or decree;

        (2)   if all existing Events of Default have been cured or waived except nonpayment of principal or interest that has become due solely because of the acceleration;

        (3)   to the extent the payment of such interest is lawful, interest on overdue installments of interest and overdue principal, which has become due otherwise than by such declaration of acceleration, has been paid;

        (4)   if the Issuer has paid the Trustee its reasonable compensation and reimbursed the Trustee for its expenses, disbursements and advances; and

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        (5)   in the event of the cure or waiver of an Event of Default of the type described in clause (4) of the description above of Events of Default, the Trustee shall have received an Officer's Certificate and an Opinion of Counsel that such Event of Default has been cured or waived.

        No such rescission shall affect any subsequent Default or impair any right consequent thereto.

        Subject to the provisions of the Indenture relating to the duties of the Trustee thereunder, in case an Event of Default occurs and is continuing, the Trustee will be under no obligation to exercise any of the rights or powers under the Indenture at the request or direction of any of the Holders of the Notes unless the Holders have offered to the Trustee reasonable indemnity or security against any loss, liability or expense. Except to enforce the right to receive payment of principal, premium, if any, or interest when due, no Holder of a Note may pursue any remedy with respect to the Indenture or the Notes unless:

        (1)   such Holder has previously given the Trustee notice that an Event of Default is continuing;

        (2)   Holders of at least 25% in principal amount of the total outstanding Notes have requested the Trustee to pursue the remedy;

        (3)   Holders of the Notes have offered the Trustee reasonable security or indemnity against any loss, liability or expense;

        (4)   the Trustee has not complied with such request within 60 days after the receipt thereof and the offer of security or indemnity; and

        (5)   Holders of a majority in principal amount of the total outstanding Notes have not given the Trustee a direction inconsistent with such request within such 60-day period.

        Subject to certain restrictions, under the Indenture the Holders of a majority in principal amount of the total outstanding Notes are given the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee. The Trustee, however, may refuse to follow any direction that conflicts with law or the Indenture or that the Trustee determines is unduly prejudicial to the rights of any other Holder of a Note or that would involve the Trustee in personal liability.

        The Indenture provides that the Issuer is required to deliver to the Trustee annually a statement regarding compliance with the Indenture, and the Issuer is required, within five Business Days, upon becoming aware of any Default, to deliver to the Trustee a statement specifying such Default.

No Personal Liability of Directors, Officers, Employees and Stockholders

        No director, officer, employee, incorporator or stockholder of the Issuer or any Guarantor or any of their parent entities (other than the Issuer and the Guarantors) shall have any liability for any obligations of the Issuer or the Guarantors under the Notes, the Guarantees or the Indenture or for any claim based on, in respect of, or by reason of such obligations or their creation. Each Holder by accepting Notes waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. Such waiver may not be effective to waive liabilities under the federal securities laws, and it is the view of the SEC that such a waiver is against public policy.

Legal Defeasance and Covenant Defeasance

        The obligations of the Issuer and the Guarantors under the Indenture will terminate (other than certain obligations) and will be released upon payment in full of all of the Notes. The Issuer may, at its option and at any time, elect to have all of its obligations discharged with respect to the Notes and

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have the Issuer's and each Guarantor's obligation discharged with respect to its Guarantee ("Legal Defeasance") and cure all then existing Events of Default except for:

        (1)   the rights of Holders of Notes to receive payments in respect of the principal of, premium, if any, and interest on the Notes when such payments are due, solely out of the trust created pursuant to the Indenture;

        (2)   the Issuer's obligations with respect to Notes concerning issuing temporary Notes, registration of such Notes, mutilated, destroyed, lost or stolen Notes and the maintenance of an office or agency for payment and money for security payments held in trust;

        (3)   the rights, powers, trusts, duties and immunities of the Trustee, and the Issuer's obligations in connection therewith; and

        (4)   the Legal Defeasance provisions of the Indenture.

        In addition, the Issuer may, at its option and at any time, elect to have its obligations and those of each Guarantor released with respect to certain covenants that are described in the Indenture ("Covenant Defeasance") and thereafter any omission to comply with such obligations shall not constitute a Default with respect to the Notes. In the event Covenant Defeasance occurs, certain events (not including non-payment, bankruptcy, receivership, rehabilitation and insolvency events pertaining to the Issuer but not its Restricted Subsidiaries) described under "Events of default and remedies" will no longer constitute an Event of Default with respect to the Notes.

        In order to exercise either Legal Defeasance or Covenant Defeasance with respect to the Notes:

        (1)   the Issuer must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders of the Notes, cash in U.S. dollars, Government Securities, or a combination thereof, in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of, premium, if any, and interest due on the Notes on the stated maturity date or on the redemption date, as the case may be, of such principal, premium, if any, or interest on such Notes, and the Issuer must specify whether such Notes are being defeased to maturity or to a particular redemption date;

        (2)   in the case of Legal Defeasance, the Issuer shall have delivered to the Trustee an Opinion of Counsel reasonably acceptable to the Trustee confirming that, subject to customary assumptions and exclusions,

        (a)   the Issuer has received from, or there has been published by, the United States Internal Revenue Service a ruling, or

        (b)   since the issuance of the Notes, there has been a change in the applicable U.S. federal income tax law, in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, subject to customary assumptions and exclusions, the Holders of the Notes will not recognize income, gain or loss for U.S. federal income tax purposes, as applicable, as a result of such Legal Defeasance and will be subject to U.S. federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred;

        (3)   in the case of Covenant Defeasance, the Issuer shall have delivered to the Trustee an Opinion of Counsel reasonably acceptable to the Trustee confirming that, subject to customary assumptions and exclusions, the Holders of the Notes will not recognize income, gain or loss for U.S. federal income tax purposes as a result of such Covenant Defeasance and will be subject to such tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred;

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        (4)   no Default (other than that resulting from borrowing funds to be applied to make such deposit and any similar and simultaneous deposit relating to other Indebtedness and, in each case, the granting of Liens in connection therewith) shall have occurred and be continuing on the date of such deposit;

        (5)   such Legal Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a default under the Senior Credit Facility or any other material agreement or instrument (other than the Indenture) to which the Issuer or any Restricted Subsidiary is a party or by which the Issuer or any Restricted Subsidiary is bound (other than that resulting from borrowing funds to be applied to make such deposit and any similar and simultaneous deposit relating to other Indebtedness and, in each case, the granting of Liens in connection therewith);

        (6)   the Issuer shall have delivered to the Trustee an Opinion of Counsel to the effect that, as of the date of such opinion and subject to customary assumptions and exclusions following the deposit, the trust funds will not be subject to the effect of Section 547 of Title 11 of the United States Code;

        (7)   the Issuer shall have delivered to the Trustee an Officer's Certificate stating that the deposit was not made by the Issuer with the intent of defeating, hindering, delaying or defrauding any creditors of the Issuer or any Guarantor or others; and

        (8)   the Issuer shall have delivered to the Trustee an Officer's Certificate and an Opinion of Counsel (which Opinion of Counsel may be subject to customary assumptions and exclusions), each stating that all conditions precedent provided for or relating to the Legal Defeasance or the Covenant Defeasance, as the case may be, have been complied with.

Satisfaction and Discharge

        The Indenture will be discharged and will cease to be of further effect as to all Notes when either:

        (1)   all Notes theretofore authenticated and delivered, except lost, stolen or destroyed Notes which have been replaced or paid and Notes for whose payment money has theretofore been deposited in trust, have been delivered to the Trustee for cancellation; or

        (2)   (a) all Notes not theretofore delivered to the Trustee for cancellation have become due and payable by reason of the making of a notice of redemption or otherwise, will become due and payable within one year or may be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Issuer, and the Issuer or any Guarantor has irrevocably deposited or caused to be deposited with the Trustee, as trust funds in trust solely for the benefit of the Holders of the Notes, cash in U.S. dollars, Government Securities, or a combination thereof, in such amounts as will be sufficient without consideration of any reinvestment of interest to pay and discharge the entire indebtedness on the Notes not theretofore delivered to the Trustee for cancellation for principal, premium, if any, and accrued interest to the date of maturity or redemption;

        (b)   no Default (other than that resulting from borrowing funds to be applied to make such deposit and any similar and simultaneous deposit relating to other Indebtedness and, in each case, the granting of Liens in connection therewith) with respect to the Indenture or the Notes shall have occurred and be continuing on the date of such deposit or shall occur as a result of such deposit, and such deposit will not result in a breach or violation of, or constitute a default under the Senior Credit Facility or any other material agreement or instrument (other than the Indenture) to which the Issuer or any Guarantor is a party or by which the Issuer or any Guarantor is bound (other than that resulting from borrowing funds to be applied to make such deposit and any similar and simultaneous deposit relating to other Indebtedness and, in each case, the granting of Liens in connection therewith);

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        (c)   the Issuer has paid or caused to be paid all sums payable by it under the Indenture; and

        (d)   the Issuer has delivered irrevocable instructions to the Trustee to apply the deposited money toward the payment of the Notes at maturity or the redemption date, as the case may be.

        In addition, the Issuer must deliver an Officer's Certificate and an Opinion of Counsel to the Trustee stating that all conditions precedent to satisfaction and discharge have been satisfied.

Amendment, Supplement and Waiver

        Except as provided in the next two succeeding paragraphs, the Indenture, any Guarantee and the Notes may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the Notes then outstanding, including consents obtained in connection with a purchase of, or tender offer or exchange offer for, Notes, and any existing Default (except default in respect of the principal or interest on the Note) or compliance with any provision of the Indenture, the Notes issued thereunder or any Guarantee may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes, other than Notes beneficially owned by the Issuer or its Affiliates (including consents obtained in connection with a purchase of or tender offer or exchange offer for the Notes).

        The Indenture provides that, without the consent of each affected Holder of Notes, an amendment or waiver may not, with respect to any Notes held by a non-consenting Holder:

        (1)   reduce the principal amount of such Notes whose Holders must consent to an amendment, supplement or waiver;

        (2)   reduce the principal of or change the fixed final maturity of any such Note, reduce the premium payable upon redemption or repurchase of any Note or change the time at which any Note may be redeemed as described in "Optional redemption" (other than the notice periods relating to an optional redemption of the Notes, so long as such notice periods comply with DTC's procedures);

        (3)   reduce the rate of or change the time for payment of interest on any Note;

        (4)   waive a Default in the payment of principal of or premium, if any, or interest on the Notes, except a rescission of acceleration of the Notes by the Holders of at least a majority in aggregate principal amount of the Notes with respect to a non payment default and a waiver of the payment default that resulted from such acceleration, or in respect of a covenant or provision contained in the Indenture or any Guarantee that cannot be amended or modified without the consent of all Holders;

        (5)   make any Note payable in money other than that stated therein;

        (6)   make any change in the provisions of the Indenture relating to waivers of past Defaults or the rights of Holders to receive payments of principal of or premium, if any, or interest on the Notes;

        (7)   make any change in these amendment and waiver provisions;

        (8)   impair the right of any Holder to receive payment of principal of, or interest on such Holder's Notes on or after the due dates therefor or to institute suit for the enforcement of any payment on or with respect to such Holder's Notes;

        (9)   make any change in the subordination provisions thereof that would adversely affect the Holders; or

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        (10) except as expressly permitted by the Indenture, modify the Guarantees of any Significant Subsidiary or any group of Subsidiaries that, taken together as of the date of the most recent audited financial statements of the Issuer, would constitute a Significant Subsidiary in any manner adverse to the Holders of the Notes.

        Notwithstanding the foregoing, the Issuer, any Guarantor (with respect to its Guarantee or the Indenture) and the Trustee may amend or supplement the Indenture and any Guarantee or Notes without the consent of any Holder:

        (1)   to cure any ambiguity, omission, mistake, defect or inconsistency;

        (2)   to provide for uncertificated Notes of such series in addition to or in place of certificated Notes;

        (3)   to comply with the covenant relating to mergers, consolidations and sales of assets;

        (4)   to provide for the assumption of the Issuer's or any Guarantor's obligations to the Holders;

        (5)   to make any change that would provide any additional rights or benefits to the Holders or that does not adversely affect the legal rights under the Indenture of any such Holder;

        (6)   to add covenants for the benefit of the Holders or to surrender any right or power conferred upon the Issuer or any Guarantor;

        (7)   to comply with requirements of the SEC in order to effect or maintain the qualification of the Indenture under the Trust Indenture Act;

        (8)   to evidence and provide for the acceptance and appointment under the Indenture of a successor Trustee thereunder pursuant to the requirements thereof;

        (9)   to provide for the issuance of Exchange Notes or private exchange notes, which are identical to Exchange Notes except that they are not freely transferable;

        (10) to add a Guarantor under the Indenture;

        (11) to secure the Notes;

        (12) to conform the text of the Indenture, Guarantees or the Notes to any provision of this "Description of Notes" to the extent that such provision in this "Description of Notes" was intended to be a verbatim recitation of a provision of the Indenture, Guarantee or Notes;

        (13) to make any amendment to the provisions of the Indenture relating to the transfer and legending of Notes as permitted by the Indenture, including, without limitation, to facilitate the issuance and administration of the Notes; provided, however, that (i) compliance with the Indenture as so amended would not result in Notes being transferred in violation of the Securities Act or any applicable securities law and (ii) such amendment does not materially and adversely affect the rights of Holders to transfer Notes; or

        (14) to make any change that does not adversely affect the Holders in any material respect.

        The consent of the Holders is not necessary under the Indenture to approve the particular form of any proposed amendment. It is sufficient if such consent approves the substance of the proposed amendment.

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Notices

        Notices given by publication will be deemed given on the first date on which publication is made, and notices given by first-class mail, postage prepaid, will be deemed given five calendar days after mailing.

Concerning the Trustee

        The Indenture contains certain limitations on the rights of the Trustee thereunder, should it become a creditor of the Issuer, to obtain payment of claims in certain cases, or to realize on certain property received in respect of any such claim as security or otherwise. The Trustee will be permitted to engage in other transactions; however, if it acquires any conflicting interest, it must eliminate such conflict within 90 days, apply to the SEC for permission to continue or resign.

        The Indenture provides that the Holders of a majority in principal amount of the outstanding Notes will have the right to direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee, subject to certain exceptions. The Indenture provides that in case an Event of Default shall occur (which is not cured), the Trustee will be required, in the exercise of its power, to use the degree of care of a prudent person in the conduct of his own affairs. Subject to such provisions, the Trustee will be under no obligation to exercise any of its rights or powers under the Indenture at the request of any Holder of the Notes, unless such Holder shall have offered to the Trustee security and indemnity reasonably satisfactory to it against any loss, liability or expense.

Governing Law

        The Indenture, the Notes and each Guarantee are governed by and construed in accordance with the laws of the State of New York.

Book-Entry Settlement and Clearance

        The Exchange Notes will be issued in the form of several registered notes in global form, without interest coupons (collectively, the "Global Notes" and each individually, a "Global Note"). Upon issuance, each of the Global Notes will be deposited with the Trustee as custodian for The Depositary Trust company ("DTC") and registered in the name of Cede & Co., as nominee of DTC. Ownership of beneficial interests in each Global Note will be limited to persons who have accounts with DTC ("DTC participants") or persons who hold interests through DTC participants.

        We expect that under procedures established by DTC:

•

upon deposit of each Global Note with DTC's custodian, DTC will credit portions of the principal amount of the Global Note to the accounts of the DTC participants; and



•

ownership of beneficial interests in each Global Note will be shown on, and transfer of ownership of those interests will be effected only through, records maintained by DTC (with respect to interests of DTC participants) and the records of DTC participants (with respect to other owners of beneficial interests in the Global Note).

        Beneficial interests in the Global Notes may not be exchanged for notes in physical, certificated form expect in the limited circumstances described below.

Book-Entry Procedures for the Global Notes

        All interests in the Global Notes will be subject to the operations and procedures of DTC. We provide the following summaries of those operations and procedures solely for the convenience of

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investors. The operations and procedures of each are controlled by and may be changed at any time. Neither we nor the initial purchasers are responsible for those operations or procedures.

        DTC has advised us that it is:

•

a limited purpose trust company organized under the laws of the State of New York;



•

a "banking organization" within the meaning of the New York State Banking Law;



•

a member of the Federal Reserve System;



•

a "clearing corporation" within the meaning of the New York State Uniform Commercial Code; and



•

a "clearing agency" registered under Section 17A of the Securities Exchange Act of 1934.

        DTC was created to hold securities for its participants and to facilitate the clearance and settlement of securities transactions between its participants through electronic book-entry changes to the accounts of its participants. DTC's participants include securities brokers and dealers, including the initial purchasers; banks and trust companies; clearing corporations and other organizations. Indirect access to DTC's system is also available to others such as banks, brokers, dealers and trust companies; these indirect participants clear through or maintain a custodial relationship with a DTC participant, either directly or indirectly. Investors who are not DTC participants may beneficially own securities held by or on behalf of DTC only through DTC participants or indirect participants in DTC.

        So long as DTC's nominee is the registered owner of a Global Note, that nominee will be considered the sole owner or holder of the notes represented by that Global Note for all purposes under the indenture. Except as provided below, owners of beneficial interests in a Global Note:

•

will not be entitled to have Notes represented by the Global Note registered in their names;



•

will not receive or be entitled to receive physical, certificated Notes; and



•

will not be considered the owners or holders of the Notes under the Indenture for any purpose, including with respect to the giving of any direction, instruction or approval to the Trustee under the Indenture.

        As a result, each investor who owns a beneficial interest in a Global Note must rely on the procedures of DTC to exercise any rights of a holder of Notes under the Indenture (and, if the investor is not a participant or an indirect participant in DTC, on the procedures of the DTC participant through which the investor owns its interest).

        Payments of principal, premium (if any) and interest with respect to the Notes represented by a Global Note will be made by the Trustee to DTC's nominee as the registered holder of the Global Note. Neither we nor the Trustee will have any responsibility or liability for the payment of amounts to owners of beneficial interests in a Global Note, for any aspect of the records relating to or payments made on account of those interests by DTC, or for maintaining, supervising or reviewing any records of DTC relating to those interests.

        Payments by participants and indirect participants in DTC to the owners of beneficial interests in a Global Note will be governed by standing instructions and customary industry practice and will be the responsibility of those participants or indirect participants and DTC.

        Transfers between participants in DTC will be effected under DTC's procedures and will be settled in same-day funds.

        DTC has agreed to the above procedures to facilitate transfers of interests in the Global Notes among participants in its settlement systems. However, DTC is not obligated to perform these procedures and may discontinue or change these procedures at any time. Neither we nor the Trustee

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will have any responsibility for the performance by DTC or its participants or indirect participants of its obligations under the rules and procedures governing its operations.

Certificated Notes

        Notes in physical, certificated form will be issued and delivered to each person at DTC identifies as a beneficial owner of the related Notes only if:

•

DTC notifies us at any time that it is unwilling or unable to continue as depositary for the Global Notes and a successor depositary is not appointed within 90 days;



•

DTC ceases to be registered as a clearing agency under the Securities Exchange Act of 1934 and a successor depositary is not appointed within 90 days;



•

we, at our option, notify the Trustee that we elect to cause the issuance of certificated notes; or



•

certain other events provided in the indenture should occur.

Certain definitions

        Set forth below are certain defined terms used in the Indenture. For purposes of the Indenture, unless otherwise specifically indicated, the term "consolidated" with respect to any Person refers to such Person consolidated with its Restricted Subsidiaries, and excludes from such consolidation any Unrestricted Subsidiary.

        "Acquired Indebtedness" means, with respect to any specified Person,

        (1)   Indebtedness of any other Person existing at the time such other Person is merged with or into or became a Restricted Subsidiary of such specified Person, including Indebtedness incurred in connection with, or in contemplation of, such other Person merging with or into or becoming a Restricted Subsidiary of such specified Person, and

        (2)   Indebtedness secured by a Lien encumbering any asset acquired by such specified Person.

        "Additional Interest" means all additional interest then owing pursuant to the Registration Rights Agreement.

        "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlling," "controlled by" and "under common control with"), as used with respect to any Person, shall mean the possession, directly or indirectly, 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 agreement or otherwise.

        "Applicable Premium" means, with respect to any Note on any Redemption Date, the greater of:

        (1)   1.0% of the principal amount of such Note; and

        (2)   the excess, if any, of (a) the present value at such Redemption Date of (i) the redemption price of such Note at February 15, 2012 (each such redemption price being set forth in the table appearing above under the caption "—Optional Redemption"), plus (ii) all required interest payments due on such Note through February 15, 2012 (excluding accrued but unpaid interest to the Redemption Date), computed using a discount rate equal to the Treasury Rate as of such Redemption Date plus 50 basis points; over (b) the principal amount of such Note.

        "Asset Sale" means:

        (1)   the sale, conveyance, transfer or other disposition, whether in a single transaction or a series of related transactions, of property or assets (including by way of a Sale and Lease-Back

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Transaction) of the Issuer or any of its Restricted Subsidiaries (each referred to in this definition as a "disposition"); or

        (2)   the issuance or sale of Equity Interests of any Restricted Subsidiary, whether in a single transaction or a series of related transactions; in each case, other than:

        (a)   any disposition of Cash Equivalents or Investment Grade Securities or obsolete or worn out equipment in the ordinary course of business or any disposition of inventory or goods (or other assets) held for sale in the ordinary course of business;

        (b)   the disposition of all or substantially all of the assets of the Issuer in a manner permitted pursuant to the provisions described above under "—Certain Covenants—Merger, Consolidation or Sale of All or Substantially All Assets" or any disposition that constitutes a Change of Control pursuant to the Indenture;

        (c)   the making of any Restricted Payment or Permitted Investment that is permitted to be made, and is made, under the covenant described above under "—Certain Covenants—Limitation on Restricted Payments";

        (d)   any transaction or series of related transactions for which an aggregate fair market value of less than $5.0 million is received; provided that the aggregate fair market value of such dispositions shall not exceed $15.0 million in the aggregate during any fiscal year;

        (e)   any disposition of property or assets or issuance of securities by a Restricted Subsidiary of the Issuer to the Issuer or by the Issuer or a Restricted Subsidiary of the Issuer to another Restricted Subsidiary of the Issuer;

        (f)    to the extent allowable under Section 1031 of the Internal Revenue Code of 1986, any exchange of like property (excluding any boot thereon) for use in a Similar Business;

        (g)   the lease, assignment or sub-lease of any real or personal property in the ordinary course of business;

        (h)   any issuance or sale of Equity Interests in, or Indebtedness or other securities of, or assets of an Unrestricted Subsidiary;

        (i)    foreclosures on assets;

        (j)    any financing transaction with respect to property built or acquired by the Issuer or any Restricted Subsidiary after the Issue Date, including Sale and Lease-Back Transactions and asset securitizations, permitted by the Indenture;

        (k)   the issuance by a Restricted Subsidiary of Preferred Stock that is permitted to be made under the covenant "Limitation on incurrence of indebtedness and issuance of disqualified stock and preferred stock"; and

        (l)    the licensing of intellectual property.

        "beneficial ownership" has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating the beneficial ownership of any particular "person" (as such term is used in Section 13(d)(3) of the Exchange Act), such "person" shall be deemed to have beneficial ownership of all securities that such "person" has the right to acquire, whether such right is currently exercisable or is exercisable only after the passage of time.

        "Business Day" means each day which is not a Legal Holiday.

        "Capital Stock" means:

        (1)   in the case of a corporation, corporate stock;

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        (2)   in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock;

        (3)   in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited); and

        (4)   any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person.

        "Capitalized Lease Obligation" means, at the time any determination thereof is to be made, the amount of the liability in respect of a capital lease that would at such time be required to be capitalized and reflected as a liability on a balance sheet (excluding the footnotes thereto) in accordance with GAAP.

        "Cash Equivalents" means:

        (1)   United States dollars, Euros or any national currency of any participating member state of the EMU, or such local currencies held by the Company and its Restricted Subsidiaries from time to time in the ordinary course of business;

        (2)   securities issued or directly and fully and unconditionally guaranteed or insured by the U.S. government or a member nation of the European Union (or any agency or instrumentality thereof the securities of which are unconditionally guaranteed as a full faith and credit obligation of the U.S. government) with maturities of not more than 12 months from the date of acquisition;

        (3)   certificates of deposit, time deposits and Eurodollar time deposits with maturities of 12 months or less from the date of acquisition, bankers' acceptances with maturities not exceeding 12 months and overnight bank deposits, in each case with any commercial bank having capital and surplus in excess of $250.0 million, or the U.S. dollar equivalent in the case of non-U.S. banks;

        (4)   fully collateralized repurchase obligations for underlying securities of the types described in clauses (2) and (3) above entered into with any financial institution meeting the qualifications specified in clause (3) above;

        (5)   commercial paper maturing within 12 months after the date of acquisition and having a rating of at least P-2 from Moody's or A-2 from S&P or carrying an equivalent rating by a nationally recognized rating agency if both of the two named rating agencies cease publishing ratings of investments;

        (6)   readily marketable direct obligations issued by any state, commonwealth or territory of the United States or any political subdivision thereof having one of the two highest rating categories obtainable from either Moody's or S&P (or one of the two highest rating categories obtainable from a nationally recognized rating agency if both of the two named rating agencies cease publishing ratings of investments) with maturities of 12 months or less from the date of acquisition;

        (7)   instruments equivalent to those referred to in clauses (1) through (6) of this definition denominated in euros or any other foreign currency comparable in credit quality and tenor to those referred to in such clauses and customarily used by corporations for cash management purposes in any jurisdiction outside the United States to the extent reasonably required in connection with any business conducted by any Restricted Subsidiary organized in such jurisdiction;

        (8)   Investments in funds investing substantially all of their assets in Cash Equivalents of the types described in clauses (1) through (7) of this definition; and

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        (9)   Investments with average maturities of 12 months or less from the date of acquisition in money market funds rated AAA- (or the equivalent thereof) or better by S&P or Aaa3 (or the equivalent thereof) or better by Moody's.

        "Change of Control" means the occurrence of any of the following:

        (1)   the sale, assignment, transfer, lease, conveyance or other disposition, in one or more related transactions, of all or substantially all of the properties and assets of the Issuer and its Subsidiaries, taken as a whole, to any Person other than a Permitted Holder; or

        (2)   the Issuer becomes aware of (by way of a report or any other filing pursuant to Section 13(d) of the Exchange Act, proxy, vote, written notice or otherwise) the acquisition by (x) any Person (other than one or more Permitted Holders) or (y) any Persons that together (i) are a group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, or any successor provision), or (ii) are acting, for the purpose of acquiring, holding or disposing of securities (within the meaning of Rule 13d-5(b)(1) under the Exchange Act) (other than, in the case of clauses (i) and (ii), Permitted Holders), in a single transaction or in a related series of transactions, by way of merger, consolidation or other business combination or purchase of beneficial ownership, directly or indirectly, of 50% or more of the total voting power of the Voting Stock of the Issuer or any of its direct or indirect parent entities.

        "Consolidated Depreciation and Amortization Expense" means with respect to any Person for any period, the total amount of depreciation and amortization expense, including the amortization of deferred financing fees of such Person and its Restricted Subsidiaries for such period on a consolidated basis and otherwise determined in accordance with GAAP.

        "Consolidated Interest Expense" means, with respect to any Person for any period, without duplication, the sum of:

        (1)   consolidated interest expense of such Person and its Restricted Subsidiaries for such period, to the extent such expense was deducted (and not added back) in computing Consolidated Net Income (including (a) amortization of original issue discount resulting from the issuance of Indebtedness at less than par, (b) all commissions, discounts and other fees and charges owed with respect to letters of credit or bankers' acceptances, (c) non-cash interest payments (but excluding any non-cash interest expense attributable to the movement in the mark to market valuation of Hedging Obligations or other derivative instruments pursuant to GAAP), (d) the interest component of Capitalized Lease Obligations, and (e) net settlement payments, if any, made pursuant to interest rate Hedging Obligations with respect to Indebtedness (less any net settlement payments, if any, received pursuant to interest rate Hedging Obligations with respect to Indebtedness), and excluding (A) any Additional Interest, (B) amortization of deferred financing fees, debt issuance costs, commissions, fees and expenses, (C) any expensing of bridge, commitment and other financing fees relating to any financings and (D) any annual agency or similar fees paid under any Credit Facilities; plus

        (2)   consolidated capitalized interest of such Person and its Restricted Subsidiaries for such period, whether paid or accrued; less

        (3)   interest income for such period of such Person and its Restricted Subsidiaries.

For purposes of this definition, interest on a Capitalized Lease Obligation shall be deemed to accrue at an interest rate reasonably determined by such Person to be the rate of interest implicit in such Capitalized Lease Obligation in accordance with GAAP.

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        "Consolidated Leverage Ratio", with respect to any Person as of any date of determination, means the ratio of (x) Consolidated Total Indebtedness of such Person as of the end of the most recent fiscal quarter for which internal financial statements are available to (y) the aggregate amount of EBITDA of such Person for the period of the most recently ended four full consecutive fiscal quarters for which internal financial statements are available. In the event that the Issuer or any Restricted Subsidiary incurs, assumes, guarantees, redeems, retires or extinguishes any Indebtedness (other than Indebtedness incurred under any revolving credit facility unless such Indebtedness has been permanently repaid and has not been replaced) or issues or redeems Disqualified Stock or Preferred Stock subsequent to the commencement of the period for which the Consolidated Leverage Ratio is being calculated but prior to or simultaneously with the event for which the calculation of the Consolidated Leverage Ratio is made (the "Consolidated Leverage Ratio Calculation Date"), then the Consolidated Leverage Ratio shall be calculated giving pro forma effect to such incurrence, assumption, guarantee, redemption, retirement or extinguishment of Indebtedness, or such issuance or redemption of Disqualified Stock or Preferred Stock, as if the same had occurred at the beginning of the applicable four-quarter period.

        For purposes of making the computation referred to above, Investments, acquisitions, dispositions, mergers, consolidations and disposed operations (as determined in accordance with GAAP) that have been made by the Issuer or any of its Restricted Subsidiaries during the four-quarter reference period or subsequent to such reference period and on or prior to or simultaneously with the Consolidated Leverage Ratio Calculation Date shall be calculated on a pro forma basis assuming that all such Investments, acquisitions, dispositions, mergers, consolidations and disposed operations (and the change in any associated fixed charge obligations and the change in EBITDA resulting therefrom) had occurred on the first day of the four-quarter reference period. If since the beginning of such period any Person that subsequently became a Restricted Subsidiary or was merged with or into the Issuer or any of its Restricted Subsidiaries since the beginning of such period shall have made any Investment, acquisition, disposition, merger, consolidation or disposed operation that would have required adjustment pursuant to this definition, then the Consolidated Leverage Ratio shall be calculated giving pro forma effect thereto for such period as if such Investment, acquisition, disposition, merger, consolidation or disposed operation had occurred at the beginning of the applicable four-quarter period.

        For purposes of this definition, whenever pro forma effect is to be given to an investment, acquisition, disposition, merger or consolidation (including the Transactions) and the amount of income or earnings relating thereto, the pro forma calculations shall be determined in good faith by a responsible financial or accounting Officer of the Issuer; provided that such calculations are set forth in an Officer's Certificate signed by the Issuer's chief financial officer stating (i) that such calculations are based on the reasonable good faith beliefs of the Officers executing such Officer's Certificate at the time of such execution and (ii) that any related incurrence of Indebtedness is permitted pursuant to the Indenture.

        "Consolidated Net Income" means, with respect to any Person for any period, the aggregate of the Net Income of such Person and its Restricted Subsidiaries for such period, on a consolidated basis, and otherwise determined in accordance with GAAP; provided, however, that, without duplication,

        (1)   any after-tax effect of extraordinary, non-recurring or unusual gains or losses (less all fees and expenses relating thereto) or expenses (including relating to the Transactions to the extent incurred on or prior to December 31, 2007), severance, relocation costs and curtailments or modifications to pension and post-retirement employee benefit plans shall be excluded,

        (2)   the cumulative effect of a change in accounting principles during such period shall be excluded,

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        (3)   any after-tax effect of income (loss) from disposed, abandoned or discontinued operations and any net after-tax gains or losses on disposal of disposed, abandoned or discontinued operations shall be excluded,

        (4)   any after-tax effect of gains or losses (less all fees and expenses relating thereto) attributable to asset dispositions other than in the ordinary course of business, as determined in good faith by the Board of Directors of the Issuer, shall be excluded,

        (5)   the Net Income for such period of any Person that is not a Subsidiary, or that is an Unrestricted Subsidiary, or that is accounted for by the equity method of accounting, shall be excluded; provided that Consolidated Net Income of the Issuer shall be increased by the Net Income of such Person to the extent of the amount of dividends or distributions or other payments made by such Person that are actually paid in cash (or to the extent converted into cash) to the referent Person or a Restricted Subsidiary thereof in respect of such period; provided further, that such increase shall not apply for purposes of determining the amount payable for Restricted Payments under clause 3(a) of the first paragraph of "—Certain Covenants—Limitation on Restricted Payments" to the extent such dividends or distributions or other payments are included in clause (d) of such first paragraph,

        (6)   solely for the purpose of determining the amount available for Restricted Payments under clause (3)(a) of the first paragraph of "—Certain Covenants—Limitation on Restricted Payments," the Net Income for such period of any Restricted Subsidiary (other than any Guarantor) shall be excluded to the extent the declaration or payment of dividends or similar distributions by that Restricted Subsidiary of its Net Income is not at the date of determination wholly permitted without any prior governmental approval (which has not been obtained) or, directly or indirectly, by the operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule, or governmental regulation applicable to that Restricted Subsidiary or its stockholders, unless such restriction with respect to the payment of dividends or similar distributions has been legally waived; provided that Consolidated Net Income of the Issuer will be increased by the Net Income of such person to the extent of the amount of dividends or other distributions or other payments actually paid in cash (or to the extent converted into cash) by such Person to the Issuer or a Restricted Subsidiary thereof in respect of such period, to the extent not already included therein,

        (7)   any impairment charge or asset write-off pursuant to Financial Accounting Standards Board Statements No. 142 and No. 144 and the amortization of intangibles arising pursuant to Financial Accounting Standards Board Statement No. 141 shall be excluded,

        (8)   effects of adjustments (including the effects of such adjustments pushed down to the Issuer and its Restricted Subsidiaries) in any line item in such Person's consolidated financial statements pursuant to GAAP resulting from the application of purchase accounting in relation to the Transactions or any consummated acquisition shall be excluded,

        (9)   any after-tax effect of income (loss) from the early extinguishment of Indebtedness or Hedging Obligations or other derivative instruments shall be excluded,

        (10) any fees and expenses incurred during such period, or any amortization thereof for such period, in connection with any acquisition, Investment, Asset Sale, issuance or repayment of Indebtedness, issuance of Equity Interests, refinancing transaction or amendment or modification of any debt instrument (in each case, including any such transaction consummated prior to the Issue Date and any such transaction undertaken but not completed) and any charges or non-recurring merger costs incurred during such period as a result of any such transaction shall be excluded,

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        (11) non-cash income or charges resulting from mark-to-market accounting under Financial Accounting Standard No. 52 relating to Indebtedness denominated in foreign currencies shall be excluded,

        (12) any non-cash compensation expense recorded from grants of stock appreciation or similar rights, stock options, restricted stock or other rights shall be excluded, and

        (13) accruals and reserves that are established within 12 months after the Issue Date that are required to be established in accordance with GAAP as a result of the Transactions shall be excluded.

        Notwithstanding the foregoing, for the purpose of the covenant described under "—Certain Covenants—Limitation on Restricted Payments" only (other than clause (3)(d) thereof), there shall be excluded from Consolidated Net Income any income arising from any sale or other disposition of Restricted Investments made by the Issuer and its Restricted Subsidiaries, any repurchases and redemptions of Restricted Investments from the Issuer and its Restricted Subsidiaries, any repayments of loans and advances which constitute Restricted Investments by the Issuer or any of its Restricted Subsidiaries, any sale of the stock of an Unrestricted Subsidiary or any distribution or dividend from an Unrestricted Subsidiary, in each case only to the extent such amounts increase the amount of Restricted Payments permitted under such covenant pursuant to clause (3)(d) thereof. For purposes of this definition, amounts distributed, dividended, loaned or otherwise transferred to any direct or indirect parent pursuant to clause (14) of the exceptions of "—Certain Covenants—Limitation on Restricted Payments" shall be deducted in calculating Consolidated Net Income without duplication of other expenses reflected in Consolidated Net Income.

        "Consolidated Total Indebtedness" means, as at any date of determination, an amount equal to the sum of (1) the aggregate amount of all outstanding Indebtedness of the Issuer and its Restricted Subsidiaries on a consolidated basis consisting of Indebtedness for borrowed money, Obligations in respect of Capitalized Lease Obligations and debt obligations evidenced by promissory notes and similar instruments and (2) the aggregate amount of all outstanding Disqualified Stock of the Issuer and all Preferred Stock of its Restricted Subsidiaries on a consolidated basis, with the amount of such Disqualified Stock and Preferred Stock equal to the greater of their respective voluntary or involuntary liquidation preferences and maximum fixed repurchase prices, in each case determined on a consolidated basis in accordance with GAAP. For purposes hereof, the "maximum fixed repurchase price" of any Disqualified Stock or Preferred Stock that does not have a fixed repurchase price shall be calculated in accordance with the terms of such Disqualified Stock or Preferred Stock as if such Disqualified Stock or Preferred Stock were purchased on any date on which Consolidated Total Indebtedness shall be required to be determined pursuant to the Indenture, and if such price is based upon, or measured by, the fair market value of such Disqualified Stock or Preferred Stock, such fair market value shall be determined reasonably and in good faith by the Issuer.

        "Contingent Obligations" means, with respect to any Person, any obligation of such Person guaranteeing any leases, dividends or other obligations that do not constitute Indebtedness ("primary obligations") of any other Person (the "primary obligor") in any manner, whether directly or indirectly, including, without limitation, any obligation of such Person, whether or not contingent,

        (1)   to purchase any such primary obligation or any property constituting direct or indirect security therefor,

        (2)   to advance or supply funds

        (a)   for the purchase or payment of any such primary obligation, or

        (b)   to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, or

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        (3)   to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation against loss in respect thereof.

        "Contribution Agreements" means, collectively, (i) the Agreement and Plan of Merger, dated as of January 23, 2007, among RDA Holding Co., WRC Acquisition Co. and WRC Media Inc., and (ii) the Stock Acquisition Agreement, dated as of January 23, 2007, among Direct Holdings U.S. Corp., RDA Holding Co. and the members of Direct Holdings Worldwide L.L.C. named therein.

        "Credit Facilities" means, with respect to the Issuer or any of its Restricted Subsidiaries, one or more debt facilities, including the Senior Credit Facility, or other financing arrangements (including, without limitation, commercial paper facilities or indentures) providing for revolving credit loans, term loans, letters of credit or other long-term indebtedness, including any notes, mortgages, guarantees, collateral documents, instruments and agreements executed in connection therewith, and any amendments, supplements, modifications, extensions, renewals, restatements or refundings thereof and any indentures or credit facilities or commercial paper facilities that replace, refund or refinance any part of the loans, notes, other credit facilities or commitments thereunder, including any such replacement, refunding or refinancing facility or indenture that increases the amount permitted to be borrowed thereunder or alters the maturity thereof (provided that such increase in borrowings is permitted under "—Certain Covenants—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock") or adds Restricted Subsidiaries as additional borrowers or guarantors thereunder and whether by the same or any other agent, lender or group of lenders.

        "Default" means any event that is, or with the passage of time or the giving of notice or both would be, an Event of Default.

        "Designated Non-cash Consideration" means the fair market value of non-cash consideration received by the Issuer or a Restricted Subsidiary in connection with an Asset Sale that is so designated as Designated Non-cash Consideration pursuant to an Officer's Certificate, setting forth the basis of such valuation, executed by the principal financial officer of the Issuer, less the amount of cash or Cash Equivalents received in connection with a subsequent sale of or collection on such Designated Non-cash Consideration.

        "Designated Preferred Stock" means Preferred Stock of the Issuer or any parent entity thereof (in each case other than Disqualified Stock) that is issued for cash after the Issue Date (other than to a Restricted Subsidiary, the Issuer or an employee stock ownership plan or trust established by the Issuer or any of its Subsidiaries) and is so designated as Designated Preferred Stock, pursuant to an Officer's Certificate executed by the principal financial officer of the Issuer or the applicable parent corporation thereof, as the case may be, on the issuance date thereof, the cash proceeds of which are excluded from the calculation set forth in clause (3) of the first paragraph of the "Certain Covenants—Limitation on Restricted Payments" covenant.

        "Designated Senior Indebtedness" means:

        (1)   any Indebtedness outstanding under the Senior Credit Facility; and

        (2)   any other Senior Indebtedness permitted under the Indenture, the principal amount of which is $50.0 million or more and that has been designated by the Issuer as "Designated Senior Indebtedness."

        "Disqualified Stock" means, with respect to any Person, any Capital Stock of such Person which, by its terms, or by the terms of any security into which it is convertible or for which it is putable or exchangeable, or upon the happening of any event, matures or is mandatorily redeemable pursuant to a sinking fund obligation or otherwise, or is redeemable at the option of the holder thereof, in whole or in part, or is convertible into or exchangeable for Indebtedness or Disqualified Stock (excluding Capital

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Stock which is convertible or exchangeable solely at the option of the Issuer or a Restricted Subsidiary (it being understood that upon such conversion or exchange it shall be an incurrence of such Indebtedness or Disqualified Stock)), in each case prior to the date 91 days after the earlier of the maturity date of the Notes or the date the Notes are no longer outstanding; provided, however, that (x) if such Capital Stock is issued to any plan for the benefit of employees of the Issuer or its Subsidiaries or by any such plan to such employees, such Capital Stock shall not constitute Disqualified Stock solely because it may be required to be repurchased by the Issuer or its Subsidiaries in order to satisfy applicable statutory or regulatory obligations and (y) such Capital Stock shall not constitute Disqualified Stock if such Capital Stock matures or is mandatorily redeemable or is redeemed at the option of the holders thereof as a result of a change of control or asset sale so long as the relevant change of control or asset sale provisions taken as a whole, are no more favorable in any material respect to holders of such Capital Stock than the asset sale and change of control provisions applicable to the Notes and any purchase requirement triggered thereby may not become operative until compliance with the asset sale and change of control provisions applicable to the Notes.

        "DTC" means The Depository Trust Company.

        "Domestic Subsidiary" means, with respect to any Person, any subsidiary of such Person that is organized or existing under the laws of the United States, any state thereof, or the District of Columbia.

        "EBITDA" means, with respect to any Person for any period, the Consolidated Net Income of such Person for such period

        (1)   increased (without duplication) by:

        (a)   provision for taxes based on income or profits or capital, including, without limitation, state, franchise and similar taxes and foreign withholding taxes of such Person paid or accrued during such period deducted (and not added back) in computing Consolidated Net Income; plus

        (b)   Consolidated Interest Expense of such Person for such period (including (x) net losses or Hedging Obligations or other derivative instruments entered into for the purpose of hedging interest rate risk and (y) costs of surety bonds in connection with financing activities, in each case, to the extent included in Consolidated Interest Expense) to the extent the same was deducted (and not added back) in calculating such Consolidated Net Income; plus

        (c)   Consolidated Depreciation and Amortization Expense of such Person for such period to the extent the same were deducted (and not added back) in computing Consolidated Net Income; plus

        (d)   any expenses or charges (other than depreciation or amortization expense) related to any Equity Offering, Permitted Investment, acquisition, disposition, recapitalization or the incurrence of Indebtedness permitted to be incurred by the Indenture (including a refinancing thereof) (whether or not successful), including (i) such fees, expenses or charges related to the offering of the Notes and the Credit Facilities and (ii) any amendment or other modification of the Notes, and, in each case, deducted (and not added back) in computing Consolidated Net Income; plus

        (e)   the amount of any restructuring charge or reserve deducted (and not added back) in such period in computing Consolidated Net Income, including any one-time costs incurred in connection with acquisitions after the Issue Date and costs related to the closure and/or consolidation of facilities; plus

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        (f)    any other non-cash charges, including any write-offs or write-downs, reducing Consolidated Net Income for such period (excluding any such non-cash charge that represents an accrual or reserve for potential cash items in any future period); plus

        (g)   the amount of management, monitoring, consulting and advisory fees and related expenses paid in such period to the Investors to the extent otherwise permitted under "—Certain Covenants—Transactions with Affiliates"; plus

        (h)   any costs or expense incurred by the Issuer or a Restricted Subsidiary pursuant to any management equity plan or stock option plan or any other management or employee benefit plan or agreement or any stock subscription or shareholder agreement, to the extent that such cost or expenses are funded with cash proceeds contributed to the capital of the Issuer or net cash proceeds of an issuance of Equity Interest of the Issuer (other than Disqualified Stock) solely to the extent that such net cash proceeds are excluded from the calculation set forth in clause (3) of the first paragraph under "—Certain Covenants—Limitation on Restricted Payments";

        (2)   decreased by (without duplication) non-cash items increasing Consolidated Net Income of such Person for such period, excluding any non-cash items to the extent they represent the reversal of an accrual or reserve for a potential cash item that reduced EBITDA in any prior period, and

        (3)   increased or decreased by (without duplication):

        (a)   any net gain or loss resulting in such period from Hedging Obligations and the application of Statement of Financial Accounting Standards No. 133; plus or minus, as applicable,

        (b)   any net gain or loss resulting in such period from currency translation gains or losses related to currency remeasurements of Indebtedness (including any net loss or gain resulting from Hedging Obligations for currency exchange risk).

        "EMU" means economic and monetary union as contemplated in the Treaty on European Union.

        "Equity Interests" means Capital Stock and all warrants, options or other rights to acquire Capital Stock, but excluding any debt security that is convertible into, or exchangeable for, Capital Stock.

        "Equity Offering" means any public or private sale of common stock or Preferred Stock of the Issuer or (to the extent the net cash proceeds thereof are contributed to the Issuer) any of its direct or indirect parent companies (excluding Disqualified Stock), other than:

        (1)   public offerings with respect to the Issuer's or any direct or indirect parent entity's common stock registered on Form S-4 or Form S-8;

        (2)   issuances to any Subsidiary of the Issuer;

        (3)   any such public or private sale that constitutes an Excluded Contribution or representing Designated Preferred Stock; and

        (4)   any offering of common stock or Preferred Stock issued in connection with a transaction that constitutes a Change of Control.

        "Euro" means the single currency of participating member states of the EMU.

        "Event of Default" has the meaning set forth under "—Events of Default and Remedies."

        "Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC promulgated thereunder.

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        "Exchange Notes" means any notes issued in exchange for the Notes pursuant to the Registration Rights Agreement or similar agreement.

        "Excluded Contribution" means net cash proceeds, marketable securities or Qualified Proceeds received by the Issuer after the Issue Date from

        (1)   contributions to its common equity capital, and

        (2)   the sale (other than to a Subsidiary of the Issuer or to any management equity plan or stock option plan or any other management or employee benefit plan or agreement of the Issuer) of Capital Stock (other than Disqualified Stock and Designated Preferred Stock) of the Issuer, in each case designated as Excluded Contributions pursuant to an Officer's Certificate executed by the principal financial officer of the Issuer on the date such capital contributions are made or the date such Equity Interests are sold, as the case may be, which are excluded from the calculation set forth in clause (3) of the first paragraph under "Certain Covenants—Limitation on Restricted Payments."

        "Existing Issuer Preferred Stock" means the existing Preferred Stock, Second Preferred Stock and Third Subordinated Preferred Stock of the Issuer outstanding on the Issue Date.

        "Foreign Subsidiary" means, with respect to any Person, any Restricted Subsidiary of such Person that is not organized or existing under the laws of the United States, any state thereof, the District of Columbia, and any Restricted Subsidiary of such Foreign Subsidiary.

        "GAAP" means generally accepted accounting principles in the United States which are in effect on the Issue Date.

        "Government Securities" means securities that are:

        (1)   direct obligations of the United States of America for the timely payment of which its full faith and credit is pledged; or

        (2)   obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America the timely payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America, which, in either case, are not callable or redeemable at the option of the issuers thereof, and shall also include a depository receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act), as custodian with respect to any such Government Securities or a specific payment of principal of or interest on any such Government Securities held by such custodian for the account of the holder of such depository receipt; provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the Government Securities or the specific payment of principal of or interest on the Government Securities evidenced by such depository receipt.

        "guarantee" means a guarantee (other than by endorsement of negotiable instruments for collection in the ordinary course of business), direct or indirect, in any manner (including letters of credit and reimbursement agreements in respect thereof), of all or any part of any Indebtedness or other obligations.

        "Guarantee" means the guarantee by any Guarantor of the Issuer's Obligations under the Indenture. When used as a verb, "Guarantee" shall have a corresponding meaning.

        "Guarantor" means each Restricted Subsidiary that Guarantees the Notes in accordance with the terms of the Indenture.

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        "Hedging Obligations" means, with respect to any Person, the obligations of such Person under any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, commodity swap agreement, commodity cap agreement, commodity collar agreement, foreign exchange contract, currency swap agreement or similar agreement providing for the transfer or mitigation of interest rate or currency risks either generally or under specific contingencies.

        "Holder" means the Person in whose name a Note is registered on the registrar's books.

        "Indebtedness" means, with respect to any Person, without duplication:

        (1)   any indebtedness (including principal and premium) of such Person, whether or not contingent:

        (a)   in respect of borrowed money;

        (b)   evidenced by bonds, notes, debentures or similar instruments or letters of credit or bankers' acceptances (or, without duplication, reimbursement agreements in respect thereof);

        (c)   representing the balance deferred and unpaid of the purchase price of any property (including Capitalized Lease Obligations), except (i) any such balance that constitutes a trade payable or similar obligation to a trade creditor, in each case accrued in the ordinary course of business and (ii) any earn-out obligation until the amount of such obligation becomes a liability on the balance sheet of such Person in accordance with GAAP; or

        (d)   representing any Hedging Obligations; if and to the extent that any of the foregoing Indebtedness (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet (excluding the footnotes thereto) of such Person prepared in accordance with GAAP;

        (2)   to the extent not otherwise included, any obligation by such Person to be liable for, or to pay, as obligor, guarantor or otherwise, on the obligations of the type referred to in clause (1) of a third Person (whether or not such items would appear upon the balance sheet of the such obligor or guarantor), other than by endorsement of negotiable instruments for collection in the ordinary course of business; and

        (3)   to the extent not otherwise included, the obligations of the type referred to in clause (1) of a third Person secured by a Lien on any asset owned by such first Person, whether or not such Indebtedness is assumed by such first Person; provided, however, that notwithstanding the foregoing, Indebtedness shall be deemed not to include Contingent Obligations incurred in the ordinary course of business.

        "Independent Financial Advisor" means an accounting, appraisal, investment banking firm or consultant to Persons engaged in Similar Businesses of nationally recognized standing that is, in the good faith judgment of the Issuer, qualified to perform the task for which it has been engaged.

        "Initial Purchasers" means J.P. Morgan Securities Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Citigroup Global Markets Inc. and Greenwich Capital Markets, Inc.

        "Investment Grade Rating" means a rating equal to or higher than Baa3 (or the equivalent) by Moody's and BBB- (or the equivalent) by S&P, or an equivalent rating by any other Rating Agency.

        "Investment Grade Securities" means:

        (1)   securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality thereof (other than Cash Equivalents);

        (2)   debt securities or debt instruments with an Investment Grade Rating, but excluding any debt securities or instruments constituting loans or advances among the Issuer and its Subsidiaries;

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        (3)   investments in any fund that invests exclusively in investments of the type described in clauses (1) and (2), which fund may also hold immaterial amounts of cash pending investment or distribution; and

        (4)   corresponding instruments in countries other than the United States customarily utilized for high quality investments.

        "Investments" means, with respect to any Person, all investments by such Person in other Persons (including Affiliates) in the form of loans (including guarantees), advances or capital contributions (excluding accounts receivable, trade credit, advances to customers, commissions, travel and similar advances to officers and employees, in each case made in the ordinary course of business), purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities issued by any other Person and investments that are required by GAAP to be classified on the balance sheet (excluding the footnotes) of such Person in the same manner as the other investments included in this definition to the extent such transactions involve the transfer of cash or other property. For purposes of the definition of "Unrestricted Subsidiary" and the covenant described under "—Certain Covenants—Limitation on Restricted Payments":

        (1)   "Investments" shall include the portion (proportionate to the Issuer's equity interest in such Subsidiary) of the fair market value of the net assets of a Subsidiary of the Issuer at the time that such Subsidiary is designated an Unrestricted Subsidiary; provided, however, that upon a redesignation of such Subsidiary as a Restricted Subsidiary, the Issuer shall be deemed to continue to have a permanent "Investment" in an Unrestricted Subsidiary in an amount (if positive) equal to:

        (a)   the Issuer's "Investment" in such Subsidiary at the time of such redesignation; less

        (b)   the portion (proportionate to the Issuer's equity interest in such Subsidiary) of the fair market value of the net assets of such Subsidiary at the time of such redesignation; and

        (2)   any property transferred to or from an Unrestricted Subsidiary shall be valued at its fair market value at the time of such transfer, in each case as determined in good faith by the Issuer.

        "Investors" means Ripplewood Holdings L.L.C. J. Rothschild Group Ltd., GoldenTree Asset Management, L.P., GSO Capital Partners, Merrill Lynch Capital Corporation, Magnetar Capital and their respective Affiliates but not including, however, any portfolio companies thereof.

        "Issue Date" means March 2, 2007.

        "Issuer" has the meaning set forth in the first paragraph under "General"; provided that when used in the context of determining the fair market value of an asset or liability under the Indenture, "Issuer" shall be deemed to mean the board of directors of the Issuer when the fair market value is equal to or in excess of $10.0 million (unless otherwise expressly stated).

        "Legal Holiday" means a Saturday, a Sunday or a day on which commercial banking institutions are not required to be open in the State of New York.

        "Lien" means, with respect to any asset, any mortgage, lien (statutory or otherwise), pledge, hypothecation, charge, security interest, preference, priority or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law, including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction; provided that in no event shall an operating lease be deemed to constitute a Lien.

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        "Merger Agreement" means the Agreement and Plan of Merger, dated as of November 16, 2006, among RDA Holding Co., Doctor Acquisition Co. and The Reader's Digest Association, Inc., as the same may be amended prior to the Issue Date.

        "Moody's" means Moody's Investors Service, Inc. and any successor to its rating agency business.

        "Net Income" means, with respect to any Person, the net income (loss) of such Person, determined in accordance with GAAP and before any reduction in respect of Preferred Stock dividends.

        "Net Proceeds" means the aggregate cash proceeds and Cash Equivalents received by the Issuer or any of its Restricted Subsidiaries in respect of any Asset Sale, including any cash and Cash Equivalents received in a Permitted Asset Swap or upon the sale or other disposition or collection of any Designated Non-cash Consideration or securities received in any Asset Sale, net of the direct costs relating to such Asset Sale and the sale or disposition of such Designated Non-cash Consideration, including legal, accounting and investment banking fees, and brokerage and sales commissions, any relocation expenses incurred as a result thereof, taxes paid or payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements), amounts required to be applied to the repayment of principal, premium, if any, and interest on Senior Indebtedness required (other than required by clause (1) of the second paragraph of "Repurchase at the Option of Holders—Asset Sales") to be paid as a result of such transaction and any deduction of appropriate amounts to be provided by the Issuer or any of its Restricted Subsidiaries as a reserve in accordance with GAAP against any liabilities associated with the asset disposed of in such transaction and retained by the Issuer or any of its Restricted Subsidiaries after such sale or other disposition thereof, including pension and other post-employment benefit liabilities and liabilities related to environmental matters or against any indemnification obligations associated with such transaction.

        "Obligations" means any principal, interest (including any interest accruing subsequent to the filing of a petition in bankruptcy, reorganization or similar proceeding at the rate provided for in the documentation with respect thereto, whether or not such interest is an allowed claim under applicable state, federal or foreign law), other monetary obligations, penalties, fees, indemnifications, reimbursements (including reimbursement obligations with respect to letters of credit and banker's acceptances), damages and other liabilities, and guarantees of payment of such principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities, payable under the documentation governing any Indebtedness.

        "Officer" means the Chairman of the Board, the Chief Executive Officer, the Chief Financial Officer, the President, any Executive Vice President, Senior Vice President or Vice President, the Treasurer or the Secretary of the Issuer. "Officer" of any Guarantor has a correlative meaning.

        "Officer's Certificate" means a certificate signed on behalf of the Issuer or Guarantor, as the case may be, by an Officer of the Issuer or Guarantor, who must be the principal executive officer, the principal financial officer, the treasurer or the principal accounting officer of the Issuer or Guarantor, that meets the requirements set forth in the Indenture.

        "Opinion of Counsel" means a written opinion from legal counsel who is acceptable to the Trustee. The counsel may be an employee of or counsel to the Issuer.

        "Permitted Asset Swap" means the concurrent purchase and sale or exchange of Related Business Assets or a combination of Related Business Assets and cash or Cash Equivalents between the Issuer or any of its Restricted Subsidiaries and another Person; provided, that any cash or Cash Equivalents received must be applied in accordance with the "Repurchase at the Option of Holders—Asset Sales" covenant; provided, further, that, in the good faith determination of the Issuer, the aggregate fair market value of the property or assets being transferred by the Issuer or such Restricted Subsidiary is not greater than the aggregate fair market value of the property or assets received by the Issuer or such Restricted Subsidiary in such exchange (provided, however, that in the event such aggregate fair market

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value of the property or assets being transferred or received by the Issuer is greater than or equal to $15.0 million, such determination shall be made in good faith by senior management of the Issuer).

        "Permitted Holders" means each of the Investors and members of management of the Issuer (or its direct parent) who are holders of Equity Interests of the Issuer (or any of its direct or indirect parent companies) on the Issue Date and any group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act or any successor provision) of which any of the foregoing are members; provided, that, in the case of such group and without giving effect to the existence of such group or any other group, such Investors and members of management, collectively, have beneficial ownership of more than 50% of the total voting power of the Voting Stock of the Issuer. Any person or group where acquisition of beneficial ownership constitutes a Change of Control in respect of which a Change of Control Offer is made in accordance with the requirements of the Indenture will thereafter, together with its Affiliates, constitute a Permitted Holder.

        "Permitted Investments" means:

        (1)   any Investment in the Issuer or any of its Restricted Subsidiaries;

        (2)   any Investment in cash and Cash Equivalents or Investment Grade Securities;

        (3)   any Investment by the Issuer or any of its Restricted Subsidiaries in a Person that is engaged in a Similar Business if as a result of such Investment:

        (a)   such Person becomes a Restricted Subsidiary; or

        (b)   such Person, in one transaction or a series of related transactions, is merged or consolidated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, the Issuer or a Restricted Subsidiary, and, in each case, any Investment held by such Person; provided, that such Investment was not acquired by such Person in contemplation of such acquisition, merger, consolidation or transfer;

        (4)   any Investment in securities or other assets not constituting cash, Cash Equivalents or Investment Grade Securities and received in connection with an Asset Sale made pursuant to the provisions of "—Repurchase at the Option of Holders—Asset Sales" or any other disposition of assets not constituting an Asset Sale;

        (5)   any Investment existing on the Issue Date;

        (6)   any Investment acquired by the Issuer or any of its Restricted Subsidiaries:

        (a)   in exchange for any other Investment or accounts receivable held by the Issuer or any such Restricted Subsidiary in connection with or as a result of a bankruptcy, workout, reorganization or recapitalization of the issuer of such other Investment or accounts receivable; or

        (b)   as a result of a foreclosure by the Issuer or any of its Restricted Subsidiaries with respect to any secured Investment or other transfer of title with respect to any secured Investment in default;

        (7)   Hedging Obligations permitted under clause (9) of the second paragraph of the covenant described in "—Certain Covenants—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock";

        (8)   Investments the payment for which consists of Equity Interests (exclusive of Disqualified Stock) of the Issuer or any of its direct or indirect parent companies; provided, however, that such Equity Interests will not increase the amount available for Restricted Payments under clause (3) of the first paragraph under the covenant described in "—Certain Covenants—Limitations on Restricted Payments";

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        (9)   guarantees of Indebtedness permitted under the covenant described in "—Certain Covenants—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock";

        (10) any transaction to the extent it constitutes an Investment that is permitted and made in accordance with the provisions of the second paragraph of the covenant described under "—Certain Covenants—Transactions with Affiliates" (except transactions described in clauses (2), (5) and (9) of such paragraph);

        (11) Investments consisting of purchases and acquisitions of inventory, supplies, material or equipment;

        (12) additional Investments having an aggregate fair market value, taken together with all other Investments made pursuant to this clause (12) that are at that time outstanding (without giving effect to the sale of an Unrestricted Subsidiary to the extent the proceeds of such sale do not consist of cash or marketable securities), not to exceed the greater of (x) $50.0 million and (y) 3% of Total Tangible Assets (with the fair market value of each Investment being measured at the time made and without giving effect to subsequent changes in value);

        (13) Investments made in connection with the funding of contributions under any non-qualified employee retirement plan or similar employee compensation plan in an amount not to exceed the amount of compensation expense recognized by the Issuer and any Restricted Subsidiary in connection with such plans;

        (14) advances to, or guarantees of Indebtedness of, employees not in excess of $10.0 million outstanding at any one time, in the aggregate; provided that amounts that are forgiven shall continue to be deemed outstanding; and

        (15) loans and advances to officers, directors and employees for business-related travel expenses, moving expenses and other similar expenses, in each case incurred in the ordinary course of business or consistent with past practices or to fund such Person's purchase of Equity Interests of the Issuer or any direct or indirect parent entity thereof.

        "Permitted Junior Securities" means:

        (1)   Equity Interests in the Issuer, any Guarantor or any direct or indirect parent of the Issuer; or

        (2)   unsecured debt securities that are subordinated to all Senior Indebtedness (and any debt securities issued in exchange for Senior Indebtedness) to substantially the same extent as, or to a greater extent than, the Notes and the related Guarantees are subordinated to Senior Indebtedness under the Indenture; provided that the term "Permitted Junior Securities" shall not include any securities distributed pursuant to a plan of reorganization if the Indebtedness under the Senior Credit Facility is treated as part of the same class as the Notes for purposes of such plan of reorganization; provided, further, that to the extent that any Senior Indebtedness of the Issuer or the Guarantors outstanding on the date of consummation of any such plan of reorganization is not paid in full in cash on such date, the holders of any such Senior Indebtedness not so paid in full in cash have consented to the terms of such plan of reorganization.

        "Permitted Liens" means, with respect to any Person:

        (1)   pledges or deposits by such Person under workmen's compensation laws, unemployment insurance laws or similar legislation, or good faith deposits in connection with bids, tenders, contracts (other than for the payment of Indebtedness) or leases to which such Person is a party, or deposits to secure public or statutory obligations of such Person or deposits of cash or U.S. government bonds to secure surety or appeal bonds to which such Person is a party, or deposits as

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security for contested taxes or import duties or for the payment of rent, in each case incurred in the ordinary course of business;

        (2)   Liens imposed by law, such as carriers', warehousemen's and mechanics' Liens, in each case for sums not yet overdue for a period of more than 30 days or being contested in good faith by appropriate proceedings or other Liens arising out of judgments or awards against such Person with respect to which such Person shall then be proceeding with an appeal or other proceedings for review if adequate reserves with respect thereto are maintained on the books of such Person in accordance with GAAP;

        (3)   Liens for taxes, assessments or other governmental charges not yet overdue for a period of more than 30 days or payable or subject to penalties for nonpayment or which are being contested in good faith by appropriate proceedings diligently conducted, if adequate reserves with respect thereto are maintained on the books of such Person in accordance with GAAP;

        (4)   Liens in favor of issuers of performance and surety bonds or bid bonds or with respect to other regulatory requirements or letters of credit issued pursuant to the request of and for the account of such Person in the ordinary course of its business;

        (5)   minor survey exceptions, minor encumbrances, easements or reservations of, or rights of others for, licenses, rights-of-way, sewers, electric lines, telegraph and telephone lines and other similar purposes, or zoning or other restrictions as to the use of real properties or Liens incidental to the conduct of the business of such Person or to the ownership of its properties which were not incurred in connection with Indebtedness and which do not in the aggregate materially adversely affect the value of said properties or materially impair their use in the operation of the business of such Person;

        (6)   Liens securing Indebtedness permitted to be incurred or issued pursuant to clause (11), (17) or (20) of the second paragraph under "Certain Covenants—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock"; provided that Liens securing Indebtedness permitted to be incurred pursuant to clause (17) are solely on the assets acquired, and Liens on Indebtedness incurred pursuant to clause (20) are solely on the assets of Foreign Subsidiaries;

        (7)   Liens existing on the Issue Date (excluding Liens under the Senior Credit Facility);

        (8)   Liens on property or shares of stock of a Person at the time such Person becomes a Subsidiary; provided, however, that such Liens are not created or incurred in connection with, or in contemplation of, such other Person becoming such a Subsidiary; provided, further, however, that such Liens may not extend to any other property owned by the Issuer or any of its Restricted Subsidiaries;

        (9)   Liens on property at the time the Issuer or a Restricted Subsidiary acquired the property, including any acquisition by means of a merger or consolidation with or into the Issuer or any of its Restricted Subsidiaries; provided, however, that such Liens are not created or incurred in connection with, or in contemplation of, such acquisition; provided, further, however, that the Liens may not extend to any other property owned by the Issuer or any of its Restricted Subsidiaries;

        (10) Liens securing Indebtedness or other obligations of a Restricted Subsidiary owing to the Issuer or another Restricted Subsidiary permitted to be incurred in accordance with the covenant described under "Certain Covenants—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock";

        (11) Liens securing Hedging Obligations so long as the related Indebtedness is, and is permitted to be under the Indenture, secured by a Lien on the same property securing such Hedging Obligations;

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        (12) Liens on specific items of inventory or other goods and proceeds of any Person securing such Person's obligations in respect of bankers' acceptances issued or created for the account of such Person to facilitate the purchase, shipment or storage of such inventory or other goods;

        (13) leases, subleases, licenses or sublicenses granted to others in the ordinary course of business which do not materially interfere with the ordinary conduct of the business of the Issuer or any of its Restricted Subsidiaries and do not secure any Indebtedness;

        (14) Liens arising from Uniform Commercial Code financing statement filings regarding operating leases entered into by the Issuer and its Restricted Subsidiaries in the ordinary course of business;

        (15) Liens in favor of the Issuer or any Guarantor;

        (16) Liens to secure any refinancing, refunding, extension, renewal or replacement (or successive refinancing, refunding, extensions, renewals or replacements) as a whole, or in part, of any Indebtedness secured by any Lien referred to in the foregoing clauses (6), (7), (8) and (9); provided, however, that (a) such new Lien shall be limited to all or part of the same property that secured the original Lien (plus improvements on such property), and (b) the Indebtedness secured by such Lien at such time is not increased to any amount greater than the sum of (i) the outstanding principal amount or, if greater, committed amount of the Indebtedness described under clauses (6), (7), (8) and (9) at the time the original Lien became a Permitted Lien under the Indenture, and (ii) an amount necessary to pay any fees and expenses, including premiums, related to such refinancing, refunding, extension, renewal or replacement;

        (17) deposits made in the ordinary course of business to secure liability to insurance carriers;

        (18) other Liens securing obligations incurred in the ordinary course of business which obligations do not exceed $25.0 million at any one time outstanding;

        (19) Liens securing judgments for the payment of money not constituting an Event of Default under clause (5) under the caption "Events of Default and Remedies," so long as such Liens are adequately bonded and any appropriate legal proceedings that may have been duly initiated for the review of such judgment have not been finally terminated or the period within which such proceedings may be initiated has not expired;

        (20) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods in the ordinary course of business;

        (21) Liens (i) of a collection bank arising under Section 4-210 of the Uniform Commercial Code, or any comparable or successor provision, on items in the course of collection, (ii) attaching to commodity trading accounts or other commodity brokerage accounts incurred in the ordinary course of business, and (iii) in favor of banking institutions arising as a matter of law encumbering deposits (including the right of set-off) and which are within the general parameters customary in the banking industry;

        (22) Liens deemed to exist in connection with Investments in repurchase agreements permitted under "Certain Covenants—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock"; provided that such Liens do not extend to any assets other than those that are the subject of such repurchase agreements;

        (23) Liens encumbering reasonable customary initial deposits and margin deposits and similar Liens attaching to commodity trading accounts or other brokerage accounts incurred in the ordinary course of business and not for speculative purposes;

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        (24) Liens that are contractual rights of set-off (i) relating to the establishment of depository relations with banks not given in connection with the issuance of Indebtedness, (ii) relating to pooled deposit or sweep accounts of the Issuer or any of its Restricted Subsidiaries to permit satisfaction of overdraft or similar obligations incurred in the ordinary course of business of the Issuer and its Restricted Subsidiaries or (iii) relating to purchase orders and other agreements entered into with customers of the Issuer or any of its Restricted Subsidiaries in the ordinary course of business; and

        (25) Liens arising out of conditional sale, title retention, consignment or similar arrangements for the sale or purchase of goods entered into by the Issuer or any Restricted Subsidiary in the ordinary course of business.

        For purposes of this definition, the term "Indebtedness" shall be deemed to include interest on such Indebtedness.

        "Person" means any individual, corporation, limited liability company, partnership, joint venture, association, joint stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity.

        "Preferred Stock" means any Equity Interest with preferential rights of payment of dividends or upon liquidation, dissolution or winding up.

        "Qualified Proceeds" means assets that are used or useful in, or Capital Stock of any Person engaged in, a Similar Business; provided that the fair market value of any such assets or Capital Stock shall be determined by the Issuer in good faith.

        "Rating Agencies" means Moody's and S&P or if Moody's or S&P or both shall not make a rating on the Notes publicly available, a nationally recognized statistical rating agency or agencies, as the case may be, selected by the Issuer which shall be substituted for Moody's or S&P or both, as the case may be.

        "Redemption Date" has the meaning set forth under "Optional redemption."

        "Registration Rights Agreement" means the Registration Rights Agreement with respect to the Notes dated as of the Issue Date, among the Issuer, the Guarantors and the Initial Purchasers.

        "Related Business Assets" means assets (other than cash or Cash Equivalents) used or useful in a Similar Business; provided that any assets received by the Issuer or a Restricted Subsidiary in exchange for assets transferred by the Issuer or a Restricted Subsidiary will not be deemed to be Related Business Assets if they consist of securities of a Person, unless upon receipt of the securities of such Person, such Person would become a Restricted Subsidiary.

        "Representative" means any trustee, agent or representative (if any) for an issue of Senior Indebtedness of the Issuer.

        "Restricted Investment" means an Investment other than a Permitted Investment.

        "Restricted Subsidiary" means, at any time, any direct or indirect Subsidiary of the Issuer (including any Foreign Subsidiary) that is not then an Unrestricted Subsidiary; provided, however, that upon an Unrestricted Subsidiary's ceasing to be an Unrestricted Subsidiary, such Subsidiary shall be included in the definition of "Restricted Subsidiary."

        "S&P" means Standard & Poor's, a division of The McGraw-Hill Companies, Inc., and any successor to its rating agency business.

        "Sale and Lease-Back Transaction" means any arrangement providing for the leasing by the Issuer or any of its Restricted Subsidiaries of any real or tangible personal property, which property has been

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or is to be sold or transferred by the Issuer or such Restricted Subsidiary to a third Person in contemplation of such leasing.

        "SEC" means the U.S. Securities and Exchange Commission.

        "Secured Indebtedness" means any Indebtedness of the Issuer or any of its Restricted Subsidiaries secured by a Lien.

        "Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations of the SEC promulgated thereunder.

        "Senior Credit Facility" means the Credit Facility under the Credit Agreement to be entered into as of the Issue Date by and among RDA Holding Co., the Issuer, the subsidiary guarantors party thereto, the lenders party thereto in their capacities as lenders thereunder and JPMorgan Chase Bank, N.A., as Administrative Agent, including any guarantees, collateral documents, instruments and agreements executed in connection therewith, and any amendments, supplements, modifications, extensions, renewals, restatements, refundings or refinancings thereof and any indentures or credit facilities or commercial paper facilities with banks or other institutional lenders or investors that replace, refund or refinance any part of the loans, notes, other credit facilities or commitments thereunder, including any such replacement, refunding or refinancing facility or indenture that increases the amount borrowable thereunder or alters the maturity thereof (provided that such increase in borrowings is permitted under "—Certain Covenants—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock" above).

        "Senior Indebtedness" means:

        (1)   all Indebtedness of the Issuer or any Guarantor outstanding under the Senior Credit Facility and related Guarantees (including interest accruing on or after the filing of any petition in bankruptcy or similar proceeding or for reorganization of the Issuer or any Guarantor (at the rate provided for in the documentation with respect thereto, regardless of whether or not a claim for post-filing interest is allowed in such proceedings)), and any and all other fees, expense reimbursement obligations, indemnification amounts, penalties, and other amounts (whether existing on the Issue Date or thereafter created or incurred) and all obligations of the Issuer or any Guarantor to reimburse any bank or other Person in respect of amounts paid under letters of credit, acceptances or other similar instruments;

        (2)   all Hedging Obligations (and guarantees thereof) owing to a Lender (as defined in the Senior Credit Facility) or any Affiliate of such Lender (or any Person that was a Lender or an Affiliate of such Lender at the time the applicable agreement giving rise to such Hedging Obligation was entered into); provided that such Hedging Obligations are permitted to be incurred under the terms of the Indenture;

        (3)   any other Indebtedness of the Issuer or any Guarantor permitted to be incurred under the terms of the Indenture, unless the instrument under which such Indebtedness is incurred expressly provides that it is on a parity with or subordinated in right of payment to the Notes or any related Guarantee; and

        (4)   all Obligations with respect to the items listed in the preceding clauses (1), (2) and (3); provided, however, that Senior Indebtedness shall not include:

        (a)   any obligation of such Person to the Issuer or any of its Subsidiaries;

        (b)   any liability for federal, state, local or other taxes owed or owing by such Person;

        (c)   any accounts payable or other liability to trade creditors arising in the ordinary course of business;

196

        (d)   any Indebtedness or other Obligation of such Person which is subordinate or junior in any respect to any other Indebtedness or other Obligation of such Person; or

        (e)   that portion of any Indebtedness which at the time of incurrence is incurred in violation of the Indenture; provided, however, that such Indebtedness shall be deemed not to have been incurred in violation of the Indenture for purposes of this clause if such Indebtedness consists of Designated Senior Indebtedness and the holder(s) of such Indebtedness of their agent or representative (a) had no actual knowledge at the time of incurrence that the incurrence of such Indebtedness violated the Indenture and (b) shall have receive a certificate from an Officer of the Issuer to the effect that the incurrence of such Indebtedness does not violate the provisions of the Indenture.

        "Senior Subordinated Indebtedness" means:

        (1)   with respect to the Issuer, Indebtedness which ranks equal in right of payment to the Notes issued by the Issuer; and

        (2)   with respect to any Guarantor, Indebtedness which ranks equal in right of payment to the Guarantee of such entity of the Notes.

        "Significant Subsidiary" means any Restricted Subsidiary that would be a "significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X promulgated pursuant to the Securities Act, as such regulation is in effect on the Issue Date.

        "Similar Business" means any business conducted or proposed to be conducted by the Issuer and its Restricted Subsidiaries on the Issue Date or any business that is similar, reasonably related, incidental or ancillary thereto.

        "Sponsor Management Agreement" means the management agreement between certain of the management companies associated with the Investors and Reader's Digest.

        "Subordinated Indebtedness" means,

        (1)   with respect to the Issuer, any Indebtedness of the Issuer which is by its terms subordinated in right of payment to the Notes, and

        (2)   with respect to any Guarantor, any Indebtedness of any Guarantor which is by its terms subordinated in right of payment to the Guarantee of such entity of the Notes.

        "Subsidiary" means, with respect to any Person:

        (1)   any corporation, association, or other business entity (other than a partnership, joint venture, limited liability company or similar entity) of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time of determination owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person or a combination thereof or is consolidated under GAAP with such Person at such time; and

        (2)   any partnership, joint venture, limited liability company or similar entity of which

        (x)   more than 50% of the capital accounts, distribution rights, total equity and voting interests or general or limited partnership interests, as applicable, are owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person or a combination thereof whether in the form of membership, general, special or limited partnership or otherwise, and

        (y)   such Person or any Restricted Subsidiary of such Person is a controlling general partner or otherwise controls such entity.

197

        "Total Assets" means the total assets of the Issuer and its Restricted Subsidiaries on a consolidated basis determined in accordance with GAAP, as shown on the most recent balance sheet of the Issuer or such other Person as may be expressly stated.

        "Total Tangible Assets" means Total Assets after deducting accumulated depreciation and amortization, allowances for doubtful accounts, other applicable reserves and other similar items of the Issuer and its Restricted Subsidiaries and after deducting, to the extent otherwise included therein, the amounts of (without duplication):

        (1)   the excess of cost of the fair market value of assets or business acquired, as determined by the Issuer in good faith (or if such fair market value exceeds $50.0 million, in writing by an Independent Financial Advisor);

        (2)   any revaluation or other write-up in book value of assets subsequent to the last day of the fiscal quarter of the Issuer immediately preceding the Issue Date as a result of a change in the method of valuation in accordance with GAAP;

        (3)   unamortized debt discount and expenses and other unamortized deferred charges, goodwill, patents, trademarks, service marks, trade names, copyrights, licenses, organization or developmental expenses and other intangible items;

        (4)   minority interest in consolidated Subsidiaries held by Persons other than the Company or any Restricted Subsidiary;

        (5)   treasury stock;

        (6)   cash or securities set aside and held in a sinking or other analogous fund established for the purpose of redemption or other retirement of Capital Stock; and

        (7)   Investments in and assets of Unrestricted Subsidiaries.

        "Transactions" means the transactions contemplated by the Merger Agreement and the Contribution Agreements, the issuance of the Notes and borrowings under the Senior Credit Facility as in effect on the Issue Date.

        "Treasury Rate" means, as of any Redemption Date, the yield to maturity as of such Redemption Date of United States Treasury securities with a constant maturity (as compiled and published in the most recent Federal Reserve Statistical Release H.15 (519) that has become publicly available at least two Business Days prior to the Redemption Date (or, if such Statistical Release is no longer published, any publicly available source of similar market data)) most nearly equal to the period from the Redemption Date to February 15, 2012; provided, however, that if the period from the Redemption Date to February 15, 2012 is less than one year, the weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year will be used.

        "Trust Indenture Act" means the Trust Indenture Act of 1939, as amended (15 U.S.C §§ 77aaa-777bbbb).

        "Trustee" has the meaning set forth under "—General."

        "Unrestricted Subsidiary" means:

        (1)   any Subsidiary of the Issuer which at the time of determination is an Unrestricted Subsidiary (as designated by the Issuer, as provided below); and

        (2)   any Subsidiary of an Unrestricted Subsidiary.

        The Board of Directors of the Issuer may designate any Subsidiary of the Issuer (including any existing Subsidiary and any newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary unless such Subsidiary or any of its Subsidiaries owns any Equity Interests or Indebtedness

198

of, or owns or holds any Lien on, any property of, the Issuer or any Subsidiary of the Issuer (other than solely any Subsidiary of the Subsidiary to be so designated); provided that

        (1)   any Unrestricted Subsidiary must be an entity of which the Equity Interests entitled to cast at least a majority of the votes that may be cast by all Equity Interests having ordinary voting power for the election of directors or Persons performing a similar function are owned, directly or indirectly, by the Issuer;

        (2)   such designation complies with the covenants described under "—Certain Covenants—Limitation on Restricted Payments"; and

        (3)   each of:

        (a)   the Subsidiary to be so designated; and

        (b)   its Subsidiaries has not at the time of designation, and does not thereafter, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable with respect to any Indebtedness pursuant to which the lender has recourse to any of the assets of the Issuer or any Restricted Subsidiary.

        The Board of Directors of the Issuer may designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided that, immediately after giving effect to such designation, no Default shall have occurred and be continuing and either:

        (1)   the Issuer could incur at least $1.00 of additional Indebtedness pursuant to the Consolidated Leverage Ratio test described in the first paragraph under "—Certain Covenants—Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock"; or

        (2)   the Consolidated Leverage Ratio for the Issuer its Restricted Subsidiaries would be lower than such ratio for the Issuer and its Restricted Subsidiaries immediately prior to such designation, in each case on a pro forma basis taking into account such designation.

        Any such designation by the Issuer shall be notified by the Issuer to the Trustee by promptly filing with the Trustee a copy of the resolution of the board of directors of the Issuer or any committee thereof giving effect to such designation and an Officer's Certificate certifying that such designation complied with the foregoing provisions.

        "Voting Stock" of any Person as of any date means the Capital Stock of such Person that is at the time entitled to vote in the election of the board of directors of such Person.

        "Weighted Average Life to Maturity" means, when applied to any Indebtedness, Disqualified Stock or Preferred Stock, as the case may be, at any date, the quotient obtained by dividing:

        (1)   the sum of the products of the number of years from the date of determination to the date of each successive scheduled principal payment of such Indebtedness or redemption or similar payment with respect to such Disqualified Stock or Preferred Stock multiplied by the amount of such payment; by

        (2)   the sum of all such payments.

        "Wholly-Owned Subsidiary" of any Person means a Subsidiary of such Person, 100% of the outstanding Equity Interests of which (other than directors' qualifying shares and shares issued to foreign nationals under applicable law) shall at the time be owned by such Person or by one or more Wholly-Owned Subsidiaries of such Person.

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DESCRIPTION OF OTHER INDEBTEDNESS

Senior Secured Credit Facilities

Overview

        We maintain a debt financing arrangement described below, which is referred to as the "Debt Financing." The Debt Financing includes a credit agreement dated as of March 2, 2007, among Doctor Acquisition Co. (which was merged with and into the Company), RDA Holding Co., the Company, the overseas borrowers from time to time party thereto, including RD German Holdings GmbH (the "German Borrower"), JPMorgan Chase Bank, N.A., as administrative agent, the lenders from time to time party thereto, Citicorp North America, Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as co-syndication agents, and The Royal Bank of Scotland plc, as documentation agent, pursuant to which the lenders have provided us with a $1,610.0 million senior secured credit facility, consisting of a $1,310.0 million seven-year term loan facility (the "Senior Secured Term Loan Facility") and a $300.0 million six-year senior secured revolving facility (the "Senior Secured Revolving Credit Facility" and together with the Senior Secured Term Loan Facility, the "Senior Secured Credit Facilities"). The Senior Secured Term Loan Facility includes a $100.0 million tranche made available in an equivalent amount of Euros (the "Euro tranche") to the German Borrower. The following description is only a summary of certain material provisions of our Senior Secured Credit Facilities, and does not purport to be complete and is qualified in its entirety by reference to our senior secured credit agreement.

        The Company and the German Borrower are the borrowers under the Senior Secured Credit Facilities. The Senior Secured Revolving Credit Facility includes borrowing capacity available for letters of credit and for borrowings on same-day notice referred to as the swingline loans.

Interest Rates and Fees

        Borrowings under the Senior Secured Credit Facilities bear interest at a rate equal to an applicable margin plus, at our option, either (a) a base rate determined by reference to the higher of (1) the prime rate of JPMorgan Chase Bank, N.A. and (2) the federal funds rate plus 0.5% or (b) a Eurocurrency rate determined by reference to the rate (adjusted for statutory reserve requirements for Eurocurrency liabilities) for Eurocurrency deposits for a period of one, two, three or six months or, subject to availability to the lenders, nine or twelve months, as selected by the borrower, appearing on the Dow Jones Market screen. The interest rate with respect to the Senior Secured Term Loan Facility is a percentage per annum equal to (1) the base rate plus 1.00% for base rate loans and (2) the Eurocurrency rate plus 2.00% for Eurocurrency rate loans. The interest rate with respect to the Senior Secured Revolving Credit Facility is a percentage per annum equal to (1) the base rate plus 1.25% for base rate loans and (2) the Eurocurrency rate plus 2.25% for Eurocurrency rate loans. Applicable margins with respect to revolving loans are subject to reduction by up to 75 basis points based on our consolidated leverage ratio from time to time.

        In addition to paying interest on outstanding principal under the Senior Secured Credit Facilities, our senior secured credit agreement provides that we are required to pay a commitment fee to the lenders under the Senior Secured Revolving Credit Facility in respect of the average daily unutilized commitments thereunder. The initial commitment fee rate is 0.375% per annum and may be reduced subject to our attaining certain leverage ratios. We are also required to pay a letter of credit fee equal to the applicable margin for revolving loans on the daily maximum amount available to be drawn under each letter of credit (which fee may be reduced subject to our attaining certain leverage ratios) and a fronting fee equal to 0.125% per annum on the daily maximum amount available to be drawn under each letter of credit, in addition to customary letter of credit fees.

200

Prepayments

        Our senior secured credit agreement requires us to prepay outstanding term loans, subject to certain exceptions, with:

•

100% of the net cash proceeds of any incurrence of debt, other than certain debt permitted under the senior secured credit agreement;



•

100% of the net cash proceeds of all nonordinary course asset sales or other dispositions of property by RDA Holding Co. or the Company or its subsidiaries (including insurance and condemnation proceeds), subject to certain exceptions, if we do not commit to reinvest those proceeds in assets to be used in our business or to make certain other permitted investments within 12 months of such sale or disposition, as long as such reinvestment is completed within an additional 12 months of such commitment to reinvest; and



•

50% (which percentage will be reduced to 25% and 0% if our total leverage ratio is less than certain ratios) of our annual excess cash flow.

        We may voluntarily prepay outstanding loans under the Senior Secured Credit Facilities at any time without premium or penalty, subject to customary "breakage" costs with respect to LIBOR loans and certain other exceptions.

Amortization

        We are required to repay installments on the loans under the Senior Secured Term Loan Facility in equal quarterly installments (with any remainder due on the seventh anniversary of the closing date of the Senior Secured Credit Facilities) in quarterly amounts equal to 0.25% of the initial aggregate principal amount.

        Principal amounts outstanding under the Senior Secured Revolving Credit Facility are due and payable in full at maturity, six years from the date of the closing of the Senior Secured Credit Facilities.

Guarantees and Security

        All obligations under the Senior Secured Credit Facilities, including the loans made under the Euro tranche to the German Borrower, are unconditionally guaranteed by RDA Holding Co., the Company and, subject to certain exceptions, each of RDA Holding Co.'s direct and indirect domestic wholly-owned subsidiaries, referred to in this section collectively as "Guarantors." The loans made to the German Borrower are, subject to certain exceptions, also unconditionally guaranteed by the subsidiaries of the German Borrower as well as secured by all of the stock and certain assets of those subsidiaries.

        All obligations under the Senior Secured Credit Facilities, and the guarantees of those obligations, are secured by the following assets of the Guarantors, subject to certain exceptions:

•

100% of the common stock of the Company and each of its direct and indirect domestic subsidiaries owned by the Company or a U.S. Guarantor, and 65% of the voting common stock and 100% of the non-voting common stock of direct foreign subsidiaries of the Company or a U.S. Guarantor; and



•

a security interest in substantially all tangible and intangible assets of the Company and each U.S. Guarantor.

201

Certain Covenants and Events of Default

        The senior secured credit agreement contains a number of covenants that, among other things, restrict, subject to certain exceptions, our ability to:

•

incur additional indebtedness;



•

create liens on assets;



•

engage in mergers or consolidations;



•

sell assets;



•

pay dividends and distributions;



•

make investments, loans or advances;



•

repay subordinated indebtedness (including the Notes offered hereby);



•

make certain acquisitions;



•

engage in certain transactions with affiliates;



•

enter into certain burdensome agreements;



•

amend material agreements governing our subordinated indebtedness (including the Notes offered hereby);



•

change our lines of business; and



•

make capital expenditures.

        In addition, the senior secured credit agreement includes a financial covenant requiring us to maintain a maximum leverage ratio.

        The senior secured credit agreement also contains certain customary affirmative covenants and events of default.

International Lines of Credit

        International lines of credit and overdraft facilities totaled $43.6 million at September 30, 2007, of which $0 was outstanding at September 30, 2007. These lines of credit are subject to renewal annually.

202

MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS

        The following discussion is a summary of certain material U.S. federal income tax consequences of the Exchange Offer to holders of Original Notes, but is not a complete analysis of all potential tax effects. The summary below is based upon the Internal Revenue Code of 1986, as amended (the "Code"), regulations of the Treasury Department, administrative rulings and pronouncements of the Internal Revenue Service and judicial decisions, all of which are subject to change, possibly with retroactive effect. This summary does not address all of the U.S. Federal income tax consequences that may be applicable to particular holders, including dealers in securities, financial institutions, insurance companies and tax-exempt organizations. In addition, this summary does not consider the effect of any foreign, state, local, gift, estate or other tax laws that may be applicable to a particular holder. This summary applies only to a holder that acquired Original Notes at original issue for cash and holds such Original Notes as a capital asset within the meaning of Section 1221 of the Code.

        An exchange of Original Notes for Exchange Notes pursuant to the Exchange Offer will not be treated as a taxable exchange or other taxable event for U.S. federal income tax purposes. Accordingly, there will be no U.S. Federal income tax consequences to holders who exchange their Original Notes for Exchange Notes in connection with the Exchange Offer and any such holder will have the same adjusted tax basis and holding period in the Exchange Notes as it had in the Original Notes immediately before the exchange.

        The foregoing discussion of certain U.S. federal income tax considerations does not consider the facts and circumstances of any particular holder's situation or status. Accordingly, each holder of Original Notes considering this Exchange Offer should consult its own tax advisor regarding the tax consequences of the Exchange Offer to it, including those under state, foreign and other tax laws.

PLAN OF DISTRIBUTION

        Each broker-dealer that receives Exchange Notes for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes during the 180 days after the expiration of the Exchange Offer. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Notes received in exchange for Original Notes where such Original Notes were acquired as a result of market-making activities or other trading activities. We have agreed that, for a period of not less than 180 days after the expiration date, we will make this prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any such resale.

        We will not receive any proceeds from any sale of Exchange Notes by broker-dealers. Exchange Notes received by broker-dealers for their own account pursuant to the Exchange Offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the Exchange Notes or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer and/or the purchasers of any such Exchange Notes. Any broker-dealer that receives Exchange Notes for its own account in the Exchange Offer in exchange for Notes that were acquired by such broker-dealer as a result of market-making or other trading activities may be deemed to be an "underwriter" within the meaning of the Securities Act and must deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such Exchange Notes. The letter of transmittal states that, by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act.

        For a period of 180 days after the expiration date, we will promptly send additional copies of this prospectus and any amendment or supplement to this prospectus to any broker-dealer that requests

203

such documents in the letter of transmittal. We have agreed to pay all expenses incident to the Exchange Offer other than dealers' and brokers' discounts, commissions and transfer taxes, if any, and will indemnify the holders of the Original Notes (including any broker-dealers) against certain liabilities, including liabilities under the Securities Act.

VALIDITY OF THE EXCHANGE NOTES

        The validity of the Exchange Notes will be passed upon for us by Cravath, Swaine & Moore LLP, New York, New York.

EXPERTS

        The combined consolidated financial statements of The Reader's Digest Association, Inc. and subsidiaries as of June 30, 2007, and related combined consolidated statements of operations, stockholders' equity, and cash flows for the year then ended included in this prospectus, have been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report appearing herein. The combined balance sheet of WRC Media and subsidiaries, now known as The Reader's Digest Association, Inc., as of June 30, 2006, and the related combined statements of operations, changes in stockholders' deficit, and cash flows for the years ended June 30, 2006 and 2005 included in this prospectus, have been audited by KPMG LLP, an independent registered public accounting firm, as stated in their report appearing herein.

        The consolidated financial statements of The Reader's Digest Association, Inc. and subsidiaries for the year ended June 30, 2006, and the related statements of operations, stockholders' equity, and cash flows for the year then ended included in this prospectus, have been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report appearing herein. The consolidated financial statements of The Reader's Digest Association, Inc. and subsidiaries for the year ended June 30, 2005, and the related statements of operations, stockholders' equity and cash flows for the years ended June 30, 2005 and 2004 included in this prospectus, have been audited by KPMG LLP, an independent registered public accounting firm, as stated in their report appearing herein.

204

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

		Page
Consolidated and Combined Financial Statements for the Reader's Digest Association, Inc. and Subsidiaries, Formerly WRC Media Inc.:
Consolidated Financial Statements—for the years ended June 30, 2007, June 30, 2006 and June 30, 2005:
	Report of Independent Registered Public Accounting Firm for June 30, 2007 and the Year Then Ended	F-3
	Report of Independent Registered Public Accounting Firm for June 30, 2006 and the Years Ended June 30, 2006 and 2005	F-4
	Combined Consolidated Statement of Operations for the Year Ended June 30, 2007 and Combined Statements of Operations for the Years Ended June 30, 2006 and 2005	F-5
	Consolidated Balance Sheet as of June 30, 2007 and Combined Balance Sheet as of June 30, 2006	F-6
	Combined Consolidated Statement of Cash Flows for the Year Ended June 30, 2007 and Combined Statements of Cash Flows for the Years Ended June 30, 2006 and 2005	F-7
	Combined Consolidated Statement of Changes in Stockholders' Equity (Deficit) for the Year Ended June 30, 2007 and Combined Statements of Changes in Stockholders' Equity (Deficit) for the Years Ended June 30, 2006 and 2005	F-8
	Notes to Combined Consolidated and Combined Financial Statements	F-9
Consolidated Financial Statements—for the three month periods ended September 30, 2007 and 2006 (unaudited):
	Consolidated Condensed Statement of Operations for the Three-Month Period Ended September 30, 2007 and Combined Condensed Statement of Operations for the Three-Month Period Ended September 30, 2006	F-65
	Consolidated Condensed Balance Sheets as of September 30, 2007 and June 30, 2007	F-66
	Consolidated Condensed Statement of Cash Flows for the Three-Month Period Ended September 30, 2007 and Combined Condensed Statement of Cash Flows for the Three-Month Period Ended September 30, 2006	F-67
	Notes to Consolidated and Combined Condensed Financial Statements—for the three and six months ended December 31, 2005 and 2004	F-68
Consolidated Historical Financial Statements for The Reader's Digest Association, Inc. and Subsidiaries:
Consolidated Financial Statements—for the years ended June 30, 2006, June 30, 2005 and June 30, 2004:
	Report of Independent Registered Public Accounting firm for June 30, 2006 and the year then ended	F-79
	Report of Independent Registered Public Accounting Firm for June 30, 2005 and the years ended June 30, 2005 and 2004	F-80
	Consolidated statements of operations—for the years ended June 30, 2006, 2005 and 2004	F-81
	Consolidated balance sheets—as of June 30, 2006 and 2005	F-82

F-1

	Consolidated statements of cash flows—for the years ended June 30, 2006, 2005 and 2004	F-83
	Consolidated statements of changes in stockholders' equity—for the years ended June 30, 2006, 2005 and 2004	F-84
	Notes to consolidated financial statements	F-85
Pro Forma Financial Information:
	Pro forma combined consolidated statement of operations for the year ended June 30, 2007	F-123
	Notes to pro forma combined consolidated statement of operations for the year ended June 30, 2007	F-124

F-2

Report of Independent Registered Public Accounting Firm

The Stockholders and Board of Directors
The Reader's Digest Association, Inc.

        We have audited the accompanying consolidated balance sheet of The Reader's Digest Association, Inc. and subsidiaries as of June 30, 2007, and the related combined consolidated statements of operations, stockholders' equity, and cash flows for the year then ended, of the corporations listed in Note 1. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

        We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company's internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provide a reasonable basis for our opinion.

        In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of The Reader's Digest Association, Inc. and subsidiaries at June 30, 2007, and the combined consolidated results of their operations and their cash flows for the year ended June 30, 2007, of the corporations listed in Note 1, in conformity with U.S. generally accepted accounting principles.

/s/ Ernst & Young LLP

New York, New York
December 12, 2007

F-3

Independent Auditors' Report

The Board of Directors
WRC Media Inc.:

        We have audited the accompanying combined balance sheet of WRC Media Inc. and subsidiaries, now known as The Reader's Digest Association, Inc. ("the Company"), as of June 30, 2006, and the related combined statements of operations, changes in stockholders' deficit, and cash flows for the years ended June 30, 2006 and 2005. These combined financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these combined financial statements based on our audits.

        We conducted our audits in accordance with the standards of the Public Company Accounting Overisight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the combined financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        In our opinion, the combined financial statements referred to above present fairly, in all material respects, the financial position of WRC Media Inc. and subsidiaries as of June 30, 2006, and the results of its operations and its cash flows for the years ended June 30, 2006 and 2005 in conformity with U.S. generally accepted accounting principles.

/s/ KPMG LLP

New York, New York
December 11, 2007

F-4

The Reader's Digest Association, Inc. and Subsidiaries

Combined Consolidated Statements of Operations for the Year Ended June 30, 2007 and
Combined Statements of Operations for the Years Ended June 30, 2006 and 2005

			Years ended June 30,
			2007			2006			2005
			In millions
Revenues			$	1,076.4		$	394.1		$	442.5
Product, distribution and editorial expenses				(496.8	)		(180.3	)		(192.6	)
Promotion, marketing and administrative expenses				(578.9	)		(212.4	)		(245.2	)
Goodwill and intangible asset impairment				—			—			(70.1	)
Other operating items, net				(36.2	)		(14.5	)		(20.6	)
	Operating Loss			(35.5	)		(13.1	)		(86.0	)
Interest expense, including amortization of deferred financing costs of $(6.5), $(8.8) and $(2.3), respectively				(78.9	)		(25.2	)		(58.7	)
Gain on recapitalization at WRC Media, Inc.				18.5			38.0			—
Other (expense) income, net				0.5			(0.2	)		0.1
	Loss before (provision) benefit for income taxes, discontinued operations and extraordinary item			(95.4	)		(0.5	)		(144.6	)
Income tax benefit (provision)				4.7			(2.5	)		51.9
	Loss from continuing operations			(90.7	)		(3.0	)		(92.7	)
	Income from discontinued operations WRC Media Inc. (including gain on sale of subsidiary of $92.2 net of taxes of $(39.2) in fiscal 2006)			—			55.1			8.4
		Direct Holdings U.S. Corp.		—			—			8.5
	Extraordinary gain from release of purchase contingency at Direct Holdings U.S. Corp.			—			7.3			—
Net (loss) income			$	(90.7	)	$	59.4		$	(75.8	)

See accompanying Notes to Combined Consolidated and Combined Financial Statements.

F-5

The Reader's Digest Association, Inc. and Subsidiaries

Consolidated Balance Sheet as of June 30, 2007 and
Combined Balance Sheet as of June 30, 2006

		At June 30,
		2007			2006
		In millions, except share data
Assets
Current assets
	Cash and cash equivalents	$	50.2		$	7.5
	Accounts receivable, net		326.0			35.5
	Inventories		188.1			24.6
	Prepaid and deferred promotion costs		61.4			3.5
	Prepaid expenses and other current assets		164.9			19.7
Total current assets			790.6			90.8
Property, plant and equipment, net			117.7			24.6
Goodwill			1,844.3			63.3
Other intangible assets, net			1,090.7			15.3
Prepaid pension assets			336.5			—
Other noncurrent assets			218.8			5.2
Total assets		$	4,398.6		$	199.2
Liabilities and stockholders' equity
Current liabilities
	Short-term debt	$	13.1		$	164.9
	Accounts payable		238.2			25.9
	Accrued expenses		320.6			65.4
	Income taxes payable		22.7			0.6
	Unearned revenues		311.9			25.5
	Other current liabilities		11.3			1.9
Total current liabilities			917.8			284.2
Long-term debt			1,981.4			17.9
Unearned revenues			102.2			1.7
Accrued pension			112.9			—
Postretirement and postemployment benefits other than pensions			61.1			—
Other noncurrent liabilities			536.7			10.5
Total liabilities		$	3,712.1		$	314.3
Commitments and contingencies
Stockholders' equity (deficit)
	Preferred stock		20.7			—
	Common stock (par value $1.00 per share, authorized and issued 1,000 shares at June 30, 2007; par value $0.01, authorized 400,300,000 shares on a combined basis, 309,380,484 issued and outstanding on a combined basis at June 30, 2006)		—			3.1
	Paid-in capital		1,001.8			195.8
	Accumulated deficit		(405.1	)		(313.6	)
	Accumulated other comprehensive gain (loss)		69.1			(0.4	)
Total stockholders' equity (deficit)			686.5			(115.1	)
Total liabilities and stockholders' equity (deficit)		$	4,398.6		$	199.2

See accompanying Notes to Combined Consolidated and Combined Financial Statements.

F-6

The Reader's Digest Association, Inc. and Subsidiaries

Combined Consolidated Statements of Cash Flows for the Year Ended June 30, 2007 and
Combined Statement of Cash Flows for the Years Ended June 30, 2006 and 2005

		Years ended June 30,
		2007			2006			2005
		In millions
Cash flows from operating activities
Net loss from continuing operations		$	(90.7	)	$	(3.0	)	$	(92.7	)
Depreciation and amortization			36.7			15.0			20.0
Non-cash gain on recapitalization			(18.5	)		(38.0	)		—
Accrual of dividends on preferred stock			0.5			1.5			24.6
Accrual of payment in kind interest on long-term debt			—			—			0.5
Non-cash income tax benefit			—			0.5			(45.4	)
Non-cash write-off of deferred financing fees			2.5			7.4			—
Impairment of prepaid fulfillment and distribution			—			11.8			18.3
Impairment of goodwill and intangibles			—			—			70.1
Amortization of debt issue costs			4.0			1.4			2.3
Stock-based compensation			2.0			(0.2	)		0.2
Net gain on sales of long-term assets			0.2			—			—
Changes in assets and liabilities, net of effects of acquisitions and dispositions
	Accounts receivable, net		56.6			3.6			1.9
	Inventories		31.3			1.7			2.4
	Prepaid and deferred promotion costs		(17.4	)		(2.5	)		1.1
	Other assets		(29.6	)		(4.7	)		(28.1	)
	Unearned revenues		19.1			0.4			2.0
	Income and deferred taxes, net		(0.3	)		(1.3	)		0.1
	Accounts payable and accrued expenses		(140.1	)		9.4			(0.8	)
	Other liabilities		(31.9	)		(3.3	)		(7.7	)
Net change in cash due to continuing operating activities			(175.6	)		(0.3	)		(31.2	)
Net change in cash due to discontinued operating activities			—			1.1			24.6
Net change in cash due to operating activities			(175.6	)		0.8			(6.6	)
Cash flows from investing activities
Payments for business acquisitions			—			(0.7	)		—
Proceeds from sales of property, plant and equipment			14.4			—			—
Capital expenditures			(14.4	)		(12.3	)		(10.9	)
Net change in cash due to continuing investing activities			—			(13.0	)		(10.9	)
Net change in cash due to discontinued investing activities			—			264.8			14.2
Net change in cash due to investing activities			—			251.8			3.3
Cash flows from financing activities
Proceeds from borrowings			1,921.0			80.2			6.2
Debt payments			(895.8	)		—			—
Proceeds from revolving credit line			—			36.5			20.0
Repayments of revolving credit line			—			(26.5	)		(16.0	)
Repayments of Subordinated Notes			—			(163.3	)		(7.6	)
Repayments of Second-Lien Term Loan			—			(146.5	)		—
Short-term borrowings, net			85.2			—			—
Cash paid for financing fees			(65.2	)		(4.3	)		—
Proceeds from sale of issuance of common stock			—			26.0			—
Redemption of senior preferred stock			—			(55.4	)		—
Redemption fees of junior preferred stock			—			(0.2	)		—
Distribution to RDA Holding Co., net of cash acquired in the acquisition transaction			(1,553.1	)		—			—
Capital contribution from RDA Holding Co.			725.1			—			—
Other, net			(0.4	)		(1.5	)		—
Net change in cash due to continuing financing activities			216.8			(255.0	)		2.6
Net change in cash due to discontinued financing activities			—			—			—
Net change in cash due to financing activities			216.8			(255.0	)		2.6
Effect of exchange rate fluctuations on cash and cash equivalents			1.5			0.3			0.2
Net change in cash and cash equivalents			42.7			(2.1	)		(0.5	)
Cash and cash equivalents at beginning of year			7.5			9.6			10.1
Cash and cash equivalents at end of year		$	50.2		$	7.5		$	9.6
Supplemental information
Cash paid for interest		$	31.6		$	14.6		$	33.0
Cash paid for income taxes		$	14.5		$	4.2		$	1.3

See accompanying Notes to Combined Consolidated and Combined Financial Statements.

F-7

The Reader's Digest Association, Inc. and Subsidiaries

Combined Consolidated Statement of Changes in Stockholders' Equity (Deficit) for the year ended June 30, 2007 and Combined Statement of Changes in Stockholders' Equity (Deficit) for the years ended June 30, 2006 and 2005

			Preferred Stock			Common Stock			Paid-in Capital			Accumulated Deficit			Accumulated Other Comprehensive Loss			Total
			In millions
Balance at June 30, 2004			$	23.9		$	0.1		$	131.8		$	(290.1	)	$	(2.2	)	$	(136.5	)
Comprehensive loss
	Net loss												(75.8	)					(75.8	)
	Other comprehensive loss:
		Translation gain														0.9			0.9
		Minimum pension liability														0.1			0.1
Total comprehensive loss																		$	(74.8	)
Stock compensation										0.2									0.2
18% junior preferred stock dividends				4.6									(4.6	)					—
Balance at June 30, 2005			$	28.5		$	0.1		$	132.0		$	(370.5	)	$	(1.2	)	$	(211.1	)
Comprehensive income
	Net income												59.4						59.4
	Other comprehensive income:
		Translation gain														(1.1	)		(1.1	)
		Unrealized gain on derivative contract														0.1			0.1
		Minimum pension liability											(1.8	)		1.8			—
Total comprehensive income																		$	58.4
Issuance of common stock							2.1			23.9									26.0
Elimination of common stock subject to redemption										0.9									0.9
Redemption of 15% senior preferred stock classified as debt							0.9			10.6									11.5
Redemption of 18% junior preferred stock				(28.8	)					28.6									(0.2	)
Stock compensation										(0.2	)								(0.2	)
Due from Lillian Vernon Corporation													(0.4	)					(0.4	)
18% junior preferred stock dividends				0.3									(0.3	)					—
Balance at June 30, 2006			$	—		$	3.1		$	195.8		$	(313.6	)	$	(0.4	)	$	(115.1	)
Comprehensive loss
	Net loss												(90.7	)					(90.7	)
	Other comprehensive income:
		Translation gain, net of deferred tax liability of $(0.2)														1.7			1.7
		Unrealized gain on derivatives, net of deferred taxes of $(4.0)														6.8			6.8
		Deferred pension liabilities and other retirement benefits, net of deferred taxes of $(31.9)														61.0			61.0
Total comprehensive loss																		$	(21.2	)
Reader's Digest Association Inc. preferred stock assumed in purchase accounting				20.7															20.7
WRC Media Inc. Common Stock (see Note 2, Entities under Common Control for further information)							(3.1	)		3.1									—
RDA Holding Co. capital contribution										725.1									725.1
Distribution to RDA Holding Co.										(3.9	)								(3.9	)
Adjustment of historically carrying amounts (38.5% for WRC Media, Inc. and 15.6% for Direct Holdings U.S. Corp. of fair value of assets acquired and liabilities assumed (see Note 2, Entities under Common Control for further information)										80.2									80.2
Assumption of Direct Holdings Worldwide Corp. liabilities										(1.4	)								(1.4	)
Stock-based compensation expense										2.9									2.9
Preferred stock dividends													(0.8	)					(0.8	)
Balance at June 30, 2007			$	20.7		$	—		$	1,001.8		$	(405.1	)	$	69.1		$	686.5

Accumulated Other Comprehensive Loss, net of tax, is comprised of foreign currency translation adjustments of $1.3, $(0.5) and $0.6 at June 30, 2007, 2006 and 2005 respectively; deferred pension liabilities and other retirement benefits of $61.0 and ($1.8) at June 30, 2007 and 2005, respectively; and unrealized gains on derivatives of $6.8 and $0.1 at June 30, 2007 and 2006.

See accompanying Notes to Combined Consolidated and Combined Financial Statements.

F-8

The Reader's Digest Association, Inc. and Subsidiaries

Notes to Combined Consolidated and Combined Financial Statements

Subsequent to March 2, 2007 and unless indicated otherwise, references in Notes to Combined Consolidated and Combined Financial Statements to "we," "us" and "our" are to The Reader's Digest Association, Inc. and subsidiaries, WRC Media Inc. and Direct Holdings U.S. Corp. Prior to March 2, 2007, these references are to the combined operations of WRC Media Inc. and Direct Holdings U.S. Corp. All references to 2007, 2006 and 2005, unless otherwise indicated, are to fiscal 2007, fiscal 2006 and fiscal 2005, respectively. Our fiscal year is the period from July 1 through June 30. Dollars are presented in millions, except for share and per share data.

Note 1 Organization and Summary of Significant Accounting Policies

Description of Our Business

        We are a diverse multimedia publisher and a provider of information, entertainment and education through published magazines, books, educational products, recorded music collections and home video products. We sell these and other products worldwide through direct marketing and direct sales channels. Our best known trademark is our flagship brand, Reader's Digest. Our business for 2007 is organized and reports across three primary business segments: Reader's Digest North America, Reader's Digest International, and School & Educational Services (formerly known as Consumer Business Services). For fiscal 2007, we also had two additional reportable segments, WRC Media Inc. ("WRC Media"), and Direct Holdings U.S. Corp. ("Direct Holdings"), business that have not yet been fully integrated into our three primary reportable segments. For further commentary regarding these segments, see Management's Discussion and Analysis and Note 15, Segments.

Basis of Presentation and Use of Estimates

        The accompanying combined consolidated financial statements as of June 30, 2007 and for the year then ended include the accounts of The Reader's Digest Association, Inc. and its majority-owned subsidiaries as of March 2, 2007 and the predecessor entities WRC Media and Direct Holdings for the full year. The Reader's Digest Association, Inc. and its majority owned subsidiaries are owned by RDA Holding Co., with the ultimate parent being Ripplewood Holdings L.L.C. The accompanying combined financial statements as of June 30, 2006 and for the years ended June 30, 2006 and 2005 include only the accounts of WRC Media and Direct Holdings. Accordingly, comparability of the year ended June 30, 2007 to the years ended June 30, 2006 and 2005 is limited. See Note 3, Acquisitions and Divestitures, for the pro-forma results as though the acquisition took place at the beginning of the periods presented.

        On January 23, 2007, RDA Holding Co. (a Ripplewood Holdings L.L.C. ("Ripplewood") controlled entity), WRC Acquisition Co. (a subsidiary of RDA Holding Co.) and WRC Media entered into a merger agreement that provided for WRC Acquisition Co. to merge with and into WRC Media, with WRC Media being the surviving corporation (the "WRC Media Merger"). An investment fund affiliated with Ripplewood acquired its original interest in WRC Media in 1999 and had at the time of the WRC Media Merger approximately a 46% economic interest and a majority voting interest in WRC Media. The merger consideration of $100.7 paid to WRC Media's existing stockholders to acquire all the common stock of WRC Media at the closing of the WRC Merger on March 2, 2007 included a combination of RDA Holding Co. common stock ($80.6), RDA Holding Co. junior pay-in-kind preferred stock ($20.0) and cash ($0.1).

        On January 23, 2007, RDA Holding Co. entered into a stock acquisition agreement to acquire all the common stock of Direct Holdings in exchange for shares of common stock of RDA Holding Co. and net cash totaling $56.7 (the "Direct Holdings Stock Acquisition"). An investment fund affiliated

F-9

The Reader's Digest Association, Inc. and Subsidiaries

Notes to Combined Consolidated and Combined Financial Statements (Continued)

Note 1 Organization and Summary of Significant Accounting Policies (Continued)

with Ripplewood acquired its original interest in Direct Holdings in December 2003 and had at the time of the Direct Holdings Stock Acquisition approximately an 84% voting and economic interest in Direct Holdings. The net consideration of $56.7 paid at the closing of the Direct Holdings Stock Acquisition on March 2, 2007 included a combination of RDA Holding Co. common stock ($50.1) and net cash ($6.6).

        On March 2, 2007, RDA Holding Co. acquired The Reader's Digest Association, Inc. pursuant to a Merger Agreement dated November 16, 2006 among The Reader's Digest Association, Inc., RDA Holding Co. and Doctor Acquisition Co. (a wholly owned subsidiary of RDA Holding Co.) (the "RDA Merger Agreement"). Pursuant to the RDA Merger Agreement, Doctor Acquisition Co. was merged with and into The Reader's Digest Association, Inc., with The Reader's Digest Association, Inc. being the surviving corporation (the "Acquisition Transaction"). In the Acquisition Transaction, each outstanding share of common stock of The Reader's Digest Association, Inc. (except those held in treasury) was converted into the right to receive $17.00 in cash and each outstanding share of Doctor Acquisition Co. was converted into one share of common stock of The Reader's Digest Association, Inc., as the surviving corporation. Prior to the Acquisition Transaction, The Reader's Digest Association, Inc. was a publicly traded company listed on the New York Stock Exchange. Upon the closing of the Acquisition Transaction, RDA Holding Co. became the owner of all the issued and outstanding common stock of The Reader's Digest Association, Inc., as the surviving corporation of the Acquisition Transaction. Concurrently with the closing of The Reader's Digest Association, Inc. acquisition on March 2, 2007, RDA Holding Co. contributed all of the outstanding shares of WRC Media and Direct Holdings to The Reader's Digest Association, Inc.

        Prior to the acquisition of The Reader's Digest Association, Inc., investment funds affiliated with Ripplewood controlled a majority of the voting rights in both WRC Media and Direct Holdings. WRC Media is treated as the predecessor company since Ripplewood acquired its controlling ownership position in WRC Media in 1999, prior to its ownership position in Direct Holdings and The Reader's Digest Association, Inc. The combination of WRC Media and Direct Holdings for the periods prior to March 2, 2007 was accounted for using the accounting method prescribed in Statement of Financial Accounting Standards ("SFAS") No. 141, "Business Combinations," for a combination of entities under common control. See Note 2, Entities under Common Control, for additional information.

        The acquisition of The Reader's Digest Association, Inc. by RDA Holding Co. was accounted for using the purchase method of accounting prescribed in SFAS No. 141. (See Note 3, Acquisition and Divestitures, for additional information.) Accordingly, the consolidated results of The Reader's Digest Association, Inc. are included in the combined consolidated financial statements from the acquisition date on March 2, 2007 and include the pushdown of purchase consideration from RDA Holding Co. As a result, the accompanying combined financial statements of The Reader's Digest Association, Inc. and subsidiaries consist exclusively of the combined results of WRC Media and Direct Holdings for all periods prior to March 2, 2007.

        All significant intercompany accounts and transactions have been eliminated in consolidation and combination. These financial statements are prepared in conformity with U.S. generally accepted accounting principles, which require management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of operating revenues and expenses during the reporting period. These estimates are based on management's knowledge of current events and actions

F-10

The Reader's Digest Association, Inc. and Subsidiaries

Notes to Combined Consolidated and Combined Financial Statements (Continued)

Note 1 Organization and Summary of Significant Accounting Policies (Continued)

that we may undertake in the future; however, actual results may ultimately differ from those estimates. The primary estimates underlying our combined consolidated and combined financial statements include the allocation of purchase consideration, allowances for returns and doubtful accounts, valuations of inventories, restructuring charges, recoverability of direct response advertising, recoverability of goodwill, intangible assets and long-lived assets, income taxes, estimates of pension, postemployment and postretirement benefits and valuations of stock-based compensation.

        The Reader's Digest Association, Inc. reports on a fiscal year that begins July 1. The years ended June 30, 2007 and 2006 are fiscal 2007 and 2006, respectively. WRC Media and Direct Holdings previously reported on a fiscal year that ended on December 31 and on a fiscal year that ended on the last Saturday in June, respectively. Both WRC Media and Direct Holdings changed their respective fiscal year ends to June 30, which was retroactively applied to the 2006 and 2005 combined financial statements. Direct Holdings' 2006 fiscal year began on June 26, 2005 and ended on June 24, 2006 and its 2005 fiscal year began on June 24, 2004 and ended on June 25, 2005. The period from June 25, 2006 to June 30, 2006 and June 26, 2005 to June 30, 2005 is not material to the combined financial statements for 2006 and 2005, respectively.

Concentrations of Credit Risk

        Financial instruments that potentially expose us to concentrations of credit risk consist primarily of trade accounts receivable and our interest rate swaps. We believe our concentrations of credit risk with respect to trade receivables are limited due to our large number of customers, their low individual dollar balances and their dispersion across many different geographic and economic environments. Our interest rate swap agreements are with a diverse group of large international banks. See Note 8, Financial Instruments for further information.

        At June 30, 2006, a significant customer had an accounts receivable balance of approximately $5.0.

Cash and Cash Equivalents

        We consider all highly liquid investments with original maturities of three months or less at the date of purchase to be cash equivalents. The carrying amount approximates fair value based upon the short-term maturity of these investments.

Inventories

        Inventories consist primarily of finished goods and raw materials (including paper) and are stated at the lower of cost or market value. Cost is determined using the weighted average cost method or the first-in, first-out (FIFO) method. We periodically assess our inventory for obsolescence and to ensure it is recorded at the lower of cost or market value.

Long-Lived Assets

Property, Plant and Equipment, Net

        Assets that comprise property, plant and equipment, net are stated at cost less accumulated depreciation and amortization. Depreciation expense is generally calculated on a straight-line basis over the estimated useful lives of the assets: 10-40 years for buildings; 3-10 years for equipment, furniture and fixtures; and 3-5 years for software capitalized for internal use. Leasehold improvements are

F-11

The Reader's Digest Association, Inc. and Subsidiaries

Notes to Combined Consolidated and Combined Financial Statements (Continued)

Note 1 Organization and Summary of Significant Accounting Policies (Continued)

amortized on a straight-line basis over the initial term of the lease or the useful life of the improvement, whichever is shorter. Maintenance and repairs are expensed as incurred.

Capitalized Software to be Sold, Leased or Otherwise Marketed

        We capitalize software cost to be sold, leased or otherwise marketed under SFAS 86, "Computer Software to be Sold, Leased, or Otherwise Marketed." Research and development costs are charged to expense when incurred. Additionally, we capitalize acquired and developed technologies that meet the provisions of SFAS 86. The establishment of technological feasibility and the ongoing assessment of the recoverability of these costs require considerable judgment by management with respect to certain external factors, including, but not limited to, anticipated future gross product revenues, estimated economic product lives and changes in software and hardware technology. Software development costs are amortized on a straight-line basis over the expected life of the product which is generally four years. We periodically evaluate the net realizable value of capitalized software development costs based on factors such as budgeted sales, product development cycles and management's market emphasis. Amortization of software to be sold of $(6.0), $(4.6) and $(3.4) for 2007, 2006 and 2005, respectively, is included in product, distribution and editorial expenses on the accompanying combined consolidated statement of operations.

Goodwill and Other Intangible Assets, Net

        Goodwill represents the excess of costs over the fair value of net assets of acquired businesses. Other intangible assets, net comprises trade names, licensing agreements, customer relationships and databases, favorable lease commitments, technology and software. Acquired intangibles with finite lives are amortized, on a straight-line basis, over their estimated useful lives. See Note 2, Entities under Common Control, and Note 7, Goodwill and Other Intangible Assets, Net, for additional information.

Impairment of Long-Lived Assets

        We review for recoverability, at least annually (in the fourth quarter), the carrying amount of goodwill and intangibles with indefinite lives. This assessment involves comparing the fair value of the reporting unit or asset, as applicable, to its carrying value. Recognition of the impairment, if any, is determined in accordance with the SFAS No. 142, "Goodwill and Other Intangible Assets." See Note 7, Goodwill and Other Intangible Assets, Net, for additional information.

        Intangible assets with finite lives and property, plant and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of that asset may not be recoverable in accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." We assess recoverability by comparing the asset's carrying amount to the undiscounted future net cash flows expected to be generated by the asset. If we determine that the asset is impaired, the impairment recognized is the amount by which the carrying amount of the asset exceeds the fair value of the asset.

        In accordance with SFAS 144, long-lived assets that management have committed to sell at fair market value, including establishing a program to locate a buyer within a year, and are available for sale in present condition are reported as assets held for sale. In addition, the results of operations of a component of an entity that has either been disposed of or classified as held for sale shall be reported in discontinued operations if the operations and cash flows of the component have been eliminated

F-12

The Reader's Digest Association, Inc. and Subsidiaries

Notes to Combined Consolidated and Combined Financial Statements (Continued)

Note 1 Organization and Summary of Significant Accounting Policies (Continued)

from the ongoing operations of the entity as a result of the disposal transaction and the entity will not have any significant continuing involvement in the operation of the component after the disposal transaction. See Note 3, Acquisitions and Divestitures, for further information.

Direct Holdings' Prepaid fulfillment and distribution services

        Prior to August 31, 2007, Direct Holdings shared fulfillment and distribution, information services and other administrative functions with Lillian Vernon Corporation (LVC), a former related party. See Note 16, Related Party Transactions, for further information. As part of these shared services, Direct Holdings made payments to fund its share of costs associated with these services. In addition, Direct Holdings made other payments in advance of receiving these services. These were recorded as prepaid fulfillment services. As of June 30, 2007 and June 24, 2006, a net receivable (payable) of approximately $(1.2) and $0, respectively, was outstanding.

        Due to the sale of LVC to an unrelated third party on May 26, 2006 (see Note 16, Related Party Transactions), certain LVC receivable balances related to prepaid fulfillment and distribution services were determined to be fully impaired since the third party purchaser of LVC did not assume the outstanding balance owed to Direct Holdings.

Debt Issuance Costs

        Debt issuance costs consist of fees and expenses incurred in connection with borrowings of The Reader's Digest Association, Inc, WRC Media and Direct Holdings. These fees are amortized over the terms of the related debt agreements. Capitalized debt issuance costs are included in other noncurrent assets on the balance sheets. To the extent a significant portion of outstanding borrowings are retired, a proportionate amount of debt issue costs related to those borrowings is written off.

Stock-Based Compensation

        In December 2004, the Financial Accounting Standards Board issued SFAS No. 123R, Share-Based Payment, (SFAS No. 123R). This statement requires the use of fair-value recognition provisions when determining the value of stock based compensation. SFAS 123R was effective at the beginning of the first annual period beginning after December 15, 2005. WRC Media and Direct Holdings adopted this standard effective July 1, 2006 using the modified prospective transitional method. Disclosure is not presented because pro forma expense for stock based compensation is not material in all periods prior to adoption.

        Prior to the adoption of SFAS 123R, stock-based compensation arrangements with employees were accounted for using the intrinsic value method in accordance with the provisions of APB 25, Accounting for Stock Issued to Employees, (APB No. 25). Under the guidelines of APB 25, compensation cost for stock based employee compensation plans is recognized based on the amount by which the fair value of the common stock on the date of grant exceeds the amount an employee must pay to acquire the stock. See Note 10, Equity Compensation Plans, for further information.

Financial Instruments

        Due to the short-term maturities of cash, cash equivalents, receivables and payables, the carrying value of these financial instruments approximates their fair values. Based on current market prices as of

F-13

The Reader's Digest Association, Inc. and Subsidiaries

Notes to Combined Consolidated and Combined Financial Statements (Continued)

Note 1 Organization and Summary of Significant Accounting Policies (Continued)

June 30, 2007, the fair value of our $600 9% Senior Subordinated notes is approximately $564. Due to variable interest rates, the fair value of our $300 revolving credit facility and $1,310 term loan approximates the carrying values at June 30, 2007. At June 30, 2006, the fair value of WRC Media's borrowings under the First Lien Facility and Second Lien Term Loan and Direct Holdings' Amended CIT Credit Facility was estimated to approximate their carrying values due to the facilities' variable interest rates and the repayment of all outstanding borrowings in March 2007. See Note 12, Debt, for additional information on our debt instruments.

        We entered into several interest rate swap agreements to reduce our exposure to interest rate volatility. These instruments qualify as hedges, therefore, changes in fair value are recorded in other comprehensive (loss) income. See Note 8, Financial Instruments, for further information.

Pensions and Postretirement Benefits Other Than Pensions

        We account for our pension and postretirement benefits in accordance with SFAS No. 158, "Employers' Accounting for Defined Benefit Pension and Postretirement Plans (an amendment of FASB Statements No. 87, 88, 106, and 132R)." As a result, we recognize the over or underfunded status of our defined benefit pension plans as an asset (overfunded) or liability (underfunded) in the consolidated statement of financial position. We recognize any changes in the funded or unfunded status through accumulated comprehensive (loss) income. Our projected benefit obligations are determined using actuarial models that incorporate estimates for employee turnover and mortality, increases in employee compensation and healthcare costs, and an employee's age at retirement. These estimates are reviewed annually with actuarial consultants to determine the reasonableness of our assumptions. While these models help determine the obligation, SFAS No. 158 attempts to match recognition of the obligation with the period over which our employees earn benefits. Because employees earn benefits over many years of service, the accounting rules require the recognition of certain events (including plan amendments and certain gains and losses) over multiple years rather than the year the event occurs. This principle also applies to recognition of the expected return on plan assets. Although the rate represents our expectation of the long-term performance of our asset portfolio, performance will likely vary in the short term. We amortize the difference between the actual and expected return on assets over a five-year period in our statement of operations. Income and expenses from our pension plans are included in promotion, marketing and administrative expenses on the statements of operations. WRC Media and Direct Holdings do not sponsor any defined benefit pension plans.

Revenues

Magazines

        Sales of our magazine subscriptions, less estimated bad debt and return reserves, are deferred and recognized as revenues proportionately, on the first of each month, over the subscription period. Revenues from sales of magazines through the newsstand are recognized at the issue date, net of an allowance for returns. Advertising revenues are recorded as revenues at the time the advertisements are published, net of discounts and advertising agency commissions.

F-14

The Reader's Digest Association, Inc. and Subsidiaries

Notes to Combined Consolidated and Combined Financial Statements (Continued)

Note 1 Organization and Summary of Significant Accounting Policies (Continued)

Sponsor Fundraising Programs

        Our sponsor fundraising program business, QSP, Inc., receives its revenues net of amounts due to its sponsors. Accordingly, we present revenues net of sponsors' earnings. Sales of subscriptions to magazines published by other companies and sales of music products are recorded as revenues at the time orders are submitted to the publisher, net of bad debts and remittances to magazine and music publishers.

Books, Music, Video, DVD, Display Marketing and Other Products

        Revenues are recorded when title passes, net of provisions for estimated returns and bad debts. Title passes at time of shipment or upon delivery. For our display marketing products, title passes either at the point of sale or at the time of shipment. In certain circumstances, our promotion entitles the customer to a preview period. Revenue generated by these promotions is recognized after the preview period lapses.

        When we recognize revenues for most of our products, we also record an estimate of bad debts and returns. These estimates are based on historical data and the method of promotion. Reserve levels are adjusted as actual data is received. In the direct marketing business, returns and bad debts are tied to customer responses to our promotional efforts. Accordingly, we deduct estimates of returns and bad debts from gross revenue.

Software Products

        We recognize revenues from the sale of our software products in accordance with the provisions of SOP 97-2, "Software Revenue Recognition," ("SOP 97-2") as amended by SOP 98-9, "Software Revenue Recognition, with Respect to Certain Transactions." Under SOP 97-2, we recognize revenue for software sales upon shipment of the product, provided collection of the receivable is probable, payment is due within one year and the fee is fixed or determinable. If an acceptance period is required, revenues are recognized upon the earlier of customer acceptance or the expiration of the acceptance period. If significant post-delivery obligations exist, revenues are deferred until no significant obligations remain. Revenue from service contracts, instructions and user training are recognized as the services are performed. Software hosting services and post-contract support is recognized ratably over the term of the related contract. Included in unearned revenues is our obligation to perform under signed contracts for which payment has been made.

        In addition, SOP 97-2 generally requires that revenue from software arrangements involving multiple elements be allocated among each element of the arrangement based on the relative fair values of the elements, such as software licenses, installation, training and post-contract customer support. Furthermore, SOP 97-2 requires that revenue be recognized as each element is delivered and we have no significant performance obligations remaining. Our multiple element arrangements generally consist of a software license, installation, training and post-contract support. Certain of our multiple element arrangements also may include hosting of software licensed to the customer. Our multiple element arrangements containing hosting services provide the customer with the contractual right to take possession of the software at any time during the hosting period without significant penalty.

F-15

The Reader's Digest Association, Inc. and Subsidiaries

Notes to Combined Consolidated and Combined Financial Statements (Continued)

Note 1 Organization and Summary of Significant Accounting Policies (Continued)

        Software revenues are recognized using the residual method. We allocate the aggregate revenue from multiple element arrangements to each element based on vendor specific objective evidence. We have established vendor-specific objective evidence for installation, training and post-contract support, as we sell installation, training, subscriptions and post-contract customer support independent of multiple element agreements. Customers are charged the same price for installation, training, subscriptions and post-contract customer support, whether these items are sold as part of a multiple element agreement or sold separately.

        If we enter into a multiple element agreement where vendor-specific objective evidence of fair value for each element of the arrangement does not exist, all revenue from the arrangement is deferred until all elements of the arrangement are delivered.

Lease Financing Arrangements

        We enter into lease financing arrangements for our software products and services. These leases are immediately assigned to a third party with no recourse to us. We retain no risk in these arrangements and have no history of granting concessions related to the arrangements. Accordingly, we recognize revenue upon delivery of its products and services under these lease arrangements.

Shipping and Handling

        Costs for shipping products to customers and the associated handling costs are expensed as incurred and are included in product, distribution and editorial expenses on the combined consolidated and combined statements of operations. In certain circumstances, shipping and handling costs are billed to the customer. These billings are recognized in revenue.

Promotion Costs

        Non-direct advertising, including internal advertising costs, prepublication, editorial, market testing and fulfillment costs, is expensed as incurred.

        Direct response advertising consists primarily of promotion costs incurred, such as paper and postage, in connection with the sale of magazine subscriptions, books and other products. We account for costs of direct response advertising under the American Institute of Certified Public Accountants (AICPA) Statement of Position (SOP) 93-7, "Reporting on Advertising Costs." Under SOP 93-7, costs associated with direct response advertising that can be directly linked to eliciting sales and result in probable future benefits are capitalized on a cost-pool-by-cost-pool basis. Books and home entertainment advertising costs are amortized over a period that is generally less than one year. We assess the carrying amount of our capitalized direct response advertising costs for recoverability on a periodic basis. Magazine related direct response advertising costs are expensed when the related promotion is mailed.

        Promotion expense, which consists of both amortization of promotion costs and costs expensed as incurred, included in the combined consolidated and combined statements of operations totaled $(290.6) in 2007; $(134.6) in 2006 and $(119.9) in 2005. Prepaid and deferred promotion costs included on the combined consolidated and combined statements of financial position were $61.4 and $3.5 as of June 30, 2007 and 2006, respectively.

        Commissions earned by agents for new magazine subscribers are included in promotion, marketing and administrative expenses in the combined consolidated statement of operations. These costs are

F-16

The Reader's Digest Association, Inc. and Subsidiaries

Notes to Combined Consolidated and Combined Financial Statements (Continued)

Note 1 Organization and Summary of Significant Accounting Policies (Continued)

deferred and amortized over the related subscription term, typically one to three years. Amounts deferred and included in prepaid expenses and other current assets on the balance sheets were $27.1 as of June 30, 2007. Amounts included in other noncurrent assets on the balance sheets were $22.7 as of June 30, 2007. WRC Media and Direct Holdings do not have any deferred agent commissions.

Income Taxes

        Income taxes are accounted for in accordance with SFAS No. 109, "Accounting for Income Taxes," which requires that deferred tax assets and liabilities be recognized, using enacted tax rates, for the effect of temporary differences between the book and tax bases of recorded assets and liabilities. Deferred tax assets, including net operating losses, are reduced by a valuation allowance if it is "more likely than not" that some portion or all of the deferred tax assets will not be realized.

        We are subject to tax in a number of locations, including many state and foreign jurisdictions. As might be expected, significant judgment is required when calculating our world-wide provision for income taxes. Because of this uncertainty, we establish consolidated tax liabilities based on an estimate of whether it is likely that additional taxes and interest will be due. In some cases, many years may elapse before an audit is completed with respect to items for which a reserve has been established. As settlements are reached, we adjust the corresponding accruals, if required, in the period in which the final determination is made.

Foreign Currency Translation

        The functional currency for our foreign operations is the local currency. Revenues and expenses denominated in foreign currencies are translated at average monthly exchange rates prevailing during the year. The assets and liabilities of international subsidiaries are translated into U.S. dollars at the rates of exchange in effect at the balance sheet date. The resulting translation adjustment is reflected as a separate component of combined consolidated and combined stockholders' equity (deficit) in accumulated other comprehensive (loss) income.

Recent Accounting Standards

        In June 2006, the FASB issued FASB Interpretation 48, "Accounting for Uncertainty in Income Taxes—an Interpretation of SFAS 109" (FIN 48). FIN 48 clarifies the accounting for income taxes by prescribing a minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. It also provides guidance on derecognition and measurement of tax positions. Disclosure requirements under this guidance will include a rollforward of the beginning and ending unrecognized tax benefits as well as specific detail related to tax uncertainties for which it is reasonably possible the amount of unrecognized tax benefit will significantly increase or decrease within a year. FIN 48 is effective for fiscal years beginning after December 15, 2006 for public companies and for fiscal years beginning after December 15, 2007 for non-public companies. We are currently evaluating the impact of this standard on our consolidated financial statements and the impact is not expected to be material. We plan on adopting FIN 48 during fiscal year 2008.

        In September 2006, the FASB issued Statement of Financial Accounting Standards (SFAS) No. 157, "Fair Value Measurements" (SFAS No. 157). This Statement defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. This Statement applies under other accounting pronouncements that require or permit fair value

F-17

The Reader's Digest Association, Inc. and Subsidiaries

Notes to Combined Consolidated and Combined Financial Statements (Continued)

Note 1 Organization and Summary of Significant Accounting Policies (Continued)

measurements. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. We are evaluating the impact of this standard on our consolidated financial statements and the impact is not expected to be material.

        Also in September 2006, the FASB issued SFAS No. 158, "Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans (an amendment of FASB Statements No. 87, 88, 106, and 132R)" (SFAS No. 158). The objectives of this Statement are for an employer to: (1) recognize the overfunded or underfunded status of a single-employer defined benefit postretirement plan as an asset or liability in its statement of financial position and to recognize changes in that funded status in comprehensive income in the year in which the changes occur; and (2) measure the plan status as of the date of its year-end statement of financial position. SFAS No. 158 is effective for the requirement to recognize the funded status of a benefit plan and the disclosure requirements as of the end of the fiscal year ending after December 15, 2006. The requirement to measure plan assets and benefit obligations as of the date of the employer's fiscal year-end statement of financial position will be effective for fiscal years ending after December 15, 2008. We adopted this statement effective March 2, 2007. See Note 9, Benefit Plans, for additional information.

        In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities. SFAS No. 159 permits entities to voluntarily choose to measure many financial assets and financial liabilities at fair value. The election is made on an instrument-by-instrument basis and is irrevocable. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. We are currently evaluating the provisions of SFAS No. 159 to determine the potential impact, if any, the adoption will have on our consolidated financial statements.

Note 2 Entities under Common Control

        In accordance with SFAS No. 141, the purchase price paid to the holders of the common stock of WRC Media and Direct Holdings not owned by investment funds affiliated with Ripplewood (38.5% in the case of WRC Media and 15.6% in the case of Direct Holdings) in the WRC Media Merger and the Direct Holdings Stock Acquisition (see Note 1, Organization and Summary of Significant Accounting Policies) was accounted for using the purchase method of accounting and resulted in goodwill of $15.5 at WRC Media, which is non-deductible for tax purposes. Accordingly, only 38.5%, in the case of WRC Media, and 15.6%, in the case of Direct Holdings, of assets acquired and liabilities assumed have been adjusted to their fair market value, with the remaining percentage recorded at historical carrying amounts. These adjustments are given effect as of the acquisition date of March 2, 2007. The amount allocated to goodwill is reflective of the benefit RDA Holding Co. expects to realize from expected cost savings and growth initiatives.

F-18

The Reader's Digest Association, Inc. and Subsidiaries

Notes to Combined Consolidated and Combined Financial Statements (Continued)

Note 2 Entities under Common Control (Continued)

        The following table represents the historical carrying amounts adjusted for 38.5% (WRC Media) and 15.6% (Direct Holdings) of fair values of assets acquired and liabilities assumed at the date of acquisition:

		WRC Media			Direct Holdings
Current assets		$	34.9		$	62.6
Plant and equipment			6.4			3.9
Capitalized software			14.8			—
Identified intangible assets			14.7			—
Goodwill			63.3			—
Other noncurrent assets			12.1			0.5
	Total historical assets acquired		146.2			67.0
Current liabilities			56.2			109.5
Debt			162.4
Long-term liabilities			11.2			1.2
	Net historical liabilities assumed		(83.6	)		(43.7	)
Adjustment for non-Ripplewood controlled ownership percentage (WRC Media (61.5%); Direct Holdings (84.4%))			51.4			36.9
Fair value adjustments, including deferred taxes and deferred revenue adjustments of $39.6 and $2.5, respectively, at WRC Media and deferred taxes of $10.9 at Direct Holdings			42.1			10.9
Identified intangible assets—fair value			17.9			5.1
	Net assets assumed		27.8			9.2
Consideration paid by RDA Holding Co., including transaction costs			43.3			9.2
	Goodwill allocation—fair value		15.5			—

        The fair value adjustment to the intangible assets listed in the above table as of the acquisition date utilized are based on an independent third party appraisal and are as follows:

	WRC Media		Weighted Average Life	Direct Holdings		Weighted Average Life
Tradenames—indefinite-lived	$	6.8	—	$	—	—
Tradenames—definite-lived		2.8	10.0 years		—	—
Customer relationships		2.9	3.2 years		2.5	2.0 years
Developed technology		3.9	6.0 years		—	—
Licensing and technology support agreements		1.5	4.0 years		2.3	17.0 years
Other intangibles		—	—		0.3	4.1 years
	$	17.9		$	5.1

F-19

The Reader's Digest Association, Inc. and Subsidiaries

Notes to Combined Consolidated and Combined Financial Statements (Continued)

Note 3 Acquisitions and Divestitures

Acquisition of The Reader's Digest Association, Inc.

        On March 2, 2007, RDA Holding Co. acquired 100% of the outstanding common stock of The Reader's Digest Association, Inc. for $1,517.1, net of cash acquired of $119.6, plus capitalized transaction costs of $36.0. In connection with the Acquisition Transaction, RDA Holding Co. contributed cash of $725.1 to the Reader's Digest Association, Inc. for the issuance of 1,000 shares of common stock. The acquisition was accounted for using the purchase method of accounting and resulted in $1,764.9 of goodwill on the date of acquisition, a portion which is deductible for tax purposes. The amount allocated to goodwill is reflective of the benefit RDA Holding Co. expects to realize from expected cost savings and growth initiatives. The resulting purchase consideration was pushed down from RDA Holding Co. and was assigned to the following reporting units based on the following fair values: $866.0 (Reader's Digest North America); $695.4 (Reader's Digest International); and $203.5 (School & Educational Services). As a result of acquisition accounting described in Note 1, Organization and Summary of Significant Accounting Policies, the results of the historical business of The Reader's Digest Association, Inc. and subsidiaries are included in the accompanying combined consolidated financial statements only as of, and for periods ending after, March 2, 2007.

        The cost of the Acquisition Transaction was used to establish a new accounting basis at The Reader's Digest Association, Inc. and subsidiaries, by allocating the cost of the assets acquired, including identified intangible assets and liabilities assumed at estimated fair values, which was determined using a number of factors, including the use of an independent appraisal. The excess of the cost of the acquisition over the amounts assigned to the net assets acquired is recorded to goodwill.

        The following table below represents the allocations of the aggregate purchase price based on their fair values of assets acquired and liabilities assumed at the date of acquisition:

Current assets		$	831.5
Property, plant and equipment			107.9
Identified intangible assets			1,077.6
Prepaid pension assets			275.6
Other noncurrent assets			58.2
	Total assets acquired		2,350.8
Other current liabilities			659.8
Debt			716.5
Unearned revenues			363.3
Accrued pension and postretirement and postemployment benefits other than pensions			212.7
Other non-current liabilities			470.1
Preferred stock			20.6
	Net liabilities assumed		(92.2	)
Consideration paid by RDA Holding Co., including transaction costs			1,672.7
Goodwill		$	1,764.9

F-20

The Reader's Digest Association, Inc. and Subsidiaries

Notes to Combined Consolidated and Combined Financial Statements (Continued)

Note 3 Acquisitions and Divestitures (Continued)

        The components of the intangible assets listed in the above table as of the acquisition date are as follows:

	Amount		Weighted Average Life
Reader's Digest tradename—indefinite-lived	$	621.0	—
Other tradenames—indefinite-lived		143.0	—
Tradenames—definite-lived		12.0	6.3
Customer relationships		202.7	8.2
Database		89.2	7.0
Favorable lease commitments		4.4	14.8
Technology and software		4.2	6.7
Licensing agreements		0.9	3.0
Other intangible assets		0.2	3.2
	$	1,077.6	7.8 years

        The following table presents pro-forma results of operations as though the acquisition took place at July 1, 2005:

	2007			2006
Net revenues	$	2,691.1		$	2,622.9
Loss before discontinued operations and extraordinary items		(262.1	)		(395.8	)
Net loss	$	(262.1	)	$	(333.4	)

        These pro forma results have been prepared for comparative purposes only and include certain adjustments, such as additional amortization expense for identified intangibles, increased interest expense from the incurrence of debt and other purchase accounting related adjustments. The unaudited pro forma financial information is not intended to be indicative of the results of operations that actually would have resulted had the acquisition occurred at the beginning of each period, or of future results of operations or financial condition of our consolidated entity.

Sale of American Guidance Services and Recapitalization of WRC Media

        On July 22, 2005, WRC Media completed the sale of its American Guidance Service, Inc. ("AGS") subsidiary and recapitalization in a series of related transactions. AGS is a publisher of testing and assessment products and supplemental instructional materials. These transactions were undertaken to

F-21

The Reader's Digest Association, Inc. and Subsidiaries

Notes to Combined Consolidated and Combined Financial Statements (Continued)

Note 3 Acquisitions and Divestitures (Continued)

reduce WRC Media's financial leverage by redeeming its outstanding debt securities and converting its preferred stock into common shares. The specific transactions consummated were as follows:

        1.     The sale of the subsidiary's shares for $274.0 in cash resulted in a net gain of $53.0

        The gain was net of $143.9 of associated intangible assets, including $121.0 of goodwill. The gain, reported in income from discontinued operations, net, was calculated as follows:

		Amount
Sale price		$	274.0
Net assets of subsidiary			(31.5	)
Associated intangible assets			(143.9	)
Transaction costs			(6.4	)
	Gain on sale	$	92.2
Income tax provision on gain on sale			(39.2	)
	Net gain	$	53.0

        The accompanying combined financial statements reflect the operations of AGS as a discontinued operation. The operating results of AGS have been reported in the combined statements of operations as income from discontinued operations. Revenue and income from operations before income taxes and net income of AGS for the fiscal years ended June 30, 2006 and 2005 were as follows:

	June 30, 2006			June 30, 2005
Revenues	$	5.8		$	79.8
Income from operations before income taxes		3.7			27.8
Income tax provision on discontinued operations		(1.6	)		(19.4	)
Net income from discontinued operations	$	2.1		$	8.4

        2.     The redemption and repurchase of all the shares of WRC Media's 15% Senior Preferred Stock and the warrants to purchase common stock of two of WRC Media's subsidiaries.

F-22

The Reader's Digest Association, Inc. and Subsidiaries

Notes to Combined Consolidated and Combined Financial Statements (Continued)

Note 3 Acquisitions and Divestitures (Continued)

        The consideration consisted of $55.0 in cash, $30.0 Second Lien Term Loans, and 92,754,145 shares of new WRC Media common stock valued at $0.12 per share resulting in a gain of $54.2, net of $28.6 in estimated future interest on the Second Lien Term Loans. The gain was calculated as follows:

		Amount
Preferred stock accreted value at July 22, 2005		$	167.9
Warrants to purchase common stock of subsidiaries			11.8
Total liabilities			179.7
Cash paid at closing			55.0
Second lien term loans			58.6
Common stock			11.5
Transaction costs			0.4
	Total consideration		125.5
	Gain on redemption	$	54.2

        The Second Lien Loans' stated value at June 30, 2006 includes $23.6, of estimated interest as discussed in Note 12, Debt.

        3.     The redemption and repurchase of all the shares of 18% Junior Participating Cumulative Convertible Preferred Stock of WRC Media for 721,105 shares of new WRC Media common stock.

        The holders of the 18% Junior Participating Cumulative Convertible Preferred Stock received 23,803,853 common shares of the 208,696,287 common shares that the controlling shareholder purchased from WRC Media.

        4.     The repayment of the $152.0 12³/4% Senior Subordinated Notes due 2009 at 106.375% for a prepayment penalty of $9.7, plus $1.6 in net interest for 40 days subsequent to closing.

        The loss of $14.7 includes the write-off of the unamortized discount of $3.4. In addition, the repayment of the $145.0 existing Second Lien at 101% resulted in a prepayment penalty of $1.5. The total loss from the debt repayments was calculated as follows:

		Amount
Prepayment penalty		$	9.7
Unamortized discount			3.4
Interest through prepayment closing			1.6
	Total loss on repayment subordinated debt		14.7
Second lien prepayment penalty			1.5
	Total loss on extinguishment of debt	$	16.2

        5.     The repayment of borrowings of $11.0 existing under the First Lien Revolver which had a total commitment of $30.0.

        Funds for the above debt repayments were provided by WRC Media's sale of 208,696,287 shares of common stock to its controlling shareholder at $0.12 per share for total consideration of $26.0 and by borrowings under the Credit and Guaranty Agreement with new First Lien Term Loans of $82.5

F-23

The Reader's Digest Association, Inc. and Subsidiaries

Notes to Combined Consolidated and Combined Financial Statements (Continued)

Note 3 Acquisitions and Divestitures (Continued)

divided between Tranche A of $37.5 and Tranche B of $45.0 and under the Credit and Guaranty Agreement of $11.5 of the $25.0 commitment.

        The gain on recapitalization was calculated as follows:

Net gain on redemption of 15% senior preferred stock	$	54.2
Loss on extinguishment of debt		(16.2	)
	$	38.0

Acquisition of the Time Life Business

        In December 2003, Direct Holdings was formed to acquire the assets and stock of the Time Life business contemplated for sale to Direct Holdings Worldwide L.L.C. (the Parent). On December 31, 2003, the formation of Direct Holdings was consummated from subsidiaries of Time Warner Inc. by the Parent and certain of its subsidiaries, acquiring 100% of the assets and stock representing the Time Life business for $1.00 plus potential additional consideration. The acquisition by the Parent of the Time Life businesses was pushed down to Direct Holdings.

        The additional contingent consideration provided that Time Inc. (the Seller) would receive payments in the future if the business sold met certain performance targets (Earn Out Agreement). Specifically, the Seller would receive consideration equal to four times the amount by which the average annual earnings before interest, taxes, depreciation and amortization (EBITDA), subject to certain adjustments, for each of the two consecutive four fiscal quarter periods over a two-year period exceeded $10.0 commencing on July 1, 2004. As the fair value of the liabilities acquired exceeded the fair value of the assets acquired, Direct Holdings recorded an acquisition contingency of approximately $8.4. The amount of the acquisition contingency at June 25, 2005 was management's best estimate as of the balance sheet date regarding the expected liability. As of June 24, 2006, Direct Holdings did not exceed the $10 million minimum EBITDA under the Earn Out Agreement. As provided under SFAS No. 141, if the fair value of contingent consideration issued was less than the amount initially recognized as if it were a liability, the excess liability would be allocated to reduce proportionately the amounts assigned to assets acquired. Any unallocated negative goodwill would be recognized as an extraordinary gain in the period the contingent consideration provision was resolved. Accordingly, Direct Holdings released the acquisition contingency of $8.4 by writing off the remaining net book value of approximately $0.3 relating to fixed assets, and approximately $0.9 relating to intangible assets. The remaining balance of the acquisition contingency, which represented negative goodwill of approximately $7.3, was recognized as an extraordinary gain in the 2006 combined statement of operations.

        Beginning January 1, 2005, Direct Holdings is obligated under a trademark licensing agreement for the Time Life tradename to make annual royalty payments for an initial term of 10 years to Time Warner for use of the Time Life logo and tradename. The royalty is based on net revenues as defined in the agreement to a maximum of $2.5 per calendar year. Upon the completion of the Acquisition Transaction, this agreement was modified and the royalty is based on net revenues as defined in the agreement to a maximum of $5.0 per calendar year. The royalty is payable annually based on calendar year sales. The trademark agreement can be renewed under certain conditions for an additional 10 years.

F-24

The Reader's Digest Association, Inc. and Subsidiaries

Notes to Combined Consolidated and Combined Financial Statements (Continued)

Note 3 Acquisitions and Divestitures (Continued)

        Direct Holdings has entered into various contractual relationships with Time Inc. and certain other subsidiaries of Time Warner Inc. These relationships include certain subleases in the U.S. and certain warehousing, distribution and administrative support functions in Europe and Australia.

Sale of Direct Holdings' Asia Unit

        Direct Holdings entered into an active plan to sell its Asia business segment during Fiscal 2004 which included Direct Holdings' Asia unit, Educational Technologies Limited together with its subsidiaries (ETL). These assets were recorded at an amount not in excess of what management expected to receive upon sale less costs of disposal.

        Direct Holdings entered into a share purchase agreement dated February 22, 2005 (the Share Purchase Agreement). In connection with the closing of the Share Purchase Agreement which occurred on March 1, 2005, Direct Holdings licensed certain rights to ETL. The proceeds from the sale of the business were approximately $14.8. The gain from the sale of the Asia business is recorded in the statement of operations for 2005 as gain on sale of discontinued operations of approximately $9.0.

Note 4 Other Operating Items, Net

        Items included in Other Operating Items, Net consist of: 1) contractual charges related to the strategic repositioning of our businesses 2) asset impairments associated with restructuring charges and 3) restructuring charges, representing the streamlining of our organizational structure.

Contractual Charges

        In 2007, we incurred charges of $(15.0) related to the restructuring of our agreement with World's Finest Chocolate, Inc. The agreement was restructured to reduce the length of the agreement and the annual minimum tonnage purchase requirements. In addition, the terms of exclusivity and employment of the sales force were modified. See Note 14, Contingencies and Commitments for further information.

        We also incurred charges of $(4.4) in 2007 related to our contract with a supply chain consulting firm engaged to analyze cost reduction opportunities as part of our restructuring plan within Reader's Digest's supply chain and maintenance, repair and operations functions.

Asset Impairments

        Asset impairments related to the carrying value of certain long-lived assets are calculated in accordance with the provisions of SFAS No. 144. In connection with the restructuring activities described below, we incurred asset impairments of $(1.9) at WRC Media and Direct Holdings in 2007. In addition, in connection with the write-off of prepaid fulfillment services from Lillian Vernon Corporation, Direct Holdings incurred charges of $(13.1) and $(18.4) in 2006 and 2005, respectively. See Note 15, Related Party Transactions for further information.

Restructuring Activities

        We recorded restructuring charges on the combined consolidated and combined statements of operations of $(14.9), $(1.4) and $(2.2) in 2007, 2006 and 2005, respectively. In certain instances, circumstances arose that resulted in decisions to retain employees previously identified for termination,

F-25

The Reader's Digest Association, Inc. and Subsidiaries

Notes to Combined Consolidated and Combined Financial Statements (Continued)

Note 4 Other Operating Items, Net (Continued)

and in certain other instances the costs associated with actions identified were settled for less than originally anticipated. In these instances, the associated charges were reversed.

        Restructuring charges are recorded in accordance with SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities" or SFAS No. 112, "Employers' Accounting for Postemployment Benefits." Under SFAS No. 146, costs associated with restructuring actions, including one-time severance benefits, are only recorded once a liability has been incurred. However, the severance programs at Reader's Digest Association, Inc. generally do not qualify as one time benefits; therefore, we recognize severance amounts pursuant to SFAS No.112. Severance charges represent the cost to separate employees from our operations to streamline the organization. The separation is accomplished through a combination of voluntary and involuntary severance programs. As such, severance amounts are recorded when a termination plan is developed and approved, including the identification of positions to be separated, and when payment is probable and estimable. Other amounts related to restructuring actions, including charges to terminate contractual obligations in connection with streamlining activities, are recorded in accordance with SFAS No. 146.

        In addition, as a result of the purchase method of accounting described in Note 3, Acquisitions and Divestitures, and in accordance with EITF Issue No. 95-3 "Recognition of Liabilities in Connection with a Purchase Business Combination," we recorded a restructuring liability of $(36.8) as of the date of the Acquisition Transaction. Approximately 8%, 74%, 10% and 8% of this liability relates to Reader's Digest North America, Reader's Digest International, School & Educational Services and Corporate, respectively. This represents actions to realign our cost structure in response to The Reader's Digest Association, Inc. acquisition, and primarily includes employee severance across all major functions and change of control payments to executive management. Severance charges represent the cost to separate employees from our operations to streamline the organization and lower our cost base. Additionally, in connection with purchase accounting, previously existing restructuring liabilities of $4.3 were assumed. These liabilities primarily relate to severance costs and contract terminations to lower our cost base commensurate with our current revenues and streamline our operations.

F-26

The Reader's Digest Association, Inc. and Subsidiaries

Notes to Combined Consolidated and Combined Financial Statements (Continued)

Note 4 Other Operating Items, Net (Continued)

        The table below outlines the activity related to the restructuring actions recorded in 2007 as well as charges recorded in previous periods for WRC Media and Direct Holdings:

	Severance			Contract Obligations			Other Costs			Total
Balance at June 30, 2004	$	7.7		$	13.4		$	—		$	21.1
Accruals (Reversals)		(0.2	)		2.4			—			2.2
Spending		(7.3	)		(4.1	)		—			(11.4	)
Balance at June 30, 2005		0.2			11.7			—			11.9
Accruals (Reversals)		2.0			(1.7	)		1.1			1.4
Spending		(1.6	)		(3.3	)		(0.6	)		(5.5	)
Balance at June 30, 2006		0.6			6.7			0.5			7.8
Accruals (reversal)		1.7			(0.4	)		1.0			2.3
Liabilities assumed in purchase of Reader's Digest Association, Inc.		40.0			0.7			0.4			41.1
Accruals recorded in connection with RDA Merger related to Direct Holdings and WRC Media		5.7			5.9			1.0			12.6
Spending		(7.6	)		(3.0	)		(2.6	)		(13.2	)
Balance at June 30, 2007	$	40.4		$	9.9		$	0.3		$	50.6

        During 2007, restructuring activities comprised:

•

Charges of $(2.3) primarily related to employee separation and contractual fees due to the closure of WRC Media's subsidiary operations and charges of $(0.4) related to the closure of Direct Holdings' Chicago, Illinois telemarketing office in the second quarter of 2007 and income of $0.4 related to an adjustment to a previously existing lease accrual.



•

Charges in connection with the Acquisition Transaction for both Direct Holdings and WRC Media totaled $(5.7) for severance, $(5.9) for contract termination costs and $(1.0) of other costs. The charges associated with WRC Media relate to the transitioning of corporate functions to The Reader's Digest Association, Inc. headquarters and the consolidation of operations in Austin, Texas. The charges associated with Direct Holdings are attributable to the closing of certain offices, fulfillment contract terminations and transitioning corporate functions to The Reader's Digest Association, Inc. headquarters.

        During 2006, restructuring activities comprised:

•

Charges of $(2.6) related to WRC Media's February 2006 restructuring plan for the consolidation of CompassLearning. The plan was communicated in February 2006 and, accordingly, WRC Media incurred charges related to both a workforce reduction and the closure of two facilities. Pursuant to the restructuring, 64 positions were eliminated with severance and other benefit costs approximating $(1.2) related to their termination and $(0.4) related to other contract costs. Most of the workforce reductions and relocations involved technical and support personnel. The terminations and relocations were substantially complete by December 2006.

F-27

The Reader's Digest Association, Inc. and Subsidiaries

Notes to Combined Consolidated and Combined Financial Statements (Continued)

Note 4 Other Operating Items, Net (Continued)

There were no lease termination costs. Other costs of $(1.0) include excess rent fees, the cost of moving selected equipment to the new facility and other charges.

•

Reversals of $2.2 at WRC Media related to previously established lease reserves. We review our restructuring plans periodically to determine the appropriateness of existing accruals in light of current circumstances. Accordingly we recorded these charges based upon the settlement of certain lease agreements and updated estimates of remaining lease termination obligations associated with facilities vacated during 2002.



•

Charges of $(1.0) pertaining to the announcement by Direct Holdings in January 2006 of a restructuring plan affecting its European office. These costs were recorded in connection with a staff reduction, in an effort to eliminate redundancies within the European office as well as in Direct Holdings' other offices in the United States and Australia.

        During 2005, restructuring activities comprised:

•

Charges of $(2.6) at Weekly Reader related to a previously established reserve for lease terminations resulting from the updating of the assumptions used in determining the fair value of the remaining lease obligations associated with facilities vacated during 2002.



•

Income of $0.4 at Direct Holdings related to accruals recorded in previous years. We review our restructuring plans periodically to determine the appropriateness of existing accruals in light of current circumstances. Accordingly, these reversals, were recorded because of the occurrence of events that affected our original plans.

Note 5 Other (Expense) Income, Net

	2007			2006			2005
Interest income	$	2.3		$	0.3		$	—
Net gain on foreign exchange		0.3			—			—
Net loss on the sales of certain investments		—			(0.5	)		—
Other (expense) income, net		(2.1	)		—			0.1
Total other (expense) income, net	$	0.5		$	(0.2	)	$	0.1

F-28

The Reader's Digest Association, Inc. and Subsidiaries

Notes to Combined Consolidated and Combined Financial Statements (Continued)

Note 6 Supplemental Balance Sheet Information

        The components of certain balance sheet accounts as of June 30 are as follows:

Accounts Receivable, Net

			2007			2006
Gross accounts receivable, trade			$	523.4		$	49.2
	Beginning reserve for returns			(6.6	)		(8.8	)
	Reader's Digest reserve for returns assumed in purchase accounting			(67.9	)		—
	Additions to allowances(1)			(209.1	)		(15.3	)
	Actual returns(2)			212.9			17.5
Ending reserve for returns				(70.7	)		(6.6	)
	Beginning reserve for bad debts			(7.1	)		(7.5	)
	Reader's Digest reserve for bad debts assumed in purchase accounting			(115.3	)		—
		Additions to allowances(1)		(49.1	)		(13.9	)
		Actual bad debts(2)		44.8			14.3
Ending reserve for bad debts				(126.7	)		(7.1	)
Ending reserve for returns and bad debts				(197.4	)		(13.7	)
Accounts receivable, net			$	326.0		$	35.5

(1)

Additions to allowances represent estimated reserves established at the time of revenue recognition for returns and bad debts in accordance with SFAS No. 48, "Revenue Recognition When Right of Return Exists." Amounts are recorded as an offset to revenues.



(2)

Actual returns and bad debts include actual experience during the period and the effects of foreign currency translation.

Inventories

		2007			2006
	Raw materials	$	10.9		$	—
	Work in process		7.8			—
	Finished goods		232.9			30.4
Gross inventory			251.6			30.4
	Beginning inventory reserve		(5.8	)		(6.4	)
	Reader's Digest inventory reserve assumed in purchase accounting		(52.5	)		—
	Additions to reserve		(10.6	)		(1.2	)
	Inventory write-offs		5.4			1.8
Ending inventory reserve			(63.5	)		(5.8	)
Inventories, net		$	188.1		$	24.6

F-29

The Reader's Digest Association, Inc. and Subsidiaries

Notes to Combined Consolidated and Combined Financial Statements (Continued)

Note 6 Supplemental Balance Sheet Information (Continued)

Property, Plant and Equipment, Net

	2007			2006
Land	$	2.5		$	—
Buildings and building improvements		26.4			—
Furniture, fixtures and equipment		105.3			15.0
Software for internal use		80.8			10.7
Software to be sold or leased		30.6			32.3
Leasehold improvements		35.6			5.2
Accumulated depreciation and amortization*		(163.5	)		(38.6	)
Total property, plant and equipment, net	$	117.7		$	24.6

*

Depreciation and amortization expense related to property, plant and equipment amounted to $(16.0), $(8.6) and $(7.6) for the years ended June 30, 2007, 2006 and 2005, respectively. The depreciation and amortization expense for Direct Holdings excludes $0.3 of assets written off due to a reduction in the acquisition contingency in the year ended June 30, 2006.

Other Noncurrent Assets

	2007		2006
Deferred tax assets	$	102.5	$	0.1
Deferred financing, net		63.0		3.3
Fair value of interest rate swaps		10.8		0.1
Other, principally operating assets		42.5		1.7
Total other noncurrent assets	$	218.8	$	5.2

Accrued Expenses

	2007		2006
Compensation and other employee benefits	$	79.0	$	5.6
Royalties and copyrights payable		28.6		19.1
Taxes, other than income taxes		1.3		4.1
Accrued interest		25.7		—
Restructuring accrual (see Note 4)		50.6		7.8
Other, principally operating expenses		135.4		28.8
Total accrued expenses	$	320.6	$	65.4

F-30

The Reader's Digest Association, Inc. and Subsidiaries

Notes to Combined Consolidated and Combined Financial Statements (Continued)

Note 6 Supplemental Balance Sheet Information (Continued)

Other Noncurrent Liabilities

	2007		2006
Deferred tax liabilities	$	466.8	$	8.7
Other, principally operating liabilities		69.9		1.8
Total other noncurrent liabilities	$	536.7	$	10.5

Note 7 Goodwill and Other Intangible Assets, Net

        The changes in the carrying amount of goodwill by reportable segment for the fiscal year ended June 30, 2007 are as follows:

	WRC Media		Reader's Digest North America		Reader's Digest International		Schools and Educational Services		Total
Balance as of June 30, 2006	$	63.3	$	—	$	—	$	—	$	63.3
Additions as a result of the WRC Media Merger, Direct Holdings Stock Acquisition and the Acquisition Transaction (see Note 3, Acquisitions and Divestitures)		15.5		866.0		696.0		203.5		1,780.4
Balance as of June 30, 2007	$	78.8	$	866.0	$	696.0	$	203.5	$	1,844.3

        At least annually (in the fourth quarter), we review the carrying amount of goodwill and other intangibles with indefinite lives in our reporting units for recoverability. During interim periods, we continually monitor changes in our businesses for indicators of impairment. Our reporting units were determined based on our principal operating segments for the current fiscal year. Our Reader's Digest North America unit includes Allrecipes.com and Reiman, while our Schools and Educational Services segment is composed of QSP and Books Are Fun. See Note 15, Segments, for further information.

F-31

The Reader's Digest Association, Inc. and Subsidiaries

Notes to Combined Consolidated and Combined Financial Statements (Continued)

Note 7 Goodwill and Other Intangible Assets, Net (Continued)

        The following categories of acquired intangible assets are included in other intangible assets, net as of June 30, 2007 and 2006:

		2007				2006
		Gross		Net		Gross		Net
Intangible assets with indefinite lives:
	Reader's Digest Tradename—indefinite	$	621.0	$	621.0	$	—	$	—
	Other Tradenames—indefinite		158.4		156.9		13.7		11.2
Intangible assets with finite lives:
	Tradenames		18.6		16.7		3.7		3.0
	Customer relationships		228.9		194.2		20.8		0.4
	Customer database		89.3		85.1		—		—
	Licensing agreements and technical support agreements		4.7		4.4		—		—
	Favorable lease commitments		4.5		4.2		—		—
	Technology and software		16.5		7.6		8.4		—
	Other intangibles		2.4		0.6		2.2		0.7
Total intangible assets		$	1,144.3	$	1,090.7	$	48.8	$	15.3

        Amortization related to intangible assets with finite lives amounted to $(20.7), $(6.4) and $(12.4) for the years ended June 30, 2007, 2006 and 2005, respectively, excluding the write-off of the remaining intangible assets at Direct Holdings due to a reduction in the acquisition contingency of $(0.9) in 2006. The remaining weighted average amortization period of our intangible assets is 7.8 years. Estimated fiscal year amortization expense for intangible assets with finite lives is as follows: fiscal 2008—$61.3; fiscal 2009—$54.5; fiscal 2010—$39.6; fiscal 2011—$35.0 and fiscal 2012—$31.0.

        WRC Media performed an annual impairment test during the second quarter of fiscal 2006 and 2005. The calendar 2005 analysis indicated an impairment in the value of goodwill and intangibles at World Almanac and the Weekly Reader as a result of the then current trends and competitive environment in which those business units operate. Accordingly, goodwill and intangible impairment charges of $50.8 and $19.3, respectively were recorded in 2005.

        WRC Media's measurement of fair value of goodwill and intangibles was based on evaluations utilizing both a discounted cash flow, as well as a market approach. These evaluations utilized the best information available in the circumstances, including reasonable and supportable assumptions and projections. Certain key assumptions utilized, including changes in revenue, operating expenses, working capital requirements and capital expenditures including prepublication costs, are based on estimates related to WRC Media's strategic initiatives and current market conditions. Such assumptions also are consistent with those utilized in WRC Media's annual planning process. WRC Media's discounted cash flow evaluation used a discount rate that corresponds to WRC Media's weighted-average cost of capital. This discount rate assumed was consistent with that used for investment decisions and takes into account the specific and detailed operating plans and strategies of WRC Media. The market data utilized represented valuations of comparable companies. Collectively, these evaluations were management's best estimate of projected future cash flows and market values.

        In fiscal 2005, WRC Media goodwill was reduced by $6.2 as the tax benefit related to an acquired net operating loss was utilized.

F-32

The Reader's Digest Association, Inc. and Subsidiaries

Notes to Combined Consolidated and Combined Financial Statements (Continued)

Note 8 Financial Instruments

Risk Management and Objectives

        The functional currency for our foreign operations is the local currency. In the normal course of business, substantially all of the transactions of our foreign operations occur in the local currency. We purchase forward contracts to minimize the effect of fluctuating currencies on specifically identifiable transactions. These transactions were minimal in 2007.

        As a matter of policy, we do not speculate in financial markets and, therefore, we do not hold financial instruments for trading purposes. We continually monitor foreign currency risk and our use of derivative instruments.

Derivative Instruments

        On April 19, 2007, we entered into interest rate swap agreements with a notional value totaling $750.0, involving the exchange of floating- for fixed-rate interest payments, to reduce interest rate volatility and to comply with the interest rate hedging provisions of our senior secured credit facility. The transactions included $450.0 of 3-year interest rate swaps and $300.0 of 5-year interest rate swaps. In each case, we will receive floating-rate interest payments that offset the LIBOR component of the interest due on some of our floating-rate debt and make fixed-rate interest payments over the life of the respective interest rate swaps. The fixed interest rate under the 3-year swaps is 4.89% and the fixed interest rate under the 5-year swaps is 4.94%.

        The LIBOR-based loans can be prepaid without penalty (other than accrued interest) at any time during the contractual term of the loans and the swaps are not by their terms cancellable, the hedging relationship does not qualify for the use of the shortcut method of assessing hedge effectiveness. However, we will evaluate the likelihood of whether we will continue to borrow using LIBOR-based loans based on our business plan, and whether the interest payments made on the outstanding loans being hedged will be sufficient to match the terms of the swaps during the life of the hedges (and therefore result in interest payments).

        Since the (i) notional value of the swaps is the same as the principal value of the loans generating the hedged interest payments, (ii) floating-rate leg of the swaps and the hedged variable interest payments received on the loans are both based on 3-month LIBOR, (iii) interest rate reset dates applicable to both the floating-rate leg of the swaps and the hedged interest payments on the loans are the same, (iv) payment date on the loans and the settlement under the swaps occur on the same day each period, and (v) hedging relationship does not contain any other basis differences, except for the prepayment feature noted above, we will assess the effectiveness of our hedging strategy using the method described in Derivatives Implementation Group Statement 133 Implementation Issue No. G9, "Cash Flow Hedges: Assuming No Ineffectiveness When Critical Terms of the Hedging Instrument and the Hedged Transaction Match in a Cash Flow Hedge." Accordingly, changes in the fair values of the interest rate swap agreements are expected to be exactly offset by changes in the fair value of the underlying debt.

        Additionally, we evaluate whether the creditworthiness of each swap counterparty is such that default on its obligations under the swap is not probable. We also assess whether the LIBOR-based interest payments are probable of being paid under the loans at the inception and, on an ongoing basis (no less than once each quarter), during the life of each hedging relationship.

F-33

The Reader's Digest Association, Inc. and Subsidiaries

Notes to Combined Consolidated and Combined Financial Statements (Continued)

Note 8 Financial Instruments (Continued)

        As of June 30, 2007 the fair market value of our interest rate swaps increased, resulting in a gain of $10.8, which is recorded net of deferred taxes of $4.0. This change is reported in accumulated other comprehensive (loss) income, which is included in stockholders' equity on the balance sheets.

        In addition, WRC Media used derivative financial instruments to reduce its exposure to interest rate volatility in 2006 and 2005. Pursuant to the terms of the First-Lien Facility and Second-Lien Term Loan Credit Agreements described in Note 12, Debt, WRC Media was required to enter into or maintain interest rate protection agreements (interest rate swaps, caps, collars or similar agreements) in a notional amount that, when taken together with the aggregate principal amount of total debt, as defined, subject to a fixed interest rate, was equal to at least 50% of the aggregate principal amount of total debt. In October 2005 WRC Media entered into a two-year interest rate cap agreement with a notional principal amount of $0.1, which caps the six-month LIBO rate, as defined, on $42.5 of the loans at 5.25%. The interest rate protection agreement qualified for hedge accounting treatment and, as such, WRC Media marked to market the contract at the end of each period. For those instruments that qualified as hedges, changes in fair value were recorded in other comprehensive (loss) income. The cost of derivative financial instruments was amortized over the contract life. At June 30, 2006, the market value of the interest rate cap was $0.1, which was recorded in other comprehensive (loss) income. In 2007, the interest rate cap was terminated in connection with the repayment of all WRC Media outstanding debt.

Note 9 Benefit Plans

Defined Benefit Pension Plans

        We offer defined benefit plans to eligible employees in the United States and in several international markets. Contributions to these plans meet the minimum funding requirements in each respective market. Benefit payments are principally based on a combination of years of service and compensation.

        Effective March 2, 2007, we adopted SFAS No. 158. As a result, we recognized the overfunded and underfunded status of our defined benefit pension plans as an asset (overfunded) or liability (underfunded) in the accompanying consolidated statement of financial position and have adopted a new measurement date (June 30) for our defined benefit pension plans. Due to the fact that the adoption of SFAS No. 158 on March 2, 2007 coincides with the Acquisition Transaction and related purchase method of accounting described in SFAS No. 141 there was no impact on accumulated other comprehensive (loss) upon adoption. The impact of the adoption of SFAS No. 158 recorded in

F-34

The Reader's Digest Association, Inc. and Subsidiaries

Notes to Combined Consolidated and Combined Financial Statements (Continued)

Note 9 Benefit Plans (Continued)

purchase method of accounting on our statement of financial position is as follows for our significant defined benefit pension plans:

U.S. Plans:

	March 2, 2007			Adjustments		Adjusted Balance as of March 2, 2007
Prepaid pension assets	$	306.5		(58.9	)	$	247.6
Accrued expenses and accrued pension		(80.5	)	(4.2	)		(84.7	)
Deferred tax assets		1.8		(1.8	)		—
Accrued expenses and postretirement benefit obligations other than pensions		(92.4	)	26.7			(65.7	)
Accumulated other comprehensive (loss) gain		(3.3	)	3.3			—

International Plans:

	March 2, 2007			Adjustments		Adjusted Balance as of March 2, 2007
Prepaid pension assets	$	27.9		(0.7	)	$	27.2
Accrued expenses and accrued pension		(36.7	)	(41.2	)		(77.9	)
Deferred tax assets		14.6		(14.6	)
Postretirement benefit obligations other than pensions		(1.9	)	(0.4	)		(2.3	)
Accumulated other comprehensive (loss) gain		(34.2	)	34.2			—

U.S. Plans

        In the U.S. we maintain funded and unfunded defined benefit plans. The Reader's Digest Association, Inc. Retirement Plan (Retirement Plan) is our largest plan and is over-funded. We have not made any contributions in 2007, nor do we expect to make any contributions in fiscal 2008.

        Our unfunded plans were established for certain officers. Since these plans are only available to certain executives, they are not qualified under the Internal Revenue Code (IRC). We fund the benefit payments under these plans as they arise. We expect to make $9.8 of contributions to these plans in fiscal 2008.

        In August 2006, the Pension Protection Act of 2006 was signed into law. This law changed the vesting requirement for cash balance pension plans, changed the interest rates used to calculate lump-sum benefit payments, established guidance for valuing pension assets and obligations related to the new minimum funding standards and changed the terms used to determine the plan's tax status. There is no material impact of this law on our U.S plans.

        The overriding principle followed in managing our Retirement Plan assets is to obtain a reasonable rate of return in terms of both income and appreciation, consistent with the "Prudent Man" Rule of the Employee Retirement Income Security Act of 1974 (ERISA), while providing liquidity to satisfy short-term obligations.

F-35

The Reader's Digest Association, Inc. and Subsidiaries

Notes to Combined Consolidated and Combined Financial Statements (Continued)

Note 9 Benefit Plans (Continued)

        The table below details our current and target asset allocation as of our June 30, 2007 measurement date.

Asset Class	Actual Allocation as of June 30, 2007		Target Allocation Range
Equities	66	%	52% - 72%
Fixed income	23	%	23% - 35%
Other	11	%	0% - 19%
Total	100	%

        Equities include companies with both large and small market capitalizations, as well as listed companies in international markets. Our allocation tends to be heavily weighted in favor of large capitalized companies. More than half of the Retirement Plan's funds are invested in equity markets because these investments tend to provide better returns and offer some protection from inflation. Fixed income securities are included in the portfolio to protect the Retirement Plan's assets from inflation and to preserve capital. Other assets, including private equity and real estate investments, are utilized to a small extent to take advantage of investments that provide higher returns. The Retirement Plan allows investment managers to invest in derivative instruments, provided that certain criteria specified in the plan's investment policy are satisfied.

        The expected rate of return on plan assets is a significant driver in calculating our net pension (benefit) cost. In order to calculate our 2007 (benefit) cost, we used an expected return on plan assets of 8.50%. This rate was based on an analysis of historical returns generated by asset classes in which our funds are invested and on projected returns for portfolios with assets similar to ours.

        Estimated benefit payments during the next 10 years are expected to be, by fiscal year: 2008—$44.0; 2009—$43.3; 2010—$45.5; 2011—$42.9; 2012—$44.8 and from 2013 to 2017—a total of $221.6.

International Plans

        We also offer defined benefit pension plans in several markets outside the United States. For the significant plans, in fiscal 2008, we expect to contribute $9.6.

        The table below reflects the actual allocation of assets held for our international plans and the allocation required pursuant to our most recent investment policy for these plans. These percentages have been calculated on a weighted average basis because the assets comprised several plans.

Asset Class		Actual Allocation as of June 30, 2007		Target Allocation
Equities		68	%	67	%
Fixed income		32	%	33	%
	Total	100	%

        Similar to the U.S. plans, the expected rate of return on plan assets is a significant driver in calculating the net pension (benefit) cost for our international plans. In order to calculate our 2007 expense, we used a return on plan assets of 7.05%. These rates were based on a methodology similar to that used to determine the rate of return for our Retirement Plan.

F-36

The Reader's Digest Association, Inc. and Subsidiaries

Notes to Combined Consolidated and Combined Financial Statements (Continued)

Note 9 Benefit Plans (Continued)

        Estimated benefit payments during the next 10 years are expected to be, by fiscal year: 2008—$15.1; 2009—$14.1; 2010—$14.8; 2011—$15.3; 2012—$15.9 and from 2013 to 2017—a total of $90.5.

Assumptions

        The table below outlines the weighted average assumptions used to determine our projected benefit obligation as of year-end and pension (benefit) cost for the period from March 2, 2007 to June 30, 2007 for:

	U.S. Plans		International Plans
Benefit obligation
	2007		2007
Discount rate	6.25	%	5.57	%
Compensation increase rate	4.00	%	3.94	%
Pension (benefit) cost	2007		2007
Discount rate	5.50	%	5.07	%
Compensation increase rate	4.00	%	3.94	%
Long-term rate of return on plan assets	8.50	%	7.05	%

        Components of net periodic pension (benefit) cost are as follows:

	U.S. Plans			International Plans
	2007			2007
Service cost	$	3.1		$	2.7
Interest cost		9.7			6.0
Expected return on plan assets		(19.8	)		(7.0	)
Curtailment/Settlement (gains)		—			(1.3	)
Net periodic pension (benefit) cost	$	(7.0	)	$	0.4

F-37

The Reader's Digest Association, Inc. and Subsidiaries

Notes to Combined Consolidated and Combined Financial Statements (Continued)

Note 9 Benefit Plans (Continued)

        A reconciliation of the beginning and ending balances of benefit obligations and fair value of plan assets and the funded status of the defined benefit pension plans is as follows:

		U.S. Plans			International Plans
		2007			2007
Change in benefit obligation:
Benefit obligation at March 2, 2007		$	553.2		$	360.0
	Service cost		3.1			2.7
Interest cost			9.7			6.0
Participant contributions			—			0.5
Actuarial (gain)			(30.9	)		(32.9	)
Exchange rate changes			—			11.1
Settlements/Curtailments			—			(1.3	)
Other expenses						(0.4	)
Benefits paid			(14.2	)		(4.3	)
Benefit obligation at end of year			520.9			341.4
Change in plan assets:
Fair value at March 2, 2007			716.1			309.3
Actual return on plan assets			41.3			10.4
Employer contribution			3.0			2.7
Participant contributions			—			0.5
Exchange rate changes			—			12.3
Other expenses						(0.4	)
Benefits paid			(14.2	)		(4.3	)
Fair value at end of year			746.2			330.5
Funded status			225.3			(10.9	)
	Items not yet recognized as a component of net periodic cost:
Net actuarial gain (loss)			52.4			37.0

        In fiscal 2008, we expect to recognize none of the actuarial gain in the United States Plan and a gain of $1.4 in our international plans.

        The accumulated benefit obligation as of June 30, 2007 (the actuarial present value of benefits earned, excluding future compensation increase assumptions) for our U.S. plans and international plans was $508.8 and $307.5, respectively.

Other Postretirement Benefits

        We provide medical and dental benefits to certain retired employees and their dependents of Reader's Digest. The plans that provide these benefits cover all of our eligible employees in the United States who were hired before July 1, 2005 and, to a lesser extent, employees in Canada.

F-38

The Reader's Digest Association, Inc. and Subsidiaries

Notes to Combined Consolidated and Combined Financial Statements (Continued)

Note 9 Benefit Plans (Continued)

        The table below outlines the weighted average assumptions used to determine our postretirement benefit obligation as of year-end and our postretirement cost for the period from March 2, 2007 to June 30, 2007:

Postretirement benefit obligation	2007
Discount rate	6.25	%
Healthcare cost trend rate assumed for next year	8.00	%
Rate to which the cost trend rate is assumed to decline	5.00	%
Number of years to ultimate trend rate	6
Postretirement cost
Discount rate	5.50	%
Healthcare cost trend rate assumed for next year	9.00	%
Rate to which the cost trend rate is assumed to decline	5.00	%
Number of years to ultimate trend rate	7

        Components of net periodic postretirement (benefit) cost are as follows:

	2007
Service cost	$	0.2
Interest cost		1.2
Net periodic postretirement (benefit) cost	$	1.4

        A reconciliation of the beginning and ending balances of benefit obligations and fair value of plan assets and the funded status of the plans is as follows:

	2007
Change in benefit obligation:
Benefit obligation at beginning of year	$	68.0
Service cost		0.2
Interest cost		1.2
Actuarial (gain)		(3.5	)
Exchange rate		0.2
Benefits paid		(2.0	)
Benefit obligation at end of year		64.1
Change in plan assets:
Fair value at beginning of year		—
Employer contribution		2.0
Benefits paid		(2.0	)
Fair value at end of year		—
Unfunded status		(64.1	)
Items not yet recognized as a component of net period cost:
Net actuarial gain (loss)		3.5

F-39

The Reader's Digest Association, Inc. and Subsidiaries

Notes to Combined Consolidated and Combined Financial Statements (Continued)

Note 9 Benefit Plans (Continued)

        We do not expect to recognize any of the net actuarial gain in fiscal 2008.

        Assumed healthcare cost trend rates have a significant effect on the amounts reported for postretirement benefits. A one-percentage-point increase in assumed healthcare cost trend rates would increase the total of the service and interest cost components by $0.5 and the postretirement benefit obligation by $7.5 for the year ended June 30, 2007. A one-percentage-point decrease in assumed healthcare cost trend rates would decrease the total of the service and interest cost components by $(0.4) and the postretirement benefit obligation by $(6.3) for the year ended June 30, 2007.

        Estimated benefit payments during the next 10 years are expected to be, by fiscal year: 2008—$6.5; 2009—$6.4; 2010—$6.3; 2011—$6.2; 2012—$6.2; and from 2013 to 2017—a total of $27.3. Estimated receipts pursuant to the Medicare Reform Act during the next 10 years are expected to be, by fiscal year: 2008—$0.5; 2009—$0.6; 2010—$0.6; 2011—$0.6; 2012—$0.6; and from 2013 to 2017—a total of $3.3.

Balance Sheet Classification

        Amounts recognized on the balance sheets related to our significant pension and postretirement plans are as follows:

	Pension Benefits			Other Benefits
	2007			2007
Prepaid pension assets	$	336.5		$	—
Accrued expenses		(10.9	)		(6.4	)
Accrued pension		(111.3	)		—
Postretirement benefits other than pensions		—			(57.7	)

        Balances of pension plans with projected and accumulated benefit obligations in excess of the fair value of plan assets are as follows:

	Plans with Projected Benefit Obligations in Excess of Plan Assets		Plans with Accumulated Benefit Obligations in Excess of Plan Assets
	2007		2007
Projected benefit obligation	$	374.4		N/A
Accumulated benefit obligation		N/A	$	345.7
Fair value of plan assets	$	252.3	$	252.3

WRC Media Defined Benefit Plan

        A subsidiary of WRC Media, which was disposed of in July 2005, sponsored a pension plan for which the minimum pension liability adjustment was $1.8 at June 30, 2005 and was recorded as a component of other comprehensive income (loss) in the statement of stockholders' deficit. As part of the sale of the subsidiary, this amount was eliminated and is included in the gain on disposition as discussed in Note 3, Acquisitions and Divestitures.

F-40

The Reader's Digest Association, Inc. and Subsidiaries

Notes to Combined Consolidated and Combined Financial Statements (Continued)

Note 9 Benefit Plans (Continued)

Defined Contribution Plans

RDA Employee Ownership Plan and 401(k) Partnership (the 401(k) plan)—The 401(k) plan consists of both a profit-sharing plan and a savings plan under section 401(k) of the IRC. The savings plan component allows employees to make pre-tax contributions to their accounts, which may be invested in specified investment alternatives. We may match employee contributions to the extent determined by our Board of Directors. The matching contributions vest 20% per annum over a five-year period. Our contributions to the 401(k) plan, including matching contributions, were $1.1 for 2007.

WRC Media Defined Contribution Plan—Substantially all of WRC Media's employees are eligible to participate in a defined contribution plan (the "Plan"). Pursuant to the provisions of the Plan, WRC Media is obligated to match 33% of the employee's contribution to the Plan up to the first 6% of the employee's compensation. The expensed recognized by WRC Media for its contributions to the plan was $1.1, $1.1 and $1.0 for fiscal 2007, 2006 and 2005, respectively.

Direct Holding Defined Contribution Plan—Direct Holdings offers to employees certain statutory and discretionary profit sharing plans.

        Direct Holdings' 401(k) profit sharing plan includes an employee contribution and employer matching contribution feature. Eligible employees may make pre-tax contributions of up to 50% of their annual compensation under the 401(k) feature of the plan, subject to regulatory limitations. Employee contributions of up to 6% of compensation are currently matched by Direct Holdings at a rate of 50%. Employees are 100% vested in their pre-tax contributions at all times, and become fully vested in the employer matching contribution after two years of service. Direct Holdings' matching contributions to the plan for fiscal 2007, 2006 and 2005 were approximately $0.4, $0.5 and $0.6, respectively.

Note 10 Equity Compensation Plans

RDA Holding Co.

        In July 2007 the Board of Directors of RDA Holding Co. (the Board) approved the RDA Holding Co. 2007 Omnibus Incentive Compensation Plan (the 2007 Plan). All prior existing employee incentive compensation plans at Reader's Digest Association, Inc. and WRC Media were terminated upon the completion of the Acquisition Transaction. Additionally, as of June 30, 2007, there were no stock options outstanding under the Direct Holdings 2004 Stock Incentive Plan.

        Under the 2007 Plan, the Board may grant to eligible directors, employees and consultants stock options, stock appreciation rights, restricted stock, restricted stock units, and other equity-based or equity related awards that the Board determines are consistent with the purpose of the 2007 Plan and the interests of The Reader's Digest Association, Inc. and Subsidiaries. The Board may grant up to a maximum of 4,988,047 shares under the 2007 Plan. Since July 2007, the Board granted approximately 3.2 million options at an exercise price of $10 per share and 1.1 million shares of restricted stock and 0.4 million shares of restricted stock units with a fair value at $10 per share. In general, the vesting of these awards is contingent on the occurrence of certain liquidity events, as defined in the 2007 Plan and the recording of such awards is pushed down to RDA from RDA Holding Co.

F-41

The Reader's Digest Association, Inc. and Subsidiaries

Notes to Combined Consolidated and Combined Financial Statements (Continued)

Note 10 Equity Compensation Plans (Continued)

WRC Media

        In 2000, WRC Media adopted the WRC Media Inc. and Subsidiaries Year 2000 Stock Option Plan. Stock options are granted with exercise prices not less than the fair market value of the Common Stock at the time of the grant with an exercise term not to exceed 10 years. Generally, the options vest ratably over three to four years from the date of grant. In 2007, 2006 and 2005, WRC Media did not grant any stock options. In connection with the WRC Media Merger in 2007, all outstanding were stock options were terminated.

        Stock options granted prior to 2000, as well as 2002 grants, were accounted for using variable plan accounting. This was attributable to the options cashless exercise provisions and the re-pricing of certain options in 2003.

        In accordance with APB No. 25, no stock-based compensation was recognized in the statements of operations in 2007, 2006 and 2005 as the fair market value for these grants was less than the exercise price of the options. WRC Media did not issue any new stock-based awards or modify any existing awards during 2007, 2006 or 2005; therefore, there was no impact from the adoption of SFAS No. 123R using the modified- prospective method. In addition, there were no capitalized stock-based compensation costs at June 30, 2007.

        The aggregate intrinsic value of options outstanding and exercisable at June 30, 2006 and 2005 is $0.

        A summary of the WRC Media's option activity for the years ended June 30, 2006 and 2005 is as follows:

		Year ended June 30, 2006					Year ended June 30, 2005
Employee Stock Options		Shares			Weighted average exercise price		Shares		Weighted average exercise price
Outstanding, beginning of year			588,969			27.52	609,039			27.32
	Granted
	Exercised
	Cancelled		(283,010	)		22.34	(16,367	)		21.54
	Forfeited		(9,164	)		22.98	(3,703	)		20.25
Outstanding, end of year			296,795			32.61	588,969			27.52
Options exercisable at year-end			295,545			32.50	569,805			27.57
Options available for grant at year-end			31,756				22,592
Options subject to variable accounting			213,762			34.61	418,056			26.79
Weighted-average fair value of options granted during the period		$	—		$	—			$	—

Direct Holdings

        In October 2004, Direct Holdings adopted the Direct Holdings 2004 Stock Incentive Plan (the 2004 Stock Plan). Under the 2004 Stock Plan, Direct Holdings may issue, among other forms of

F-42

The Reader's Digest Association, Inc. and Subsidiaries

Notes to Combined Consolidated and Combined Financial Statements (Continued)

Note 10 Equity Compensation Plans (Continued)

compensation, incentive or nonqualified stock options at the discretion of the Board of Directors. Stock options may be granted at the fair market value at the date of grant or at an exercise price less than fair market value at the date of grant. The 2004 Stock Plan reserved 20,000 shares of common stock available for grants. Options granted vest primarily at 25% per year beginning at the end of the first year and are fully exercisable at the end of four years. All options expire ten years from the date of grant unless otherwise terminated. Direct Holdings generally grants stock options with an exercise price equal to the market value of the common stock on the date of grant. In conjunction with the Plan and individual stock options agreements, Direct Holdings adopted a Management Shareholders Agreement which provides, among other things, that certain employee shareholders are obligated to vote shares with the majority shareholder.

        In 2005, Direct Holdings granted approximately 6,500 options to certain key employees. All options had an exercise price of $162.50. The options generally vest over four years at 25% per year commencing in October 2005. At June 30, 2006, 3,244 options were exercisable at a weighted average exercise price of $162.50.

        In January 2005, Direct Holdings granted an additional 8,000 options to a consultant who became the Chief Executive Officer (CEO) in May 2005. The exercise price of those options was $162.50 per share. The stock options vest commencing with the first anniversary date according the following schedule: 25% in January 2006 and 6.25% per quarter thereafter until December 2008. On July 1, 2006, Direct Holdings granted 6,014 additional options primarily to members of senior management at an exercise price of $162.50.

        Under certain defined circumstances, Direct Holdings' had the ability to repurchase the options at either fair market value as determined or book value. Therefore, in accordance with APB No. 25, compensation income (expense) of $0.2 and $(0.2), respectively, was recognized in the combined statements of operations for 2006 and 2005, using variable accounting. (For Fiscal 2006, the fair market value of Direct Holdings outstanding options as of June 30, 2006, as calculated, resulted in a reversal of the prior year stock compensation charge.) As a result of accelerated vesting and exercise of all outstanding options in connection with the Direct Holdings' Stock Acquisition, the 2007 stock-based compensation expense was $2.0 ($1.3 net of tax).

        The fair market value of the options as of June 30, 2006 and 2005 was $132.16 and $195.11, respectively. The Black-Scholes option pricing model was used to estimate fair value using the following assumptions:

	June 30, 2006			June 30, 2005
Expected dividend yield		0.0	%		0.0	%
Risk-free interest rate		5.2	%		4.1	%
Expected volatility		40	%		41	%
Expected option term (years)		4			4
Exercise price	$	162.50		$	162.50

F-43

The Reader's Digest Association, Inc. and Subsidiaries

Notes to Combined Consolidated and Combined Financial Statements (Continued)

Note 10 Equity Compensation Plans (Continued)

        At March 2, 2007, all outstanding options (16,888) were exercised in connection with the Direct Holdings' Stock Acquisition at an exercise price of $162.50 and fair value of $279.39. The proceeds from the exercise of these options are $2.7. Changes in outstanding options are as follows:

	Options outstanding
	Number outstanding		Weighted average remaining contractual life	Weighted average exercise price
Outstanding, June 30, 2004	—		—	$	—
Granted	14,474		10		162.50
Exercised	—		—		—
Forfeited/expired	(1,500	)	—		162.50
Outstanding, June 30, 2005	12,974		—		162.50
Granted	—		—		—
Canceled	(450	)	—		162.50
Forfeited/expired	(1,650	)	—		162.50
Outstanding, June 30, 2006	10,874		9	$	162.50
Granted	6,014		10		162.50
Exercised in connection with the Direct Holdings' Stock Acquisition	(16,888	)	—		162.50
Outstanding, June 30, 2007	—		—	$	—

Note 11 Income Taxes

        For domestic operations, we will file our U.S. tax return as part of the RDA Holding Co. consolidated tax return for the period March 3, 2007 through June 30, 2007. WRC Media and Direct Holdings have filed their tax returns as separate standalone entities in the past and will file separately through March 2, 2007. The income tax liability reported has been determined using the separate return method consistent with Staff Accounting Bulletin 55, "Allocation of Expenses and Related Disclosure of Financial Statements of Subsidiaries, Divisions or Lesser Business Components of Another Entity". Under this method, the current and deferred taxes are calculated as if each member were a separate taxpayer. There are no tax related amounts due to or from affiliates as of the date of each statement of financial position presented.

        Loss before provision (benefit) for income taxes and discontinued operations is as follows:

	2007			2006			2005
United States	$	(106.4	)	$	2.3		$	(146.3	)
International		11.0			(2.8	)		1.7
Loss before provision for income taxes	$	(95.4	)	$	(0.5	)	$	(144.6	)

F-44

The Reader's Digest Association, Inc. and Subsidiaries

Notes to Combined Consolidated and Combined Financial Statements (Continued)

Note 11 Income Taxes (Continued)

        Income tax benefit (expense) is allocated to the following items:

	2007			2006			2005
Continuing operations	$	4.7		$	(2.5	)	$	51.9
Discontinued operations		—			(40.8	)		(19.4	)
Extraordinary item		—			—			—
Shareholders' equity		(36.1	)		—			—
Total	$	(31.4	)	$	(43.3	)	$	32.5

        Components of the (provision) benefit for income taxes attributable to income from continuing operations are as follows:

		2007			2006			2005
Current
	U.S. federal	$	(2.8	)	$	—		$	11.7
	U.S. state and local		(0.2	)		(0.2	)		(0.7	)
	International		(12.3	)		(1.0	)		(0.8	)
	TOTAL CURRENT	$	(15.3	)	$	(1.2	)	$	10.2
Deferred
	U.S. federal	$	23.2		$	(2.0	)		41.6
	U.S. state and local		(1.8	)		—			—
	International		(1.4	)		0.7			0.1
	Total deferred	$	20.0		$	(1.3	)		41.7
(Provision) benefit for income taxes		$	4.7		$	(2.5	)	$	51.9

        A reconciliation between the statutory U.S. federal income tax rate and the effective income tax rate is as follows:

	2007		2006		2005
U.S. statutory tax rate	35.0	%	(3.0	)%	34.8	%
International operations	(8.1	)	(314.0	)	0.7
State taxes	(2.2	)	280.1		1.9
Non-deductible loan write off			(2,340.7	)
Non-deductible amortization & impairments			—		(2.8	)
Non-deductible preferred stock dividends			(127.9	)	(6.0	)
Changes in valuation allowance	(19.4	)	(1,778.9	)	7.3
Gain on recapitalization	—		4,212.3		—
Goodwill charge	—		—		—
Other operating items	(0.4	)	—		—
Other	—		(485.9	)	(0.1	)
Effective tax rate	4.9	%	(558.0	)%	35.8	%

F-45

The Reader's Digest Association, Inc. and Subsidiaries

Notes to Combined Consolidated and Combined Financial Statements (Continued)

Note 11 Income Taxes (Continued)

        Components of deferred tax assets and liabilities are as follows:

		2007			2006
Deferred compensation and other employee benefits		$	56.2		$	1.5
Accounts receivable and other allowances			75.7			8.9
Net operating loss carryforwards			113.6			60.0
Other operating items			15.7			12.3
Tax credit carryforwards			87.8			1.9
Deferred gain on sale of buildings			12.9			—
Other accrued items			28.1			5.0
Depreciation and amortization			13.7			32.0
	Gross deferred tax assets		403.7			121.6
Valuation allowance			(200.8	)		(117.3	)
	Total net assets		202.9			4.3
Deferred compensation and other employee benefits			(105.8	)		—
Deferred promotion			(11.4	)		—
Depreciation and amortization			(311.0	)		(11.7	)
Deferred agent commissions			(18.3	)		—
Other			(90.1	)		(0.2	)
	Total net liabilities		(536.6	)		(11.9	)
Net deferred taxes		$	(333.7	)	$	(7.6	)

        Balance sheet classifications of deferred tax assets and liabilities are as follows:

	2007			2006
Prepaid expenses and other current assets	$	34.1		$	1.0
Other noncurrent assets		102.5			0.1
Other current liabilities		(3.5	)		—
Other noncurrent liabilities		(466.8	)		(8.7	)
Net deferred taxes	$	(333.7	)	$	(7.6	)

        Net operating loss carryforwards of $572.7 at June 30, 2007, are available to reduce future tax obligations of certain foreign and U.S. companies. The net operating loss carryforwards have various expiration dates, with $0.5 expiring in fiscal 2008, $543.5 expiring between 2009 and 2027 and $28.7 having indefinite carryforward periods. The Internal Revenue Service places a limitation on utilizing net operating loss carryforwards and certain "built-in losses" or deductions when an ownership change, as defined in the law, occurs. A portion of our net operating loss carryforwards are subject to these rules. In addition, foreign tax credit carryforwards of $54.3 and alternative minimum tax credit carryforwards of $12.1 and various non-US tax credit carryforwards of $4.8 are available as of June 30, 2007. Foreign tax credit carryforwards have various expiration dates beginning in fiscal 2012; alternative minimum tax credit carryforwards have an indefinite carryforward period and non-US tax credit carryforwards have various expiration dates beginning in fiscal 2013.

F-46

The Reader's Digest Association, Inc. and Subsidiaries

Notes to Combined Consolidated and Combined Financial Statements (Continued)

Note 11 Income Taxes (Continued)

        A valuation allowance has been recorded on certain deferred tax assets based on Management's assessment of their realizability on a more likely than not basis. Management has determined we are not more likely than not to realize certain deferred tax assets. As such, we have recorded a valuation allowance of $200.8 for these deferred tax assets. To the extent we generate income in future years, the tax provision will reflect the realization of such benefits. However, benefits attributable to acquired deferred tax assets, which were offset by a valuation allowance of $113.2, will reduce the excess purchase price over the net assets acquired and other noncurrent intangible assets.

        A provision has not been recorded for U.S. income taxes and foreign withholding taxes that would be payable if the undistributed earnings of certain foreign subsidiaries, aggregating approximately $130.5 as of June 30, 2007, were distributed to the U.S. in the form of dividends because we intend to permanently reinvest such foreign earnings. A determination of the amount of the unrecognized deferred tax liability related to undistributed earnings is not practical. We have recorded the taxes on those earnings that are not permanently reinvested.

        We are undergoing various federal, international, state and local audits. We have reasonably estimated and appropriately accrued for our known liabilities. There are no known potential adjustments that would have a material impact on the financial statements.

Note 12 Debt

The Reader's Digest Association, Inc.

Senior Secured Credit Facility

        On March 2, 2007, we entered into a credit agreement providing for a six-year senior secured $300.0 revolving credit facility and a seven-year $1,310.0 term loan (the "2007 Credit Agreement"). At June 30, 2007, $85.2 was outstanding under the revolving credit facility and $1,309.3 under the term loan. The 2007 Credit Agreement term loan includes within the above-mentioned facilities a US$100.0 term loan tranche made available in an equivalent amount of euros to one of our German subsidiaries. Financing fees of $40.4 related to the 2007 Credit Agreement were deferred and are amortized on a straight-line basis over the life of the agreement.

        Borrowings under the term loan bear interest at a rate equal to an applicable margin plus, at our option, either (a) a base rate ("Base Rate") determined by reference to the higher of (1) the prime rate and (2) the federal funds rate plus 0.50% or (b) a Eurocurrency rate ("Eurocurrency Rate") determined by reference to the rate for Eurocurrency deposits for a period of one, two, three or six months or, subject to availability to the lenders, nine or twelve months, as selected by us. For Base Rate loans and Eurocurrency Rate loans, the applicable margin is 1.00% and 2.00%, respectively.

        Borrowings under the revolving credit facility bear interest at a percentage per annum equal to, at our option, either (1) the Base Rate plus 1.25% for Base Rate loans or (2) the Eurocurrency Rate plus 2.25% for Eurocurrency Rate loans. Applicable margins with respect to revolving loans will be subject to reduction by up to 0.75% based on our consolidated leverage ratio from time to time.

        We are required to pay a commitment fee for the revolving credit facility for the average daily unutilized commitments. The initial commitment fee rate is 0.375% per annum and may be reduced to 0.25% subject to our attaining certain leverage ratios.

F-47

The Reader's Digest Association, Inc. and Subsidiaries

Notes to Combined Consolidated and Combined Financial Statements (Continued)

Note 12 Debt (Continued)

        The 2007 Credit Agreement generally requires us to prepay outstanding term loans upon the occurrence of certain defined events, including net cash proceeds of any incurrence of new debt (as defined), certain assets sales or dispositions (as defined) and 50% (which percentage will be reduced if our total leverage ratio is less than certain ratios) of our annual excess cash flow (as defined).

        In addition, we are required to repay the term loan in equal quarterly installments beginning June 30, 2007 (with any remainder expected to be due on March 2, 2014) in aggregate annual amounts equal to 1.0% of the initial aggregate principal amount. The principal amount outstanding under the revolving credit facility is due and payable in full at maturity, on March 2, 2013.

        All obligations under the 2007 Credit Agreement are unconditionally guaranteed by RDA Holding Co., us and, subject to certain exceptions, each of RDA Holding Co.'s direct and indirect domestic wholly-owned subsidiaries (collectively referred to as the "Guarantors"). The loans made to our German subsidiary are also unconditionally guaranteed by its subsidiaries as well as secured by all of the stock and assets of those subsidiaries (subject to certain exceptions).

        All obligations under the 2007 Credit Agreement, and the guarantees of those obligations, are generally secured by the following assets of the Guarantors: (i) 100% of our common stock and each of our direct and indirect domestic subsidiaries and 65% of the voting common stock and 100% of the non-voting common stock of our direct and indirect foreign subsidiaries and (ii) a security interest in substantially all our tangible and intangible assets. Subject to certain exceptions, all obligations of each non-U.S. borrower are unconditionally guaranteed by each restricted subsidiary of such borrower.

        The 2007 Credit Agreement contains a number of covenants that, among other things, restrict, subject to certain exceptions, our ability to: (i) incur additional indebtedness or issue shares by subsidiaries, (ii) create liens on assets, (iii) engage in mergers or consolidations, (iv) sell assets, (v) pay dividends and distributions, (vi) make investments, loans or advances, (vii) repay subordinated indebtedness (including the Senior Subordinated Notes described below), (viii) make certain acquisitions, (ix) engage in certain transactions with affiliates, (x) enter into certain burdensome agreements, (xi) amend material agreements governing our subordinated indebtedness (including the Senior Subordinated Notes), (xii) change our lines of business and (xiii) make capital expenditures.

        In addition, the 2007 Credit Agreement includes a financial covenant requiring us to comply with a maximum leverage ratio, as defined. The 2007 Credit Agreement also contains certain defined customary affirmative covenants and events of default.

        We entered into interest rate swap agreements with a notional value totaling $750.0, involving the exchange of floating- for fixed- rate interest payments, to reduce interest rate volatility and to comply with the interest rate provisions of our 2007 Credit Agreement. See Note 8, Financial Instruments, for further information.

Senior Subordinated Notes and Indenture

        On March 2, 2007, we entered into an Indenture among us, the Guarantors (as defined therein) and The Bank of New York, as Trustee, pursuant to which we issued $600.0 of 9% Senior Subordinated Notes due 2017 (the "Senior Subordinated Notes") in a private offering. Financing fees of $24.8 related to the Senior Subordinated Notes were deferred and are amortized on a straight-line basis over the life of the agreement.

F-48

The Reader's Digest Association, Inc. and Subsidiaries

Notes to Combined Consolidated and Combined Financial Statements (Continued)

Note 12 Debt (Continued)

        The Senior Subordinated Notes mature on February 15, 2017. Interest on the Senior Subordinated Notes accrues at the rate of 9% per annum and is payable semi-annually in arrears on February 15 and August 15, commencing on August 15, 2007, to the holders of Senior Subordinated Notes of record on the immediately preceding February 1 and August 1. Interest on the Senior Subordinated Notes is computed on the basis of a 360-day year comprised of twelve 30-day months.

        The Senior Subordinated Notes are guaranteed on a senior subordinated basis by all of our subsidiaries that guarantee our obligations under the 2007 Credit Agreement. Any domestic subsidiaries that in the future guarantee our indebtedness will also guarantee the Senior Subordinated Notes. The guarantees of the Senior Subordinated Notes will be released when the guarantees of our 2007 Credit Agreement indebtedness are released.

        The guarantees of the Senior Subordinated Notes are unsecured senior subordinated obligations of our subsidiary guarantors and have the same ranking with respect to indebtedness of our subsidiary guarantors as the Senior Subordinated Notes have with respect to our indebtedness.

        We may redeem some or all of the Senior Subordinated Notes at any time prior to February 15, 2012 at a price equal to 100% of the principal amount of the Senior Subordinated Notes plus accrued and unpaid interest plus a defined "make-whole" premium. The Senior Subordinated Notes are also redeemable at our option, as defined, in whole or in part, at any time on or after February 15, 2012.

        At any time prior to February 15, 2010, we may redeem, at our option, up to 35% of the original principal amount of the Senior Subordinated Notes with the proceeds of one or more equity offerings at a redemption price of 109% of the principal amount of the Senior Subordinated Notes, together with accrued and unpaid interest, if any, to the date of redemption.

        Upon the occurrence of a change of control (as defined) of The Reader's Digest Association, Inc., holders of the Senior Subordinated Notes have the right to require us to repurchase all or a portion of the Senior Subordinated Notes at a purchase price in cash equal to 101% of the principal amount of the Senior Subordinated Notes plus accrued and unpaid interest.

        The Indenture, among other things, limits our ability and the ability of our subsidiaries to: (i) incur, assume or guarantee additional indebtedness, (ii) issue redeemable stock and preferred stock, (iii) repurchase common stock, (iv) make other restricted payments, including, without limitation, paying dividends and making investments, (v) create liens, (vi) redeem debt that is junior in right of payment to the Senior Subordinated Notes, (vii) sell or otherwise dispose of assets, including common stock of subsidiaries, (viii) enter into agreements that restrict dividends from subsidiaries or (ix) enter into mergers or consolidations.

Registration Rights Agreement

        In connection with the issuance of the Senior Subordinated Notes, we entered into a Registration Rights Agreement, dated as of March 2, 2007. The Registration Rights Agreement provides that we and each of the Guarantors will, at our expense and for the benefit of the holders of the Senior Subordinated Notes, (i) file a registration statement on an appropriate registration form (an "Exchange Offer Registration Statement") with respect to a registered offer (an "Exchange Offer") to exchange the Senior Subordinated Notes for new notes guaranteed by the Guarantors on a senior subordinated basis, with terms substantially identical in all material respects to the Senior Subordinated Notes (the notes so exchanged, the "Exchange Notes") (except that the Exchange Notes will not contain terms

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Notes to Combined Consolidated and Combined Financial Statements (Continued)

Note 12 Debt (Continued)

with respect to transfer restrictions or any increase in annual interest rate) and (ii) use our reasonable best efforts to cause the Exchange Offer Registration Statement to be declared effective under the Securities Act of 1933.

        Upon an Exchange Offer Registration Statement being declared effective, we will offer the Exchange Notes (and the related guarantees) in exchange for surrender of the Senior Subordinated Notes.

        If the Exchange Offer is not consummated, in certain circumstances we will be required to file a shelf registration statement covering resale of the Senior Subordinated Notes. In addition, in certain circumstances if the Exchange Offer is not consummated on or prior to the 360th day after March 2, 2007, up to an additional 1.0% of penalty interest may accrue on the principal amount of the Senior Subordinated Notes outstanding.

2005 Credit Agreement and Senior Unsecured Notes

        On March 2, 2007, the entire outstanding principal amount of $390.0 under our $500.0 Five-Year Revolving Credit Agreement dated April 14, 2005 and amended April 19, 2006 (the "2005 Credit Agreement") was repaid and we also repurchased $299.9 of the $300.0 aggregate outstanding principal amount of our 6¹/2% senior unsecured notes due in 2011.

Debt Maturities and Interest Expense

        Total debt maturities during the next five years are as follows:

2008		$	13.1
2009			13.1
2010			13.1
2011			13.1
Later years			1,942.1
	Total	$	1,994.5

        At June 30, 2007 and 2006, we had borrowings of $1,994.5 and $182.8 outstanding, respectively. $13.1 and $182.8 at June 30, 2007 and 2006, respectively, were classified as short-term debt on the statements of financial position and $1,981.4 at June 30, 2007 is classified as long-term debt on the statements of financial position.

Financial Statement Reporting Requirements

        We were delayed in the timely delivery of our fiscal 2007 year-end audited financial statements and first quarter 2008 unaudited financial statements pursuant to the terms of our 2007 Credit Agreement and the Indenture relating to our Senior Subordinated Notes (the "Financial Delivery Requirement"). The delay in completing the Financial Delivery Requirement results from technical aspects of the accounting rules and complexities related to changing the fiscal year-end for our predecessor company WRC Media from December 31 to June 30 to conform to our June 30 reporting cycle. On December 12, 2007, we received a notice from the Administrative Agent under our 2007 Credit Agreement that commenced the 30 day period during which we must satisfy the Financial Delivery

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Notes to Combined Consolidated and Combined Financial Statements (Continued)

Note 12 Debt (Continued)

Requirement under our 2007 Credit Agreement. Until we satisfy the Financial Delivery Requirement under our 2007 Credit Agreement, we were be unable to draw down funds from our revolving credit facility. Delivery of our Annual Report satisfied the Financial Delivery Requirement as it related to the fiscal 2007 year-end audited financial statements.

WRC Media

Credit and Guaranty Agreement

        In connection with the July 2005 sale of a subsidiary and related recapitalization transactions, two of WRC Media's subsidiaries entered into the Credit and Guaranty Agreement ("First-Lien Facility"). The agreement provided for a facility consisting of a Senior Term Loan with a Tranche A and Tranche B, and a Revolving Credit Facility ("WRC Revolver"), to be secured by liens on substantially all of WRC Media's assets. The agreement also provided for a final maturity of the First-Lien Facility of July 22, 2009.

        Beginning November 20, 2006, in connection with the delivery of WRC Media's financial statements as of and for the nine-month period ended September 30, 2006, WRC Media was in default of the Credit and Guaranty Agreement because its borrowings were in excess of the permitted borrowings. At December 31, 2006, WRC Media was not in compliance with certain defined covenants, including leverage and coverage ratios. On January 23, 2007, WRC Media entered into the Forbearance and First Amendment Agreement whereby, among other provisions, WRC Media was, subject to certain terms and conditions, provided $23.0 in permitted borrowings. Under the terms of the Forbearance and First Amendment Agreement, subject to certain conditions including the avoidance of additional defaults, the lenders agreed not to exercise certain rights until March 31, 2007. In consideration of the execution and delivery of the Forbearance and First Amendment Agreement, WRC Media was required to pay a forbearance fee of up to $4.3 on the maturity date of the term loans. As noted above, WRC Media was also in default of certain financial covenants which were not waived. By virtue of these defaults, the lenders were entitled to certain remedies, including the repayment of all borrowings.

        In connection with the Acquisition Transaction and the contribution of WRC Media to The Reader's Digest Association, Inc., on March 2, 2007, WRC Media repaid all borrowings and forbearance fees, under the First-Lien Facility and the Forbearance and First Amendment agreements, totaling $112.6.

Term Loan Credit Facility

        In connection with the July 22, 2005 redemption and repurchase by WRC Media of all of the shares of WRC Media's 15% Senior Preferred Stock due 2011 ("Senior Preferred Stock) and the warrants to purchase common stock of two of WRC Media's subsidiaries, WRC Media entered into a $30.0 Term Loan and Guaranty Agreement ("Second-Lien Term Loan Credit Agreement"), in addition to the payment of $55.0 and the issuance of 92,754,145 shares of WRC Media common stock to the holders of Senior Preferred Stock.

        The Second-Lien Term Loan Credit Agreement provided for similar but less restrictive covenants to those of the Credit and Guaranty Agreement. The Second-Lien Term Loan Credit Agreement was a priority loan to the Credit and Guaranty Agreement.

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Notes to Combined Consolidated and Combined Financial Statements (Continued)

Note 12 Debt (Continued)

        SFAS No. 15, "Accounting by Debtors and Creditors for Troubled Debt Restructurings," prescribes the accounting when debt is restructured by a company. Additional guidance on the application of SFAS No. 15 is provided by EITF Issue 02-07, "Determining Whether a Debtor's Modification or Exchange of Debt Instruments is within the Scope of FASB Statement No. 15." The consensus of these pronouncements is that unless there is evidence to the contrary, when debt is restructured with consideration materially less than the carrying value of the retired debt, the provisions of SFAS No. 15 apply. Therefore, although WRC Media was in compliance with its loan covenants when the recapitalization transactions occurred in 2005, because the consideration issued to the Senior Preferred shareholders was significantly less than the Senior Preferred Stock's carrying value, the provisions of SFAS No. 15 applied. Accordingly, the difference between the carrying value of the Senior Preferred Stock and the consideration received by the Senior Preferred shareholders of $82.8 was reduced by the $28.6 of interest expected to be earned by the Second-Lien Term Loan Credit Agreement loan holders over the term of the loan. Therefore, WRC Media recognized a gain of $54.2 and increased the carrying value of the Second-Lien Term Loan Credit Agreement loan by $28.6. The net gain on recapitalization of $38.0 was not reduced by income taxes.

        Beginning November 20, 2006, WRC Media was in default of the Second-Lien Term Loan Credit Agreement due to the excess borrowings discussed above and the cross default provisions of the Credit and Guaranty Agreement and Second-Lien Term Loan Credit Agreement. As of December 31, 2006, WRC Media was also in default of certain financial covenants which had not been waived. By virtue of these defaults, the lenders were entitled to certain remedies, including the repayment of all borrowings.

        In connection with the Acquisition Transaction and the contribution of WRC Media to The Reader's Digest Association, Inc., on March 2, 2007, WRC Media repaid all borrowings under the Second-Lien Term Loan Credit Agreement, totaling $40.1. In connection with the repayment of the Second-Lien Term Loan Credit Agreement, WRC Media recognized a gain in other income and (expense), net on the extinguishment since accrued interest of $18.5 expected to be earned by the Second-Lien Term Loan Credit Agreement was not required to be paid.

Direct Holdings

        On May 31, 2005, Direct Holdings entered into an amended asset-backed revolving credit agreement (the "Amended CIT Credit Facility") with The CIT Group/Business Credit, Inc. ("CIT"). The Amended CIT Credit Facility provided for a maximum available credit line totaling $20.0. The credit line was collateralized by substantially all of the assets of Direct Holdings, including accounts receivable, inventory and equipment. The Amended CIT Credit Facility also provided for two Term Loans ("Term Loan A" and "Term Loan B") in the amount of $2.5 each and a $5.0 sub limit for standby letters of credit within the $20.0 credit line.

        In February 2006, CIT assigned Term Loan B to Citicorp North America. In March 2006, the maximum revolving credit line decreased from $20.0 to $15.0 pursuant to an Extension Agreement. New financial covenants as well as other restrictions were set forth. The Extension Agreement also waived a default associated with delivery of audited financial statements for the year ended June 30, 2005.

        On May 26, 2006, Direct Holdings entered into an Assumption and Amendment Agreement which provided for several changes to the Amended CIT Credit Facility and Extension Agreements. The Assumption and Amendment Agreement was necessary to remove consolidated covenants and

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Notes to Combined Consolidated and Combined Financial Statements (Continued)

Note 12 Debt (Continued)

provisions that were in place prior to the sale of Direct Holdings' previous sister company, Lillian Vernon Corporation. Term Loan A increased to $3.8 and Term Loan B increased to $12.5.

        On December 27, 2006, CIT entered into an Amendment and Waiver (the "Waiver Amendment") with Direct Holdings and certain other parties, amending the Amended CIT Credit Facility. Among other things, the Waiver Amendment provided for a waiver through December 31, 2006 relating to delivery of annual audited financial statements for the year ended June 30, 2006. It also amended certain EBITDA calculations and trailing EBITDA minimums required to be maintained by Direct Holdings.

        In connection with the Acquisition Transaction and the contribution of Direct Holdings to The Reader's Digest Association, Inc., on March 2, 2007, Direct Holdings repaid the outstanding principal and accrued interest of $29.6 under the Amended CIT Credit Facility (including its revolver, Term Loan A and Term Loan B).

Lines of Credit

        As of June 30, 2007, international lines of credit and overdraft facilities totaled $41.6, of which $23.5 were outstanding. The interest rates on outstanding borrowings at June 30, 2007 ranged from 5.4% to 6.5%. These lines of credit are subject to renewal annually.

        As of June 30, 2007, our $2.9 stand-by letters of credit serves as security for a real estate leases entered into by WRC Media.

Note 13 Capital Stock

        In connection with the Acquisition Transaction, Reader's Digest Association, Inc. was authorized to issue 391,000 shares (1,000 common shares and 390,000 preferred shares). 1,000 common shares are outstanding at a par value of $1.00 per share and are owned by RDA Holding Co. Each issued and outstanding share of Reader's Digest Association, Inc. preferred stock remained issue and outstanding as shares of preferred stock of the surviving corporation as of June 30, 2007.

        Preferred stock consists of the following as of June 30:

	2007
First preferred stock, par value $1.00 per share; authorized 40,000 shares; issued and outstanding 29,720 shares	$	1.7
Second preferred stock, par value $1.00 per share; authorized 120,000 shares; issued and outstanding 103,720 shares		6.4
Third subordinated preferred stock, par value $1.00 per share; authorized 230,000 shares; issued and outstanding 155,022 shares		12.6
Total preferred stock	$	20.7

        All shares of preferred stock have a preference in liquidation of $100.00 per share. The difference between the aggregate par value and liquidation preference has been appropriated from retained

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Notes to Combined Consolidated and Combined Financial Statements (Continued)

Note 13 Capital Stock (Continued)

earnings and is shown as part of the value of preferred stock. At our option and at any time, all preferred stock is redeemable at $105.00 per share plus accrued dividends. The terms of the first preferred stock and the second preferred stock provide for annual cumulative dividends of $4.00 per share. The terms of the third subordinated preferred stock provide for annual cumulative dividends of $5.00 per share. Preferred stockholders do not have any voting rights.

        In connection with the Acquisition Transaction certain holders of preferred stock executed their preferred stock appraisal rights. In October 2007, we reached an agreement to redeem 26,725, 83,783 and 87,083 shares of first preferred stock, second preferred stock and third subordinated preferred stock, respectively, for $11.6.

Note 14 Commitments and Contingencies

General Litigation

        From time to time, we are involved in a variety of claims, lawsuits, investigations and proceedings that arise in the ordinary course of business. We cannot predict the ultimate outcome of these matters with certainty. Management believes that the ultimate outcome of these matters will not have a material adverse effect on our financial position or results of operations, although our results and cash flow could be significantly unfavorably affected in the reporting periods in which these matters are resolved.

Supply and Service Agreements

        We maintain several long-term agreements with vendors primarily for the purchase of paper, printing and fulfillment services. These agreements expire at various times through fiscal 2012.

        In the normal course of business, we enter into long-term arrangements with suppliers for raw materials and merchandise and with other parties whose recordings or works we use in our products. These arrangements may contain minimum purchase requirements. We enter into these agreements to facilitate an adequate supply of materials and to enable us to develop better products for sale to our customers.

        On October 17, 2007, we entered into a seven year contract with Williams Lea, a global corporate information solutions provider. Under the contract, Williams Lea will deliver outsourced print procurement and marketing solutions to our operations in 19 countries across the United States and Canada, Europe, Middle East, Asia Pacific and Latin America. Williams Lea will assume the promotional printing operations of our direct-mail business, providing us with increased leverage and purchasing power by virtue of Williams Lea's expertise and global scale.

World's Finest Chocolate, Inc

        In May 2000, QSP Inc. (QSP) entered into a long-term licensing agreement with World's Finest Chocolate, Inc (WFC) whereby QSP received the exclusive fundraising rights for WFC's products. In May 2007, the agreement with WFC was restructured to reduce the term of the agreement from December 31, 2020 to December 31, 2009, reduce our annual minimum tonnage purchase requirements for the remaining term of the agreement, phase out the fundraising exclusivity rights previously granted to QSP (effective January 1, 2008), and eliminate certain employment restrictions.

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Notes to Combined Consolidated and Combined Financial Statements (Continued)

Note 14 Commitments and Contingencies (Continued)

        As a result of substantially reducing the term of the previous contract and lowering the minimum tonnage commitment, a charge of $(15.0) was recorded as of June 30, 2007 in other operating items, net on the combined consolidated statement of operations. Of the total charge, $8.0 was paid in 2007, and $4.0 will be paid during the third quarter of 2008 and $3.0 during 2009.

        As of June 30, 2006, QSP accrued $5.6 million in anticipation of not meeting its calendar year 2006 minimum tonnage requirement of 11,300 tons. During 2007, the minimum tonnage accrual of $4.8 was reversed and an additional $2.7 inventory cost reduction was recognized in connection with certain performance and delivery issues at WFC. Both of these amounts were recorded as a credit to product, distribution and editorial expenses.

        The approximate annual minimum purchase amount under this restated agreement by calendar year are 9,000 tons in 2007 ($51.3), 8,000 tons in 2008 ($46.7) and 7,000 tons in 2009 ($41.9). These amounts are estimates based on defined minimum tonnage requirements, as stipulated in the restated agreement, and nominal price increases. Failure to meet calendar year minimum tonnage amounts could result in QSP paying a penalty to WFC of $1.00 per pound below the minimum purchase requirement. It is QSP's intention to meet the annual minimum tonnage requirements for the remaining term of the restated agreement

Lease Obligations

        We occupy certain facilities under lease arrangements and lease certain equipment.

        Rental expense and sublease income are as follows:

	2007			2006			2005
Rental expense	$	13.5		$	6.6		$	7.2
Sublease income		(2.5	)		(0.9	)		(0.3	)
Net rental expense	$	11.0		$	5.7		$	6.9

        Future minimum rental commitments, net of sublease income, for noncancelable operating leases for the next five fiscal years and thereafter (extending to 2024) are as follows:

	Minimum Rental Payments	Minimum Sublease Income	Net
2008	30.8	6.9	23.9
2009	28.5	5.5	23.0
2010	24.6	3.4	21.2
2011	22.1	3.2	18.9
2012	20.5	3.1	17.4
Later years	87.3	12.2	75.1

Note 15 Segments

        Our businesses are structured into the same reportable segments (Reader's Digest North America, Reader's Digest International, School & Educational Services (formerly Consumer Business Services), WRC Media and Direct Holdings) that our chief operating decision maker uses to assess business

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Notes to Combined Consolidated and Combined Financial Statements (Continued)

Note 15 Segments (Continued)

performance. As of June 30, 2007, WRC Media and Direct Holdings have not been fully integrated into our businesses. Accordingly, the business performance of both WRC Media and Direct Holdings were assessed and monitored on a standalone basis in 2007. WRC Media and Direct Holdings were also assessed and monitored on a standalone basis in the 2006 and 2005 combined financial statements. We expect to have WRC Media and Direct Holdings fully integrated into our business in 2008. In addition to the reportable segments, we separately report Corporate Unallocated expenses, which are expenses not directly attributable to business unit performance. Similarly, we separately report the effects of goodwill and intangible asset impairment charges, certain purchase accounting related fair value adjustments and other operating items, net, because our chief operating decision maker does not factor these items when assessing business unit performance. Here is a brief description of the activities included within our reportable segments.

Reader's Digest North America

        This segment comprises our operations in the United States and Canada that publish and market Reader's Digest magazine, Reiman magazines and several special interest magazines. It also includes our operations in the United States and Canada that publish and market Books and Home Entertainment products (including Select Editions, Reader's Digest Young Families, music and video products, and series and general books related to the following affinities: reading, home and health, and entertainment) as well as two new businesses launched in 2006, Allrecipes.com and Taste of Home Entertaining.

        These businesses have a common focus on the direct marketing aspect of new customer acquisition at a minimal cost. The performance of Reader's Digest magazine and our special interest magazines is driven primarily by circulation revenues and, secondarily, by advertising sales. Circulation is also the principal driver of performance for Reiman magazines, which have limited advertising revenues. The results of our Books and Home Entertainment business are driven by the size of our active customer base, new customer acquisition programs, response rates to promotional mailings, customer payment rates and membership in our continuity series business.

Reader's Digest International

        This segment comprises our operations outside of the United States and Canada, with our most significant markets in the United Kingdom, Germany, Central Europe, Australia and France. The businesses in this segment publish and market Reader's Digest magazine (in numerous editions and languages) and books and home entertainment products (described above).

        The performance of these businesses is driven by factors similar to those in the Reader's Digest North America segment, except that overall results are less sensitive to changes in individual geographic market conditions due to the number of markets in which we operate. The results for Reader's Digest magazine in international markets are driven primarily by circulation and secondarily by advertising revenues. The results of our books and home entertainment products in these markets are driven by the size of our active customer base, new customer acquisition programs, response rates to promotional mailings, customer payment rates and membership in our continuity series business.

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Notes to Combined Consolidated and Combined Financial Statements (Continued)

Note 15 Segments (Continued)

School & Educational Services

        This segment comprises Books Are Fun, our display marketing business, and QSP, our youth fundraising businesses, in the United States and Canada.

        Books Are Fun and QSP principally sell products through non-direct marketing channels, primarily through their sales forces. The performance of these businesses is driven by product selection, the number of accounts or events, the average sales per account or event, and the number of participants in fundraising programs.

WRC Media

        WRC Media is a leading publisher of classroom periodicals, including the Weekly Reader. WRC Media also publishes grade-specific workbooks, fiction and nonfiction texts, and other supplementary educational materials, including customized instructional materials paid for by various sponsors, all of which are distributed primarily to pre-K - 12 students throughout the United States. WRC Media sells its proprietary and third-party products through catalogs, telesales operations and independent distributors.

        WRC Media also develops and distributes research-based, technology learning solutions. The CompassLearning Odyssey software solution is a comprehensive educational assessment, curriculum, reporting and management tool suite for grades pre-K - 12, all of which are aligned to local, state and national standards. In addition, WRC Media provides consulting/teacher training services to educators on curriculum development and technology integration in the classroom, utilizing its software products.

        The results of our WRC Media business are driven by software sales, subscriber renewal rates, new customer acquisition programs, response rates to promotional mailings and customer payment rates.

Direct Holdings

        Direct Holdings and its subsidiaries is a global direct marketer of music, videos, and DVDs under the Time Life brand. The Time Life name and logo are registered trademarks of Time Inc. and Time Warner Inc. and are used under a license agreement with Direct Holdings. DHW has offices in the United States, Europe, and Australia. It markets products primarily on television via DRTV advertising, through retail locations, via telephone, the internet, and direct mail.

        The results of our Direct Holdings business are driven by response rates to television advertisements, success of new product introductions and customer payment rates.

Intercompany Eliminations and Corporate Unallocated Expenses

        We present our segment revenues and operating (losses) profits consistent with how we manage our operations and how our chief operating decision maker reviews our results. Revenues and expenses attributable to intercompany transactions are included in the results of our reportable segments. Such amounts are eliminated (under the intercompany eliminations caption below) to reconcile our reportable segment amounts to combined consolidated amounts, as reported in the statements of operations. Accounting policies of our segments are the same as those described in Note 1, Organization and Summary of Significant Accounting Policies. In addition to intercompany revenues and expenses, we separately report Corporate Unallocated expenses, which cover expenses that are not

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Notes to Combined Consolidated and Combined Financial Statements (Continued)

Note 15 Segments (Continued)

directly attributable to business unit performance. Corporate Unallocated expenses include the cost of governance and other corporate-related expenses, as well as income and expenses associated with our U.S. pension plans and retiree healthcare benefits.

        We evaluate performance and allocate resources based on operating income from continuing operations excluding other operating items and Corporate Unallocated expenses. Identifiable assets by segment are those assets that are used in the operations of that business. Corporate assets consist primarily of cash and cash equivalents, certain prepaid expenses, marketable securities, certain pension assets, certain fixed assets and certain other current assets. Sales are attributed to countries based on selling location. Long-lived assets are primarily: property, plant and equipment, net; goodwill and intangible assets, net; and prepaid pension benefits.

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Notes to Combined Consolidated and Combined Financial Statements (Continued)

Note 15 Segments (Continued)

Reportable Segment Financial Information

		Years ended June 30,
		2007			2006			2005
Revenues
	Reader's Digest North America	$	294.9		$	—		$	—
	Reader's Digest International		352.0			—			—
	School & Educational Services		99.9			—			—
	WRC Media		136.8			134.1			139.0
	Direct Holdings		252.4			260.0			303.5
	Intercompany eliminations		(4.1	)		—			—
	Purchase accounting related adjustments(1)		(55.5	)		—			—
Total revenues		$	1,076.4		$	394.1		$	442.5
Operating (loss) profit
	Reader's Digest North America	$	51.6		$	—		$	—
	Reader's Digest International		39.6			—			—
	School & Educational Services		(5.7	)		—			—
	WRC Media		(0.3	)		2.5			1.9
	Direct Holdings		(7.5	)		(1.1	)		2.8
	Goodwill and intangible asset impairment charge(2)		—			—			(70.1	)
	Purchase accounting related adjustments(1)		(62.6	)		—			—
	Corporate Unallocated		(14.4	)		—			—
	Other operating items, net(3)		(36.2	)		(14.5	)		(20.6	)
Total operating (loss) profit		$	(35.5	)	$	(13.1	)	$	(86.0	)
Assets
	Reader's Digest North America	$	1,659.8		$	—		$	—
	Reader's Digest International		1,575.9			—			—
	School & Educational Services		415.9			—			—
	WRC Media		225.0			142.4			366.7
	Direct Holdings		78.9			56.8			62.6
	Corporate		443.1			—			—
Total assets		$	4,398.6		$	199.2		$	429.3

(1)

Purchase accounting related fair value adjustments primarily include the fair value reduction to unearned revenue. These charges are not included in the segment results reviewed by the chief operating decision maker. See Note 2, Acquisition and Divestitures, for further information.

(2)

The goodwill and intangible asset impairment charges related to WRC Media is not included in segment results reviewed by our chief operating decision maker. See Note 7, Goodwill and Other Intangible Assets, Net, for additional information.

(3)

Other operating items, net consists of contractual charges related to the strategic repositioning of our business, asset impairments and restructuring charges. Such items are not included in segment

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Notes to Combined Consolidated and Combined Financial Statements (Continued)

Note 15 Segments (Continued)

results reviewed by our chief operating decision maker. See Note 4, Other Operating Items, Net, for further information.

		Years ended June 30,
		2007		2006		2005
Depreciation and amortization and asset impairments
	Reader's Digest North America	$	9.4	$	—	$	—
	Reader's Digest International		11.7		—		—
	School & Educational Services		2.1		—		—
	WRC Media		9.1		10.8		13.2
	Direct Holdings		2.0		4.2		6.9
	WRC Media asset impairment charges		—		—		70.1
	Corporate		2.4		—		—
Total depreciation, amortization and asset impairments		$	36.7	$	15.0	$	90.2
Capital expenditures
	Reader's Digest North America	$	2.3	$	—	$	—
	Reader's Digest International		3.2		—		—
	School & Educational Services		0.3		—		—
	WRC Media		7.1		7.8		6.7
	Direct Holdings		0.6		0.4		2.5
	Corporate		0.9		—		—
Total capital expenditures		$	14.4	$	8.2	$	9.2

        The following table presents our combined consolidated net revenues by product:

		Years ended June 30,
		2007		2006		2005
Revenues
	Books	$	376.9	$	42.5	$	45.3
	Magazines—advertising		57.8		—		—
	Magazines—subscription		173.4		46.6		46.3
	Music and videos		337.6		260.1		303.5
	Food and gift		63.6		—		—
	Other		67.1		44.9		47.4
Total revenues		$	1,076.4	$	394.1	$	442.5

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Notes to Combined Consolidated and Combined Financial Statements (Continued)

Note 15 Segments (Continued)

        Information about geographic areas is as follows:

		Years ended June 30,
		2007			2006		2005
Revenues
	United States	$	622.6		$	318.3	$	343.7
	International		454.0			75.8		98.8
	Inter-area		(0.2	)		—		—
Total revenues		$	1,076.4		$	394.1	$	442.5
Long-lived assets, net
	United States	$	2,075.2		$	108.0	$	114.5
	International		1,430.3			0.5		1.5
Total long-lived assets, net		$	3,505.5		$	108.5	$	116.0

Note 16 Related Party Transactions

Transaction Fee Agreement

        In connection with the Acquisition Transaction, RDA Holding Co. entered into a transaction fee agreement with Ripplewood pursuant to which Ripplewood received an aggregate transaction fee of $25.0 in cash. This amount was pushed down to us from RDA Holding Co. resulting in the deferral of $11.3 in financing fees in connection with the 2007 Credit Agreements and Senior Subordinated Notes and $13.7 in transaction costs recorded in connection with purchase accounting.

        In addition, in connection with the Acquisition Transaction we paid $3.9 of transaction fees, primarily related to the bridge loan commitment fee, on behalf of RDA Holding Co. This payment was recorded as a reduction in additional paid in capital.

Management Services Agreement

Reader's Digest Association, Inc.

        In connection with the Acquisition Transaction, RDA Holding Co. entered into a management services agreement with Ripplewood, J. Rothschild Group (Guernsey) Ltd., and GoldenTree Asset Management, LP, pursuant to which Ripplewood, J. Rothschild Group (Guernsey) Ltd., and GoldenTree Asset Management, LP (together the "Service Providers"), to receive a management fee of $7.5 million (the "Management Fee") paid quarterly each January 1, April 1, July 1 and October 1 following the closing date, paid pro rata in accordance with the percentage listed for each Service Provider in the management services agreement. The Management Fee will be paid in cash, in immediately available funds, to the account of each Service Provider provided to RDA Holding Co. in writing by such Service Provider. As the services provided under the management agreement are for our benefit, the payment of these fees was pushed down to us.

        The management services agreement has a term of seven years. Upon a public offering or a change of control, the management services agreement will terminate, and the Service Providers will be entitled to the net present value of the remaining payments under the management services agreement.

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The Reader's Digest Association, Inc. and Subsidiaries

Notes to Combined Consolidated and Combined Financial Statements (Continued)

Note 16 Related Party Transactions (Continued)

In addition to the Management Fee, RDA Holding Co. will pay (or cause us to pay) directly, or reimburse, the Service Providers for their out-of-pocket expenses, which include reasonable out-of-pocket costs and expenses incurred by the Service Providers in connection with the services rendered under the management services agreement.

        The management services agreement will also provide that, to the extent that RDA Holding Co. requests services other than management services from a Service Provider, RDA Holding Co. and such Service Provider may negotiate mutually agreed upon fees and expenses to be paid by RDA Holding Co. for such other services, and such other services will be deemed to be provided under the management services agreement. The management services agreement will include customary exculpatory and indemnification provisions in favor of the Service Providers.

        In 2007, we expensed $2.5 of management fees and did not have an accrual as of June 30, 2007.

WRC Media

        In connection with the acquisitions of Weekly Reader and CompassLearning in 1999, WRC Media entered into management agreements with its principal shareholder, Ripplewood. In accordance with the management agreements, the shareholder provides WRC Media consulting and financial advisory services. Under the original agreements, WRC Media was obligated to pay to the shareholder annual aggregate management fees for services totaling $1.0, which are payable quarterly. The agreements have no stated term, but can be terminated by the shareholder upon five days notice. In addition, WRC Media will reimburse the principal shareholder for reasonable out-of-pocket costs and expenses incurred in connection with the performance of its services.

        These agreements were revised as part of the recapitalization in July 2005, and the revised agreements prohibit the payment of management fees subject to certain conditions. In addition, WRC Media will reimburse the principal shareholder for reasonable out-of-pocket costs and expenses incurred in connection with the performance of its services. WRC Media did not pay any management fees in 2007 and 2006. During 2005, WRC Media incurred management fees of $1.0, which is included in promotion, marketing and administrative expenses. In connection with the WRC Media Merger, the agreements were terminated.

Direct Holdings

        Concurrent with the acquisition described in Note 3, Direct Holdings became party to an agreement with Ripplewood, whereby Ripplewood would render to Direct Holdings advisory and consulting services in relation to the affairs of Direct Holdings, including without limitation, (i) advice in designing financing structures and advice regarding relationships with Direct Holdings' lenders and bankers; (ii) advice regarding the structure and timing of public offerings of debt and equity securities of Direct Holdings; (iii) advice regarding property dispositions or acquisitions; and (iv) such other advice directly or ancillary to the above financial advisory services as may be reasonably requested by Direct Holdings. In consideration of these services, Direct Holdings agreed to pay Ripplewood a quarterly monitoring fee equal to approximately $0.2 through May, 2006. In June 2006, the quarterly monitoring fee increased to $0.3 as a result of the sale of Lillian Vernon Corporation. The agreement is in effect through the first date on which Ripplewood beneficially owns less than 9.5% of the equity of Direct Holdings and, therefore, this agreement was terminated on March 2, 2007 in connection with the Direct Holdings Stock Acquisition.

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The Reader's Digest Association, Inc. and Subsidiaries

Notes to Combined Consolidated and Combined Financial Statements (Continued)

Note 16 Related Party Transactions (Continued)

        For fiscal 2007, 2006 and 2005, the total expense recorded in connection with the monitoring agreement was approximately $0.8 each year.

ZelnickMedia Corp. and Strauss Zelnick

        On January 1, 2004, Direct Holdings entered into a management agreement with ZelnickMedia Corp. (ZM) under which ZM provides management services to Direct Holdings. Under the management agreement (as amended and restated), Direct Holdings agreed to pay ZM an annual fee of approximately $0.5 for advisory and consulting services. Direct Holdings also pays out-of-pocket expenses of ZM in connection with the management of Direct Holdings. ZM was also eligible for an annual bonus under the management agreement, which was based on the achievement of an EBITDA target compared to budget. The bonus is earned if at least 80% of the EBITDA target was achieved, and increased in accordance with defined levels up to a cap of the lesser of 333% of the base annual management fee or $2.5, if more than 150% of the EBITDA target was achieved.

        In connection with the Direct Holdings Stock Acquisition, the management agreement (as amended and restated) was terminated and replaced with a new agreement in which ZM provides management services to Direct Holdings through December 2008 for an annual fee of $0.8. In addition, Direct Holdings paid any unpaid annual bonus due under the terms of the previous management agreement.

        The new management agreement may be terminated either immediately or upon 15 or 30 days notice depending on the circumstances. If the agreement is terminated by Direct Holdings for cause or by ZM without good reason, then ZM is not entitled to any future management fees. If the agreement is terminated for any other reason, then ZM is entitled to continuing management fee and expense payments through the original term of the agreement, which is December 2008.

        For fiscal 2007, 2006 and 2005, the total amount expensed including the aforementioned bonus, was approximately $2.0, $0.8 and $0.7, respectively, and is included in promotion, marketing and administrative expenses in the accompanying combined consolidated and combined statement of operations. As of June 30, 2007 and 2006 the amount accrued related to this agreement is approximately $0.9 and $0.4, respectively.

        Under a separate Service Agreement entered into on January 1, 2004, Mr. Strauss Zelnick became the Chairman of Direct Holdings. In May 2005, Direct Holdings hired a full time CEO and Mr. Zelnick retained the title of Chairman. Mr. Zelnick received no cash compensation in his capacity as Chairman. Mr. Zelnick is also the Chairman and CEO of ZelnickMedia Corp. This Service Agreement was terminated in connection with the Direct Holdings Stock Acquisition.

Lillian Vernon Corporation

        In March 2003, Ripplewood formed a new holding company, LVC Holdings L.L.C. and its wholly-owned merger subsidiary to acquire a publicly-traded company, Lillian Vernon Corporation. LVC Holdings L.L.C. was subsequently renamed Direct Holdings Worldwide L.L.C.

        Although both Lillian Vernon Corporation (LVC) and Direct Holdings were owned by Direct Holdings Worldwide L.L.C., each company was generally managed autonomously. However, there were certain administrative and order fulfillment operations that were shared for cost and efficiency purposes. Direct Holdings shared management fees that were paid to both Ripplewood and ZM. LVC

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The Reader's Digest Association, Inc. and Subsidiaries

Notes to Combined Consolidated and Combined Financial Statements (Continued)

Note 16 Related Party Transactions (Continued)

charges Direct Holdings for certain order fulfillment services, information technology costs, and certain occupancy costs of LVC's Virginia Beach Distribution Center, as well as certain administrative functions, on a monthly basis at agreed-upon rates based upon the usage of such functions. For Fiscal 2007, 2006 and 2005, LVC billed Direct Holdings approximately $13.5, $10.9 and $7.4 respectively, for services and shared costs related to distribution and approximately $0.5, $3.7 and $8.6, respectively, for selling, general and administrative expenses.

        As part of the Amended CIT Credit Facility discussed in Note 12, Debt, LVC and Direct Holdings entered into an intercompany loan arrangement whereby LVC periodically requested advances and made repayments to fund its cash flow requirements. As of June 30, 2007 and June 30, 2006, the balance of the prepaid fulfillment services was approximately $(1.2) and $0, respectively. See Note 1, Organization and Summary of Significant Accounting Polices for further information.

        On May 26, 2006, LVC entered into a stock purchase agreement and other agreements where all of the outstanding stock was acquired by an unrelated third party. As part of the LVC sale transaction, Direct Holdings assumed certain related party liabilities of $2.4, a related party receivable of $1.3 million and incurred additional debt with CIT of approximately $10.0. In addition, the third party purchaser did not assume the prepaid fulfillment and distribution balance owed by LVC to Direct Holdings of approximately $27.5. Direct Holdings, on behalf of the Parent, incurred $1.8 in costs related to the LVC sale transaction. In addition, Direct Holdings assumed $1.2 in a note payable from LVC. The net costs from these transactions of $0.6 are presented as due from parent in the statement of stockholders' deficit.

        As part of the stock purchase agreement, certain domestic subsidiaries of Direct Holdings agreed to negotiate and to enter into a Transition Services Agreement and an Operating Agreement as provided by the summary of key terms for each agreement. The summary of the key terms of the Transition Services Agreement requires, among other things, that certain information technology, employee and benefit administration services be transferred from LVC to Direct Holdings. The summary of the key terms of the Operating Agreement, among other provisions, generally obligates Direct Holdings to continue using the LVC Virginia Beach warehouse facility for its fulfillment and distribution services for a term of four years at either the lower of current or market rates payable monthly.

        Direct Holdings did not enter into either a Transition Services Agreement or an Operating Agreement with LVC, but the parties proceeded to provide and receive services as provided in the respective summaries of key terms. Pursuant to the summary of key terms outlined in the stock purchase agreement for the Operating Agreement, in 2007, Direct Holdings exercised its right to terminate early the operating services provided by LVC. Direct Holdings notified LVC in February 2007 that it was terminating the services arrangement effective August 31, 2007. The summary of key terms required Direct Holdings to pay a termination fee of $3 million on the termination date, which was recorded in Other Operating Items, net on the combined consolidated statement of operations during 2007. During the six month termination period, Direct Holdings continued to pay LVC for certain operating costs incurred as part of providing on-going fulfillment, customer service and distribution services as well as termination related expenses through the end August 2007.

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The Reader's Digest Association, Inc. and Subsidiaries

Consolidated Condensed Statement of Operations for the three-month period ended September 30, 2007 and Combined Condensed Statement of Operations for the three-month period ended September 30, 2006

(In millions)

(unaudited)

		Three-month period ended September 30,
		2007			2006
Revenues		$	577.8		$	94.0
Product, distribution and editorial expenses			(278.9	)		(45.5	)
Promotion, marketing and administrative expenses			(391.1	)		(53.1	)
Other operating items, net			(0.8	)		—
	Operating loss		(93.0	)		(4.6	)
Interest expense			(45.5	)		(4.8	)
Other income, net			2.1			0.2
Loss before income taxes			(136.4	)		(9.2	)
Income tax benefit (provision)			13.4			(0.3	)
	Net loss	$	(123.0	)	$	(9.5	)

See accompanying Notes to Consolidated and Combined Condensed Financial Statements.

F-65

The Reader's Digest Association, Inc. and Subsidiaries

Consolidated Condensed Balance Sheets as of September 30, 2007 and June 30, 2007

(In millions)

		September 30, 2007			June 30, 2007
		(unaudited)
Assets
Current assets
	Cash and cash equivalents	$	69.0		$	50.2
	Accounts receivable, net		371.6			326.0
	Inventories		218.3			188.1
	Prepaid and deferred promotion costs		66.9			61.4
	Prepaid expenses and other current assets		182.5			164.9
Total current assets			908.3			790.6
	Property, plant and equipment, net		118.0			117.7
	Goodwill		1,837.8			1,844.3
	Other intangible assets, net		1,072.6			1,090.7
	Prepaid pension assets		345.1			336.5
	Other noncurrent assets		207.3			218.8
Total assets		$	4,489.1		$	4,398.6
Liabilities and stockholders' equity
Current liabilities
	Short-term debt	$	13.1		$	13.1
	Accounts payable		278.5			238.2
	Accrued expenses		287.8			320.6
	Income taxes payable		5.3			22.7
	Unearned revenues		394.9			311.9
	Other current liabilities		10.6			11.3
Total current liabilities			990.2			917.8
	Long-term debt		2,123.5			1,981.4
	Unearned revenues		124.0			102.2
	Accrued pension		109.6			112.9
	Post-retirement and post-employment benefits other than pensions		59.7			61.1
	Other noncurrent liabilities		530.2			536.7
Total liabilities		$	3,937.2		$	3,712.1
	Preferred stock		20.7			20.7
	Paid-in capital		1,001.8			1,001.8
	Accumulated deficit		(528.1	)		(405.1	)
	Accumulated other comprehensive gain		57.5			69.1
Total stockholders' equity			551.9			686.5
Total liabilities and stockholders' equity		$	4,489.1		$	4,398.6

See accompanying Notes to Consolidated and Combined Condensed Financial Statements.

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The Reader's Digest Association, Inc. and Subsidiaries

Consolidated Condensed Statement of Cash Flows for the three-month period ended September 30, 2007 and Combined Condensed Statement of Cash Flows for the three-month period ended September 30, 2006

(In millions)

(unaudited)

			Three-month period ended September 30,
			2007			2006
Cash flows from operating activities
Net loss			$	(123.0	)	$	(9.5	)
Depreciation and amortization				22.8			2.6
Accrual of payment in kind interest on long-term debt				—			0.2
Amortization of debt issuance costs				2.1			0.3
Net gain on sale of certain assets				(0.4	)		—
Changes in assets and liabilities, net of effects of Acquisitions and dispositions
		Accounts receivable, net		(38.7	)		(19.9	)
		Inventories		(27.7	)		(1.2	)
		Prepaid and deferred promotion costs		(3.8	)		(0.3	)
		Other assets		(12.2	)		(1.9	)
		Unearned revenues		101.7			23.6
		Income and deferred taxes, net		(32.9	)		0.1
		Accounts payable and accrued expenses		(2.9	)		2.4
		Other liabilities		(10.5	)		(0.4	)
Net change in cash due to operating activities				(125.5	)		(4.0	)
Cash flows from investing activities
	Proceeds from sales of certain assets			10.2			—
	Capital expenditures			(4.8	)		(3.3	)
Net change in cash due to investing activities				5.4			(3.3	)
Cash flows from financing activities
	Proceeds from borrowings, net			136.4			9.3
	Other, net			0.1			—
Total change in cash due to financing activities				136.5			9.3
Effect of exchange rate changes on cash				2.4			0.2
Net change in cash and cash equivalents				18.8			2.2
Cash and cash equivalents at beginning of period				50.2			7.5
Cash and cash equivalents at end of period			$	69.0		$	9.7

See accompanying Notes to Consolidated and Combined Condensed Financial Statements.

F-67

The Reader's Digest Association, Inc. and Subsidiaries

Notes to Consolidated and Combined Condensed Financial Statements

(Dollars in millions, except per share data)

(unaudited)

Subsequent to March 2, 2007 and unless indicated otherwise, references in Notes to Consolidated and Combined Condensed Financial Statements to "we," "us" and"our" are to The Reader's Digest Association, Inc. and subsidiaries, including its predecessor entities WRC Media Inc. and Direct Holdings U.S. Corp. Prior to March 2, 2007, these references are to the combined operations of WRC Media Inc. and Direct Holdings U.S. Corp. All references to 2008 and 2007, unless otherwise indicated, are to fiscal 2008 and fiscal 2007, respectively. Our fiscal year is the period from July 1 through June 30. Dollars are presented in millions, except for share and per share data.

(1) Basis of Presentation and Use of Estimates

        The accompanying consolidated condensed financial statements as of September 30, 2007 and for the three-month period then ended include the accounts of The Reader's Digest Association, Inc. and its majority-owned subsidiaries including the predecessor entities WRC Media Inc. ("WRC Media") and Direct Holdings U.S. Corp. ("Direct Holdings"). We and our majority owned subsidiaries are owned by RDA Holding Co., an entity controlled by Ripplewood Holdings L.L.C. The accompanying combined condensed financial statements for the three-month period ended September 30, 2006 include only the accounts of WRC Media and Direct Holdings. Accordingly, comparability of the three-month period ended September 30, 2007 to the three-month period ended September 30, 2006 is limited. The accompanying consolidated and combined condensed financial statements should be read in conjunction with the audited combined consolidated and combined financial statements included in our Annual Report for the fiscal year ended June 30, 2007. See "Note 3—Acquisition of The Reader's Digest Association, Inc.", for the pro-forma results as though the acquisition took place at the beginning of the periods presented.

        On January 23, 2007, RDA Holding Co. (a Ripplewood Holdings L.L.C. ("Ripplewood") controlled entity), WRC Acquisition Co. (a subsidiary of RDA Holding Co.) and WRC Media entered into a merger agreement that provided for WRC Acquisition Co. to merge with and into WRC Media, with WRC Media being the surviving corporation (the "WRC Media Merger"). An investment fund affiliated with Ripplewood acquired its original interest in WRC Media in 1999 and had at the time of the WRC Media Merger approximately a 46% economic interest and a majority voting interest in WRC Media. The merger consideration of $100.7 paid to WRC Media's existing stockholders to acquire all the common stock of WRC Media at the closing of the WRC Merger on March 2, 2007 included a combination of RDA Holding Co. common stock ($80.6), RDA Holding Co. junior pay-in-kind preferred stock ($20.0) and cash ($0.1).

        On January 23, 2007, RDA Holding Co. entered into a stock acquisition agreement to acquire all the common stock of Direct Holdings in exchange for shares of common stock of RDA Holding Co. and net cash totaling $56.7 (the "Direct Holdings Stock Acquisition"). An investment fund affiliated with Ripplewood acquired its original interest in Direct Holdings in December 2003 and had at the time of the Direct Holdings Stock Acquisition approximately an 84% voting and economic interest in Direct Holdings. The net consideration of $56.7 paid at the closing of the Direct Holdings Stock Acquisition on March 2, 2007 included a combination of RDA Holding Co. common stock ($50.1) and net cash ($6.6).

        On March 2, 2007, RDA Holding Co. acquired The Reader's Digest Association, Inc. pursuant to a Merger Agreement dated November 16, 2006 among The Reader's Digest Association, Inc., RDA

F-68

The Reader's Digest Association, Inc. and Subsidiaries

Notes to Consolidated and Combined Condensed Financial Statements (Continued)

(Dollars in millions, except per share data)

(unaudited)

(1) Basis of Presentation and Use of Estimates (Continued)

Holding Co. and Doctor Acquisition Co. (a wholly owned subsidiary of RDA Holding Co.) (the "RDA Merger Agreement"). Pursuant to the RDA Merger Agreement, Doctor Acquisition Co. was merged with and into The Reader's Digest Association, Inc., with The Reader's Digest Association, Inc. being the surviving corporation (the "Acquisition Transaction"). In the Acquisition Transaction, each outstanding share of common stock of The Reader's Digest Association, Inc. (except those held in treasury) was converted into the right to receive $17.00 in cash and each outstanding share of Doctor Acquisition Co. was converted into one share of common stock of The Reader's Digest Association, Inc., as the surviving corporation. Prior to the Acquisition Transaction, The Reader's Digest Association, Inc. was a publicly traded company listed on the New York Stock Exchange. Upon the closing of the Acquisition Transaction, RDA Holding Co. became the owner of all the issued and outstanding common stock of The Reader's Digest Association, Inc., as the surviving corporation of the Acquisition Transaction. Concurrently with the closing of The Reader's Digest Association, Inc. acquisition on March 2, 2007, RDA Holding Co. contributed all of the outstanding shares of WRC Media and Direct Holdings to The Reader's Digest Association, Inc.

        Prior to the acquisition of The Reader's Digest Association, Inc., investment funds affiliated with Ripplewood controlled a majority of the voting rights in both WRC Media and Direct Holdings. WRC Media is treated as the predecessor company since Ripplewood acquired its controlling ownership position in WRC Media in 1999, prior to its ownership position in Direct Holdings and The Reader's Digest Association, Inc. The combination of WRC Media and Direct Holdings for the periods prior to March 2, 2007 was accounted for using the accounting method prescribed in Statement of Financial Accounting Standards ("SFAS") No. 141, "Business Combinations," for a combination of entities under common control.

        The acquisition of The Reader's Digest Association, Inc. by RDA Holding Co. was accounted for using the purchase method of accounting prescribed in SFAS No. 141. Accordingly, the consolidated condensed results of The Reader's Digest Association, Inc. are included in the consolidated condensed financial statements from the acquisition date on March 2, 2007 and include the pushdown of purchase consideration from RDA Holding Co. As a result, the accompanying combined financial statements of The Reader's Digest Association, Inc. and subsidiaries consist exclusively of the combined results of WRC Media and Direct Holdings for all periods prior to March 2, 2007.

        All significant intercompany accounts and transactions have been eliminated in the 2008 consolidation and the 2007 combination. These statements, except for the consolidated condensed balance sheet as of June 30, 2007 and accompanying notes have not been audited or reviewed but, in the opinion of management, have been prepared in conformity with U.S. generally accepted accounting principles, applying certain assumptions and estimates, including all adjustments considered necessary to present such information fairly. All other adjustments are of a normal recurring nature. Although these estimates are based on management's knowledge of current events and actions that we may undertake in the future, actual results may ultimately differ from those estimates. Operating results for any interim period are not necessarily indicative of the results for an entire year due to the seasonality of our business.

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The Reader's Digest Association, Inc. and Subsidiaries

Notes to Consolidated and Combined Condensed Financial Statements (Continued)

(Dollars in millions, except per share data)

(unaudited)

(1) Basis of Presentation and Use of Estimates (Continued)

        We report on a fiscal year that begins July 1. The three-month periods ended September 30, 2007 and 2006 are the first fiscal quarters of 2008 and 2007, respectively. WRC Media and Direct Holdings previously reported on a fiscal year that ended on December 31 and on a fiscal year that ended on the last Saturday in June, respectively. Both WRC Media and Direct Holdings changed their respective fiscal year ends to June 30. Direct Holdings' first fiscal quarter for the 2007 fiscal year began on June 25, 2006 and ended on September 23, 2006. The period from September 24, 2006 to September 30, 2006 is not material to Direct Holdings and the combined financial statements for 2007.

Recent Accounting Standards

        In June 2006, the FASB issued FASB Interpretation 48, "Accounting for Uncertainty in Income Taxes—an Interpretation of SFAS 109" ("FIN 48"). FIN 48 clarifies the accounting for income taxes by prescribing a minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. It also provides guidance on derecognition and measurement of tax positions. Disclosure requirements under this guidance will include a roll forward of the beginning and ending unrecognized tax benefits as well as specific detail related to tax uncertainties for which it is reasonably possible the amount of unrecognized tax benefit will significantly increase or decrease within a year. FIN 48 is effective for fiscal years beginning after December 15, 2006 for public companies and for fiscal years beginning after December 15, 2007 for non-public companies. We adopted FIN 48 effective October 1, 2007. See "Note 10-Income Taxes" for additional information.

        In September 2006, the FASB issued Statement of Financial Accounting Standards ("SFAS") No. 157, "Fair Value Measurements" ("SFAS No. 157"). This Statement defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. This Statement applies under other accounting pronouncements that require or permit fair value measurements. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. We are evaluating the impact of this standard on our consolidated financial statements and the impact is not expected to be material.

        Also in September 2006, the FASB issued SFAS No. 158, "Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans (an amendment of FASB Statements No. 87, 88, 106, and 132R)" ("SFAS No. 158"). The objectives of this Statement are for an employer to: (1) recognize the overfunded or underfunded status of a single-employer defined benefit postretirement plan as an asset or liability in its statement of financial position and to recognize changes in that funded status in comprehensive income in the year in which the changes occur; and (2) measure the plan status as of the date of its year-end statement of financial position. SFAS No. 158 is effective for the requirement to recognize the funded status of a benefit plan and the disclosure requirements as of the end of the fiscal year ending after December 15, 2006. The requirement to measure plan assets and benefit obligations as of the date of the employer's fiscal year-end statement of financial position will be effective for fiscal years ending after December 15, 2008. We adopted this statement effective March 2, 2007.

        In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities". SFAS No. 159 permits entities to voluntarily choose to measure many

F-70

The Reader's Digest Association, Inc. and Subsidiaries

Notes to Consolidated and Combined Condensed Financial Statements (Continued)

(Dollars in millions, except per share data)

(unaudited)

(1) Basis of Presentation and Use of Estimates (Continued)

financial assets and financial liabilities at fair value. The election is made on an instrument-by-
instrument basis and is irrevocable. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. We are currently evaluating the provisions of SFAS No. 159 to determine the potential impact, if any, the adoption will have on our consolidated financial statements.

(2) Equity-Based Compensation

        In July 2007, upon the recommendation of the Compensation Committee of our Board of Directors, the Board of Directors of RDA Holding Co. (the "Holding Co. Board") approved the RDA Holding Co. 2007 Omnibus Incentive Compensation Plan (the "2007 Plan"). All of our prior existing employee incentive compensation plans were terminated upon the completion of the Acquisition Transaction. Under the 2007 Plan, the Holding Co. Board may grant to eligible directors, employees and consultants stock options, stock appreciation rights, restricted stock, restricted stock units, and other equity-based or equity related awards in RDA Holding Co. that the Holding Co. Board determines, in consultation with the Compensation Committee of our Board of Directors, are consistent with the purpose of the 2007 Plan and our best interests. The Holding Co. Board may grant up to a maximum of 4,988,047 shares under the 2007 Plan. On July 12, 2007, the Holding Co. Board granted approximately 1.0 million stock options at an exercise price of $10 per share, 1.1 million shares of restricted stock and 0.2 million shares of restricted stock units with a fair market value of $10 per share. As of September 30, 2007, 1.0 million stock options, 1.0 million shares of restricted stock and 0.2 million shares of restricted stock units were outstanding. In general, these stock options vest over four years. The exercise and/or vesting of these awards is also contingent on the occurrence of certain liquidity events, as defined in the 2007 Plan and the recording of such awards is pushed down to us from RDA Holding Co. As a result of these provisions, no stock based compensation expense has been recognized subsequent to the granting of these stock options, restricted stock and restricted stock units.

(3) Acquisition of The Reader's Digest Association, Inc.

        On March 2, 2007, RDA Holding Co. acquired 100% of the outstanding common stock of The Reader's Digest Association, Inc. for $1,517.1, net of cash acquired of $119.6, plus capitalized transaction costs of $36.0. In connection with the Acquisition Transaction, certain holders of preferred stock executed their preferred stock appraisal rights. In October 2007, we reached an agreement to redeem 26,725, 83,783 and 87,083 shares of preferred stock, second preferred stock and third subordinated preferred stock, respectively, for an aggregate of approximately $11.6.

        The following table presents pro-forma results of operations as though the Acquisition Transaction was consummated at July 1, 2006:

	Three-month period ended September 30, 2006
Revenues	$	555.6
Net loss	$	(123.4	)

F-71

The Reader's Digest Association, Inc. and Subsidiaries

Notes to Consolidated and Combined Condensed Financial Statements (Continued)

(Dollars in millions, except per share data)

(unaudited)

(3) Acquisition of The Reader's Digest Association, Inc. (Continued)

        These pro forma results have been prepared for comparative purposes only and include certain adjustments, such as additional amortization expense for identified intangibles, increased interest expense from the incurrence of debt in connection with the Acquisition Transaction and other purchase accounting related adjustments. The unaudited pro forma financial information is not intended to be indicative of the results of operations that actually would have resulted had the Acquisition Transaction occurred at the beginning of the period, or of future results of operations or financial condition of our consolidated entity.

(4) Revenues and Operating Profit (Loss) by Reportable Segment

        The accounting policies of our segments are the same as those described in Note 15 in the combined consolidated financial statements included in our Annual Report for the fiscal year ended June 30, 2007. As of September 30, 2007, WRC Media and Direct Holdings have not been fully integrated into our businesses. Accordingly, the business performance of both WRC Media and Direct Holdings were assessed and monitored on a standalone basis. WRC Media and Direct Holdings were also assessed on a standalone basis in the 2007 combined condensed financial statements. We expect to have WRC Media and Direct Holdings fully integrated into our business during 2008. See "Management's Discussion And Analysis Of Financial Condition—Our Reportable Segments" in this prospectus for additional information on our segment reporting.

        Reportable segments are based on our method of internal reporting. We present our segment revenues as if the intercompany transactions were with third parties. Revenues and expenses attributable to intercompany transactions are eliminated to reconcile our reportable segment amounts

F-72

The Reader's Digest Association, Inc. and Subsidiaries

Notes to Consolidated and Combined Condensed Financial Statements (Continued)

(Dollars in millions, except per share data)

(unaudited)

(4) Revenues and Operating Profit (Loss) by Reportable Segment (Continued)

to consolidated or combined amounts, as reported in our consolidated and combined condensed statements of operations.

			Three-month period ended September 30,
			2007			2006
REVENUES
	Reader's Digest North America		$	231.4		$	—
	Reader's Digest International			264.9			—
	School & Educational Services			50.1			—
	WRC Media			28.9			34.6
	Direct Holdings			53.1			59.4
	Intercompany eliminations			(7.2	)		—
	Purchase accounting related adjustment(1)			(43.4	)		—
		TOTAL REVENUES	$	577.8		$	94.0
Operating profit (loss)
	Reader's Digest North America		$	6.9		$	—
	Reader's Digest International			(0.8	)		—
	School & Educational Services			(20.1	)		—
	WRC Media			(2.8	)		0.9
	Direct Holdings			(8.8	)		(5.5	)
	Corporate Unallocated(2)			(23.2	)		—
	Other operating items, net(3)			(0.8	)		—
	Purchase accounting related adjustment(1)			(43.4	)		—
Operating loss			$	(93.0	)	$	(4.6	)

(1)

Purchase accounting related fair value adjustment to reduce unearned revenues. This charge was not included in the segment results reviewed by the chief operating decision maker.

(2)

Corporate Unallocated includes expenses for the cost of governance and centrally managed expenses, as well as the accounting for U.S. pension plans, postretirement healthcare costs, and other costs that are not allocated to the reportable segments, such as the amortization of intangible assets. Governance and centrally managed expenses include costs for departments such as corporate finance, general corporate management, legal, public relations and treasury and for related information technology and facility costs incurred by these departments.

(3)

Other operating items, net, include restructuring and contractual charges and a gain on sales of certain non-strategic assets and, therefore, are not included in segment results reviewed by our chief operating decision maker.

F-73

The Reader's Digest Association, Inc. and Subsidiaries

Notes to Consolidated and Combined Condensed Financial Statements (Continued)

(Dollars in millions, except per share data)

(unaudited)

(5) Comprehensive Loss

        Accumulated other comprehensive loss as reported in our balance sheets primarily represents deferred pension liabilities and other retirement benefits, foreign currency translation adjustments and the unrealized gain (loss) on our derivatives. The components of comprehensive loss, net of related tax, for the three-month periods ended September 30, 2007 and 2006 were as follows:

		Three-month period ended September 30,
		2007			2006
Net loss		$	(123.0	)	$	(9.5	)
Change in:
	Foreign currency translation adjustments		(1.7	)		0.2
	Unrealized loss on derivatives		(9.9	)		(0.1	)
Total comprehensive loss		$	(134.6	)	$	(9.4	)

(6) Other Operating Items, Net

        As described in our Annual Report for the fiscal year ended June 30, 2007, amounts included in Other Operating Items, Net for the three month period ended September 30, 2007 primarily consist of: 1) contractual charges related to the strategic repositioning of our businesses totaling $(0.7), primarily related to our contract with a supply chain consulting firm engaged to analyze cost reduction opportunities; 2) asset impairments associated with prior restructuring charges of $(0.4); and 3) restructuring charges of $(0.3), representing the streamlining of our organizational structure and related to our restructuring activities recorded in previous periods.

        For the three month period ending September 30, 2007, other operating items, net, also include the sale of certain non-strategic assets, which resulted in a gain of $0.4.

        The table below reflects changes for the three-month period ended September 30, 2007 to our restructuring accruals recorded in previous periods.

	Severance			Contract Obligations			Other Costs			Total
Balance at June 30, 2007	$	40.4		$	9.9		$	0.3		$	50.6
Accruals		—			—			0.3			0.3
Spending		(5.9	)		(2.4	)		(0.3	)		(8.6	)
Balance at September 30, 2007	$	34.5		$	7.5		$	0.3		$	42.3

F-74

The Reader's Digest Association, Inc. and Subsidiaries

Notes to Consolidated and Combined Condensed Financial Statements (Continued)

(Dollars in millions, except per share data)

(unaudited)

(7) Inventories

	September 30, 2007		June 30, 2007
Raw materials	$	9.4	$	10.5
Work-in-progress		4.9		7.8
Finished goods		204.0		169.8
Total inventories	$	218.3	$	188.1

(8) Debt

The Reader's Digest Association, Inc.

2007 Credit Agreement and Senior Subordinated Notes

        As described in Note 12 to the combined consolidated financial statements included in our Annual Report for the fiscal year ended June 30, 2007, our borrowings include proceeds under our six-year senior secured $300.0 revolving credit facility and a seven-year $1,310.0 term loan (collectively, the "2007 Credit Agreement") and $600.0 in 9% Senior Subordinated Notes due 2017. At September 30, 2007, $225.0 was outstanding under the revolving credit facility, $1,204.0 was outstanding under the term loan in the United States, €75.3 was outstanding under the term loan made available to one of our German subsidiaries, and $600.0 was outstanding under the Senior Subordinated Notes. Interest expense for the three-month period ended September 30, 2007 was $(45.5) including the amortization of deferred financing fees of $(2.1). The weighted average interest rate on our borrowings for the three month period ended September 30, 2007 was 7.7%.

Derivative Instruments

        As described in Note 8 to the combined consolidated financial statements included in our Annual Report for the fiscal year ended June 30, 2007, on April 19, 2007, we entered into interest rate swap agreements with a notional value totaling $750.0, involving the exchange of floating for fixed-rate interest payments, to reduce interest rate volatility and to comply with the interest rate hedging provisions of our 2007 Credit Agreement. The transactions included $450.0 of 3-year interest rate swaps and $300.0 of 5-year interest rate swaps. In each case, we will receive floating-rate interest payments that offset the LIBOR component of the interest due on some of our floating-rate debt and make fixed-rate interest payments over the life of the respective interest rate swaps. The fixed interest rate under the 3-year swaps is 4.89% and the fixed interest rate under the 5-year swaps is 4.94%.

        Additionally, we evaluate whether the creditworthiness of each swap counterparty is such that default on its obligations under the swap is not probable. We also assess whether the LIBOR-based interest payments are probable of being paid under the loans at the inception and, on an ongoing basis (no less than once each quarter), during the life of each hedging relationship.

        As of September 30, 2007 the fair market value of our interest rate swaps decreased, resulting in a loss of $(9.9), net of deferred taxes of $6.0. This change is reported in accumulated other comprehensive loss, which is included in stockholders' equity on the September 30, 2007 balance sheet.

F-75

The Reader's Digest Association, Inc. and Subsidiaries

Notes to Consolidated and Combined Condensed Financial Statements (Continued)

(Dollars in millions, except per share data)

(unaudited)

(8) Debt (Continued)

Financial Statement Reporting Requirements

        We were delayed in the delivery of our fiscal 2007 year-end audited financial statements and first quarter 2008 unaudited financial statements pursuant to the terms of our 2007 Credit Agreement and the Indenture relating to our Senior Subordinated Notes (the "Financial Delivery Requirement"). The delay in completing the Financial Delivery Requirement resulted from technical aspects of the accounting rules and complexities related to changing the fiscal year-end for our predecessor company WRC Media from December 31 to June 30 to conform to our June 30 reporting cycle. On December 12, 2007, we received a notice from the Administrative Agent under our 2007 Credit Agreement that commenced the 30 day period during which we must satisfy the Financial Delivery Requirement under our 2007 Credit Agreement. The delivery of our Annual Report for the fiscal year ended June 30, 2007, on December 12, 2007 satisfied the Financial Delivery Requirement as it related to the fiscal 2007 year-end audited financial statements. Delivery of our Quarterly Report satisfied the Financial Delivery Requirement as it related to the first quarter 2008 unaudited financial statements, thus fully satisfying the Financial Delivery Requirement. Until we satisfied the Financial Delivery Requirement under our 2007 Credit Agreement, we were unable to draw down funds from our revolving credit facility.

WRC Media and Direct Holdings

        At September 30, 2006, WRC Media and Direct Holdings had combined outstanding borrowings of $192.4 under WRC Media's Credit and Guaranty Agreement and Second-Lien Term Loans and Direct Holdings' CIT Group/Business Credit, Inc. Credit Facility. The combined interest expense for the three months ended September 30, 2006 was $(4.8), including the amortization of deferred financing fees of $(0.3). The weighted average interest rate on the combined borrowings of WRC Media and Direct Holdings for the three month period ended September 30, 2006 was 14.0%.

(9) Pension Information

        We sponsor various pension plans, including those for employees in the United States, international employees and supplemental plans for executives. WRC Media and Direct Holdings do not sponsor any defined benefit pension plans.

        The table below details the components of our net periodic pension benefit.

	Three-month period ended September 30, 2007
Service cost	$	4.1
Interest cost		12.4
Expected return on plan assets		(20.8	)
Recognized actuarial gain		(0.1	)
Curtailments, etc.		(1.1	)
Net periodic pension benefit	$	(5.5	)

F-76

The Reader's Digest Association, Inc. and Subsidiaries

Notes to Consolidated and Combined Condensed Financial Statements (Continued)

(Dollars in millions, except per share data)

(unaudited)

(9) Pension Information (Continued)

        For the three-month period ended September 30, 2007, approximately $2.1 was contributed to our international pension plans. Because the Retirement Plan in the United States is over-funded, we did not make any contributions during the three-month periods ended September 30, 2007. The U.S. supplemental retirement plans are not qualified under the Internal Revenue Code because they are available only to certain executives. We pay the benefits under these unfunded plans as the obligations are incurred and paid $3.6 during the three-month period ended September 30, 2007.

        We also sponsor certain postretirement benefit plans in the U.S. and Canada. The table below details the components of our net periodic postretirement cost.

	Three-month period ended September 30, 2007
Service cost	$	0.2
Interest cost		0.9
Net periodic postretirement cost	$	1.1

(10) Income Taxes

        During the three-month periods ended September 30, 2007 and 2006, we recorded an income tax benefit (provision) of $13.4 and $(0.3), respectively. The benefit recorded for the three-month period ended September 30, 2007, primarily relates to losses incurred during the quarter that are expected to offset profits in subsequent quarters in the fiscal year.

        In July 2006, the Financial Accounting Standards Board issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement 109. Among other things, FIN 48 provides guidance to address uncertainty in tax positions and clarifies the accounting for income taxes by prescribing a minimum recognition threshold which income tax positions must achieve before being recognized in the financial statements. In addition, FIN 48 requires expanded annual disclosures, including a rollforward of the beginning and ending aggregate unrecognized tax benefits as well as specific detail related to tax uncertainties for which it is reasonably possible the amount of unrecognized tax benefit will significantly increase or decrease within twelve months. We adopted FIN 48 on October 1, 2007, and were not required to record a change to retained earnings due to the adoption. The amount of unrecognized tax benefits from uncertain tax positions at October 1, 2007 was $24.9 including $3.8 of unrecognized tax benefits that, if recognized, would affect the effective tax rate and $21.1 of tax positions arising from business combinations that, if recognized, ultimately would be recorded as an adjustment to goodwill and would not impact the effective tax rate.

        We consider many factors when evaluating and estimating our tax positions and tax benefits, which may require periodic adjustments and which may not accurately anticipate actual outcomes. It is reasonably possible that the amount of the unrecognized benefit with respect to certain of our unrecognized tax positions will significantly increase or decrease within the next 12 months. These changes may be the result of settlement of ongoing audits or final decisions in transfer pricing matters. At this time, an estimate of the range of the reasonably possible outcomes cannot be made.

F-77

The Reader's Digest Association, Inc. and Subsidiaries

Notes to Consolidated and Combined Condensed Financial Statements (Continued)

(Dollars in millions, except per share data)

(unaudited)

(10) Income Taxes (Continued)

        We recognize interest and, if applicable, penalties which could be assessed related to unrecognized tax benefits in income tax expense. We have accrued approximately $1.8 related to interest as of October 1, 2007.

        We and our subsidiaries file income tax returns in the U.S. federal jurisdiction, and many state and foreign jurisdictions. The significant foreign jurisdictions include Canada, the United Kingdom, France, Germany and Australia. With a few exceptions, we are no longer subject to U.S. federal or state and local income tax examinations for the years prior to 2003. In addition, we have subsidiaries in various foreign jurisdictions that have statutes of limitation generally ranging from 3 to 6 years.

        In addition to unrecognized tax benefits, our valuation allowances relate to tax benefits in certain jurisdictions arising from net operating losses and foreign tax credit carryforwards. On an ongoing basis, the Company reassesses the need for such valuation allowances based on recent operating results, its assessment of the likelihood of future taxable income and developments in the relevant tax jurisdictions.

F-78

Report of Independent Registered Public Accounting Firm

The Stockholders and Board of Directors
The Reader's Digest Association, Inc.

        We have audited the accompanying consolidated balance sheet of The Reader's Digest Association, Inc. and subsidiaries as of June 30, 2006, and the related consolidated statements of operations, stockholders' equity, and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

        We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

        In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of The Reader's Digest Association, Inc. and subsidiaries at June 30, 2006, and the consolidated results of their operations and their cash flows for the year then ended, in conformity with U.S. generally accepted accounting principles.

        As discussed in Note 1 to the consolidated financial statements, the Company adopted Statement of Financial Accounting Standards No. 123(R), effective July 1, 2005.

	/s/ Ernst & Young LLP
Stamford, Connecticut August 17, 2006

F-79

Report of independent registered public accounting firm

The Board of Directors and Stockholders
The Reader's Digest Association, Inc.

        We have audited the accompanying consolidated balance sheet of The Reader's Digest Association, Inc. and subsidiaries as of June 30, 2005, and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the years in the two-year period ended June 30, 2005. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

        We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of The Reader's Digest Association, Inc. and subsidiaries as of June 30, 2005, and the results of their operations and their cash flows for each of the years in the two-year period ended June 30, 2005, in conformity with U.S. generally accepted accounting principles.

/s/ KPMG LLP

New York, New York
August 30, 2005

F-80

The Reader's Digest Association, Inc. and Subsidiaries

Consolidated Statements of Operations

		Year ended June 30,
		2006			2005			2004
		In millions, except per share data
Revenues		$	2,386.2		$	2,389.7		$	2,388.5
Product, distribution and editorial expenses			(997.1	)		(970.9	)		(972.9	)
Promotion, marketing and administrative expenses			(1,240.0	)		(1,337.5	)		(1,294.5	)
Goodwill charge			(187.8	)		(129.0	)		—
Other operating items, net			(6.8	)		14.1			(8.8	)
	Operating (loss) profit		(45.5	)		(33.6	)		112.3
Other (expense) income, net			(41.1	)		(45.8	)		(46.2	)
	(Loss) income before provision for income taxes		(86.6	)		(79.4	)		66.1
Income tax provision			(30.8	)		(11.5	)		(16.6	)
Net (loss) income		$	(117.4	)	$	(90.9	)	$	49.5
Basic and diluted (loss) earnings per share
	Basic (loss) earnings per share Weighted average common shares outstanding		95.9			97.4			97.1
	Basic (loss) earnings per share	$	(1.24	)	$	(0.95	)	$	0.50
Diluted (loss) earnings per share
	Adjusted weighted average common shares outstanding		95.9			97.4			99.2
	Diluted (loss) earnings per share	$	(1.24	)	$	(0.95	)	$	0.49
	Dividends per common share	$	0.40		$	0.30		$	0.20

See accompanying notes to consolidated financial statements.

F-81

The Reader's Digest Association, Inc. and Subsidiaries

Consolidated Balance Sheets

		At June 30,
		2006			2005
		In millions, except share data
Assets
Current assets:
	Cash and cash equivalents	$	34.7		$	37.7
	Accounts receivable, net		261.9			233.9
	Inventories		172.3			162.4
	Prepaid and deferred promotion costs		62.3			53.8
	Prepaid expenses and other current assets		173.1			144.9
Total current assets			704.3			632.7
	Property, plant and equipment, net		119.3			119.3
	Goodwill		744.1			880.9
	Other intangible assets, net		134.4			137.8
	Prepaid pension assets		324.6			307.9
	Other noncurrent assets		95.4			102.0
Total assets		$	2,122.1		$	2,180.6
Liabilities and stockholders' equity
Current liabilities:
	Accounts payable	$	128.2		$	109.8
	Accrued expenses		257.3			267.4
	Income taxes payable		40.6			34.5
	Unearned revenues		394.1			395.5
	Other current liabilities		9.8			12.4
Total current liabilities			830.0			819.6
Long-term debt			695.0			559.2
Unearned revenues			131.2			133.0
Accrued pension			108.7			121.5
Postretirement and postemployment benefits other than pensions			94.2			96.7
Other noncurrent liabilities			87.9			84.4
Total liabilities		$	1,947.0		$	1,814.4
Commitments and contingencies (Notes 6, 11 and 13)
Stockholders' equity
	Preferred stock		28.8			28.8
	Common stock (par value $0.01 per share; authorized 200,000,000 shares; 145,922,062 issued in 2006 and 2005; 95,047,776 and 99,256,958 outstanding in 2006 and 2005, respectively)		1.5			1.5
	Unamortized restricted stock		—			(9.1	)
	Paid-in capital		208.1			206.8
	Retained earnings		1,064.3			1,221.6
	Accumulated other comprehensive loss		(67.4	)		(84.1	)
	Treasury stock, at cost (50,874,286 and 46,665,104 shares in 2006 and 2005, respectively)		(1,060.2	)		(999.3	)
Total stockholders' equity			175.1			366.2
Total liabilities and stockholders' equity		$	2,122.1		$	2,180.6

See accompanying notes to consolidated financial statements.

F-82

The Reader's Digest Association, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

	Years ended June 30,
	2006			2005			2004
	(In millions)
Cash flows from operating activities
Net (loss) income	$	(117.4	)	$	(90.9	)	$	49.5
Depreciation and amortization		36.8			56.9			63.2
Magazine deferred promotion charge		—			—			27.2
Asset impairments		190.6			129.0			1.1
Amortization of debt issue costs		1.5			10.3			12.1
Stock-based compensation		14.3			11.2			10.2
Net gain on sales of long-term assets		(4.1	)		(14.3	)		(10.0	)
Changes in assets and liabilities, net of effects of acquisitions and dispositions
Accounts receivable, net		(19.1	)		3.6			34.1
Inventories		(7.8	)		(7.7	)		6.4
Prepaid and deferred promotion costs (including the amortization of previously deferred promotion costs)		(7.5	)		54.0			0.7
Other assets		(25.7	)		13.6			4.3
Unearned revenues		(9.2	)		(9.0	)		(12.7	)
Income and deferred taxes, net		(0.3	)		0.1			1.6
Accounts payable and accrued expenses		1.9			(7.1	)		(6.8	)
Other liabilities		(6.3	)		(10.7	)		(6.5	)
Net change in cash due to operating activities		47.7			139.0			174.4
Cash flows from investing activities
Proceeds from sales of other long-term assets		0.9			6.7			3.8
Proceeds from sales of property, plant and equipment		3.7			62.8			7.1
Purchase of Allrecipes.com, net of cash acquired		(65.9	)		—			—
Purchases of intangible assets		(0.5	)		—			(1.3	)
Capital expenditures		(19.9	)		(23.5	)		(16.1	)
Net change in cash due to investing activities		(81.7	)		46.0			(6.5	)
Cash flows from financing activities
Proceeds / (repayments) from borrowings, net		135.8			214.6			43.9
Proceeds from Senior Notes offering		—			—			300.0
Repayments of term loan		—			(377.0	)		(488.4	)
Cash paid for financing fees		(0.3	)		(2.2	)		(7.6	)
Proceeds from employee stock purchase plan and exercise of stock options		2.2			3.3			2.5
Dividends paid		(39.9	)		(30.5	)		(20.7	)
Treasury stock repurchases		(65.2	)		(5.0	)		—
Other, net		(3.7	)		(3.0	)		0.5
Net change in cash due to financing activities		28.9			(199.8	)		(169.8	)
Effect of exchange rate fluctuations on cash and cash equivalents		2.1			2.2			0.9
Net change in cash and cash equivalents		(3.0	)		(12.6	)		(1.0	)
Cash and cash equivalents at beginning of year		37.7			50.3			51.3
Cash and cash equivalents at end of year		34.7			37.7			50.3
Supplemental information
Cash paid for interest		38.7			36.8			34.2
Cash paid for income taxes		34.1			21.2			28.7

See accompanying notes to consolidated financial statements.

F-83

The Reader's Digest Association, Inc. and Subsidiaries

Consolidated Statements of Changes in Stockholders' Equity

			Capital stock
			Preferred stock		Common stock		Unamortized restricted stock			Paid-in capital			Retained earnings			Accumulated other comprehensive (loss) income			Treasury stock, at cost			Total
			In millions
Balance at June 30, 2003			$	28.8	$	1.5	$	(12.7	)	$	215.0		$	1,314.2		$	(109.2	)	$	(1,024.7	)	$	412.9
Comprehensive income
	Net income													49.5									49.5
	Other comprehensive income:
		Translation gain															5.8						5.8
		Net unrealized gain on investments, net of deferred taxes of $(0.1)															0.2						0.2
		Reclassification adjustments for investment gains that are included in net income, net of deferred taxes $0.3															(0.5	)					(0.5	)
		Net realized loss on derivatives, net of nominal deferred taxes															(0.1	)					(0.1	)
		Reclassification adjustments for derivative losses that are included in net income, net of deferred taxes of $(0.5)															0.9						0.9
		Minimum pension liability, net of deferred taxes of $(7.7)															13.5						13.5
Total comprehensive income																							69.3
Stock issued under various plans								0.2			(4.9	)								18.9			14.2
Common Stock dividends														(19.4	)								(19.4	)
Preferred Stock dividends														(1.3	)								(1.3	)
Balance at June 30, 2004			$	28.8	$	1.5	$	(12.5	)	$	210.1		$	1,343.0		$	(89.4	)	$	(1,005.8	)	$	475.7
Comprehensive loss
	Net loss													(90.9	)								(90.9	)
	Other comprehensive income:
		Translation gain															8.1						8.1
		Reclassification adjustments for derivative losses that are included in net income, net of nominal deferred taxes															0.5						0.5
		Minimum pension liability, net of deferred taxes of $1.9															(3.3	)					(3.3	)
Total comprehensive loss																							(85.6	)
Stock issued under various plans								3.4			(3.3	)								13.5			13.6
Common Stock repurchased																				(7.0	)		(7.0	)
Common Stock dividends														(29.2	)								(29.2	)
Preferred Stock dividends														(1.3	)								(1.3	)
Balance at June 30, 2005			$	28.8	$	1.5	$	(9.1	)	$	206.8		$	1,221.6		$	(84.1	)	$	(999.3	)	$	366.2
Comprehensive loss
	Net loss
		Other comprehensive income:												(117.4	)								(117.4	)
		Translation gain															9.4						9.4
		Minimum pension liability, net of deferred taxes of $(3.7)															7.3						7.3
Total comprehensive loss																							(100.7	)
Reclassification of Unamortized Restricted Stock to Paid-In Capital								9.1			(9.1	)											—
Stock issued under various plans											10.4									2.3			12.7
Common Stock repurchased																				(63.2	)		(63.2	)
Common Stock dividends														(38.6	)								(38.6	)
Preferred Stock dividends														(1.3	)								(1.3	)
Balance at June 30, 2006			$	28.8	$	1.5	$	—		$	208.1		$	1,064.3		$	(67.4	)		(1,060.2	)	$	175.1

        Accumulated Other Comprehensive Loss, net of tax, is comprised of foreign currency translation adjustments of ($31.8), ($42.5) and ($50.6) at June 30, 2006, 2005 and 2004 respectively; minimum pension liabilities of ($35.6), ($41.6) and ($38.3) at June 30, 2006, 2005 and 2004, respectively; and unrealized losses on derivatives of ($0.5) at December 31, 2004.

See accompanying notes to consolidated financial statements.

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The Reader's Digest Association, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

Dollars in millions, except per share data

Unless otherwise indicated, references in Notes to Consolidated Financial Statements to "we," "our" and "us" are to The Reader's Digest Association, Inc. and its subsidiaries. All references to 2006, 2005 and 2004, unless otherwise indicated, are to fiscal 2006, fiscal 2005 and fiscal 2004, respectively. Our fiscal year represents the period from July 1 through June 30.

Note 1 Organization and summary of significant accounting policies

Description of our business

        We are a diversified media company that produces and distributes books, magazines and other products worldwide. We sell these and other products through direct marketing and direct sales channels. Our best known trademark is our flagship magazine, Reader's Digest. We conduct business through three reportable segments: Reader's Digest North America, Reader's Digest International and Consumer Business Services. For further commentary regarding these segments, see Management's Discussion and Analysis and Note 14, Segments.

Basis of presentation and use of estimates

        The accompanying consolidated financial statements include the accounts of The Reader's Digest Association, Inc. and its majority-owned subsidiaries. Intercompany transactions and accounts have been eliminated in consolidation. These financial statements are prepared in conformity with U.S. generally accepted accounting principles, which require management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of operating revenues and expenses during the reporting period. These estimates are based on management's knowledge of current events and actions that we may undertake in the future; however, actual results may ultimately differ from those estimates. The primary estimates underlying our consolidated financial statements include allowances for returns and doubtful accounts, valuations of inventories, recoverability of direct response advertising and subscriber acquisition costs, recoverability of goodwill and other intangible assets, income taxes, estimates of pension, postemployment and postretirement benefits and valuations of our stock options.

Concentrations of credit risk

        Financial instruments that potentially expose us to concentrations of credit risk consist primarily of trade accounts receivable. However, we believe our concentrations of credit risk with respect to trade receivables are limited due to our large number of customers, their low individual dollar balances and their dispersion across many different geographic and economic environments.

Cash and cash equivalents

        We consider all highly liquid investments with original maturities of three months or less at the date of purchase to be cash equivalents. The carrying amount approximates fair value based upon the short-term maturity of these investments.

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Notes to Consolidated Financial Statements (Continued)

Dollars in millions, except per share data

Note 1 Organization and summary of significant accounting policies (Continued)

Inventories

        Inventories consist primarily of finished goods and raw materials (including paper) and are stated at the lower of cost or market value. For all inventories, cost is determined using the weighted-average cost method, which approximates the first-in, first-out (FIFO) method.

Long-lived assets

Property, plant and equipment, net

        Assets that comprise property, plant and equipment, net are stated at cost less accumulated depreciation and amortization. Depreciation expense is generally calculated on a straight-line basis over the estimated useful lives of the assets: 10-40 years for buildings; 3-10 years for equipment, furniture and fixtures; and 5 years for software. Leasehold improvements are amortized on a straight-line basis over the initial term of the lease or the useful life of the improvement, whichever is shorter.

Goodwill and other intangible assets, net

        Goodwill comprises the excess of costs over the fair value of net assets of acquired businesses. Other intangible assets, net comprises licensing agreements, customer lists, tradenames and other items. Acquired intangibles with finite lives are amortized, on a straight-line basis, over their estimated useful lives. See Note 6, Goodwill and Other Intangible Assets, Net, for additional information.

Impairment of long-lived assets

        We review for recoverability, at least annually, the carrying amount of goodwill and intangibles with indefinite lives. This assessment involves comparing the fair value of the reporting unit or asset, as applicable, to its carrying value. Recognition of the impairment, if any, is determined in accordance with the Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standards (SFAS) No. 142, "Goodwill and Other Intangible Assets." See Note 6, Goodwill and Other Intangible Assets, Net, for additional information.

        Intangible assets with finite lives and property, plant and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of that asset may not be recoverable in accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." We assess recoverability by comparing the asset's carrying amount to the undiscounted future net cash flows expected to be generated by the asset. If we determine that the asset is impaired, the impairment recognized is the amount by which the carrying amount of the asset exceeds the fair value of the asset.

Debt issuance costs

        Debt issuance costs consist of fees and expenses incurred in connection with our borrowings. These fees are amortized over the terms of the related debt agreements, which range from five to seven years. Capitalized debt issuance costs are included in other noncurrent assets on the balance sheets. To the extent we retire a significant portion of our borrowings, a proportionate amount of debt issue costs related to those borrowings is written off.

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The Reader's Digest Association, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Dollars in millions, except per share data

Note 1 Organization and summary of significant accounting policies (Continued)

Stock-based compensation

        Effective July 1, 2005, we adopted the fair-value recognition provision of SFAS No. 123R, "Share-Based Payment" (SFAS No. 123R) and Securities and Exchange Commission Staff Accounting Bulletin No. 107 (SAB 107), using the modified prospective transition method; therefore prior periods have not been restated. Prior to July 1, 2005, we accounted for stock-based compensation under SFAS No. 123, "Accounting for Stock-Based Compensation" (SFAS No. 123). As permitted by SFAS No. 123, compensation cost was recognized for stock-based compensation using the intrinsic value method under Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued to Employees" (APB No. 25). Under this method, compensation cost was the excess, if any, of the quoted market price of the stock at the grant date over the amount an employee must pay to acquire the stock. Since we grant stock options with an exercise price equal to the market price at the date of grant, no compensation cost was recognized. Additional information is presented in Note 9, Employee Equity Compensation Plans.

Financial instruments

        Due to the short-term maturities of our cash, cash equivalents, receivables and payables, the carrying value of these financial instruments approximates their fair values. Due to variable interest rates and current market prices, the fair value of our $500.0 Revolving Credit Agreement and Senior Notes, respectively, approximate their carrying values. See Note 11, Debt, for additional information on our debt instruments.

Pensions and postretirement benefits other than pensions

        We account for our pension and postretirement benefits in accordance with SFAS No. 87, "Employers' Accounting for Pensions," SFAS No. 88, "Employers' Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits" and SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions." Pursuant to these statements, obligations are determined using actuarial models that incorporate estimates for employee turnover and mortality, increases in employee compensation and healthcare costs, and an employee's age at retirement. These estimates are reviewed annually with actuarial consultants to determine the reasonableness of our assumptions. While these models help determine the obligation, SFAS No. 87 and No. 106 attempt to match recognition of the obligation with the period over which our employees earn benefits. Because employees earn benefits over many years of service, the accounting rules require the recognition of certain events (including plan amendments and certain gains and losses) over multiple years rather than the year the event occurs. This principle also applies to recognition of the expected return on plan assets. Although the rate represents our expectation of the long-term performance of our asset portfolio, performance will likely vary in the short term. We amortize the difference between the actual and expected return on assets over a five-year period. Income and expenses associated with our pension plans are included in promotion, marketing and administrative expenses on the statements of operations.

        In addition, pursuant to SFAS No. 87, we recognize a minimum pension liability in certain instances where the plan's accumulated benefit obligation as of our measurement date, March 31, exceeds the fair value of plan assets. This amount is adjusted based on whether we have a net pension

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The Reader's Digest Association, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Dollars in millions, except per share data

Note 1 Organization and summary of significant accounting policies (Continued)

asset or liability. The minimum pension liability, as adjusted, is included in the accrued pension caption on our balance sheets. The offset is first applied to any unrecognized prior service cost and the remainder is included in accumulated other comprehensive loss in stockholders' equity on our balance sheets.

Revenues

Magazines

        Sales of our magazine subscriptions, less estimated cancellations, are deferred and recognized as revenues proportionately over the subscription period. Revenues from sales of magazines through the newsstand are recognized at the issue date, net of an allowance for returns. Advertising revenues are recorded as revenues at the time the advertisements are published, net of discounts and advertising agency commissions.

Sponsor fundraising programs

        Our sponsor fundraising program business, which operates principally through QSP, Inc., receives its revenues net of amounts due to its sponsors. Accordingly, we present revenues net of sponsors' earnings. Sales of subscriptions to magazines published by other companies and sales of music products are recorded as revenues at the time orders are submitted to the publisher, net of bad debts and remittances to magazine and music publishers.

Books, display marketing and other products

        Revenues are recorded when title passes, net of provisions for estimated returns and bad debts. For our display marketing products, title passes either at the point of sale or at the time of shipment. In certain circumstances, our promotion entitles the customer to a preview period. Revenue generated by these promotions is recognized after the preview period lapses.

        When we recognize revenues for most of our products, we also record an estimate of bad debts and returns. These estimates are based on historical data and the method of promotion. Reserve levels are adjusted as actual data is received. In the direct marketing business, returns and bad debts are tied to customer responses to our promotional efforts. Accordingly, we deduct estimates of returns and bad debts from gross revenue.

Shipping and handling

        Costs for shipping products to customers and the associated handling costs are expensed as incurred and are included in product, distribution and editorial expenses on the statements of operations.

        In certain circumstances, shipping and handling costs are billed to the customer. These billings are recognized in revenue.

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Notes to Consolidated Financial Statements (Continued)

Dollars in millions, except per share data

Note 1 Organization and summary of significant accounting policies (Continued)

Promotion costs

        Non-direct advertising, including internal advertising costs and market testing and fulfillment costs, are expensed as incurred.

        Direct response advertising consists primarily of promotion costs incurred, such as paper and postage, in connection with the sale of magazine subscriptions, books and other products. We account for costs of direct response advertising under the American Institute of Certified Public Accountants Statement of Position (SOP) 93-7, "Reporting on Advertising Costs." Under SOP 93-7, costs associated with direct response advertising that can be directly linked to eliciting sales and result in probable future benefits are capitalized on a cost-pool-by-cost-pool basis. Books and home entertainment advertising costs are amortized over a period that is generally less than one year. We assess the carrying amount of our capitalized direct response advertising costs for recoverability on a periodic basis. Magazine related direct response advertising costs are expensed when the related promotion is mailed.

        During the fourth quarter of 2004, we reassessed our accounting for magazine promotion costs in response to changes in our business, as well as the strategies and initiatives being undertaken by our magazine business. As a result of these changes and pursuant to SOP 93-7, effective July 1, 2004, we began expensing magazine deferred promotion costs when the promotion is mailed to prospective customers instead of deferring and amortizing such costs. As of June 30, 2004, we recorded a pre-tax charge of $(27.2) to reflect the impact of this change in circumstances on our existing asset. The remaining balance of $(77.1) was amortized in 2005, over the initial subscription period, generally one year. These amounts are included as a component of promotion, marketing and administration expenses on the statements of operations.

        Promotion expense, which consists of both amortization of promotion costs and costs expensed as incurred, included on the statements of operations totaled $(700.7) in 2006; $(724.7) in 2005, including $(77.1) related to previously deferred magazine promotion costs; and $(678.5) in 2004, including $(27.2) related to our magazine deferred promotion charge. Prepaid and deferred promotion costs included on the balance sheets were $62.3 and $53.8 as of June 30, 2006 and 2005, respectively.

        Commissions earned by agents for new magazine subscribers are included in promotion, marketing and administrative expenses on the statements of operations. These costs are deferred and amortized over the related subscription term, typically one to three years. Amounts deferred and included in prepaid expenses and other current assets on the balance sheets were $21.7 and $22.7 as of June 30, 2006 and 2005, respectively. Amounts included in other noncurrent assets on the balance sheets were $25.5 and $25.8 as of June 30, 2006 and 2005, respectively.

Income taxes

        Income taxes are accounted for under the provisions of SFAS No. 109, "Accounting for Income Taxes." In accordance with SFAS No. 109, deferred income taxes, net of valuation allowances, reflect the future tax consequences of differences between the financial statement and tax bases of assets and liabilities. These deferred taxes are calculated by applying currently enacted tax rates. Valuation allowances are recorded when it is "more likely than not" that a deferred tax asset will not be realized.

F-89

The Reader's Digest Association, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Dollars in millions, except per share data

Note 1 Organization and summary of significant accounting policies (Continued)

Basic and diluted (loss) earnings per share

        Basic (loss) earnings per share is computed by dividing net (loss) income less preferred stock dividend requirements ($1.3 for each of 2006, 2005 and 2004) by the weighted average number of shares of Common Stock outstanding during the year.

        Diluted earnings per share is computed in the same manner except that the weighted average number of shares of Common Stock outstanding assumes the exercise and conversion of certain stock options and vesting of certain restricted stock. For the years ended June 30, 2006 and 2005, 14.4 million and 15.2 million stock options and shares of restricted stock outstanding, respectively, were excluded from the diluted-loss per share calculations since the effect of including them would have been anti-dilutive. Accordingly, our diluted loss per share for these years is calculated using the basic weighted average number of common shares outstanding.

        For 2004, the assumed exercise and conversion of stock options and vesting of restricted stock were 2.2 million shares. In addition, stock options to purchase approximately 10.8 million shares of Common Stock that were outstanding during 2004 were not included in the computation of diluted earnings per share since the effect of including these options would have been anti-dilutive.

Foreign currency translation

        The functional currency for our foreign operations is the local currency. Revenues and expenses denominated in foreign currencies are translated at average monthly exchange rates prevailing during the year. The assets and liabilities of international subsidiaries are translated into U.S. dollars at the rates of exchange in effect at the balance sheet date. The resulting translation adjustment is reflected as a separate component of stockholders' equity in accumulated other comprehensive (loss) income.

Recent accounting standards

        In June 2006, the FASB issued FASB Interpretation 48, "Accounting for Uncertainty in Income Taxes—an Interpretation of SFAS 109" (FIN 48). FIN 48 clarifies the accounting for income taxes by prescribing a minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. It also provides guidance on derecognition and measurement of tax positions. Disclosure requirements under this guidance will include a rollforward of the beginning and ending unrecognized tax benefits as well as specific detail related to tax uncertainties for which it is reasonably possible the amount of unrecognized tax benefit will significantly increase or decrease within a year. FIN 48 is effective for fiscal years beginning after December 15, 2006. We are still evaluating the impact of this standard on our consolidated financial statements.

Reclassifications and prior period adjustment

        Certain reclassifications have been made to amounts in prior periods to conform to the current period presentation.

        During the fourth quarter of 2005, we recorded an adjustment of $12.6, net of deferred taxes of $7.8, to retained earnings as of the earliest period presented. The adjustment reduced an over accrual for certain long-term employee-related liabilities which should have been adjusted in a period prior to

F-90

The Reader's Digest Association, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Dollars in millions, except per share data

Note 1 Organization and summary of significant accounting policies (Continued)

fiscal 2001. The adjustment has been considered immaterial for all periods and has no impact on the statements of operations or the statements of cash flows for the periods presented.

Note 2 Acquisitions

        On April 20, 2006, we purchased 100% of the outstanding stock of Allrecipes.com for $66.5, net of cash acquired of $2.5. Included in the purchase price is $5.3 of consideration held in escrow to indemnify us for any potential breaches of the purchase agreement. This amount is expected to be released from escrow by the first half of fiscal 2008. Allrecipes.com is an online community food and cooking website that leverages an active and growing network of home cooks to generate revenue from advertising sponsorships and retail licensing. This acquisition provides us with a digital platform to further leverage our food and cooking titles. This synergy resulted in $50.5 of goodwill, which is not deductible for tax purposes.

        The acquisition was accounted for using the purchase method of accounting. Allrecipes.com operating results have been included in our consolidated financial statements since April 20, 2006 as part of our Reader's Digest North America reportable segment. Pro forma results of operations, as if the Allrecipes.com acquisition had been made as of July 1, 2004, were not presented due to immateriality.

        Acquired identified finite-lived intangibles, totaling $8.3, are comprised of: licenses, advertising relationships, non-compete agreements, website content and developed technologies. These intangible assets are amortized over their estimated useful lives, with a weighted-average amortization period of 5.3 years. The acquired tradename is considered an indefinite-lived intangible asset. The following table represents the fair values of assets acquired and liabilities assumed at the date of acquisition:

	Amortization life (in years)	Fair market value
Identified finite-lived intangible assets:
Licenses	3	$	1.3
Advertising relationships	4		1.9
Non-compete agreements	2		0.1
Website content	10		2.1
Developed technology	4		2.9
Indefinite-lived tradename			3.6
Goodwill			50.5
Other net assets acquired			4.1
Total purchase price net of cash acquired		$	66.5

Note 3 Other operating items, net

        Items included in Other Operating Items, Net consist of: 1) gains from the sales of certain non-strategic assets and 2) restructuring charges, representing the streamlining of our organizational structure and the strategic repositioning of our businesses, including associated asset impairments.

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The Reader's Digest Association, Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Dollars in millions, except per share data

Note 3 Other operating items, net (Continued)

        Gains from the sales of certain non-strategic assets for the years ended June 30, 2006, 2005 and 2004 were $3.4, $14.1 and $6.2, respectively. Gains in 2006 included $2.5 from the sale of our building in Mexico and $0.5 from the sale of certain fine art. Gains in 2005 included $7.0 from the sale of our buildings in Australia and Portugal, $3.0 from the sale of Moneywise magazine in the United Kingdom and Crafting Traditions magazine in the United States, $3.2 from the sales of certain fine art and $1.0 from the sale of other non-strategic assets. Gains in 2004 included $6.1 from the sale of our building in Hong Kong.

        Restructuring charges are recorded in accordance with SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities." Under SFAS No. 146, costs associated with restructuring actions, including one-time severance benefits, are only recorded once a liability has been incurred. SFAS No. 146 does not consider severance benefits determined pursuant to an existing formula as one-time benefits. As our severance programs do not qualify as one-time benefits, we recognize severance amounts pursuant to SFAS No. 112, "Employers' Accounting for Postemployment Benefits" and SFAS No. 88, "Employers' Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits" (the impact of pension curtailments and settlements that are directly attributable to our restructuring actions are recorded in accordance with SFAS No. 88). Severance charges represent the cost to separate employees from our operations to streamline the organization. The separation is accomplished through a combination of voluntary and involuntary severance programs. As such, severance amounts are recorded when a termination plan is developed and approved, including the identification of positions to be separated, and when payment is probable and estimable. Other amounts related to restructuring actions, including charges to terminate contractual obligations in connection with streamlining activities, are recorded in accordance with SFAS No. 146. Asset impairments related to the carrying value of certain long-lived assets are calculated in accordance with the provisions of SFAS No. 144.

        We recorded restructuring charges on the statements of operations of $(10.2) in 2006 and $(15.0) in 2004. In certain instances, circumstances arose that resulted in decisions to retain employees previously identified for termination, and in certain other instances the costs associated with actions identified were settled for less than originally anticipated. In these instances, the associated charges were reversed.

        The table below outlines the activity related to the restructuring actions recorded in 2006 and previous years.

Initial year of charge	Balance at June 30, 2005		(Adjustments)/ accruals			Spending			Balance at June 30, 2006
2005 & prior	$	10.1	$	(0.8	)	$	(6.1	)	$	3.2
2006		—	$	7.5		$	(1.0	)	$	6.5
Total	$	10.1	$	6.7		$	(7.1	)	$	9.7

        During 2006, restructuring activities comprised:

•

Charges of $(2.8) for severance, $(2.6) for asset impairments, and $(0.5) for other costs associated with the restructuring plan at Books Are Fun. These charges were taken at Books Are Fun to lower the cost base, upgrade the management team and sales force, and improve the

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Notes to Consolidated Financial Statements (Continued)

Dollars in millions, except per share data

Note 3 Other operating items, net (Continued)

business model. The actions associated with these initiatives are expected to be completed by the end of fiscal 2007. Asset impairment charges were primarily attributed to write-offs of capitalized software costs related to abandoned assets. The remaining costs are those incurred to close the Books Are Fun jewelry business and to terminate contractual lease obligations.

•

Charges of $(3.5) for severance, $(0.2) for asset impairments, and $(1.4) in other costs to lower our cost base commensurate with our current revenues and in an effort to streamline our operations. Approximately 29%, 54% and 17% of these costs related to Reader's Digest North America, Reader's Digest International and Consumer Business Services, respectively. These actions will be completed by the end of fiscal 2007.



•

Income of $(0.8) related to reversals, primarily of severance, of charges recorded in previous years. We review our restructuring plans periodically to determine the appropriateness of existing accruals in light of current circumstances. Accordingly, these charges were reversed because of the occurrence of events that affected our original plans.

        During 2005, restructuring activities comprised:

•

Charges of $(3.6), primarily related to severance costs. These charges were taken to lower our cost base in commensuration with our current revenues and in an effort to streamline our operations. These severance costs related to the termination of positions, were substantially completed by June 30, 2006, and of which 48% were located in Reader's Digest North America, 22% were located in Reader's Digest International, 20% were located in Consumer Business Services and 10% related to Corporate.



•

Income of $3.6 related to reversals, primarily severance, of charges recorded in previous years. We review our restructuring plans periodically to determine the appropriateness of existing accruals in light of current circumstances. Accordingly, these charges, principally consisting of severance, were reversed because of the occurrence of events that affected our original plans.

        During 2004, restructuring activities comprised:

•

Charges of $(13.7) for severance and $(4.3) for contract terminations, asset impairments and costs associated with closing our Norway location. The severance charges related to streamlining operations in certain international markets and corporate departments. As a result of these actions, the employees were severed by June 30, 2006, of which 50% were located in Reader's Digest North America, 39% were located in Reader's Digest International and 11% related to Corporate.



•

Income of $1.3 related to pension curtailments as a result of employee terminations.



•

These charges were partially offset by $1.7 of reversals of charges recorded in previous periods that are no longer necessary. We review our restructuring plans periodically to determine the appropriateness of existing accruals in light of current circumstances. Accordingly, these charges, principally consisting of severance, were reversed because of the occurrence of events that affected our original plans.

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The Reader's Digest Association, Inc. and Subsidiaries

Notes to consolidated financial statements (Continued)

Dollars in millions, except per share data

Note 4 Other (expense) income, net

	2006			2005			2004
Interest income	$	6.9		$	7.4		$	5.2
Interest expense(1)		(47.9	)		(53.6	)		(55.0	)
Net gain on the sales of certain investments(2)		—			—			3.8
Net (loss) gain on foreign exchange		(0.5	)		—			(0.1	)
Other (expense) income, net		0.4			0.4			(0.1	)
Total other (expense) income, net	$	(41.1	)	$	(45.8	)	$	(46.2	)

(1)

In connection with the termination of the 2002 Credit Agreements, interest expense in 2005 included $(7.3) related to the expensing of the associated capitalized financing fees and the discontinuance of the related interest rate protection agreements. Interest expense in 2004 included $(7.3) related to the expensing of deferred financing fees because we refinanced a portion of our existing indebtedness, terminated some of our interest rate caps and repriced a portion of our borrowings. See Note 11, Debt, for additional information.



(2)

Net gain on the sales of certain investments in 2004 included proceeds of $2.7 received in exchange for our interest in Schoolpop, Inc., which merged into an unrelated third party. This item also included sales of our shares in LookSmart, Ltd. of $0.8 in 2004.

Note 5 Supplemental balance sheet information

        The components of certain balance sheet accounts as of June 30 are as follows:

Accounts receivable, net

	2006			2005
Gross accounts receivable, trade	$	422.4		$	401.3
Beginning reserve for returns		(69.3	)		(56.3	)
Additions to allowances(1)		(417.7	)		(387.3	)
Actual returns(2)		424.9			374.3
Ending reserve for returns		(62.1	)		(69.3	)
Beginning reserve for bad debts		(98.1	)		(98.1	)
Additions to allowances(1)		(100.4	)		(97.0	)
Actual bad debts(2)		100.1			97.0
Ending reserve for bad debts		(98.4	)		(98.1	)
Ending reserve for returns and bad debts		(160.5	)		(167.4	)
Accounts receivable, net	$	261.9		$	233.9

(1)

Additions to allowances represent estimated reserves established at the time of revenue recognition for returns and bad debts in accordance with SFAS No. 48, "Revenue

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Notes to consolidated financial statements (Continued)

Dollars in millions, except per share data

Note 5 Supplemental balance sheet information (Continued)

Recognition When Right of Return Exists." Amounts are recorded as an offset to revenues.

(2)

Actual returns and bad debts include actual experience during the period and the effects of foreign currency translation.

Inventories

	2006			2005
Raw materials	$	12.8		$	11.9
Work in process		7.2			5.6
Finished goods		195.6			188.4
Gross inventory		215.6			205.9
Beginning inventory reserve		(43.5	)		(42.7	)
Additions to reserve		(10.7	)		(7.5	)
Inventory write-offs		10.9			6.7
Ending inventory reserve		(43.3	)		(43.5	)
Inventories, net	$	172.3		$	162.4

Property, plant and equipment, net

	2006			2005
Land	$	10.0		$	10.1
Buildings and building improvements		87.3			85.2
Furniture, fixtures and equipment		89.9			97.2
Software		75.9			67.9
Leasehold improvements		25.6			19.6
		288.7			280.0
Accumulated depreciation and amortization*		(169.4	)		(160.7	)
Total property, plant and equipment, net	$	119.3		$	119.3

*

Depreciation and amortization expense related to property, plant and equipment amounted to $20.3, $20.0 and $23.6 for the years ended June 30, 2006, 2005 and 2004, respectively.

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Notes to consolidated financial statements (Continued)

Dollars in millions, except per share data

Note 5 Supplemental balance sheet information (Continued)

Other noncurrent assets

	2006		2005
Deferred tax assets	$	46.2	$	39.4
Other, principally operating assets		49.2		62.6
Total other noncurrent assets	$	95.4	$	102.0

Accrued expenses

	2006		2005
Compensation and other employee benefits	$	71.1	$	80.5
Royalties and copyrights payable		14.0		16.6
Taxes, other than income taxes		8.2		7.3
Accrued interest		11.6		9.0
Other operating items, net (see Note 3)		9.7		10.1
Other, principally operating expenses		142.7		143.9
Total accrued expenses	$	257.3	$	267.4

Other noncurrent liabilities

	2006		2005
Deferred tax liabilities	$	11.6	$	8.0
Deferred gain related to our Westchester, NY facility sale and leaseback (see Note 13)		21.6		22.8
Other, principally operating liabilities		54.7		53.6
Total other noncurrent liabilities	$	87.9	$	84.4

F-96

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Notes to consolidated financial statements (Continued)

Dollars in millions, except per share data

Note 6 Goodwill and other intangible assets, net

The changes in the carrying amount of goodwill by reportable segment
for the fiscal year ended June 30, 2006 are as follows:

	Reader's Digest North America		Consumer business services			Total
Balance as of June 30, 2005	$	687.5	$	193.4		$	880.9
Additions as a result of the Allrecipes.com acquisition (see Note 2)		50.5		—			50.5
Impact of foreign currency translation on goodwill balances outside the United States		—		0.5			0.5
Goodwill charge		—		(187.8	)		(187.8	)
Balance as of June 30, 2006	$	738.0	$	6.1		$	744.1

        At least annually (in the third quarter), we review the carrying amount of goodwill and other intangibles with indefinite lives in our reporting units for recoverability. Reiman and Books Are Fun are our primary reporting units in Reader's Digest North America and Consumer Business Services, respectively. In interim periods, we continually monitor changes in our businesses for indicators of impairment. Due to the shortfall in Books Are Fun's operating performance relative to our expectations during our peak selling season, we were required to review goodwill balances related to this business in the second quarter of 2006. The decline in performance was attributed to competitive pressure on margin and turnover of independent sales representatives. Based on our assessment, Books Are Fun recorded a charge of $(187.8) in the second quarter of 2006 to write off its remaining goodwill. During our annual review in 2005, we also recorded a goodwill charge of $(129.0). The fair value of Books Are Fun was determined by a third-party appraiser using a combination of discounted net cash flows and an assessment of comparable companies in the marketplace. The annual recoverability tests for the other reporting units were performed during the third quarter and we determined that no other goodwill and intangible losses have occurred.

        The following categories of acquired intangible assets are included in other intangible assets, net as of June 30, 2006 and 2005:

	2006				2005
	Gross		Net		Gross		Net
Intangible assets with indefinite lives:
Tradenames	$	93.3	$	93.3	$	89.7	$	89.7
Intangible assets with finite lives:
Licensing agreements		60.0		28.2		57.3		31.9
Customer lists		138.3		6.1		137.8		16.2
Other intangibles, including tradenames and noncompete agreements		9.2		6.8		3.0		—
Total intangible assets	$	300.8	$	134.4	$	287.8	$	137.8

F-97

The Reader's Digest Association, Inc. and Subsidiaries

Notes to consolidated financial statements (Continued)

Dollars in millions, except per share data

Note 6 Goodwill and other intangible assets, net (Continued)

        Amortization related to intangible assets with finite lives amounted to $(16.5), $(36.9) and $(39.6) for the years ended June 30, 2006, 2005 and 2004, respectively. The remaining weighted average amortization period of our intangible assets is 3.1 years. Our World's Finest Chocolate licensing agreement (detailed below) is principally amortized over the initial 10-year contract term, with a portion being amortized over the remaining 15-year term of our amended agreement. Customer lists are being amortized principally between three and six years from the date of acquisition. Our most significant customer list intangible was purchased as part of the Reiman acquisition, which will be fully amortized over the next two years. See Note 2, Acquisitions, for details on the intangibles acquired as part of the Allrecipes.com acquisition.

        Estimated fiscal year amortization expense for intangible assets with finite lives is as follows: fiscal 2007—$12.7; fiscal 2008—$8.2; fiscal 2009—$7.6; fiscal 2010—$7.0 and fiscal 2011—$1.1.

Licensing agreement

        In May 2000, QSP, Inc. entered into a long-term licensing agreement with World's Finest Chocolate, Inc. The cost associated with the agreement was assigned to licensing agreements and is included in other intangible assets, net on the balance sheets. In September 2002, this agreement was amended to extend the term of the original agreement by 10 years, reduce the annual minimum tonnage purchase requirements, favorably adjust pricing and permit QSP to sell World's Finest Chocolate products through marketing channels other than fundraising, under specified circumstances. The cost associated with the agreement was assigned to licensing agreements and is included in other intangible assets, net on the balance sheets. Amounts paid to amend the agreement have been assigned to various amortization periods ranging from 5 to 15 years (the remaining period of the amended agreement). This asset will be substantially amortized by 2010.

        The approximate annual minimum purchase amounts and related charges under the amended agreement by calendar year are: 2005—$58.8; 2006—$51.5; 2007—$64.4; 2008—$66.0; 2009—$67.6; and approximately $78.7 per year from 2010 through 2020. These amounts are estimates based on defined minimum tonnage requirements, as stipulated in the amended agreement, and nominal price increases. During the fourth quarter of 2006, we determined that it was probable that we will not meet the calendar 2006 minimum tonnage purchase commitment under this agreement and, accordingly, recorded a charge of $(5.6). In 2005, we met the minimum purchase requirement under this agreement. However, in 2004, we did not meet the minimum purchase requirements and, accordingly, recorded a charge of $(0.8).

Note 7 Financial instruments

Risk management and objectives

        The functional currency for our foreign operations is the local currency. In the normal course of business, substantially all of the transactions of our foreign operations occur in the local currency. We purchase forward contracts to minimize the effect of fluctuating currencies on specifically identifiable transactions. These transactions were minimal in 2006, 2005 and 2004.

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Notes to consolidated financial statements (Continued)

Dollars in millions, except per share data

Note 7 Financial instruments (Continued)

        As a matter of policy, we do not speculate in financial markets and, therefore, we do not hold financial instruments for trading purposes. We continually monitor foreign currency risk and our use of derivative instruments.

Derivative instruments

Cash flow hedges—There were no material cash flow hedges as of June 30, 2006 or June 30, 2005. In 2004, we terminated our interest rate caps with a notional value of $250.0 and recognized the remaining unrealized loss on those instruments, $(1.3), in interest expense. In addition, in the fourth quarter of 2005, we terminated our 2002 Credit Agreements. As a result, we terminated our remaining interest rate caps with a notional value of $150.0 and recognized the remaining unrealized loss on those instruments, $(0.4) in interest expense.

        As of June 30, 2004, the fair values of our interest rate caps were largely unchanged. For 2004, the fair value of our interest rate caps decreased, resulting in a loss of $(0.1), net of deferred taxes of zero. This change is reported in accumulated other comprehensive (loss) income, which is included in stockholders' equity on the balance sheets. The unrealized gains and losses were deferred and recognized in earnings when the related interest expense was recognized.

Note 8 Pension plans and other postretirement benefits

Defined benefit pension plans

        We offer defined benefit plans for all of our eligible employees in the United States and in several international markets. Our measurement date for these plans is March 31. Contributions to these plans meet the minimum funding requirements in each respective market. Benefit payments are principally based on a combination of years of service and compensation.

U.S. plans

        In the U.S. we maintain funded and unfunded defined benefit plans. The Reader's Digest Association, Inc. Retirement Plan (Retirement Plan) is our largest plan. It comprises almost 84% of our total U.S. benefit obligation and all of our U.S. plan assets.

        Because the Retirement Plan is over-funded, we have not made any contributions in 2006, 2005 or 2004, nor do we expect to make any contributions in fiscal 2007.

        Our unfunded plans were established for certain officers. Since these plans are only available to certain executives, they are not qualified under the Internal Revenue Code (IRC). We fund the benefit payments under these plans as they arise.

        The overriding principle followed in managing our Retirement Plan assets is to obtain a reasonable rate of return in terms of both income and appreciation, consistent with the "Prudent Man" Rule of the Employee Retirement Income Security Act of 1974 (ERISA), while providing liquidity to satisfy short-term obligations.

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Notes to consolidated financial statements (Continued)

Dollars in millions, except per share data

Note 8 Pension plans and other postretirement benefits (Continued)

        The table below details our current and target asset allocation as of our measurement date.

	Actual allocation as of March 31,
					Target allocation range
Asset Class
	2006		2005
Equities	69	%	68	%	52%—72%
Fixed income	24	%	26	%	23%—35%
Other	7	%	6	%	0%—19%
Total	100	%	100	%

        Equities include companies with both large and small market capitalizations, as well as listed companies in international markets. Our allocation tends to be heavily weighted in favor of large capitalized companies. More than half of the Retirement Plan's funds are invested in equity markets because these investments tend to provide better returns and offer some protection from inflation. Fixed income securities are included in the portfolio to protect the Retirement Plan's assets from inflation and to preserve capital. Other assets, including private equity and real estate investments, are utilized to a small extent to take advantage of investments that provide higher returns. The Retirement Plan allows investment managers to invest in derivative instruments, provided that certain criteria specified in the plan's investment policy are satisfied.

        The expected rate of return on plan assets is a significant driver in calculating our net pension (benefit) cost. In order to calculate our 2006 and 2005 (benefit) cost, we used an expected return on plan assets of 8.50%. This rate was based on an analysis of historical returns generated by asset classes in which our funds are invested and on projected returns for portfolios with assets similar to ours.

        Estimated benefit payments during the next 10 years are expected to be, by fiscal year: 2007—$42.2; 2008—$41.9; 2009—$42.7; 2010—$45.0; 2011—$41.9 and from 2012 to 2016—a total of $221.5.

International plans

        We also offer defined benefit pension plans in several markets outside the United States. For the material plans, in fiscal 2007, we expect to contribute $8.8.

        The table below reflects the actual allocation of assets held for our international plans and the allocation required pursuant to our most recent investment policy for these plans. These percentages have been calculated on a weighted average basis because the assets comprised several plans.

	Actual allocation as of March 31,
Asset Class					Target allocation
	2006		2005
Equities	68	%	64	%	61	%
Fixed income	32	%	36	%	39	%
Total	100	%	100	%

        Similar to the U.S. plans, the expected rate of return on plan assets is a significant driver in calculating the net pension (benefit) cost for our international plans. In order to calculate our 2006,

F-100

The Reader's Digest Association, Inc. and Subsidiaries

Notes to consolidated financial statements (Continued)

Dollars in millions, except per share data

Note 8 Pension plans and other postretirement benefits (Continued)

2005 and 2004 expense, we used a return on plan assets of 6.92%, 6.92% and 6.77%, respectively. These rates were based on a methodology similar to that used to determine the rate of return for our Retirement Plan.

        Estimated benefit payments during the next 10 years are expected to be, by fiscal year: 2007—$11.8; 2008—$11.8; 2009—$13.0; 2010—$12.7; 2011—$13.2 and from 2012 to 2016—a total of $75.7.

Assumptions

        The table below outlines the weighted average assumptions used to determine our projected benefit obligation as of year-end and pension (benefit) cost for the fiscal year for:

U.S. plans	2006		2005		2004
Benefit obligation
Discount rate	6.00	%	5.75	%	5.75	%
Compensation increase rate	4.00	%	4.00	%	4.50	%
Pension (benefit) cost
Discount rate	5.75	%	5.75	%	6.25	%
Compensation increase rate	4.00	%	4.50	%	4.50	%
Long-term rate of return on plan assets	8.50	%	8.50	%	8.75	%
International plans	2006		2005		2004
Benefit obligation
Discount rate	4.92	%	5.36	%	5.50	%
Compensation increase rate	3.80	%	3.66	%	3.70	%
Pension (benefit) cost
Discount rate	5.36	%	5.50	%	5.58	%
Compensation increase rate	3.66	%	3.70	%	3.63	%
Long-term rate of return on plan assets	6.92	%	6.92	%	6.77	%

        Components of net periodic pension (benefit) cost are as follows:

	U.S. Plans
	2006			2005			2004
Service cost	$	10.2		$	11.2		$	11.3
Interest cost		29.7			29.7			31.4
Expected return on plan assets		(52.2	)		(55.0	)		(50.1	)
Amortization		(0.7	)		(0.7	)		(0.7	)
Recognized actuarial loss		4.2			1.0			2.1
Net periodic pension (benefit) cost	$	(8.8	)	$	(13.8	)	$	(6.0	)

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Notes to consolidated financial statements (Continued)

Dollars in millions, except per share data

Note 8 Pension plans and other postretirement benefits (Continued)

	International plans
	2006			2005			2004
Service cost	$	6.2		$	7.5		$	7.4
Interest cost		14.7			14.8			13.4
Expected return on plan assets		(16.8	)		(17.3	)		(14.0	)
Amortization		(0.4	)		(0.4	)		(0.5	)
Recognized actuarial gain		2.9			2.2			3.1
Settlements		(0.6	)		0.6			(1.5	)
Curtailments and other items		(0.4	)		(0.1	)		0.4
Net periodic pension (benefit) cost	$	5.6		$	7.3		$	8.3

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The Reader's Digest Association, Inc. and Subsidiaries

Notes to consolidated financial statements (Continued)

Dollars in millions, except per share data

Note 8 Pension plans and other postretirement benefits (Continued)

        A reconciliation of the beginning and ending balances of benefit obligations and fair value of plan assets and the funded status of the defined benefit pension plans is as follows:

	U.S. plans						International plans
	2006			2005			2006			2005
Change in benefit obligation:
Benefit obligation at beginning of year	$	540.6		$	542.0		$	279.7		$	267.4
Service cost		10.2			11.2			6.2			7.5
Interest cost		29.7			29.7			14.7			14.8
Participant contributions		—			—			1.4			2.0
Actuarial loss		(10.7	)		1.1			33.0			8.3
Exchange rate changes		—			—			13.7			(0.6	)
Settlements		—			—			(4.3	)		(6.8	)
Benefits paid		(42.1	)		(43.4	)		(12.1	)		(12.9	)
Benefit obligation at end of year		527.7			540.6			332.3			279.7
Change in plan assets:
Fair value at beginning of year		635.3			626.4			237.3			221.5
Actual return on plan assets		85.1			44.8			51.7			20.8
Employer contribution		7.9			7.5			6.1			10.6
Participant contributions		—			—			1.4			2.0
Exchange rate changes		—			—			13.5			2.1
Settlements		—			—			(4.3	)		(6.8	)
Benefits paid		(42.1	)		(43.4	)		(12.1	)		(12.9	)
Fair value at end of year		686.2			635.3			293.6			237.3
Funded status		158.5			94.7			(38.7	)		(42.4	)
Unrecognized actuarial loss		63.4			111.0			83.0			83.5
Unrecognized transition (asset) obligation		—			—			(1.0	)		(1.3	)
Unrecognized prior service cost		(4.0	)		(4.6	)		(3.5	)		(3.3	)
Employer—fourth quarter contribution		1.8			1.9			1.8			1.7
Net amount recognized	$	219.7		$	203.0		$	41.6		$	38.2

        The accumulated benefit obligation (the actuarial present value of benefits earned, excluding future compensation increase assumptions) for our U.S. plans was $519.7 and $531.6 as of June 30, 2006 and 2005, respectively. The accumulated benefit obligation for our international plans was $296.1 and $247.6 as of June 30, 2006 and 2005, respectively.

Other postretirement benefits

        We provide medical and dental benefits to certain retired employees and their dependents. The plans that provide these benefits cover all of our eligible employees in the United States who were hired before July 1, 2005 and, to a lesser extent, employees in Canada.

F-103

The Reader's Digest Association, Inc. and Subsidiaries

Notes to consolidated financial statements (Continued)

Dollars in millions, except per share data

Note 8 Pension plans and other postretirement benefits (Continued)

        The table below outlines the weighted average assumptions used to determine our postretirement benefit obligation as of year-end and our postretirement cost for the fiscal year:

	2006		2005		2004
Postretirement benefit obligation
Discount rate	6.00	%	5.75	%	5.75	%
Healthcare cost trend rate assumed for next year	8.90	%	10.00	%	11.50	%
Rate to which the cost trend rate is assumed to decline	5.00	%	5.00	%	5.00	%
Number of years to ultimate trend rate	7		8		9
Postretirement cost
Discount rate	5.75	%	5.75	%	6.19	%
Healthcare cost trend rate assumed for next year	10.00	%	11.50	%	13.00	%
Rate to which the cost trend rate is assumed to decline	5.00	%	5.00	%	5.00	%
Number of years to ultimate trend rate	8		9		10

        Components of net periodic postretirement (benefit) cost are as follows:

	2006			2005			2004
Service cost	$	0.7		$	1.1		$	1.3
Interest cost		4.3			5.1			6.0
Amortization		(2.8	)		(1.8	)		(1.0	)
Net periodic postretirement (benefit) cost	$	2.2		$	4.4		$	6.3

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Notes to consolidated financial statements (Continued)

Dollars in millions, except per share data

Note 8 Pension plans and other postretirement benefits (Continued)

        A reconciliation of the beginning and ending balances of benefit obligations and fair value of plan assets and the funded status of the plans is as follows:

	2006			2005
Change in benefit obligation:
Benefit obligation at beginning of year	$	88.7		$	92.1
Service cost		0.7			1.1
Interest cost		4.3			5.1
Actuarial (gain)		(12.6	)		(4.5	)
Plan amendments		(11.4	)		—
Exchange rate changes		0.2			0.2
Benefits paid		(5.1	)		(5.3	)
Benefit obligation at end of year		64.8			88.7
Change in plan assets:
Fair value at beginning of year		—			—
Employer contribution		5.1			5.3
Benefits paid		(5.1	)		(5.3	)
Fair value at end of year		—			—
Funded status		(64.8	)		(88.7	)
Unrecognized actuarial gain		(18.6	)		(5.9	)
Unrecognized transition obligation		0.5			0.5
Unrecognized prior service cost		(16.5	)		(8.0	)
Employer contributions in the fourth quarter		1.5			1.2
Net amount recognized	$	(97.9	)	$	(100.9	)

        On May 19, 2004, the FASB issued FSP 106-2 "Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003" which supersedes FSP 106-1 "Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003," which was issued on January 12, 2004. This guidance relates to the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the Medicare Reform Act) signed into law on December 8, 2003. The Medicare Reform Act introduced a prescription drug benefit under Medicare Part D (Part D) and a federal subsidy for sponsors of retiree healthcare benefit plans that provide a benefit that is at least "actuarially equivalent" to Part D. Based on the level of benefits provided under our retiree healthcare plan, the majority of retiree participants are eligible to receive benefits that are at least "actuarially equivalent" to those provided by Part D. Therefore, as of our March 31, 2004 measurement date, we reflected an $11.2 benefit as an unrecognized actuarial gain. This gain will be amortized as a component of net periodic postretirement cost over ten years.

        Assumed healthcare cost trend rates have a significant effect on the amounts reported for postretirement benefits. A one-percentage-point increase in assumed healthcare cost trend rates would increase the total of the service and interest cost components by $0.4 and the postretirement benefit obligation by $5.9 for the year ended June 30, 2006. A one-percentage-point decrease in assumed

F-105

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Notes to consolidated financial statements (Continued)

Dollars in millions, except per share data

Note 8 Pension plans and other postretirement benefits (Continued)

healthcare cost trend rates would decrease the total of the service and interest cost components by $(0.4) and the postretirement benefit obligation by $(5.1) for the year ended June 30, 2006.

        Estimated benefit payments during the next 10 years are expected to be, by fiscal year: 2007—$6.5; 2008—$6.5; 2009—$6.5; 2010—$6.5; 2011—$6.5; and from 2012 to 2016—a total of $30.0. Estimated receipts pursuant to the Medicare Reform Act during the next 10 years are expected to be, by fiscal year: 2007—$0.7; 2008—$0.8; 2009—$0.8; 2010—$0.9; 2011—$0.9; and from 2012 to 2016—a total of $5.0.

Balance sheet classification

        Amounts recognized on the balance sheets related to our material pension and postretirement plans are as follows:

	Pension benefits						Other benefits
	2006			2005			2006			2005
Assets	$	325.0		$	308.0		$	—		$	—
Liabilities		(114.9	)		(127.0	)		(97.9	)		(100.9	)
Accumulated other comprehensive income		51.2			60.2			—			—
Net amount recognized	$	261.3		$	241.2		$	(97.9	)	$	(100.9	)

        Balances of pension plans with projected and accumulated benefit obligations in excess of the fair value of plan assets are as follows:

	Plans with projected benefit obligations in excess of plan assets				Plans with accumulated benefit obligations in excess of plan assets
	2006		2005		2006		2005
Projected benefit obligation	$	370.5	$	325.1		N/A		N/A
Accumulated benefit obligation		N/A		N/A	$	340.5	$	299.9
Fair value of plan assets	$	222.6	$	172.1	$	222.6	$	172.1

Note 9 Employee equity compensation plans

        We maintain several employee compensation plans relating to stock or stock-based awards, including stock options, restricted stock and phantom stock.

        The Compensation and Nominating Committee of the Board of Directors (the Committee) approved the 2005 Key Employee Long-Term Incentive Plan (the 2005 Plan) in August 2005. Under the 2005 Plan, the Committee may grant stock options, stock appreciation rights, restricted stock, restricted stock units, deferred stock, performance units, performance shares and other stock-based awards to eligible employees. The Committee may grant up to a maximum of 2,900,000 underlying shares of Common Stock under the 2005 Plan. In addition, 566,790 underlying shares available for grant under the 2002 Key Employee Long-Term Incentive Plan became available for issuance under the 2005 Plan.

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The Reader's Digest Association, Inc. and Subsidiaries

Notes to consolidated financial statements (Continued)

Dollars in millions, except per share data

Note 9 Employee equity compensation plans (Continued)

        As discussed in Note 1, Organization and Summary of Significant Accounting Policies, effective July 1, 2005, we adopted the fair-value recognition provisions of SFAS No. 123R and SAB 107 using the modified prospective transition method; therefore, prior periods have not been restated. Compensation cost recognized in 2006 includes compensation cost for all share-based payments granted prior to, but not yet vested as of July 1, 2005, based on the grant date fair value estimated in accordance with the original provisions of SFAS No. 123, and compensation cost for all share-based payments granted subsequent to July 1, 2005, based on the grant date fair value estimated in accordance with the provisions of SFAS No. 123R.

Stock options

        Stock options are granted with exercise prices not less than the fair market value of our Common Stock at the time of the grant and with an exercise term (as determined by the Committee) not to exceed 10 years. The Committee determines the vesting period for our stock options. Generally, such stock options become exercisable equally over four years. Option awards usually provide for accelerated vesting upon retirement, death or disability. In 2006, 2005 and 2004, we granted 1.3 million, 1.9 million and 1.7 million options, respectively.

        In accordance with APB No. 25, no stock-based compensation cost related to stock options was recognized in the statements of operations for 2005 and 2004, as all options granted in these periods had an exercise price equal to the market price at the date of grant. As a result of adopting SFAS No. 123R, our loss before taxes and net loss for 2006 are $(6.6) and $(4.2) higher, respectively, than if we had continued to account for stock-based compensation under APB No. 25. This resulted in an increase in our reported basic and diluted loss per share of $(0.04) for 2006. Compensation expense is recognized in the promotion, marketing and administrative expenses line item of our statements of operations on a ratable basis over the vesting periods. There were no capitalized stock-based compensation costs at June 30, 2006. As of June 30, 2006, there was $6.6 of total unrecognized compensation cost related to nonvested stock options to be recognized over a weighted-average period of 1.2 years.

        The intrinsic values of options exercised during 2006 and 2005 were not significant. The total cash received from the exercise of stock options was $0.7, $1.0 and zero for 2006, 2005 and 2004, respectively, and is classified as financing cash flows. Shares are issued from treasury stock upon exercise of the options. Prior to the adoption of SFAS No. 123R, we presented all tax benefits of deductions resulting from the exercise of stock options as operating cash flows in the statements of cash flows. SFAS No. 123R requires that cash flows from tax benefits attributable to tax deductions in excess of the compensation cost recognized for those options (excess tax benefits) be classified as financing cash flows. We did not have any excess tax benefits in 2006.

F-107

The Reader's Digest Association, Inc. and Subsidiaries

Notes to consolidated financial statements (Continued)

Dollars in millions, except per share data

Note 9 Employee equity compensation plans (Continued)

        The fair values of the options granted were estimated on the date of their grant using the Black-Scholes option-pricing model on the basis of the following weighted average assumptions:

	2006			2005			2004
Risk-free interest rate		4.2	%		3.4	%		3.3	%
Expected life		6.25 years			4.1 years			4.1 years
Expected volatility		31.7	%		32.9	%		35.7	%
Expected dividend yield		2.6	%		1.2	%		1.4	%
Weighted-average fair value of options granted	$	4.39		$	4.43		$	3.72

        The risk-free interest rate for the periods within the expected life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. In 2005 and 2004, the expected life was based on historical exercises and terminations. Due to the insignificant number of stock option exercises during the past three fiscal years, in 2006 we have estimated the expected life of options granted to be the midpoint between the average vesting term and the contractual term. The expected volatility for the periods with the expected life of the option is determined using historical volatilities based on historical closing stock prices. The expected dividend yield is based on our annual dividend in relation to our historical average stock price. The increase in the dividend yield is attributed to the increased quarterly dividend beginning February 15, 2005.

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Notes to consolidated financial statements (Continued)

Dollars in millions, except per share data

Note 9 Employee equity compensation plans (Continued)

        Changes in outstanding options are as follows:

		Options		Weighted average exercise price		Weighted average remaining contractual term (yrs.)	Aggregate intrinsic value
		(000's)
Outstanding at June 30, 2003		12,167		$	28.10
	Granted	1,731		$	13.42
	Exercised	—			—
	Canceled	(1,416	)	$	31.21
Options outstanding at June 30, 2004		12,482		$	25.66
	Granted	1,855		$	15.74
	Exercised	(66	)	$	14.59
	Canceled	(1,514	)	$	30.20
Options outstanding at June 30, 2005		12,757		$	23.76
	Granted	1,337		$	15.12
	Exercised	(46	)	$	14.26
	Canceled	(1,284	)	$	28.60
Options outstanding at June 30, 2006		12,764		$	22.41	5.1	$	0.7
Options vested or expected to vest at June 30, 2006		12,380		$	22.63	5.0	$	0.7
Options exercisable at June 30, 2006		9,252		$	25.19	3.9	$	0.4
Options available for grant at June 30, 2006		3,598

        The table below presents the pro forma effect on net (loss) income and basic and diluted (losses) earnings per share if we had applied the fair-value recognition provision to options granted under our stock option plans in 2005 and 2004. For purposes of this pro forma disclosure, the values of the options are estimated using the Black-Scholes option-pricing model and amortized to expense over the options' vesting periods.

	2005			2004
Net (loss) income
As reported	$	(90.9	)	$	49.5
Pro forma	$	(97.1	)	$	38.8
(Loss) earnings per share
As reported—basic	$	(0.95	)	$	0.50
Pro forma—basic	$	(1.01	)	$	0.39
As reported—diluted	$	(0.95	)	$	0.49
Pro forma—diluted	$	(1.01	)	$	0.38

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Notes to consolidated financial statements (Continued)

Dollars in millions, except per share data

Note 9 Employee equity compensation plans (Continued)

        For the years ended June 30, 2005 and 2004, $(6.9) and $(6.6), net of tax, respectively, of expenses related to restricted stock and other stock-based compensation are included in our net (loss) income and (loss) earnings per share, as reported.

Restricted and deferred stock

        Restricted stock are shares of Common Stock that are subject to restrictions on transfer and risk of forfeiture until the fulfillment of specified conditions. In 2005 and 2004, the market value of restricted stock awards on the date of grant was recorded as a reduction of capital stock. In connection with the adoption of SFAS No. 123R in 2006, we reclassified the unamortized restricted stock to paid-in capital. Restricted stock is expensed ratably over the term of the restriction period, ranging from two to four years.

        Deferred stock are rights to receive shares of Common Stock upon the fulfillment of specified conditions. We offer deferred stock outside the United States. Deferred stock is similar to restricted stock in all respects, except that deferred stock is issued to the employee at the completion of the vesting period.

        We recognized expense for 2006, 2005 and 2004 of $(7.7), $(11.2) and $(10.2), respectively, before taxes of $2.9, $4.2 and $3.8, respectively, for these awards. We granted 102,850 shares, 511,000 shares and 764,300 shares of restricted stock to employees during 2006, 2005 and 2004, respectively. In addition, we granted 71,300 shares, 118,900 shares and 119,400 shares of deferred stock to employees during 2006, 2005 and 2004, respectively.

        A summary of the status of our nonvested shares for both restricted and deferred stock as of June 30, 2006 is as follows:

Nonvested shares	Shares		Weighted average grant date fair value
	(000's)
Nonvested at June 30, 2005	2,416		$	15.01
Granted	174		$	15.09
Vested*	(810	)	$	15.58
Forfeitures	(105	)	$	14.76
Nonvested at June 30, 2006	1,675		$	14.76

*

The shares vested during 2006 include approximately 242,000 shares of our Common Stock surrendered by employees in order to fulfill their tax withholding obligations.

        The fair value of nonvested shares is determined based on the average of the high and low stock price of our Common Stock on the grant date. The weighted-average grant date fair values of nonvested shares granted during 2006, 2005 and 2004 were $15.09, $15.64 and $13.53, respectively. As of June 30, 2006, there was $4.5 of total unrecognized compensation cost related to nonvested restricted and deferred stock arrangements to be recognized over a weighted-average period of 1.5 years.

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Notes to consolidated financial statements (Continued)

Dollars in millions, except per share data

Note 9 Employee equity compensation plans (Continued)

Performance shares

        Performance shares give the recipients the right to receive cash equal to the value of shares of Common Stock that are earned if specific performance goals are achieved during a specific performance period. Compensation cost related to performance shares is based on management's best estimate as to whether or not the performance criteria will be satisfied and the market price of our shares on the date of the financial statements. This amount is recognized ratably over the performance period. Adjustments based on changes in our estimate of whether the performance criteria will be satisfied and changes in the market value of our shares are recorded in the period in which the change occurs. In 2004, we awarded performance shares for the 2004-2005 performance period. For this performance period, $4.9 was distributed in fiscal 2006. We have recorded $(1.9) and $(3.0) as expense during 2005 and 2004, respectively, for this award.

Restricted stock units

        A restricted stock unit is the right to receive cash equal to the value of a share of Common Stock upon the fulfillment of specified conditions. Compensation cost related to restricted stock units granted in 2006 under the 2005-2007 and 2006-2008 plans are performance based awards. Compensation cost related to these awards is based on management's best estimate as to whether or not the performance criteria will be satisfied and the market price of our shares on the date of the financial statements. This amount is recognized ratably over the performance period. Adjustments based on changes in our estimate of whether the performance criteria will be satisfied and changes in the market value of our shares are recorded in the period in which the change occurs. We granted 973,310 restricted stock units in 2006 for the 2005-2007 and 2006-2008 performance periods. We have recorded $(3.7) and $(2.1) as expense during 2006 and 2005, respectively, for these awards.

Employee stock purchase plans

        Under the U.S. Employee Stock Purchase Plan (ESPP), we are authorized to issue up to 2,650,000 shares of Common Stock (330,000 shares per annum), principally to our full-time employees in the United States, nearly all of whom are eligible to participate. Under the terms of the ESPP, employees can choose every six months to have up to 10% of their annual base earnings withheld to purchase Common Stock. Effective July 1, 2005, the purchase price of the shares to 95% of the market price of the stock on the last day of the purchase period. Prior to July 1, 2005, the purchase price of the shares was 85% of the lower of the fair market values of the Common Stock on the first and last days of the six-month purchase period. In 2006, 2005 and 2004 approximately 22%, 27% and 25% of eligible employees participated in the ESPP, respectively.

        Several of our international subsidiaries have employee stock purchase plans (international ESPP) under which we are authorized to issue up to 400,000 shares of Common Stock to our full-time employees. The terms of the international ESPP in most locations are essentially the same as the ESPP.

        Under the ESPP and the international ESPP, employees purchased 110,663 shares in 2006, 196,707 shares in 2005, and 215,011 shares in 2004

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Notes to consolidated financial statements (Continued)

Dollars in millions, except per share data

Note 9 Employee equity compensation plans (Continued)

Other compensation plans

Employee ownership plan and 401(k) partnership (the 401(k) plan)—The 401(k) plan consists of both a profit-sharing plan and a savings plan under section 401(k) of the IRC. The savings plan component allows employees to make pre-tax contributions to their accounts, which may be invested in specified investment alternatives. We may match employee contributions to the extent determined by our Board of Directors. The matching contributions vest 20% per annum over a five-year period. Our contributions to the 401(k) plan, including matching contributions, were $3.6, $3.5 and $3.9 for 2006, 2005 and 2004, respectively.

Note 10 Income taxes

        Income (loss) before provision for income taxes is as follows:

	2006			2005			2004
United States	$	(189.1	)	$	(176.1	)	$	33.0
International		102.5			96.7			33.1
Income (loss) before provision for income taxes	$	(86.6	)	$	(79.4	)	$	66.1

        Components of the provision (benefit) for income taxes attributable to income from operations are as follows:

		2006			2005			2004
Current
	U.S. federal	$	4.7		$	3.2		$	(9.5	)
	U.S. state and local		(0.1	)		1.3			2.2
	International		28.5			27.2			19.1
	Total current	$	33.1		$	31.7		$	11.8
Deferred
	U.S. federal	$	(3.8	)	$	(15.9	)	$	19.9
	U.S. state and local		3.0			(2.7	)		1.4
	International		(1.5	)		(1.6	)		(16.5	)
	Total deferred		(2.3	)		(20.2	)		4.8
Provision for income taxes		$	30.8		$	11.5		$	16.6

F-112

The Reader's Digest Association, Inc. and Subsidiaries

Notes to consolidated financial statements (Continued)

Dollars in millions, except per share data

Note 10 Income taxes (Continued)

        A reconciliation between the statutory U.S. federal income tax rate and the effective income tax rate is as follows:

	2006		2005		2004
U.S. statutory tax rate	35.0	%	35.0	%	35.0	%
International operations	(1.0	)	5.0		(11.6	)
State taxes	(1.0	)	3.8		3.6
Non taxable loss (gain) from disposition of assets	0.6		1.8		(3.2	)
Changes in valuation allowance	3.9		(6.1	)	7.9
Changes in tax accrual	(0.3	)	6.2		(8.0	)
Goodwill charge	(75.9	)	(56.9	)	—
Other operating items	(0.3	)	—		0.2
Other	3.3		(3.3	)	1.2
Effective tax rate	(35.7	)%	(14.5	)%	25.1	%

        Components of deferred tax assets and liabilities are as follows:

		2006			2005
Accounts receivable and other allowances		$	56.7		$	52.8
Net operating loss carryforwards			28.0			26.4
Other operating items			3.6			4.7
Tax credit carryforwards			69.8			44.7
Deferred gain on sale of buildings			13.5			14.6
Other accrued items			12.8			14.0
	Gross deferred tax assets		184.4			157.2
Valuation allowance			(13.1	)		(17.1	)
	Total net assets		171.3			140.1
Deferred compensation and other employee benefits			(26.6	)		(18.7	)
Deferred promotion			(11.2	)		(10.3	)
Depreciation and amortization			(37.7	)		(15.4	)
Deferred agent commissions			(17.6	)		(19.0	)
Other			(1.0	)		(2.6	)
	Total net liabilities		(94.1	)		(66.0	)
Net deferred taxes		$	77.2		$	74.1

F-113

The Reader's Digest Association, Inc. and Subsidiaries

Notes to consolidated financial statements (Continued)

Dollars in millions, except per share data

Note 10 Income taxes (Continued)

        Balance sheet classifications of deferred tax assets and liabilities are as follows:

	2006			2005
Prepaid expenses and other current assets	$	46.3		$	47.2
Other noncurrent assets		46.2			39.4
Other current liabilities		(3.7	)		(4.5	)
Other noncurrent liabilities		(11.6	)		(8.0	)
Net deferred taxes	$	77.2		$	74.1

        We have concluded that it is more likely than not that the results of future operations will generate sufficient taxable income to realize the net deferred tax assets.

        Net operating loss carryforwards of $129.8 at June 30, 2006, are available to reduce future tax obligations of certain foreign and U.S. companies. The net operating loss carryforwards have various expiration dates, the earliest being fiscal 2007, and others having indefinite carryforward periods. In addition, foreign tax credits carryforwards amounting to $58.4 and alternative minimum tax credit carryforwards of $7.9 are available as of June 30, 2006. Foreign tax credit carryforwards have various expiration dates beginning in fiscal 2012; alternative minimum tax credit carryforwards have an indefinite life.

        Approximately $3.7 of deferred tax expense and $1.9 of deferred tax benefit are included as a component of stockholders' equity for 2006 and 2005, respectively.

        A provision has not been made for U.S. income taxes and foreign withholding taxes that would be payable if undistributed earnings of the foreign subsidiaries of approximately $153.9 as of June 30, 2006, were distributed to us in the form of dividends because the company intends to permanently reinvest such foreign earnings. A determination of the amount of the unrecognized deferred tax liability related to undistributed earnings is not practical.

        The company is undergoing various federal, foreign, state and local audits. The company has reasonably estimated and appropriately accrued for its probable liabilities.

Note 11 Debt

        Our primary debt obligations as of June 30, 2006 are our borrowings under our $500.0 Five-Year Revolving Credit Agreement (2005 Credit Agreement) and $300.0 in senior unsecured notes.

2005 Credit agreement

        On April 14, 2005, we entered into a $400.0 Five-Year Revolving Credit Agreement to retire all outstanding borrowings under our Five-Year Revolving Credit and Competitive Advance Facility Agreement and $950.0 Term Loan Agreement (collectively referred to as the 2002 Credit Agreements) and for general corporate purposes. Financing fees of $(1.6) related to the 2005 Credit Agreement were deferred and are amortized on a straight-line basis over the life of the 2005 Credit Agreement. In connection with the termination of the 2002 Credit Agreements, we recorded a write-off of $(7.3) in

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Notes to consolidated financial statements (Continued)

Dollars in millions, except per share data

Note 11 Debt (Continued)

the fourth quarter of 2005 related to the associated capitalized financing fees and the discontinuance of the related interest rate protection agreements.

        On April 19, 2006, we entered into an amendment to our 2005 Credit Agreement, which increased the aggregate principal amount available to $500.0, increased the maximum leverage ratio (as defined in the amendment) and increased pricing when the leverage ratio is at higher levels. The interest rate on the 2005 Credit Agreement is currently at LIBOR plus 125 basis points and is subject to change based on our leverage ratio (as defined in the 2005 Credit Agreement). The 2005 Credit Agreement contains financial covenants that require us to maintain minimum interest coverage and maximum leverage ratios, and it is secured by the stock of a substantial portion of our subsidiaries. Financing fees of $(0.3) related to the amendment to the 2005 Credit Agreement were deferred and are amortized on a straight-line basis over the life of the 2005 Credit Agreement.

Senior notes

        During the third quarter of 2004, we completed a private placement, with registration rights, of $300.0 of 6¹/2% senior unsecured notes due in 2011 (Senior Notes) in order to refinance amounts outstanding under the $950.0 Term Loan Agreement. In the fourth quarter of 2004, these notes were exchanged for notes that were registered under the Securities Act of 1933. The proceeds from this offering were used to repay $294.0 of principal outstanding under the $950.0 Term Loan Agreement, with the remainder used to pay a portion of the financing costs.

Debt maturities and interest expense

        Total debt maturities during the next five years are as follows:

2007	$	—
2008		—
2009		—
2010		395.00
2011		300.00
Total	$	695.00

        At June 30, 2006 and 2005, we had borrowings of $695.0 and $559.2 outstanding, respectively, which are classified as long-term debt on the balance sheets.

        In 2006, 2005 and 2004, we recorded interest expense, net of $(41.0), $(46.2), and $(49.8), respectively. Interest expense in 2005 included the write-off of financing fees of $(6.9) as a result of the termination of the 2002 Credit Agreements as well as the associated discontinuance of the related interest rate protection agreements of $(0.4). Interest expense in 2004 included the write-off of financing fees of $(6.0) as a result of the refinancing and certain other transactions described above and the write-off of $(1.3) related to the termination of some of our interest rate caps that were no longer required (see Note 7, Financial Instruments). The weighted average interest rate on our borrowings charged by our lenders in 2006, 2005 and 2004 was 6.0%, 5.3% and 4.4%, respectively.

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Notes to consolidated financial statements (Continued)

Dollars in millions, except per share data

Note 11 Debt (Continued)

Lines of credit

        International lines of credit and overdraft facilities totaled $31.6 at June 30, 2006 and $27.7 at June 30, 2005, of which $13.7 and zero were outstanding at June 30, 2006 and 2005, respectively. These lines of credit are subject to renewal annually.

Note 12 Capital stock

        Preferred stock consists of the following as of June 30:

	2006		2005
First preferred stock, par value $1.00 per share; authorized 40,000 shares; issued and outstanding 29,720 shares	$	3.0	$	3.0
Second preferred stock, par value $1.00 per share; authorized 120,000 shares; issued and outstanding 103,720 shares		10.3		10.3
Third subordinated preferred stock, par value $1.00 per share; authorized 230,000 shares; issued and outstanding 155, 022 shares		15.5		15.5
Preference stock, par value $0.01 per share; authorized 25,000,000 shares; issued and outstanding none		—		—
Total preferred stock	$	28.8	$	28.8

        All shares of preferred stock have a preference in liquidation of $100.00 per share. The difference between the aggregate par value and liquidation preference has been appropriated from retained earnings and is shown as part of the value of preferred stock. At our option and at any time, all preferred stock is redeemable at $105.00 per share plus accrued dividends. The terms of the first preferred stock and the second preferred stock provide for annual cumulative dividends of $4.00 per share. The terms of the third subordinated preferred stock provide for annual cumulative dividends of $5.00 per share. Preferred stockholders do not have any voting rights.

Share repurchase authorization

        On April 28, 2005, our Board of Directors authorized our repurchase of up to $100.0 of our Common Stock over the succeeding two years and rescinded its May 2001 authorization to repurchase up to $250.0 of our Common Stock. Under the April 2005 authorization, we repurchased 4.3 million shares for $63.2 in 2006. Since the April 2005 authorization, we repurchased 4.7 million shares for $70.2. We had not repurchased any shares under the May 2001 authorization since fiscal 2002.

Note 13 Commitments and contingencies

General litigation

        From time to time, we are involved in a variety of claims, lawsuits, investigations and proceedings that arise in the ordinary course of business. We cannot predict the ultimate outcome of these matters with certainty. Management believes that the ultimate outcome of these matters will not have a material adverse effect on our financial position or results of operations, although our results and cash

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Notes to consolidated financial statements (Continued)

Dollars in millions, except per share data

Note 13 Commitments and contingencies (Continued)

flow could be significantly unfavorably affected in the reporting periods in which these matters are resolved.

Supply and service agreements

        We maintain several long-term agreements with vendors primarily for the purchase of paper, printing and fulfillment services. These agreements expire at various times through fiscal 2010.

        In the normal course of business, we enter into long-term arrangements with suppliers for raw materials and merchandise, including our agreement with World's Finest Chocolate (see Note 6, Goodwill and Other Intangible Assets, Net, for additional information), and with other parties whose recordings or works we use in our products. These arrangements may contain minimum purchase requirements. We enter into these agreements to facilitate an adequate supply of materials and to enable us to develop better products for sale to our customers.

Sale and leaseback

        On December 22, 2004, we completed the sale and partial leaseback of our corporate headquarters facility in Westchester, New York. Under the agreement, we received $48.5 in cash and will receive an additional $10.0 on the second anniversary of closing. The gain of $24.7, based on total consideration, was deferred and is being amortized over the initial 20-year lease term as a reduction in rent expense. During the lease term, we will make annual minimum lease payments of approximately $3.1, subject to increases every five years based on changes in the Consumer Price Index. In addition, we have leased additional space for three years in this facility at an annual cost of $0.7.

Lease obligations

        We occupy certain facilities under lease arrangements and lease certain equipment.

        Rental expense and sublease income are as follows:

	2006			2005			2004
Rental expense	$	26.1			23.6		$	18.3
Sublease income		(5.8	)		(5.5	)		(6.2	)
Net rental expense	$	20.3		$	18.1		$	12.1

F-117

The Reader's Digest Association, Inc. and Subsidiaries

Notes to consolidated financial statements (Continued)

Dollars in millions, except per share data

Note 13 Commitments and contingencies (Continued)

        Future minimum rental commitments, net of sublease income, for noncancelable operating leases for the next five fiscal years and thereafter (extending to 2025) are as follows:

	Minimum Rental Payments		Minimum Sublease Income			Net
2007	$	25.3	$	(6.0	)	$	19.3
2008	$	22.6	$	(5.7	)	$	16.9
2009	$	18.2	$	(4.9	)	$	13.3
2010	$	16.2	$	(2.8	)	$	13.4
2011	$	14.6	$	(2.6	)	$	12.0
Later years	$	75.1	$	(12.8	)	$	62.3

Note 14 Segments

        Our businesses are structured into the same three reportable segments (Reader's Digest North America, Reader's Digest International and Consumer Business Services) that our chief operating decision maker uses to assess business performance. In addition to the reportable segments, we separately report Corporate Unallocated expenses, which are expenses not directly attributable to business unit performance. Similarly, we separately report the effects of previously deferred magazine promotion expense, goodwill charges and other operating items, net, because our chief operating decision maker does not factor in these items when assessing business unit performance. Here is a brief description of the activities included within our reportable segments.

Reader's Digest North America

        This segment comprises our operations in the United States and Canada that publish and market Reader's Digest magazine, Reiman magazines and several special interest magazines. It also includes our operations in the United States and Canada that publish and market Books and Home Entertainment products (including Select Editions, Reader's Digest Young Families, music and video products, and series and general books related to the following affinities: reading, home and health, and entertainment) as well as two new businesses, Allrecipes.com and Taste of Home Entertaining.

        These businesses have a common focus on the direct marketing aspect of new customer acquisition at a minimal cost. The performance of Reader's Digest magazine and our special interest magazines is driven primarily by circulation revenues and, secondarily, by advertising sales. Circulation is also the principal driver of performance for Reiman magazines, which have limited advertising revenues. The results of our Books and Home Entertainment business are driven by the size of our active customer base, new customer acquisition programs, response rates to promotional mailings, customer payment rates and membership in our continuity series business.

Reader's Digest International

        This segment comprises our operations outside of the United States and Canada, with our most significant markets in the United Kingdom, Germany, Central Europe and France. The businesses in

F-118

The Reader's Digest Association, Inc. and Subsidiaries

Notes to consolidated financial statements (Continued)

Dollars in millions, except per share data

Note 14 Segments (Continued)

this segment publish and market Reader's Digest magazine (in numerous editions and languages) and books and home entertainment products (described above).

        The performance of these businesses is driven by factors similar to those in the Reader's Digest North America segment, except that overall results are less sensitive to changes in individual geographic market conditions due to the number of markets in which we operate. The results for Reader's Digest magazine in international markets are driven primarily by circulation and secondarily by advertising revenues. The results of our books and home entertainment products in these markets are driven by the size of our active customer base, new customer acquisition programs, response rates to promotional mailings, customer payment rates and membership in our continuity series business.

Consumer Business Services

        This segment comprises Books Are Fun, our display marketing business, and QSP, our youth fundraising businesses, in the United States and Canada.

        Books Are Fun and QSP principally sell products through non-direct marketing channels, primarily through their sales forces. The performance of these businesses is driven by product selection, the number of accounts or events, the average sales per account or event, and the number of participants in fundraising programs.

Intercompany eliminations and corporate unallocated expenses

        We present our segment revenues and operating (losses) profits consistently with how we manage our operations and how our chief operating decision maker reviews our results. Revenues and expenses attributable to intercompany transactions are included in the results of our reportable segments. Such amounts are eliminated (under the intercompany eliminations caption below) to reconcile our reportable segment amounts to consolidated amounts, as reported in the statements of operations. Accounting policies of our segments are the same as those described in Note 1, Organization and Summary of Significant Accounting Policies. In addition to intercompany revenues and expenses, we separately report Corporate Unallocated expenses, which cover expenses that are not directly attributable to business unit performance. Corporate Unallocated expenses include the cost of governance and other corporate-related expenses, as well as income and expenses associated with our U.S. pension plans and retiree healthcare benefits, and stock and executive compensation programs that are not allocated to the reportable segments.

        We evaluate performance and allocate resources based on operating income from continuing operations excluding other operating items and Corporate Unallocated expenses. Identifiable assets by segment are those assets that are used in the operations of that business. Corporate assets consist primarily of cash and cash equivalents, certain prepaid expenses, marketable securities, certain pension assets, certain fixed assets and certain other current assets. Sales are attributed to countries based on selling location. Long-lived assets are primarily: property, plant and equipment, net; intangible assets, net; and prepaid pension benefits.

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Notes to consolidated financial statements (Continued)

Dollars in millions, except per share data

Note 14 Segments (Continued)

Reportable segment financial information

		Years ended June 30,
		2006			2005			2004
Revenues
	Reader's Digest North America	$	939.4		$	917.3		$	919.5
	Reader's Digest International	$	1,031.2			1,012.1			969.5
	Consumer Business Services	$	445.6			485.1			525.1
	Intercompany eliminations	$	(30.0	)		(24.8	)		(25.6	)
Total revenues		$	2,386.2		$	2,389.7		$	2,388.5
Operating (loss) profit
	Reader's Digest North America	$	114.5		$	90.8		$	76.0
	Reader's Digest International		78.3			76.1			57.0
	Consumer Business Services		(2.7	)		29.4			59.0
	Previously deferred magazine promotion expense(1)		—			(77.1	)		(27.2	)
	Goodwill charge(2)		(187.8	)		(129.0	)		—
	Corporate Unallocated		(41.0	)		(37.9	)		(43.7	)
	Other operating items, net(3)		(6.8	)		14.1			(8.8	)
Total operating (loss) profit		$	(45.5	)	$	(33.6	)	$	112.3
Intercompany eliminations
	Reader's Digest North America	$	(11.3	)	$	(9.2	)	$	(11.3	)
	Reader's Digest International		(6.3	)		(4.0	)		(3.3	)
	Consumer Business Services		(12.4	)		(11.6	)		(11.0	)
Total intercompany eliminations		$	(30.0	)	$	(24.8	)	$	(25.6	)
Assets
	Reader's Digest North America	$	1,172.7		$	1,084.8		$	1,178.8
	Reader's Digest International		411.7			387.8			421.8
	Consumer Business Services		133.0			326.5			456.2
	Corporate	$	404.7			381.5			378.1
Total assets		$	2,122.1		$	2,180.6		$	2,434.9

(1)

In connection with our change to expensing magazine deferred promotion costs when the promotion is mailed to prospective customers, our reportable segment operating (loss) profit in 2005 includes such expenses as incurred. Amortization of previously deferred promotion costs in 2005 and our deferred promotion charge recorded in the fourth quarter of 2004 are not included in segment results reviewed by our chief operating decision maker. For the year ended June 30, 2005, 81% of amortization of previously capitalized magazine promotion costs was related to Reader's Digest North America and 19% to Reader's Digest International. For the year ended June 30, 2004, 45% of our magazine deferred promotion charge was related to Reader's Digest North America and 55% to Reader's Digest International.

F-120

The Reader's Digest Association, Inc. and Subsidiaries

Notes to consolidated financial statements (Continued)

Dollars in millions, except per share data

Note 14 Segments (Continued)

(2)

The goodwill charge related to Books Are Fun, part of the Consumer Business Services reportable segment, is not included in segment results reviewed by our chief operating decision maker. See Note 6, Goodwill and Other Intangible Assets, Net, for additional information.

(3)

Other operating items, net consists of gains on sales of certain non-strategic assets, asset impairments and restructuring charges. Such items are not included in segment results reviewed by our chief operating decision maker. See Note 3, Other Operating Items, Net, for further information. In previous periods, gains on sales of certain non-strategic assets were classified as other (expense) income, net, and have been reclassified to other operating items, net to conform to the current year presentation.

        In 2006, other operating items, net includes: 1) net restructuring charge of ($7.4), principally comprising severance and contract terminations, attributed: 15% to Reader's Digest North America, 31% to Reader's Digest International and 54% to Consumer Business Services, 2) asset impairments of ($2.8), primarily related to Books Are Fun, and 3) gains of $3.4 related to the sales of certain non-strategic assets.

        In 2005, other operating items, net includes gains of $14.1 related to the sales of certain non-strategic assets.

        In 2004, other operating items, net includes: 1) a restructuring charge of ($15.0), principally comprising severance and contract terminations, attributed: 12% to Reader's Digest North America, 61% to Reader's Digest International, 22% to Consumer Business Services and 5% to corporate departments that benefit the entire organization, and 2) gains of $6.2 related to the sales of certain non-strategic assets.

		Years ended June 30,
		2006		2005		2004
Depreciation, amortization and asset impairments
	Reader's Digest North America	$	16.0	$	36.5	$	39.9
	Reader's Digest International		8.5		7.3		8.1
	Consumer Business Services		12.0		9.7		11.5
	Goodwill charge		187.8		129.0		—
	Corporate	$	3.1		3.4		4.8
Total depreciation, amortization and asset impairments		$	227.4	$	185.9	$	64.3
Capital expenditures
	Reader's Digest North America	$	3.9	$	1.4	$	1.9
	Reader's Digest International		6.6		12.9		3.7
	Consumer Business Services		1.9		1.4		2.2
	Corporate		7.5		7.8		8.3
Total capital expenditures		$	19.9	$	23.5	$	16.1

F-121

The Reader's Digest Association, Inc. and Subsidiaries

Notes to consolidated financial statements (Continued)

Dollars in millions, except per share data

Note 14 Segments (Continued)

        The following table presents our consolidated net revenues by product:

	Years ended June 30,
	2006		2005		2004
Revenues
Books	$	955.1	$	971.6	$	968.5
Magazines—subscription and other		683.7		689.8		702.7
Magazines—advertising		158.9		153.2		150.0
Music and videos		264.1		262.7		240.3
Food and gift		215.1		215.0		228.7
Other		109.3		97.4		98.3
Total revenues	$	2,386.2	$	2,389.7	$	2,388.5

        Information about geographic areas is as follows:

		Years ended June 30,
		2006			2005			2004
Revenues
	United States	$	1,202.6		$	1,232.6		$	1,291.3
	International		1,189.2			1,162.6			1,102.1
	Inter-area		(5.6	)		(5.5	)		(4.9	)
Total revenues		$	2,386.2		$	2,389.7		$	2,388.5
Revenues inter-area
	United States	$	(3.5	)	$	(3.1	)	$	(2.6	)
	International		(2.1	)		(2.4	)		(2.3	)
Total revenues inter-area		$	(5.6	)	$	(5.5	)	$	(4.9	)
Long-lived assets, net
	United States	$	1,309.7		$	1,444.6		$	1,638.1
	International		61.9			63.8			75.3
Total long-lived assets, net		$	1,371.6		$	1,508.4		$	1,713.4

F-122

The Reader's Digest Association, Inc. and Subsidiaries

Pro forma combined consolidated statement of operations

for the year ended June 30, 2007

(In millions)

(Unaudited)

	The Reader's Digest Association, Inc. (Historical)			The Reader's Digest Association, Inc. for the period from July 1, 2006 to March 1, 2007			Acquisition and financing adjustments			Pro forma
Revenues	$	1,076.4		$	1,740.7		$	(126.0	)(1)	$	2,691.1
Product, distribution and editorial expenses		(496.8	)		(748.3	)		—			(1,245.1	)
Promotion, marketing and administrative expenses		(578.9	)		(953.9	)		(41.5	)(2)
								30.3	(4)		(1,544.0	)
Goodwill and intangible asset impairments		—									—
Other operating items, net		(36.2	)		(12.8	)		—			(49.0	)
Operating (loss) profit		(35.5	)		25.7			(137.2	)		(147.0	)
Interest expense (including amortization of deferred financing costs)		(78.8	)		(47.4	)		(41.8	)(3)		(168.0	)
Gain on recapitalization at WRC Media, Inc.		18.5			—			(18.5	)(5)		—
Other income (expense), net		0.4			(12.8	)		20.3	(4)		7.9
Loss before benefit (provision) for income taxes		(95.4	)		(34.5	)		(177.2	)		(307.1	)
Income tax benefit (provision)		4.7			(17.9	)		58.2	(6)		45.0
Net loss	$	(90.7	)	$	(52.4	)	$	(119.0	)	$	(262.1	)

See the accompanying notes to pro forma consolidated statement of operations.

F-123

The Reader's Digest Association, Inc. and Subsidiaries

Notes to pro forma combined consolidated statement of operations
for the year ended June 30, 2007

(In millions)

(Unaudited)

Unless indicated otherwise, references in these Notes to Pro Forma Consolidated Statement of Operations to "we," "us" and "our" are to The Reader's Digest Association, Inc. and subsidiaries. References to "Reader's Digest" are to the historical business conducted by The Reader's Digest Association, Inc. and subsidiaries prior to March 2, 2007. All references to 2007, unless otherwise indicated, are to fiscal 2007. Our fiscal year is the period from July 1 through June 30.

        The accompanying unaudited pro forma consolidated statement of operations for the year ended June 30, 2007 gives effect to the acquisition of Reader's Digest, the concurrent acquisitions of WRC Media, Inc. (WRC Media) and Direct Holdings U.S. Corp. (Direct Holdings) (collectively the "Acquisitions") and related purchase method of accounting adjustments, as if such events had occurred on July 1, 2006. Our historical statement of operations for the year ended June 30, 2007 only include the operating results of Reader's Digest from the acquisition date of March 2, 2007. As a result, Reader's Digest's operating results for the period from July 1, 2006 to March 1, 2007, are reflected as a pro forma adjustment as if the acquisition occurred on July 1, 2006.

        The pro forma adjustments also include the related financing transactions entered into by The Reader's Digest Association, Inc. in connection with the acquisition: a $1,310.0 seven-year senior secured term loan borrowing, issuance of $600.0 of 9% senior subordinated notes due 2017 (the "Notes") and borrowings under a six-year senior secured $300.0 revolving credit facility (collectively referred to as the "Financing Transactions").

        The Reader's Digest Association, Inc. and subsidiaries unaudited pro forma combined consolidated statement of operations for the year ended June 30, 2007 are derived from The Reader's Digest Association, Inc. and subsidiaries audited consolidated statement of operations. Accordingly the combined consolidated pro forma statement of operations should be read in conjunction with the audited combined consolidated financial statements included within this prospectus.

        The unaudited pro forma combined consolidated statement of operations are for comparative purposes only and do not purport to represent what our results of operations would actually have been had the Acquisitions, related purchase method of accounting adjustments and the Financing Transactions in fact occurred on the assumed date or to project our results of operations for any future date or future period.

        The unaudited pro forma combined consolidated statement of operations for the year ended June 30, 2007 includes the following acquisition and financing adjustments:

(1)

As a result of a purchase accounting fair value adjustment of $191.9 and $3.8 for the Reader's Digest Association, Inc. and WRC Media, respectively, unearned revenue on our balance sheet as of the date of the acquisition is lower than historical unearned revenue.

The noted fair value adjustments to unearned revenue resulted in a decrease of revenues of $126.0 during the year ended June 30, 2007, as if the adjustment occurred on July 1, 2006. The historical fair value adjustment reduced net revenue by approximately $55.5 for the four-month period ended June 30, 2007, $112.4 to be recognized in fiscal year 2008 and the remaining balance of $26.6 is expected to be recognized in the fiscal years thereafter.

F-124

The Reader's Digest Association, Inc. and Subsidiaries

Notes to pro forma combined consolidated statement of operations
for the year ended June 30, 2007 (Continued)

(In millions)

(Unaudited)

(2)

To give effect to the following changes in promotion, marketing and administrative expenses:

	Pro forma adjustment from July 1, 2006 to March 1, 2007
Reduction related to pension and postretirement benefits(a)	$	2.8
Reflect Reader's Digest intangible amortization recorded in connection with purchase accounting(b)		(38.1	)
Reflect WRC Media and Direct Holdings intangible amortization recorded in connection with purchase accounting(c)		(2.5	)
Reflect property and plant depreciation recorded in connection with purchase accounting		0.3
Reflect payment of Ripplewood Holdings L.L.C management fee		(5.0	)
Elimination of Direct Holdings' management fee		1.0
Pro forma increase in promotion, marketing and administrative expenses	$	(41.5	)

(a)

To reflect the reduction in promotion, marketing and administrative expenses related to the elimination of amortization of prior service cost and recognized actuarial loss from Reader's Digest's pension and postretirement benefits:

	Pro forma adjustment from July 1, 2006 to March 1, 2007
Amortization of prior service cost	$	(2.8	)
Elimination of actuarial loss		5.6
Total pro forma impact	$	2.8

Direct Holdings and WRC Media do not sponsor any defined benefit plans.

F-125

The Reader's Digest Association, Inc. and Subsidiaries

Notes to pro forma combined consolidated statement of operations
for the year ended June 30, 2007 (Continued)

(In millions)

(Unaudited)

(b)

To reflect the amortization associated with Reader's Digest intangible assets recorded pursuant to the purchase method of accounting as follows:

	Fair value		Estimated useful life	Pro forma adjustment from July 1, 2006 to March 1, 2007
Reader's Digest tradenames—indefinite-lived	$	621.0	Indefinite	$	—
Other tradenames—indefinite-lived		143.0	Indefinite
Tradenames—definite-lived		12.0	5-10 Years		(1.4	)
Customer relationships		202.7	2-13 Years		(27.0	)
Database		89.2	7 Years		(8.5	)
Favorable lease commitments		4.4	14.8 Years		(0.2	)
Other intangibles, including developed technology, website content and licensing agreements		5.3	2-10 Years		(1.0	)
Total intangible assets	$	1,077.6
Pro forma increase in amortization expense				$	(38.1	)

Definite lived intangible assets have been amortized on a straight-line basis in the pro forma consolidated statement of operations.

(c)

To reflect the amortization associated with both WRC Media and Direct Holdings' intangible assets recorded pursuant to purchase accounting as follows:

	Fair value		Estimated useful life	Pro forma adjustment from July 1, 2006 to March 1, 2007
Tradenames—indefinite-lived	$	6.8	Indefinite	$	—
Tradenames—definite-lived		2.8	10 Years		(0.2	)
Customer relationships		5.4	2-4 Years		(1.4	)
Licensing and technical support agreements		3.8	4-17 Years		(0.4	)
Developed technology		3.9	6 Years		(0.4	)
Other intangibles		0.3	2-6 Years		(0.1	)
Total intangible assets	$	23.0
Pro forma increase in amortization expense				$	(2.5	)

Definite lived intangible assets have been amortized on a straight-line basis in the pro forma consolidated statement of operations.

F-126

The Reader's Digest Association, Inc. and Subsidiaries

Notes to pro forma combined consolidated statement of operations
for the year ended June 30, 2007 (Continued)

(In millions)

(Unaudited)

(3)

To reflect the (decrease) increase in interest expense and related financing fees resulting from the Financing Transactions:

	Pro forma adjustment from July 1, 2006 to March 1, 2007
Interest expense—term loans(a)	$	(64.0	)
Interest expense—revolving credit facility(b)		(4.3	)
Commitment fee on revolving credit facility(b)		(0.5	)
Interest expense—the Notes(c)		(36.0	)
Amortization of deferred financing fees(d)		(5.5	)
Pro forma increase in interest expense and deferred financing fees related to the Financing Transactions		(110.3	)
Elimination of Reader's Digest historical interest expense and amortization of existing deferred financing fees(e)		47.4
Elimination of WRC Media's interest expense, amortization of existing deferred financing fees, prepayment penalties and forbearance fees		18.6
Elimination of Direct Holdings' interest expense and amortization of existing deferred financing fees		2.5
Pro forma increase in interest expense	$	(41.8	)

(a)

Represents interest expense related to the $1,310.0 term loans, which consists of U.S. and Euro term loans, amounting to $1,210.0 and $100.0, respectively. For the period of March 2, 2007 through June 30, 2007, the term loans bore interest at a rate equal to 200 basis points over the applicable three-month U.S. (5.36%) and Euro (4.17%) LIBOR rates, respectively. For purposes of these pro forma adjustments, it was assumed that the U.S. and Euro term loans would bear interest at rates equal to 7.36% and 6.17%, respectively. An increase or decrease of 0.125% to the interest rate would increase or decrease interest expense by $1.6 for the year ended June 30, 2007.



(b)

Represents interest expense related to the $300.0 revolving credit facility. For the period of March 2, 2007 through June 30, 2007, the revolving credit facility bore interest at 7.61%. The outstanding balance of the revolving credit facility was $85.2 at June 30, 2007. Additionally, a commitment fee of 37.5 basis points was incurred based on the unused undrawn balance of $214.8.

For purposes of these pro forma adjustments, the outstanding and unused undrawn balances of the revolving credit facility at June 30, 2007 were assumed to be outstanding and undrawn as of July 1, 2006, and outstanding amounts would bear interest at 7.61%. An increase or decrease of 0.125% to the interest rate would increase or decrease interest expense by $0.1 for the year ended June 30, 2007.

(c)

Represents interest expense related to the Notes.

F-127

The Reader's Digest Association, Inc. and Subsidiaries

Notes to pro forma combined consolidated statement of operations
for the year ended June 30, 2007 (Continued)

(In millions)

(Unaudited)

(d)

Represents amortization of deferred financing fees from debt incurred in connection with the Financing Transactions.

	Fees		Pro forma adjustment from July 1, 2006 to March 1, 2007
Term loans (due 2014)	$	40.4	$	(3.1	)
The Notes (due 2017)		24.8		(2.4	)
	$	65.2	$	(5.5	)

(e)

Represents the elimination of historical interest expense and debt financing fees ($6.0) related to the Reader's Digest previously existing notes and revolving credit facility, which are included in Reader's Digest pro forma adjustments for period from July 1, 2006 to March 1, 2007. See Note (2).

(4)

Represents the elimination of costs incurred by Reader's Digest in connection with the Reader's Digest Association, Inc. and subsidiaries acquisition, including operating and non-operating costs of $30.3 and $20.3, respectively, incurred during the year ended June 30, 2007. Operating costs primarily consisted of management incentive compensation incurred in connection with certain defined change of control provisions due to the Reader's Digest Association, Inc. and subsidiaries acquisition. Non-operating costs primarily consisted of legal and financing advisory fees.

(5)

Under Statement of Financial Accounting Standards No. 15, "Accounting by Debtors and Creditors for Troubled Debt Restructurings," interest expense expected to be earned over the term of WRC Media's debt was capitalized at the time of issuance. The remaining accrued interest balance of $18.5 was not required to be repaid upon the debt's extinguishment. Accordingly, such amount was recognized as a gain on recapitalization in our consolidated statement of operations for the year ended June 30, 2007.

(6)

Represents an adjustment to The Reader's Digest Association, Inc. historical tax benefit for the impact of the pro forma Acquisitions and Financing Transaction adjustments above.

F-128

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 20.    Indemnification of Directors and Officers.

Delaware Registrants

        Section 145(a) of the Delaware General Corporation Law (the "DGCL") provides, in relevant part, that a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding (other than an action by or in the right of the corporation) by reason of the fact that such person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe such person's conduct was unlawful. Section 145(b) of the DGCL provides that a corporation may indemnify directors and officers in an action by or in the right of the corporation to procure a judgment in its favor under the same conditions, except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper.

        Section 145(c) of the DGCL provides that to the extent that a present or former director or officer of a corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Sections 145(a) and (b), or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by such person in connection therewith. Section 145(f) provides that the indemnification provided under Section 145 is not deemed to be exclusive of any other rights to which an officer or director may be entitled under any corporation's by-law, agreement, vote or otherwise.

        Section 102(b)(7) of the DGCL provides that a corporation may in its certificate of incorporation eliminate or limit the personal liability of a director to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director except for liability: (i) for any breach of the director's duty of loyalty to the corporation or its stockholders; (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; (iii) under Section 174 of the DGCL (pertaining to certain prohibited acts including unlawful payment of dividends or unlawful purchase or redemption of the corporation's capital stock); or (iv) for any transaction from which the director derived an improper personal benefit. Each of the following Delaware corporate registrants eliminate such personal liability of their directors under such terms: The Reader's Digest Association, Inc., Alex Inc., Ardee Music Publishing, Inc., Christmas Angel Productions, Inc., Compasslearning, Inc., Direct Holdings Custom Publishing Inc., Direct Holdings Education Inc., Direct Holdings U.S. Corp., Family Reading Program Corp., Fundraising.com, Inc., Funk & Wagnalls Yearbook Corp., Home Service Publications, Inc., Lifetime Learning Systems, Inc., Pegasus Asia Investments Inc., Pegasus Finance Corp., Pegasus Investment, Inc., Pegasus Sales, Inc., Pleasantville Music Publishing, Inc., QSP, Inc., R.D. Manufacturing Corporation, RD Large Edition, Inc., RD Magazine Value Partners, Inc., RD Member Services Inc., RD Publications, Inc., RD Trade Shows, Inc., RD Walking, Inc., Reader's Digest Consumer Services, Inc., Reader's Digest Entertainment, Inc., Reader's Digest Financial Services, Inc., Reader's Digest Latinoamerica S.A., Reader's Digest Sales and Services, Inc., Reader's Digest Sub Nine, Inc.,

II-1

Reader's Digest Young Families, Inc., Reiman Media Group, Inc., Retirement Living Publishing Company, Inc., SMDDMS, Inc., Taste of Home Entertaining, Inc., Taste of Home Media Group, Inc., Taste of Home Productions, Inc., The Reader's Digest Association (Russia) Incorporated, Travel Publications, Inc., Videovation, Inc., Weekly Reader Corporation, World Almanac Education Group, Inc., World Wide Country Tours, Inc. and WRC Media Inc.

        Each of the Delaware corporate registrants (other than Pegasus Finance Corp.) provides that such registrant indemnifies its directors and officers to the maximum extent allowed by Delaware law.

        The Reader's Digest Association, Inc., has entered into indemnification agreements with its directors and executive officers. In each indemnification agreement, such registrant has agreed to indemnify the person named as indemnitee for expenses and losses, including reasonable attorneys' fees, judgments, penalties, fines and amounts paid in settlement, actually and reasonably paid or incurred by that person in connection with certain civil or criminal actions or administrative proceedings because of that person's role as a director or officer, to the fullest extent permitted under law. Such registrant also has agreed to pay in advance expenses incurred by the indemnified person in connection with such proceedings. In the case of a proceeding by or in the right of such registrant in which the indemnified person is found by a court to be liable to such registrant, no indemnification will be made unless and only to the extent that the Delaware Court of Chancery or the court where the proceeding was brought determines that that person is fairly and reasonably entitled to indemnification despite the finding of liability. Each indemnified person is also entitled to indemnification for expenses actually or reasonably incurred in connection with appearing as a witness in a proceeding. The indemnification agreements contain detailed procedures for determination of entitlement to indemnification. Each indemnification agreement permits the indemnified person to bring a lawsuit to enforce his or her rights under the indemnification agreement and to recover the expenses of such a lawsuit. The indemnification agreements are governed by Delaware law. The indemnification agreements are in addition to, and are not intended to diminish any of the rights of indemnification under, such registrant's Restated Certificate of Incorporation, such registrant's Amended and Restated By-Laws, any agreement or otherwise.

        Section 18-108 of the Delaware Limited Liability Company Act provides that, subject to such standards and restrictions, if any, as are set forth in its limited liability company agreement, a limited liability company may, and shall have the power to, indemnify and hold harmless any member or manager or other person from and against any and all claims and demands whatsoever.

        Each of the following limited liability companies provide for the elimination or limitation of the personal liability of their directors to the company or its stockholders for monetary damages for breach of fiduciary duty as a director to the same extent as the Delaware corporate registrants discussed above: QSP Distribution Services, LLC, QSP Products and Programs, LLC, QSP Sales, LLC, QSP Services, LLC, QSP Ventures, LLC, W.A. Publications, LLC, and WAPLA, LLC. Each such registrant also provides for the indemnification of its directors and officers to the maximum extent allowed by Delaware law.

        The Reader's Digest Association, Inc. maintains liability insurance for the benefit of itself and its subsidiaries' directors and officers.

Iowa Registrant

        Section 490.851 of the Iowa Business Corporation Act (the "IBCA") provides, in relevant part, that a corporation may indemnify an individual who is a party to a proceeding because the individual is a director against liability incurred in the proceeding if: the individual acted in good faith and reasonably believed (i) in the case of conduct in the individual's official capacity, that the individual's conduct was in the best interests of the corporation; or (ii) in all other cases, that the individual's conduct was at least not opposed to the best interests of the corporation. In the case of a criminal proceeding, the individual

II-2

must have had no reasonable cause to believe the individual's conduct was unlawful. An individual may also be indemnified for engaging in conduct for which broader indemnification has been made permissible or obligatory under a provision of the articles of incorporation except for liability for any of the following: (i) receipt of a financial benefit to which the person is not entitled; (ii) an intentional infliction of harm on the corporation or its shareholders; (iii) a violation of Section 490.833 of the IBCA, relating to distributions by the corporation; or (iv) an intentional violation of criminal law.

        Section 490.852 of the IBCA provides that a corporation shall indemnify a director who was wholly successful, on the merits or otherwise, in the defense of any proceeding to which the director was a party because the director is or was a director of the corporation against reasonable expenses incurred by the director in connection with the proceeding.

        In addition, Section 490.856 provides, in relevant part, that a corporation may indemnify an officer of the corporation who is a party to the proceeding because the person is an officer, to the same extent as to a director, or, if the person is an officer but not a director, to such further extent as may be provided by the articles of incorporation, the bylaws, a resolution of the board of directors, or contract, except for either of the following: (i) liability in connection with a proceeding by or in the right of the corporation other than for reasonable expenses incurred in connection with the proceeding; (ii) liability arising out of conduct that constitutes any of the following: (1) receipt by the officer of a financial benefit to which the officer is not entitled; (2) an intentional infliction of harm on the corporation or the shareholders; or (3) an intentional violation of criminal law. The provisions of applying to an officer who is not also a director shall apply to an officer who is also a director if the basis on which the officer is made a party to a proceeding is an action taken or a failure to take an action solely as an officer. An officer of the corporation who is not a director is entitled to mandatory indemnification to the same extent as a director under Section 490.852.

        While there is no longer direct reference to the elimination or limitation of personal liability of directors to the corporation or its shareholders for monetary damages for breach of a fiduciary duty as a director in the IBCA, the following Iowa corporate registrant eliminates personal liability of its directors to the full extent that such elimination or limitation is permitted under Iowa law: Books are Fun, Ltd. Such registrant also provides that it indemnifies its directors and officers to the fullest extent legally permissible under the IBCA.

New York Registrant

        Section 722(a) of the New York Business Corporation Law (the "NYBCL") provides that a corporation may indemnify any person made, or threatened to be made, a party to an action or proceeding (other than one by or in the right of the corporation to procure a judgment in its favor), whether civil or criminal, including an action by or in the right of any other corporation of any type or kind, domestic or foreign, or any partnership, joint venture, trust, employee benefit plan or other enterprise, which any director or officer of the corporation served in any capacity at the request of the corporation, by reason of the fact that he, his testator or intestate, was a director or officer of the corporation, or served such other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise in any capacity, against judgments, fines, amounts paid in settlement and reasonable expenses, including attorneys' fees actually and necessarily incurred as a result of such action or proceeding, or any appeal therein, if such director or officer acted, in good faith, for a purpose which he reasonably believed to be in, or, in the case of service for any other corporation or any partnership, joint venture, trust, employee benefit plan or other enterprise, not opposed to, the best interests of the corporation and, in criminal actions or proceedings, in addition, had no reasonable cause to believe that his conduct was unlawful. Section 722(c) of the NYBCL provides that a corporation may indemnify directors and officers in an action by or in the right of the corporation to procure a judgment in its favor under the same conditions, except that no indemnification under this Section shall be made in respect of (i) a threatened action, or a pending action which is settled or otherwise disposed of, or

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(ii) any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation, unless and only to the extent that the court in which the action was brought, or, if no action was brought, any court of competent jurisdiction, determines upon application that, in view of all the circumstances of the case, the person is fairly and reasonably entitled to indemnity for such portion of the settlement amount and expenses as the court deems proper.

        Section 723(a) of the NYBCL provides that a person who has been successful, on the merits or otherwise, in the defense of a civil or criminal action or proceeding of the character described in section 722 shall be entitled to indemnification as authorized in such section.

        Section 721 of the NYBCL provides that the indemnification provided shall not be deemed exclusive of any other rights to which a director or officer seeking indemnification may be entitled, whether contained in the certificate of incorporation or the by-laws or, when authorized by such certificate of incorporation or by-laws, (i) a resolution of shareholders, (ii) a resolution of directors, or (iii) an agreement providing for such indemnification, provided that no indemnification may be made to or on behalf of any director or officer if a judgment or other final adjudication adverse to the director or officer establishes that his acts were committed in bad faith or were the result of active and deliberate dishonesty and were material to the cause of action so adjudicated, or that he personally gained in fact a financial profit or other advantage to which he was not legally entitled.

        The following New York corporate registrant provides that such registrant indemnifies its directors and officers to the maximum extent allowed by New York law: Direct Holdings Libraries Inc.

Washington Registrant

        Section 23B.08.510 of the Washington Business Corporation Act (the "WBCA") provides, in relevant part, that a corporation may indemnify an individual made a party to a proceeding because the individual is or was a director against liability incurred in the proceeding if the individual acted in good faith if the individual reasonably believed (i) in the case of conduct in the individual's official capacity with the corporation, that the individual's conduct was in its best interests; and (ii) in all other cases, that the individual's conduct was at least not opposed to its best interests. In the case of any criminal proceeding, the individual must have had no reasonable cause to believe the individual's conduct was unlawful. A corporation may not indemnify a director under this section: (i) in connection with a proceeding by or in the right of the corporation in which the director was adjudged liable to the corporation; or (ii) in connection with any other proceeding charging improper personal benefit to the director, whether or not involving action in the director's official capacity, in which the director was adjudged liable on the basis that personal benefit was improperly received by the director. Indemnification permitted under this section in connection with a proceeding by or in the right of the corporation is limited to reasonable expenses incurred in connection with the proceeding.

        Section 23B.08.520 of the WBCA provides that unless limited by its articles of incorporation, a corporation shall indemnify a director who was wholly successful, on the merits or otherwise, in the defense of any proceeding to which the director was a party because of being a director of the corporation against reasonable expenses incurred by the director in connection with the proceeding. Section 23B.08.570 provides that unless a corporation's articles of incorporation provide otherwise, an officer of the corporation who is not a director will be entitled to mandatory indemnification to the same extent as directors, and that a corporation may provide for indemnification of officers to the same extent as directors. A corporation may also indemnify an officer who is not a director to the extent, consistent with the law, that may be provided by its articles of incorporation, bylaws, general or specific action of its board of directors, or contract.

        Section 23B.08.320 of the WBCA provides, in relevant part, that a corporation may eliminate or limit the personal liability of a director to the corporation or its shareholders for monetary damages for conduct as a director, provided that such provisions shall not eliminate or limit the liability of a

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director for acts or omissions that involve (i) intentional misconduct by a director or a knowing violation of law by a director; (ii) for conduct violating Section 23B.08.310, relating to distributions by the corporation; or (iii) for any transaction from which the director will personally receive a benefit in money, property, or services to which the director is not legally entitled. The following Washington registrant eliminates such personal liability for its director under such terms: Allrecipes.com, Inc. Such registrant also provides for indemnification under such terms of directors and officers to the full extent not prohibited by applicable law. Such registrant's articles further provide that if the WBCA is amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the registrant shall be eliminated or limited to the fullest extent not prohibited by the WBCA, as so amended.

Wisconsin Registrant

        Section 180.0851(1) of the Wisconsin Business Corporation Law (the "WBCL") provides that a corporation shall indemnify a director or officer, to the extent that he or she has been successful on the merits or otherwise in the defense of a proceeding, for all reasonable expenses incurred in the proceeding if the director or officer was a party because he or she is a director or officer of the corporation. Section 180.0851(2)(a) provides that in cases not included under subsection (1), a corporation shall indemnify a director or officer against liability incurred by the director or officer in a proceeding to which the director or officer was a party because he or she is a director or officer of the corporation, unless liability was incurred because the director or officer breached or failed to perform a duty that he or she owes to the corporation and the breach or failure to perform constitutes any of the following: (i) a willful failure to deal fairly with the corporation or its shareholders in connection with a matter in which the director or officer has a material conflict of interest; (ii) a violation of the criminal law, unless the director or officer had reasonable cause to believe that his or her conduct was lawful or no reasonable cause to believe that his or her conduct was unlawful (iii) a transaction from which the director or officer derived an improper personal profit, or; (iv) willful misconduct. Section 180.0858 provides that the indemnification provided does not preclude any additional right to indemnification that a director or officer may have under the articles of incorporation or bylaws of the corporation, a written agreement with the corporation, a resolution of the board of directors or by a majority vote of shares issued and outstanding after notice.

        Section 180.0828(1) of the WBCL provides that a director is not liable to the corporation, its shareholders, or any person asserting rights on behalf of the corporation or its shareholders, for damages, settlements, fees, fines, penalties or other monetary liabilities arising from a breach of, or failure to perform, any duty resulting solely from his or her status as a director, unless the person asserting liability proves that the breach or failure to perform constitutes any of the following: (i) a willful failure to deal fairly with the corporation or its shareholders in connection with a matter in which the director has a material conflict of interest; (ii) a violation of criminal law, unless the director had reasonable cause to believe that his or her conduct was lawful or no reasonable cause to believe that his or her conduct was unlawful; (iii) a transaction from which the director derived an improper personal profit, or; (iv) willful misconduct. Section 180.0828(2) provides that a corporation may limit the immunity provided under this section by its articles of incorporation.

        The following Wisconsin registrant provides that its directors and officers will not be liable to the corporation for any action taken in good faith if such person (i) exercised and used the same degree of care and skill as a prudent man would have exercised under the circumstances in conduct of his own affairs; or (ii) took or omitted to take such action in reliance upon advice of counsel for the corporation or upon statements made or information furnished by officers of employees of the corporation which he had reasonable grounds to believe to be true: Gareth Stevens, Inc. Such registrant also provides for indemnification of directors and officers unless recovery shall be had against such director or officer by reason his having been adjudged to have been guilty of fraud, self-dealing, or willful misconduct in the performance of his duties.

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Item 21.    Exhibits and Financial Statement Schedules.

        The following exhibits are filed herewith or incorporated herein by reference.

Exhibit Number	Description of Documents
1.1	Purchase Agreement dated as of February 27, 2007, by and among Doctor Acquisition Co., The Reader's Digest Association, Inc. and J.P. Morgan Securities Inc. as Representative of the several Initial Purchasers
2.1	Agreement and Plan of Merger dated November 16, 2006 among The Reader's Digest Association, Inc., RDA Holding Co. and Doctor Acquisition Co. (filed as Exhibit 2.1 to the Company's Current Report on Form 8-K (File No. 1-10434) dated November 16, 2006, and incorporated by reference herein).
3.1	Certificate of Incorporation of The Reader's Digest Association, Inc., effective March 2, 2007 (filed as Exhibit 3.1 to the Company's Current Report on Form 8-K (File No. 1-10434) dated March 8, 2007, and incorporated by reference herein).
3.2*	Amended and Restated By-laws of The Reader's Digest Association, Inc., effective May 22, 2007.
4.1*	Indenture dated as of March 2, 2007 among The Reader's Digest Association, Inc., the Guarantors named therein and The Bank of New York, as Trustee, relating to The Reader's Digest Association, Inc.'s 9% Senior Subordinated Notes due 2017.
4.2*	Registration Rights Agreement dated as of March 2, 2007 by and among The Reader's Digest Association, Inc., the guarantors listed therein, and J.P. Morgan Securities Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Citigroup Global Markets Inc. and Greenwich CapitalMarkets, Inc. as the Initial Purchasers of The Reader's Digest Association, Inc.'s 9% Senior Subordinated Notes due 2017.
5.1*	Opinion Letter of Cravath, Swaine & Moore LLP
10.1*	Credit Agreement dated as of March 2, 2007 among Doctor Acquisition Co., RDA Holding Co., The Reader's Digest Association, Inc. and the Overseas Borrowers, the Lenders, the Administrative Agent, the Co-Syndication Agents and the Documentation Agent party thereto.
10.2	The Reader's Digest Association, Inc. Management Incentive Compensation Plan (Amendment and Restatement as of July 1, 1994) (filed as Exhibit 10.1 to the Company's Annual Report on Form 10-K for the year ended June 30, 1994 (File No. 1-10434), and incorporated by reference herein).
10.3	Amendment No. 1 to The Reader's Digest Association, Inc. Management Incentive Compensation Plan (effective as of April 11, 1996) (filed as Exhibit 10.1.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1996 (File No. 1-10434), and incorporated by reference herein).
10.4	The Reader's Digest Association, Inc. Deferred Compensation Plan (Amendment and Restatement as of July 8, 1994) (filed as Exhibit 10.4 to the Company's Annual Report on Form 10-K for the year ended June 30, 1994 (File No. 1-10434), and incorporated by reference herein).
10.5	Excess Benefit Retirement Plan of The Reader's Digest Association, Inc. (Amendment and Restatement as of July 1, 1994) (filed as Exhibit 10.7 to the Company's Annual Report on Form 10-K for the year ended June 30, 1994 (File No. 1-10434), and incorporated by reference herein).

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10.6	The Reader's Digest 1992 Executive Retirement Plan (Amendment and Restatement as of October 10, 1996) (filed as Exhibit 10.12 to the Company's Annual Report on Form 10-K for the year ended June 30, 1997 (File No. 1-10434), and incorporated by reference herein).
10.7	The Reader's Digest Association, Inc. Deferred Compensation Plan for Directors, amended and restated as of January 1, 2003 (filed as Exhibit 10.10 to the Company's Annual Report on Form 10-K for the year ended June 30, 2003 (File No. 1-10434), and incorporated by reference herein).
10.8	The Reader's Digest Association, Inc. 2001 Income Continuation Plan for Senior Management (filed as Exhibit 10.21 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2001 (File No. 1-10434), and incorporated by reference herein).
10.9	The Reader's Digest Association, Inc. Senior Management Incentive Plan (filed as Exhibit 10.27 to the Company's Annual Report on Form 10-K for the year ended June 30, 1999 (File No. 1-10434), and incorporated by reference herein).
10.10	Assurance of Voluntary Compliance or Discontinuance dated February 26, 2001, by and among the State Attorneys General and the registrant (filed as Exhibit 99.2 to the Company's Current Report on Form 8-K dated March 9, 2001 (File No. 1-10434), and incorporated by reference herein).
10.11	Form of Indemnification Agreement between The Reader's Digest Association, Inc. and individual directors and Named Executive Officers of The Reader's Digest Association, Inc. (filed as Exhibit 10.27 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2003, and incorporated by reference herein).
10.12	FlexNet Program summary description (filed as Exhibit 10.28 to the Company's Annual Report on Form 10-K for the year ended June 30, 2003, and incorporated by reference herein).
10.13	Amended and Restated Sale Purchase Agreement between The Reader's Digest Association, Inc. and GAP III Properties LLC and Summit Development, LLC dated as of November 18, 2004, but effective as of September 10, 2004 (filed as Exhibit 10.35 to the Company's Current Report on Form 8-K dated November 18, 2004, and incorporated by reference herein).
10.14*	Contribution Agreement dated as of March 2, 2007, by and between RDA Holding Co., a Delaware corporation, and the Company.
10.15*	Employment Agreement dated March 1, 2007, between the Company and Mary G. Berner.
10.16*	Employment Letter dated August 7, 2007, between the Company and Jean B. Clifton.
10.17*	Letter Agreement dated March 20, 2007, between the Company and Michael Geltzeiler.
10.18*	Consulting Agreement dated as of March 5, 2007, between the Company and Eric W. Schrier.
12.1*	Statement of Computation of Ratio of Earnings to Fixed Charges
21.1*	List of Subsidiaries of the Company
23.1*	Consent of Cravath, Swaine & Moore LLP (included in Exhibit 5.1)
23.2*	Consent of Ernst & Young LLP
23.3*	Consents of KPMG LLP

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24.1*	Powers of Attorney (included in the signature page to the Registration Statement)
25.1*	Statement of Eligibility of The Bank of New York, as Trustee under the Indenture, on Form T-1 under the Trust Indenture Act of 1939, as amended.
99.1*	Form of Letter of Transmittal and Consent
99.2*	Form of Notice of Guaranteed Delivery
99.3*	Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees
99.4*	Form of Letter to Clients and Instruction Form
99.5*	Form of Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9

*

Filed herewith.

Item 22.    Undertakings.

        The undersigned registrant hereby undertakes:

        (1)   to file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:

          (i)  to include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;

         (ii)  to reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement;

        (iii)  to include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;

        (2)   That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

        (3)   To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

        (4)   That, for purposes of determining liability under the Securities Act of 1933 to any purchaser:

          (i)  each prospectus filed pursuant to Rule 424(b) as part of the registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the

II-8

registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.

        (5)   That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of securities:

        The undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:

          (i)  Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;

         (ii)  Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;

        (iii)  The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and

        (iv)  Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.

        Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

        The undersigned registrant hereby undertakes to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective.

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SIGNATURES

        Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Pleasantville, State of New York on February 8, 2008.

THE READER'S DIGEST ASSOCIATION, INC.,
By:	/s/  MARY G. BERNER Name: Mary G. Berner Title:  Chief Executive Officer and Director

POWER OF ATTORNEY

        Each person whose signature appears below constitutes and appoints Andrea Newborn, Esq. and Lisa M. Spivack, Esq. and each of them, as his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof.

        Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.

Signature	Title	Date
/s/  MARY G. BERNER Mary G. Berner	Chief Executive Officer and Director (Principal Executive Officer)	February 8, 2008
/s/  JEAN CLIFTON Jean Clifton	Senior Vice President and Chief Financial Officer (Principal Financial Officer)	February 8, 2008
/s/ SUSANA D'EMIC Susana D'Emic	Director of Finance (Principal Accounting Officer)	February 8, 2008
/s/  TIMOTHY C. COLLINS Timothy C. Collins	Director	February 8, 2008

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/s/  HARVEY GOLUB Harvey Golub	Director	February 8, 2008
/s/  ANDREW S. B. KNIGHT Andrew S. B. Knight	Director	February 8, 2008
/s/  ANDREW R. LACK Andrew R. Lack	Director	February 8, 2008
/s/  ERIC SCHRIER Eric Schrier	Director	February 8, 2008
/s/  STEPHEN T. SHAPIRO Stephen T. Shapiro	Director	February 8, 2008
/s/  HARRIS WILLIAMS Harris Williams	Director	February 8, 2008

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SIGNATURES

        Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Pleasantville, State of New York on February 8, 2008.

ALLRECIPES.COM, INC.
By:	/s/  LISA SHARPLES Lisa Sharples President

POWER OF ATTORNEY

        Each person whose signature appears below constitutes and appoints Andrea Newborn, Esq. and Lisa M. Spivack, Esq. and each of them, as his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof.

        Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.

Signature	Title	Date
/s/  LISA SHARPLES Lisa Sharples	President (Principal Executive Officer)	February 8, 2008
/s/  MONICA WILLIAMS Monica Williams	Vice President of Finance and Operations (Principal Financial Officer and Chief Accounting Officer)	February 8, 2008
/s/  ANDREA R. NEWBORN Andrea R. Newborn	Director	February 8, 2008
/s/  WILLIAM H. MAGILL William H. Magill	Director	February 8, 2008

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SIGNATURES

        Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Pleasantville, State of New York on February 8, 2008.

ARDEE MUSIC PUBLISHING CHRISTMAS ANGEL PRODUCTIONS, INC. PLEASANTVILLE MUSIC PUBLISHING, INC. READER'S DIGEST CONSUMER SERVICES, INC.
By:	/s/  DAWN M. ZIER Dawn M. Zier President

POWER OF ATTORNEY

        Each person whose signature appears below constitutes and appoints Andrea Newborn, Esq. and Lisa M. Spivack, Esq. and each of them, as his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof.

        Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.

Signature	Title	Date
/s/  DAWN M. ZIER Dawn M. Zier	President (Principal Executive Officer)	February 8, 2008
/s/  WILLIAM H. MAGILL William H. Magill	Director and Treasurer (Principal Financial Officer and Chief Accounting Officer)	February 8, 2008
/s/  ANDREA R. NEWBORN Andrea R. Newborn	Director	February 8, 2008

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SIGNATURES

        Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Pleasantville, State of New York on February 8, 2008.

BOOKS ARE FUN, INC.
By:	/s/  MICHAEL S. GELTZEILER Michael S. Geltzeiler Chairman

POWER OF ATTORNEY

        Each person whose signature appears below constitutes and appoints Andrea Newborn, Esq. and Lisa M. Spivack, Esq. and each of them, as his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof.

        Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.

Signature	Title	Date
/s/  MICHAEL S. GELTZEILER Michael S. Geltzeiler	Chairman (Principal Executive Officer)	February 8, 2008
/s/  TIMOTHY P. O'SHEA Timothy P. O'Shea	Chief Financial Officer (Principal Financial Officer and Chief Accounting Officer)	February 8, 2008
/s/  ANDREA R. NEWBORN Andrea R. Newborn	Director	February 8, 2008
/s/  WILLIAM H. MAGILL William H. Magill	Director	February 8, 2008

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SIGNATURES

        Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Pleasantville, State of New York on February 8, 2008.

FAMILY READING PROGRAM, INC. FUNDRAISING.COM, INC.
By:	/s/  KERRY HATCH Kerry Hatch President

POWER OF ATTORNEY

        Each person whose signature appears below constitutes and appoints Andrea Newborn, Esq. and Lisa M. Spivack, Esq. and each of them, as his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof.

        Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.

Signature	Title	Date
/s/  KERRY HATCH Kerry Hatch	President (Principal Executive Officer)	February 8, 2008
/s/  WILLIAM H. MAGILL William H. Magill	Director and Treasurer (Principal Financial Officer and Chief Accounting Officer)	February 8, 2008
/s/  ANDREA R. NEWBORN Andrea R. Newborn	Director	February 8, 2008

II-15

SIGNATURES

        Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Pleasantville, State of New York on February 8, 2008.

HOME SERVICE PUBLICATIONS, INC.
By:	/s/  ALYCE C. ALSTON Alyce C. Alston President

POWER OF ATTORNEY

        Each person whose signature appears below constitutes and appoints Andrea Newborn, Esq. and Lisa M. Spivack, Esq. and each of them, as his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof.

        Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.

Signature	Title	Date
/s/  ALYCE C. ALSTON Alyce C. Alston	President (Principal Executive Officer)	February 8, 2008
/s/  WILLIAM H. MAGILL William H. Magill	Director and Treasurer (Principal Financial Officer and Chief Accounting Officer)	February 8, 2008
/s/  ANDREA R. NEWBORN Andrea R. Newborn	Director	February 8, 2008

II-16

SIGNATURES

        Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Pleasantville, State of New York on February 8, 2008.

PEGASUS ASIA INVESTMENTS RD MAGAZINE VALUE PARTNERS, INC. RD MEMBER SERVICES, INC. RD WALKING, INC. READER'S DIGEST SUB NINE, INC. READER'S DIGEST ENTERTAINMENT, INC. RETIREMENT LIVING PUBLISHING COMPANY, INC. THE READER'S DIGEST ASSOCIATION (RUSSIA)     INCORPORATED TRAVEL PUBLICATIONS, INC. VIDEOOVATION, INC.
By:	/s/  WILLIAM H. MAGILL William H. Magill President

POWER OF ATTORNEY

        Each person whose signature appears below constitutes and appoints Andrea Newborn, Esq. and Lisa M. Spivack, Esq. and each of them, as his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof.

        Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.

Signature	Title	Date
/s/  WILLIAM H. MAGILL William H. Magill	President, Treasurer and Director (Principal Executive Officer, Principal Financial Officer and Chief Accounting Officer)	February 8, 2008
/s/  ANDREA R. NEWBORN Andrea R. Newborn	Director	February 8, 2008

II-17

SIGNATURES

        Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Pleasantville, State of New York on February 8, 2008.

PEGASUS FINANCE CORP. RD TRADE SHOWS, INC.
By:	/s/  WILLIAM H. MAGILL William H. Magill Vice President

POWER OF ATTORNEY

        Each person whose signature appears below constitutes and appoints Andrea Newborn, Esq. and Lisa M. Spivack, Esq. and each of them, as his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof.

        Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.

Signature	Title	Date
/s/  WILLIAM H. MAGILL William H. Magill	Vice President, Treasurer and Director (Principal Executive Officer, Principal Financial Officer and Chief Accounting Officer)	February 8, 2008
/s/  ANDREA R. NEWBORN Andrea R. Newborn	Director	February 8, 2008

II-18

SIGNATURES

        Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Pleasantville, State of New York on February 8, 2008.

PEGASUS INVESTMENT INC. SMDDMS, INC.
By:	/s/  GARY E. MULLER Gary E. Muller President

POWER OF ATTORNEY

        Each person whose signature appears below constitutes and appoints Andrea Newborn, Esq. and Lisa M. Spivack, Esq. and each of them, as his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof.

        Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.

Signature	Title	Date
/s/  GARY E. MULLER Gary E. Muller	President (Principal Executive Officer)	February 8, 2008
/s/  WILLIAM H. MAGILL William H. Magill	Director and Treasurer (Principal Financial Officer and Chief Accounting Officer)	February 8, 2008
/s/  ANDREA R. NEWBORN Andrea R. Newborn	Director	February 8, 2008

II-19

SIGNATURES

        Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Pleasantville, State of New York on February 8, 2008.

PEGASUS SALES, INC.
By:	/s/  DAVID ALGIRE David Algire President

POWER OF ATTORNEY

        Each person whose signature appears below constitutes and appoints Andrea Newborn, Esq. and Lisa M. Spivack, Esq. and each of them, as his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof.

        Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.

Signature	Title	Date
/s/  DAVID ALGIRE David Algire	President (Principal Executive Officer)	February 8, 2008
/s/  WILLIAM H. MAGILL William H. Magill	Director and Treasurer (Principal Financial Officer and Chief Accounting Officer)	February 8, 2008
/s/  ANDREA R. NEWBORN Andrea R. Newborn	Director	February 8, 2008
/s/  DAWN M. ZIER Dawn M. Zier	Director	February 8, 2008

II-20

SIGNATURES

        Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Pleasantville, State of New York on February 8, 2008.

QSP, INC.
By:	/s/  KERRY HATCH Kerry Hatch President

POWER OF ATTORNEY

        Each person whose signature appears below constitutes and appoints Andrea Newborn, Esq. and Lisa M. Spivack, Esq. and each of them, as his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof.

        Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.

Signature	Title	Date
/s/  KERRY HATCH Kerry Hatch	President (Principal Executive Officer)	February 8, 2008
/s/  WILLIAM H. MAGILL William H. Magill	Director and Treasurer (Principal Financial Officer and Chief Accounting Officer)	February 8, 2008
/s/  ANDREA R. NEWBORN Andrea R. Newborn	Director	February 8, 2008

II-21

SIGNATURES

        Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Pleasantville, State of New York on February 8, 2008.

QSP DISTRIBUTION SERVICES, LLC QSP PRODUCTS AND PROGRAMS, LLC QSP SALES, LLC QSP SERVICES, LLC QSP VENTURES, LLC
By:	/s/  KERRY HATCH Kerry Hatch President

POWER OF ATTORNEY

        Each person whose signature appears below constitutes and appoints Andrea Newborn, Esq. and Lisa M. Spivack, Esq. and each of them, as his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof.

        Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.

Signature	Title	Date
/s/  KERRY HATCH Kerry Hatch	President (Principal Executive Officer)	February 8, 2008
/s/  WILLIAM H. MAGILL William H. Magill	Treasurer (Principal Financial Officer and Chief Accounting Officer)	February 8, 2008

II-22

SIGNATURES

        Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Pleasantville, State of New York on February 8, 2008.

R. D. MANUFACTURING CORPORATION
By:	/s/  ALBERT L. PERRUZZA Albert L. Perruzza President

POWER OF ATTORNEY

        Each person whose signature appears below constitutes and appoints Andrea Newborn, Esq. and Lisa M. Spivack, Esq. and each of them, as his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof.

        Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.

Signature	Title	Date
/s/  ALBERT L. PERRUZZA Albert L. Perruzza	President (Principal Executive Officer)	February 8, 2008
/s/  WILLIAM H. MAGILL William H. Magill	Director and Treasurer (Principal Financial Officer and Chief Accounting Officer)	February 8, 2008
/s/  ANDREA R. NEWBORN Andrea R. Newborn	Director	February 8, 2008

II-23

SIGNATURES

        Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Pleasantville, State of New York on February 8, 2008.

RD LARGE EDITION, INC. RD PUBLICATIONS, INC. READER'S DIGEST SALES AND SERVICES, INC.
By:	/s/  EVA A. DILLON Eva A. Dillon President

POWER OF ATTORNEY

        Each person whose signature appears below constitutes and appoints Andrea Newborn, Esq. and Lisa M. Spivack, Esq. and each of them, as his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof.

        Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.

Signature	Title	Date
/s/  EVA A. DILLON Eva A. Dillon	President (Principal Executive Officer)	February 8, 2008
/s/  WILLIAM H. MAGILL William H. Magill	Director and Treasurer (Principal Financial Officer and Chief Accounting Officer)	February 8, 2008
/s/  ANDREA R. NEWBORN Andrea R. Newborn	Director	February 8, 2008

II-24

SIGNATURES

        Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Pleasantville, State of New York on February 8, 2008.

READER'S DIGEST CHILDREN'S PUBLISHING, INC.
By:	/s/  HAROLD CLARKE Harold Clarke President

POWER OF ATTORNEY

        Each person whose signature appears below constitutes and appoints Andrea Newborn, Esq. and Lisa M. Spivack, Esq. and each of them, as his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof.

        Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.

Signature	Title	Date
/s/  HAROLD CLARKE Harold Clarke	President (Principal Executive Officer)	February 8, 2008
/s/  WILLIAM H. MAGILL William H. Magill	Director and Treasurer (Principal Financial Officer and Chief Accounting Officer)	February 8, 2008
/s/  ANDREA R. NEWBORN Andrea R. Newborn	Director	February 8, 2008

II-25

SIGNATURES

        Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Pleasantville, State of New York on February 8, 2008.

READER'S DIGEST FINANCIAL SERVICES
By:	/s/  CARA SCHLANGER Cara Schlanger President

POWER OF ATTORNEY

        Each person whose signature appears below constitutes and appoints Andrea Newborn, Esq. and Lisa M. Spivack, Esq. and each of them, as his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof.

        Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.

Signature	Title	Date
/s/  CARA SCHLANGER Cara Schlanger	President (Principal Executive Officer)	February 8, 2008
/s/  WILLIAM H. MAGILL William H. Magill	Director and Treasurer (Principal Financial Officer and Chief Accounting Officer)	February 8, 2008
/s/  ANDREA R. NEWBORN Andrea R. Newborn	Director	February 8, 2008

II-26

SIGNATURES

        Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Pleasantville, State of New York on February 8, 2008.

READER'S DIGEST LATINOAMERICA, S.A. DIRECT HOLDINGS U.S. CORP. DIRECT HOLDINGS AMERICAS, INC.
By:	/s/  MICHAEL A. BRENNAN Michael A. Brennan President

POWER OF ATTORNEY

        Each person whose signature appears below constitutes and appoints Andrea Newborn, Esq. and Lisa M. Spivack, Esq. and each of them, as his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof.

        Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.

Signature	Title	Date
/s/  MICHAEL A. BRENNAN Michael A. Brennan	President (Principal Executive Officer)	February 8, 2008
/s/  WILLIAM H. MAGILL William H. Magill	Director and Treasurer (Principal Financial Officer and Chief Accounting Officer)	February 8, 2008
/s/  ANDREA R. NEWBORN Andrea R. Newborn	Director	February 8, 2008

II-27

SIGNATURES

        Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Pleasantville, State of New York on February 8, 2008.

READER'S DIGEST YOUNG FAMILIES, INC.
By:	/s/  CHARLENE F. LANCASTER Charlene F. Lancaster President

POWER OF ATTORNEY

        Each person whose signature appears below constitutes and appoints Andrea Newborn, Esq. and Lisa M. Spivack, Esq. and each of them, as his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof.

        Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.

Signature	Title	Date
/s/  CHARLENE F. LANCASTER Charlene F. Lancaster	President (Principal Executive Officer)	February 8, 2008
/s/  WILLIAM H. MAGILL William H. Magill	Director and Treasurer (Principal Financial Officer and Chief Accounting Officer)	February 8, 2008
/s/  ANDREA R. NEWBORN Andrea R. Newborn	Director	February 8, 2008

II-28

SIGNATURES

        Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Pleasantville, State of New York on February 8, 2008.

REIMAN MANUFACTURING, LLC
By:	/s/  SUZANNE M. GRIMES Suzanne M. Grimes President

POWER OF ATTORNEY

        Each person whose signature appears below constitutes and appoints Andrea Newborn, Esq. and Lisa M. Spivack, Esq. and each of them, as his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof.

        Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.

Signature	Title	Date
/s/  SUZANNE M. GRIMES Suzanne M. Grimes	President (Principal Executive Officer)	February 8, 2008
/s/  WILLIAM H. MAGILL William H. Magill	Director and Treasurer (Principal Financial Officer and Chief Accounting Officer)	February 8, 2008

II-29

SIGNATURES

        Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Pleasantville, State of New York on February 8, 2008.

REIMAN MEDIA GROUP, INC. TASTE OF HOME MEDIA GROUP, INC. TASTE OF HOME PRODUCTIONS, INC.
By:	/s/  SUZANNE M. GRIMES Suzanne M. Grimes President

POWER OF ATTORNEY

        Each person whose signature appears below constitutes and appoints Andrea Newborn, Esq. and Lisa M. Spivack, Esq. and each of them, as his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof.

        Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.

Signature	Title	Date
/s/  SUZANNE M. GRIMES Suzanne M. Grimes	President (Principal Executive Officer)	February 8, 2008
/s/  MARK A. ANDERSEN Mark A. Andersen	Chief Financial Officer (Principal Financial Officer and Chief Accounting Officer)	February 8, 2008
/s/  ANDREA R. NEWBORN Andrea R. Newborn	Director	February 8, 2008
/s/  WILLIAM H. MAGILL William H. Magill	Director	February 8, 2008

II-30

SIGNATURES

        Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Pleasantville, State of New York on February 8, 2008.

TASTE OF HOME ENTERTAINING, INC.
By:	/s/  WILLIAM D. SHAW William D. Shaw President

POWER OF ATTORNEY

        Each person whose signature appears below constitutes and appoints Andrea Newborn, Esq. and Lisa M. Spivack, Esq. and each of them, as his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof.

        Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.

Signature	Title	Date
/s/  WILLIAM D. SHAW William D. Shaw	President (Principal Executive Officer)	February 8, 2008
/s/  WILLIAM H. MAGILL William H. Magill	Director and Treasurer (Principal Financial Officer and Chief Accounting Officer)	February 8, 2008
/s/  ANDREA R. NEWBORN Andrea R. Newborn	Director	February 8, 2008

II-31

SIGNATURES

        Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Pleasantville, State of New York on February     , 2008.

WORLD WIDE COUNTRY TOURS, INC.
By:	/s/  ALYCE C. ALSTON Alyce C. Alston President

POWER OF ATTORNEY

        Each person whose signature appears below constitutes and appoints Andrea Newborn, Esq. and Lisa M. Spivack, Esq. and each of them, as his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof.

        Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.

Signature	Title	Date
/s/  ALYCE C. ALSTON Alyce C. Alston	President (Principal Executive Officer)	February 8, 2008
/s/  MARK A. ANDERSEN Mark A. Andersen	Chief Financial Officer (Principal Financial Officer and Chief Accounting Officer)	February 8, 2008
/s/  ANDREA R. NEWBORN Andrea R. Newborn	Director	February 8, 2008
/s/  WILLIAM H. MAGILL William H. Magill	Director	February 8, 2008

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SIGNATURES

        Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Pleasantville, State of New York on February 8, 2008.

W.A. PUBLICATIONS, LLC WAPLA, LLC
By:	/s/  WILLIAM H. MAGILL William H. Magill President

POWER OF ATTORNEY

        Each person whose signature appears below constitutes and appoints Andrea Newborn, Esq. and Lisa M. Spivack, Esq. and each of them, as his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof.

        Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.

Signature	Title	Date
/s/  WILLIAM H. MAGILL William H. Magill	President and Treasurer (Principal Executive Officer, Principal Financial Officer and Chief Accounting Officer)	February 8, 2008

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SIGNATURES

        Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Pleasantville, State of New York on February 8, 2008.

WRC MEDIA, INC. COMPASSLEARNING, INC. WEEKLY READER CORPORATION LIFETIME LEARNING SYSTEMS, INC. WORLD ALMANAC EDUCATION GROUP, INC. FUNK & WAGNALLS YEARBOOK CORP. GARETH STEVENS, INC.
By:	/s/  MICHAEL S. GELTZEILER Michael S. Geltzeiler President

POWER OF ATTORNEY

        Each person whose signature appears below constitutes and appoints Andrea Newborn, Esq. and Lisa M. Spivack, Esq. and each of them, as his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof.

        Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.

Signature	Title	Date
/s/  MICHAEL S. GELTZEILER Michael S. Geltzeiler	President (Principal Executive Officer)	February 8, 2008
/s/  WILLIAM H. MAGILL William H. Magill	Director and Treasurer (Principal Financial Officer and Chief Accounting Officer)	February 8, 2008
/s/  ANDREA R. NEWBORN Andrea R. Newborn	Director	February 8, 2008

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SIGNATURES

        Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Pleasantville, State of New York on February 8, 2008.

DIRECT HOLDINGS IP L.L.C.
By:	/s/  WILLIAM H. MAGILL William H. Magill President

POWER OF ATTORNEY

        Each person whose signature appears below constitutes and appoints Andrea Newborn, Esq. and Lisa M. Spivack, Esq. and each of them, as his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof.

        Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.

Signature	Title	Date
/s/  WILLIAM H. MAGILL William H. Magill	Vice President, Director and Treasurer (Principal Executive Officer, Principal Financial Officer and Chief Accounting Officer)	February 8, 2008
/s/  ANDREA R. NEWBORN Andrea R. Newborn	Director	February 8, 2008
/s/  DAWN M. ZIER Dawn M. Zier	Director	February 8, 2008

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SIGNATURES

        Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Pleasantville, State of New York on February 8, 2008.

DIRECT HOLDINGS CUSTOM PUBLISHING, INC. DIRECT HOLDINGS EDUCATION, INC. ALEX INC. DIRECT HOLDINGS CUSTOMER SERVICE INC. DIRECT HOLDINGS LIBRARIES INC.
By:	/s/  CHRISTOPHER HEARING Christopher Hearing President

POWER OF ATTORNEY

        Each person whose signature appears below constitutes and appoints Andrea Newborn, Esq. and Lisa M. Spivack, Esq. and each of them, as his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof.

        Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.

Signature	Title	Date
/s/  CHRISTOPHER HEARING Christopher Hearing	President (Principal Executive Officer)	February 8, 2008
/s/  WILLIAM H. MAGILL William H. Magill	Director and Treasurer (Principal Financial Officer and Chief Accounting Officer)	February 8, 2008
/s/  ANDREA R. NEWBORN Andrea R. Newborn	Director	February 8, 2008

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EXHIBIT INDEX

Exhibit Number	Description of Documents
1.1	Purchase Agreement dated as of February 27, 2007, by and among Doctor Acquisition Co., The Reader's Digest Association, Inc. and J.P. Morgan Securities Inc. as Representative of the several Initial Purchasers
2.1	Agreement and Plan of Merger dated November 16, 2006 among The Reader's Digest Association, Inc., RDA Holding Co. and Doctor Acquisition Co. (filed as Exhibit 2.1 to the Company's Current Report on Form 8-K (File No. 1-10434) dated November 16, 2006, and incorporated by reference herein).
3.1	Certificate of Incorporation of The Reader's Digest Association, Inc., effective March 2, 2007 (filed as Exhibit 3.1 to the Company's Current Report on Form 8-K (File No. 1-10434) dated March 8, 2007, and incorporated by reference herein).
3.2*	Amended and Restated By-laws of The Reader's Digest Association, Inc., effective May 22, 2007.
4.1*	Indenture dated as of March 2, 2007 among The Reader's Digest Association, Inc., the Guarantors named therein and The Bank of New York, as Trustee, relating to The Reader's Digest Association, Inc.'s 9% Senior Subordinated Notes due 2017.
4.2*	Registration Rights Agreement dated as of March 2, 2007 by and among The Reader's Digest Association, Inc., the guarantors listed therein, and J.P. Morgan Securities Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Citigroup Global Markets Inc. and Greenwich CapitalMarkets, Inc. as the Initial Purchasers of The Reader's Digest Association, Inc.'s 9% Senior Subordinated Notes due 2017.
5.1*	Opinion Letter of Cravath, Swaine & Moore LLP
10.1*	Credit Agreement dated as of March 2, 2007 among Doctor Acquisition Co., RDA Holding Co., The Reader's Digest Association, Inc. and the Overseas Borrowers, the Lenders, the Administrative Agent, the Co-Syndication Agents and the Documentation Agent party thereto.
10.2	The Reader's Digest Association, Inc. Management Incentive Compensation Plan (Amendment and Restatement as of July 1, 1994) (filed as Exhibit 10.1 to the Company's Annual Report on Form 10-K for the year ended June 30, 1994 (File No. 1-10434), and incorporated by reference herein).
10.3	Amendment No. 1 to The Reader's Digest Association, Inc. Management Incentive Compensation Plan (effective as of April 11, 1996) (filed as Exhibit 10.1.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1996 (File No. 1-10434), and incorporated by reference herein).
10.4	The Reader's Digest Association, Inc. Deferred Compensation Plan (Amendment and Restatement as of July 8, 1994) (filed as Exhibit 10.4 to the Company's Annual Report on Form 10-K for the year ended June 30, 1994 (File No. 1-10434), and incorporated by reference herein).
10.5	Excess Benefit Retirement Plan of The Reader's Digest Association, Inc. (Amendment and Restatement as of July 1, 1994) (filed as Exhibit 10.7 to the Company's Annual Report on Form 10-K for the year ended June 30, 1994 (File No. 1-10434), and incorporated by reference herein).

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10.6	The Reader's Digest 1992 Executive Retirement Plan (Amendment and Restatement as of October 10, 1996) (filed as Exhibit 10.12 to the Company's Annual Report on Form 10-K for the year ended June 30, 1997 (File No. 1-10434), and incorporated by reference herein).
10.7	The Reader's Digest Association, Inc. Deferred Compensation Plan for Directors, amended and restated as of January 1, 2003 (filed as Exhibit 10.10 to the Company's Annual Report on Form 10-K for the year ended June 30, 2003 (File No. 1-10434), and incorporated by reference herein).
10.8	The Reader's Digest Association, Inc. 2001 Income Continuation Plan for Senior Management (filed as Exhibit 10.21 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2001 (File No. 1-10434), and incorporated by reference herein).
10.9	The Reader's Digest Association, Inc. Senior Management Incentive Plan (filed as Exhibit 10.27 to the Company's Annual Report on Form 10-K for the year ended June 30, 1999 (File No. 1-10434), and incorporated by reference herein).
10.10	Assurance of Voluntary Compliance or Discontinuance dated February 26, 2001, by and among the State Attorneys General and the registrant (filed as Exhibit 99.2 to the Company's Current Report on Form 8-K dated March 9, 2001 (File No. 1-10434), and incorporated by reference herein).
10.11	Form of Indemnification Agreement between The Reader's Digest Association, Inc. and individual directors and Named Executive Officers of The Reader's Digest Association, Inc. (filed as Exhibit 10.27 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2003, and incorporated by reference herein).
10.12	FlexNet Program summary description (filed as Exhibit 10.28 to the Company's Annual Report on Form 10-K for the year ended June 30, 2003, and incorporated by reference herein).
10.13	Amended and Restated Sale Purchase Agreement between The Reader's Digest Association, Inc. and GAP III Properties LLC and Summit Development, LLC dated as of November 18, 2004, but effective as of September 10, 2004 (filed as Exhibit 10.35 to the Company's Current Report on Form 8-K dated November 18, 2004, and incorporated by reference herein).
10.14*	Contribution Agreement dated as of March 2, 2007, by and between RDA Holding Co., a Delaware corporation, and the Company.
10.15*	Employment Agreement dated March 1, 2007, between the Company and Mary G. Berner.
10.16*	Employment Letter dated August 7, 2007, between the Company and Jean B. Clifton.
10.17*	Letter Agreement dated March 20, 2007, between the Company and Michael Geltzeiler.
10.18*	Consulting Agreement dated as of March 5, 2007, between the Company and Eric W. Schrier.
12.1*	Statement of Computation of Ratio of Earnings to Fixed Charges
21.1*	List of Subsidiaries of the Company
23.1*	Consent of Cravath, Swaine & Moore LLP (included in Exhibit 5.1)
23.2*	Consent of Ernst & Young LLP
23.3*	Consents of KPMG LLP

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24.1*	Powers of Attorney (included in the signature page to the Registration Statement)
25.1*	Statement of Eligibility of The Bank of New York, as Trustee under the Indenture, on Form T-1 under the Trust Indenture Act of 1939, as amended.
99.1*	Form of Letter of Transmittal and Consent
99.2*	Form of Notice of Guaranteed Delivery
99.3*	Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees
99.4*	Form of Letter to Clients and Instruction Form
99.5*	Form of Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9

*

Filed herewith.

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QuickLinks

Table of Registrant Guarantors
Table of Contents
WHERE YOU CAN FIND MORE INFORMATION
FORWARD-LOOKING STATEMENTS
PROSPECTUS SUMMARY
Summary of the Terms of the Exchange Offer
Summary of the Terms of the Exchange Notes
RISK FACTORS
USE OF PROCEEDS
RATIO OF EARNINGS TO FIXED CHARGES
SELECTED CONSOLIDATED AND COMBINED FINANCIAL DATA
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
BUSINESS
PROPERTIES
LEGAL PROCEEDINGS
MANAGEMENT
EXECUTIVE COMPENSATION
2007 Summary Compensation Table
Grants of Plan-Based Awards Table
Option Exercises and Stock Vesting Table
Pension Benefits
Mary Berner, President and Chief Executive Officer
Michael Geltzeiler, Former Chief Financial Officer and President, School & Educational Services
Dawn Zier, President, North American Consumer Marketing
Albert Perruzza, Senior Vice President, Global Operations & Business Redesign
Eric Schrier, Former President and Chief Executive Officer(1)
Thomas Gardner, Former Executive Vice President and President, International(1)
Michael Brizel, Former Senior Vice President and General Counsel(1)
Thomas Ryder, Former Chairman(1)
Director Summary Compensation
SECURITY OWNERSHIP
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
THE EXCHANGE OFFER
DESCRIPTION OF NOTES
DESCRIPTION OF OTHER INDEBTEDNESS
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
PLAN OF DISTRIBUTION
VALIDITY OF THE EXCHANGE NOTES
EXPERTS
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
The Reader's Digest Association, Inc. and Subsidiaries Combined Consolidated Statements of Operations for the Year Ended June 30, 2007 and Combined Statements of Operations for the Years Ended June 30, 2006 and 2005
The Reader's Digest Association, Inc. and Subsidiaries Consolidated Balance Sheet as of June 30, 2007 and Combined Balance Sheet as of June 30, 2006
The Reader's Digest Association, Inc. and Subsidiaries Combined Consolidated Statements of Cash Flows for the Year Ended June 30, 2007 and Combined Statement of Cash Flows for the Years Ended June 30, 2006 and 2005
The Reader's Digest Association, Inc. and Subsidiaries Combined Consolidated Statement of Changes in Stockholders' Equity (Deficit) for the year ended June 30, 2007 and Combined Statement of Changes in Stockholders' Equity (Deficit) for the years ended June 30, 2006 and 2005
The Reader's Digest Association, Inc. and Subsidiaries Notes to Combined Consolidated and Combined Financial Statements
The Reader's Digest Association, Inc. and Subsidiaries Consolidated Condensed Statement of Operations for the three-month period ended September 30, 2007 and Combined Condensed Statement of Operations for the three-month period ended September 30, 2006 (In millions) (unaudited)
The Reader's Digest Association, Inc. and Subsidiaries Consolidated Condensed Balance Sheets as of September 30, 2007 and June 30, 2007 (In millions)
The Reader's Digest Association, Inc. and Subsidiaries Consolidated Condensed Statement of Cash Flows for the three-month period ended September 30, 2007 and Combined Condensed Statement of Cash Flows for the three-month period ended September 30, 2006 (In millions) (unaudited)
The Reader's Digest Association, Inc. and Subsidiaries Notes to Consolidated and Combined Condensed Financial Statements (Dollars in millions, except per share data) (unaudited)
The Reader's Digest Association, Inc. and Subsidiaries Consolidated Statements of Operations
The Reader's Digest Association, Inc. and Subsidiaries Consolidated Balance Sheets
The Reader's Digest Association, Inc. and Subsidiaries Consolidated Statements of Cash Flows
The Reader's Digest Association, Inc. and Subsidiaries Consolidated Statements of Changes in Stockholders' Equity
The Reader's Digest Association, Inc. and Subsidiaries Notes to Consolidated Financial Statements Dollars in millions, except per share data
The Reader's Digest Association, Inc. and Subsidiaries Pro forma combined consolidated statement of operations for the year ended June 30, 2007 (In millions) (Unaudited)
The Reader's Digest Association, Inc. and Subsidiaries Notes to pro forma combined consolidated statement of operations for the year ended June 30, 2007 (In millions) (Unaudited)
PART II INFORMATION NOT REQUIRED IN PROSPECTUS

Item 20. Indemnification of Directors and Officers.
Item 21. Exhibits and Financial Statement Schedules.
Item 22. Undertakings.

SIGNATURES
POWER OF ATTORNEY
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EXHIBIT INDEX

EX-3.2

Exhibit 3.2

AMENDED AND RESTATED

BY-LAWS OF

THE READER’S DIGEST ASSOCIATION, INC.

a Delaware corporation

Effective May 22, 2007

TABLE OF CONTENTS

			Page No.
ARTICLE I
Offices
SECTION 1.		Registered Office	1
SECTION 2.		Other Offices	1
ARTICLE II
	Meetings of Stockholders; Stockholders’ Consent in Lieu of Meeting
SECTION 1.		Annual Meetings	1
SECTION 2.		Special Meetings	2
SECTION 3.		Notice of Meetings	2
SECTION 4.		Quorum; Voting	2
SECTION 5.		Stockholders’ Consent in Lieu of Meeting	3
ARTICLE III
Board of Directors
SECTION 1.		General Powers	3
SECTION 2.		Number and Term of Office	4
SECTION 3.		Organization and Order of Business	4
SECTION 4.		Resignations	4
SECTION 5.		Removal of Directors	4
SECTION 6.		Vacancies	5

SECTION 7.	Place of Meetings	5
SECTION 8.	Meetings	5
SECTION 9.	Notice of Meetings	5
SECTION 10.	Quorum and Manner of Acting	6
SECTION 11.	Directors’ Consent in Lieu of Meeting	6
SECTION 12.	Meetings by Conference Telephone or Similar Communications Equipment	6
SECTION 13.	Compensation	7
SECTION 14.	Executive and Other Committees	7
ARTICLE IV
Officers
SECTION 1.	Number and Term of Office	9
SECTION 2.	President	11
SECTION 3.	Vice Presidents	11
SECTION 4.	Treasurer	11
SECTION 5.	Secretary	12
ARTICLE V
Contracts, Checks, Drafts, Bank Accounts, Etc.
SECTION 1.	Execution of Documents	12
SECTION 2.	Deposits	13
SECTION 3.	Proxies in Respect of Stock or Other Securities of Other Corporations	13

ARTICLE VI
Books and Records
ARTICLE VII
Seal
ARTICLE VIII
Fiscal Year
ARTICLE IX
Indemnification
SECTION 1.	Nature of Indemnity	14
SECTION 2.	Successful Defense	15
SECTION 3.	Determination That Indemnification Is Proper	16
SECTION 4.	Advance Payment of Expenses	16
SECTION 5.	Procedure for Indemnification of Directors and Officers	17
SECTION 6.	Survival; Preservation of Other Rights	18
SECTION 7.	Insurance	18
SECTION 8.	Severability	19
ARTICLE X
Shares and Their Transfer
SECTION 1.	Certificates for Shares	19
SECTION 2.	Record	19

SECTION 3.	Transfer and Registration of Stock	20
SECTION 4.	Lost, Destroyed or Mutilated Certificates	20
ARTICLE XI
Waivers of Notice
ARTICLE XII
Amendments

AMENDED AND RESTATED

BY-LAWS OF

THE READER’S DIGEST ASSOCIATION, INC.
a Delaware corporation

ARTICLE I

Offices

SECTION 1.Registered Office.  The registered office of The Reader’s Digest Association, Inc. (hereinafter called the “Corporation”) in the State of Delaware shall be National Registered Agents, Inc., 160 Greentree Drive, Suite 101 in the City of Dover, County of Kent, and the registered agent in charge thereof shall be National Registered Agents, Inc.

SECTION 2.Other Offices.  The Corporation may have such other offices in such places, either within or without the State of Delaware, as the Board of Directors (hereinafter called the “Board”) may from time to time determine or as the business of the Corporation may require.

ARTICLE II

Meetings of Stockholders; Stockholders’
Consent in Lieu of Meeting

SECTION 1.Annual Meetings.  The annual meeting of the stockholders for the election of directors and for the transaction of such other business as may properly come before the meeting shall be held at such place (within or without the State of Delaware), date and hour as shall be designated by the Board or as shall be designated in the notice of such meeting or waiver of notice thereof; except that no annual meeting need be held if all actions, including the election of directors, required by the Delaware General Corporation Law to be taken at a

stockholders’ annual meeting are taken by written consent in lieu of meeting pursuant to Section 5 of this Article.

SECTION 2.Special Meetings.  Special meetings of the stockholders may be called at any time by the Board, the Chairman of the Board, the President or Secretary of the Corporation or a stockholder or stockholders holding of record at least a majority of the shares of Common Stock of the Corporation issued and outstanding, such meeting to be held at such place (within or without the State of Delaware), date and hour as shall be designated in the notice of such meeting or waiver of notice thereof.

SECTION 3.Notice of Meetings.  Subject to Article XI of these By-laws, each stockholder of record shall be given written notice of each meeting of stockholders, which notice shall state the place, date and hour of such meeting, and, in the case of a special meeting, the purpose or purposes for which such meeting has been called.  Subject to Article XI of these By-laws and except as  otherwise expressly required by law, notice of each meeting of stockholders shall be given not less than 10 nor more than 60 days before the date of such meeting to each stockholder entitled to vote at such meeting.

SECTION 4.Quorum; Voting.  At each meeting of stockholders, except as otherwise expressly required by law, stockholders holding a majority of the shares of stock of the  Corporation issued and outstanding, and entitled to be voted at the meeting, shall be present in person or by proxy to constitute a quorum for the transaction of business.  In the absence of a  quorum at any such meeting or any adjournment or adjournments thereof, a majority in voting interest of those present in person or by proxy and entitled to vote thereat (or, in the absence therefrom of all the stockholders, any officer entitled to preside at, or to act as secretary of, such meeting) may adjourn such meeting from time to time until stockholders holding the amount of

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stock requisite for a quorum shall be present in person or by proxy.  At any such adjourned meeting at which a quorum may be present, any business may be transacted that could have been transacted at the meeting as originally called.

At all meetings of the stockholders, all matters, except as otherwise provided by law or in these By-laws, shall be decided by the vote of a majority of the votes cast by stockholders present in person or by proxy and entitled to vote thereat, a quorum being present.  Except as otherwise expressly required by law, the vote at any meeting of the stockholders on any question need not be by ballot, unless so directed by the chairman of the meeting.  On a vote by ballot, each ballot shall be signed by the stockholder voting, or by his or her proxy, if there be such proxy, and shall state the number of shares voted.

SECTION 5.Stockholders’ Consent in Lieu of Meeting.  Any action required by the laws of the State of Delaware to be taken at any annual or special meeting of stockholders of the Corporation, or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted.  Such writing or writings shall be filed with the minutes of meetings of stockholders and prompt notice of the taking of any such action without a meeting by less than unanimous written consent shall be given to those stockholders who have not so consented in writing.

ARTICLE III

Board of Directors

SECTION 1.General Powers.  The property, business and affairs of the Corporation shall be managed by or under the direction of the Board, which may exercise all

3

such powers of the Corporation and do all such lawful acts and things as are not by law or by the Certificate of Incorporation directed or required to be exercised or done by the stockholders.

SECTION 2.Number and Term of Office.  The number of directors that shall constitute the whole Board shall be fixed from time to time by a vote of a majority of the whole Board, but unless so fixed shall be one.  The term “whole Board” is used herein to refer to the number of directors from time to time authorized to be on the Board regardless of the number of directors then in office.  Directors need not be stockholders.  Each of the directors of the Corporation shall hold office until his or her successor shall be elected and shall qualify or until his or her earlier death or resignation or removal in the manner hereinafter provided.

SECTION 3.Organization and Order of Business.  At each meeting of the Board, the Chairman or, if the Chairman is not present, any director chosen by a majority of the directors present thereat, shall act as chairman of the meeting and preside thereat.  The Secretary of the Corporation or, in the case of his or her absence, any person (who shall be an Assistant Secretary, if an Assistant Secretary shall be present thereat) whom the chairman of the meeting shall appoint, shall act as secretary of such meeting and keep the minutes thereof.

SECTION 4.Resignations.  Any director may resign at any time by giving written notice of his or her resignation to the Board, the Chairman of the Board or the President or the Secretary of the Corporation.  Any such resignation shall take effect at the time specified therein or, if the time when it shall become effective shall not be specified therein, then it shall take effect upon receipt thereof.  Unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.

SECTION 5.Removal of Directors.  Any director or the entire Board may be removed, with or without cause, at any time by the holders of a majority of the shares then

4

entitled to vote at an election of directors or by written consent of the stockholders pursuant to Section 5 of Article II hereof.

SECTION 6.Vacancies.  Vacancies in the Board and newly created directorships resulting from any increase in the authorized number of directors may be filled by a majority of the directors then in office, although less than a quorum, or by a sole remaining director or by the stockholders of the Corporation at the next annual meeting or any special meeting called for the  purpose.

SECTION 7.Place of Meetings.  The Board may hold its meetings at such place or places within or without the State of Delaware as the Board may from time to time determine or as shall be designated in the respective notices or waivers of notice thereof.

SECTION 8.Meetings.  (a)  Annual Meetings.  The Board shall meet annually for the purpose of organization, and the transaction of other business, unless it shall have transacted all such business by written consent pursuant to Section 11 of this Article.

(b)Regular Meetings.  Regular meetings of the Board shall be held at such times and places as the Board shall from time to time determine.

(c)Special Meetings.  Special meetings of the Board shall be held whenever called by the Chairman or any two of the directors at the time in office.  Any and all business may be transacted at a special meeting that may be transacted at a regular meeting of the Board.

SECTION 9.Notice of Meetings.  Subject to Article XI of these By-laws, the Secretary of the Corporation shall give notice to each director of each meeting of the Board, including the time and place of such meeting, except that notice of any meeting shall not be required to be given to any director who shall attend such meeting.  Notice of each such meeting shall be mailed to each director, addressed to him or her at his or her residence or usual place of

5

business, at least two days before the day on which such meeting is to be held, or shall be sent to him or her by telegraph, cable, wireless or other form of recorded communication or be delivered personally or by telephone not later than the day before the date on which such meeting is to be held.  A written waiver of notice, signed by the person entitled thereto, whether before or after the time of the meeting stated therein, shall be deemed equivalent to notice.

SECTION 10.Quorum and Manner of Acting.  Except as provided by law, the Certificate of Incorporation or these By-laws, one-third of the total number of directors then in office (but not less than two) shall be present in person at any meeting of the Board in order to constitute a quorum for the transaction of business at such meeting, and the vote of a majority of those directors present at any such meeting at which a quorum is present shall be necessary for the passage of any resolution or act of the Board, except as otherwise expressly required by law or these By-laws.  In the absence of a quorum for any such meeting, a majority of the directors present thereat may adjourn such meeting from time to time until a quorum shall be present.  Notice of any adjourned meeting need not be given.

SECTION 11.Directors’ Consent in Lieu of Meeting.  Any action required or permitted to be taken at any meeting of the Board or of any committee thereof may be taken without a meeting if all members of the Board or of such committee, as the case may be, consent to such action in writing, and such writing or writings are filed with the minutes of the proceedings of the Board or such committee.

SECTION 12.Meetings by Conference Telephone or Similar Communications Equipment.  Any one or more members of the Board, or any committee designated by the Board, may participate in a meeting of the Board, or such committee, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting

6

can hear each other, and participation in a meeting pursuant to this Section shall constitute presence in person at such meeting.

SECTION 13.Compensation.  Each director, in consideration of his or her serving as such, shall be entitled to receive from the Corporation such amount per annum or such fees for attendance at meetings of the Board or of any committee, or both, as the Board shall from time to time determine.  The Board may likewise provide that the Corporation shall reimburse each director or member of a committee for any expenses incurred by him or her on account of his or her attendance at any such meeting.  Nothing contained in this Section shall be construed to preclude any director from serving the Corporation in any other capacity and receiving compensation therefor.

SECTION 14.Executive and Other Committees.  (a)  Executive Committee.  The Board may, by resolution passed by a majority of the whole Board, designate an Executive Committee consisting of such number of directors as the Board shall appoint.  The Board shall have power to designate alternate members of the Executive Committee.  Vacancies occurring on the Executive Committee for any reason may be filled by the Board at any time.  In the absence or disqualification of a member of the Executive Committee, the member or members present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in the place of any such absent or disqualified member.  Any member of the Executive Committee shall be subject to removal, with or without cause, at any time by the Board or by a majority in voting interest of the stockholders.

(b)Functions and Powers of Executive Committee.  The Executive Committee, subject to any limitations prescribed by the Board, shall possess and may exercise,

7

during the intervals between meetings of the Board, all the powers and authority of the Board in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it; provided, however, that the Executive Committee shall not have such power or authority in reference to (i) approving or adopting, or recommending to the stockholders, any action or matter (other than the election or removal of directors) expressly required by Chapter 1 of the General Corporation Law of the State of Delaware (the “DGCL”) to be submitted to stockholders for approval or (ii) adopting, amending or repealing any by-law of the Corporation.

(c)Executive Committee Meetings, Quorum and Manner of Acting.  The Executive Committee shall meet at such times and as often as may be deemed necessary and expedient and at such places as shall be determined by the Executive Committee.  A majority of the Executive Committee shall constitute a quorum, and the vote of a majority of those members of the Executive Committee present at any meeting thereof at which a quorum is present shall be necessary for the passage of any resolution or act of the Executive Committee.  The Board may designate a chairman for the Executive Committee, who shall preside at meetings thereof, and a vice chairman, who shall preside at such meetings in the absence of the chairman.  A majority of the Executive Committee may determine its rules of procedure and fix the time and place, whether within or without the State of Delaware, of its meetings and specify what notice thereof, if any, shall be given.

(d)Other Committees.  The Board may, by resolution passed by a majority of the whole Board, designate other committees of the Board, each such committee to consist of two or more directors and to have such duties and functions as shall be provided in such resolution.  A majority of all the members of any such committee may determine its rules of

8

procedure, determine its action and fix the time and place, whether within or without the State of Delaware, of its meetings and specify what notice thereof, if any, shall be given, unless the Board shall otherwise by resolution provide.  The Board shall have power to change the members of any such committee at any time, to designate alternate members of any such committee and fill vacancies therein and to discharge any such committee, either with or without cause, at any time.  In the absence or disqualification of a member of any committee, the member or members present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in the place of any such absent or disqualified member.  Any such committee, to the extent provided in the resolution of the Board, shall have and may exercise all the powers and authority of the Board in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it; provided, however, that no such committee shall have the power or authority in reference to: (i) approving or adopting, or recommending to the stockholders, any action or matter (other than the election or removal of directors) expressly required by Chapter 1 of the DGCL to be submitted to stockholders for approval or (ii) adopting, amending or repealing any by-law of the Corporation.

ARTICLE IV

Officers

SECTION 1.Number and Term of Office.  The principal officers of the Corporation shall be a President, one or more Vice Presidents, a Treasurer, a Secretary, and such other officers as the Board may deem appropriate or necessary.  Each such officer shall be elected by the Board and shall hold office until his or her earlier death or resignation or removal in the manner hereinafter provided.  The Board shall determine which officer or officers shall act

9

as chief executive officer and chief operating officer, if any, of the Corporation.  The Board may, in its discretion, designate any such Vice President by a number or numbers or a word or words (including, without limitation, the words “Executive” and “Senior”) added before or after such title.

The Board may elect, appoint or provide for the appointment of such other officers of the Corporation (including, without limitation, additional Vice Presidents) as may from time to time appear necessary or advisable in the conduct of the affairs of the Corporation.  Such other officers shall have such authority and shall perform such duties as from time time shall be prescribed by these By-laws and by the Board (or the committee or superior officer appointing such other officer) and, to the extent not so provided, as generally pertain to their respective offices.  If additional officers are elected or appointed during the year, each of them shall hold office until such officer’s successor is elected or appointed or until his or her earlier death, resignation or removal in the manner hereinafter provided.

A vacancy in any office may be filled for the unexpired portion of the term by the Board at any meeting thereof or, except in the case of any officer elected by the Board, by any committee or superior officer upon whom such power may be conferred by the Board.

All officers of the Corporation shall be subject to removal, with or without cause, at any time by the Board or by the stockholders of the Corporation, or, except in the case of any officer elected by the Board, by any committee or superior officer upon whom such power of removal may be conferred by the Board.  The Board may require any officer to give security for the faithful performance of these duties.

Any officer may resign at any time by giving written notice of his or her resignation to the President or the Secretary of the Corporation, and such resignation shall take

10

effect at the time specified therein or, if the time when it shall become effective shall not be specified therein, it shall take effect when accepted by action of the Board.  Except as aforesaid, the acceptance of such resignation shall not be necessary to make it effective.

Any number of offices may be held by the same person, except that no officer shall execute, acknowledge or verify any instrument in more than one capacity if such instrument is required by law or these By-laws to be executed, acknowledged or verified by two or more officers.

SECTION 2.President.  The President, subject to the direction of the Board, shall have such powers and perform such duties as pertain to the office of President and as the Board may from time to time prescribe, shall have the direction of all subordinate officers, agents and employees and may assign such duties to such other officers as he or she deems appropriate, and shall perform such other duties and exercise such other powers as may from time to time be prescribed by these By-laws or the Board.  The President shall also serve as the chief executive officer of the Corporation and shall have such powers and perform such duties as pertain to the office of chief executive officer unless the Board shall determine that some other officer shall be the chief executive officer.

SECTION 3.Vice Presidents.  Each Vice President shall have such powers and perform such duties as are assigned to him or her by these By-laws and shall have such other powers and perform such other duties, not inconsistent with these By-laws, as may from time to time be assigned to him or her by the Board (or the committee or superior officer appointing such Vice President) or the President.

SECTION 4.Treasurer.  The Treasurer shall have charge of, and be responsible for, the stock ledger of the Corporation and all funds and securities of the Corporation.  He or she

11

shall perform all of the duties usually incumbent upon and incident to the office of Treasurer.  He or she shall also have such powers and perform such duties as are assigned to him or her by these By-laws and shall have such other powers and perform such other duties, not inconsistent with these By-laws, as may from time to time be assigned to him or her by the Board or the President.

SECTION 5.Secretary.  The Secretary shall attend all meetings of the stockholders and of the Board and record all votes and the minutes of all proceedings in a book to be kept for that purpose and shall perform like duties for the standing committees when required.  He or she shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the Board.  He or she shall keep in safe custody the seal of the Corporation and may affix the same to any document or instrument the execution of which, on behalf of the Corporation, is duly authorized, and, when so affixed, it may be attested by his or her signature or by the signature of the Treasurer or an Assistant Secretary.  He or she shall perform all of the duties usually incumbent upon and incident to the office of Secretary.  He or she shall also have the powers and perform such duties as are assigned to him or her by these By-laws and shall have such other powers and perform such other duties, not inconsistent with these By-laws, as may from time to time be assigned to him or her by the Board or the President.

ARTICLE V

Contracts, Checks, Drafts, Bank Accounts, Etc.

SECTION 1.Execution of Documents.  The Board shall designate the officers, employees and agents of the Corporation who shall have power to execute and deliver deeds, contracts, mortgages, bonds, debentures, checks, drafts and other orders for the payment of money and other documents for and in the name of the Corporation and may authorize such officers, employees and agents to delegate such power (including authority to redelegate) by written instrument to other officers, employees or agents of the Corporation; and, unless so

12

designated or expressly authorized by these By-laws, no officer, employee or agent shall have any power or authority to bind the Corporation by any contract or engagement or to pledge its credit or to render it liable pecuniarily for any purpose or to any amount.

SECTION 2.Deposits.  All funds of the Corporation not otherwise employed shall be deposited from time to time to the credit of the Corporation or otherwise as the Board or the President or any other officer of the Corporation to whom power in that respect shall have been delegated by the Board shall select.

SECTION 3.Proxies in Respect of Stock or Other Securities of Other Corporations.  The Board may designate the officers of the Corporation who shall have authority from time to time to appoint an agent or agents of the Corporation to exercise in the name and on behalf of the Corporation the powers and rights which the Corporation may have as the holder of stock or other securities or interests in any other corporation or business entity and to vote or consent in respect of such stock, securities or interest; such designated officers may instruct the person or persons so appointed as to the manner of exercising such powers and rights; and such designated officers may execute or cause to be executed in the name and on behalf of the Corporation and under its corporate seal, or otherwise, such written proxies, powers of attorney or other instruments as they may deem necessary or proper in order that the Corporation may exercise its said powers and rights.

ARTICLE VI

Books and Records

The books and records of the Corporation may be kept at such places within or without the State of Delaware as the Board may from time to time determine.

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ARTICLE VII

Seal

The Board shall provide a corporate seal, which shall be in the form of a circle and shall bear the full name of the Corporation and the words and figures “Corporate Seal Delaware.”

ARTICLE VIII

Fiscal Year

The fiscal year of the Corporation shall end on the 30th day of June in each year, unless changed by resolution of the Board.

ARTICLE IX

Indemnification

SECTION 1.Nature of Indemnity.  The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he or she is or was or has agreed to become a director or officer of the Corporation, is or was serving or has agreed to serve at the request of the Corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise, including an employee benefit plan, or by reason of any action alleged to have been taken or omitted in such capacity, and may indemnify any person who was or is a party or is threatened to be made a party to such an action, suit or proceeding by reason of the fact that he or she is or was or has agreed to become an employee or agent of the Corporation, or is or was serving or has agreed to serve at the request of the Corporation as a director, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, including an employee benefit plan, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually

14

and reasonably incurred by him or her or on his or her behalf in connection with such action, suit or proceeding and any appeal therefrom, if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful; except that in the case of an action or suit by or in the right of the Corporation to procure a judgment in its favor (i) such indemnification shall be limited to expenses (including attorneys’ fees) actually and reasonably incurred by such person in the defense or settlement of such action or suit and (ii) no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the Delaware Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Delaware Court of Chancery or such other court shall deem proper.

The termination of any action, suit or proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the Corporation and, with respect to any criminal action or proceeding, had reasonable cause to believe that his or her conduct was unlawful.

SECTION 2.Successful Defense.  To the extent that a director, officer, employee or agent of the Corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Section 1 hereof or in defense of any claim, issue

15

or matter therein, he or she shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by him or her in connection therewith.

SECTION 3.Determination That Indemnification Is Proper.  Any indemnification of a director or officer of the Corporation under Section 1 hereof (unless ordered by a court) shall be made by the Corporation unless a determination is made that indemnification of the director or officer is not proper in the circumstances because he or she has not met the applicable standard of conduct set forth in Section 1 hereof.  Any indemnification of an employee or agent of the Corporation under Section 1 hereof (unless ordered by a court) may be made by the Corporation upon a determination that indemnification of the employee or agent is proper in the circumstances because he or she has met the applicable standard of conduct set forth in Section 1 hereof.  Any such determination shall be made (i) by a majority vote of the directors who were not parties to such action, suit or proceeding, even though less than a quorum, or (ii) by a committee of such directors designated by majority vote of such directors, even though less than a quorum, or (iii) if there are no such directors, or if such directors so direct, by independent legal counsel in a written opinion, or (iv) by the stockholders.

SECTION 4.Advance Payment of Expenses.  Expenses (including attorneys’ fees) incurred by a director or officer in defending any civil, criminal, administrative or investigative action, suit or proceeding shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of the director or officer to repay such amount if it shall ultimately be determined that he or she is not entitled to be indemnified by the Corporation as authorized in this Article IX.  Such expenses (including attorneys’ fees) incurred by other employees and agents may be so paid upon such terms and conditions, if any, as the Board deems appropriate.  The Board may authorize the

16

Corporation’s counsel to represent such director, officer, employee or agent in any action, suit or proceeding, whether or not the Corporation is a party to such action, suit or proceeding.

SECTION 5.Procedure for Indemnification of Directors and Officers.  Any indemnification of a director or officer of the Corporation under Sections 1 and 2 or advance of costs, charges and expenses to a director or officer under Section 4 shall be made promptly, and in any event within 30 days, upon the written request of the director or officer.  If a determination by the Corporation that the director or officer is entitled to indemnification pursuant to this Article is required, and the Corporation fails to respond within 60 days to a written request for indemnity, the Corporation shall be deemed to have approved such request.  If the Corporation denies a written request for indemnity or advancement of expenses, in whole or in part, or if payment in full pursuant to such request is not made within 30 days, the right to indemnification or advances as granted by this Article IX shall be enforceable by the director or officer in any court of competent jurisdiction.  Such person’s costs and expenses incurred in connection with successfully establishing his or her right to indemnification, in whole or in part, in any such action shall also be indemnified by the Corporation.  It shall be a defense to any such action (other than an action brought to enforce a claim for the advance of costs, charges and expenses under Section 4 where the required undertaking, if any, has been received by the Corporation) that the claimant has not met the standard of conduct set forth in Section 1, but the burden of providing such defense shall be on the Corporation.  Neither the failure of the Corporation (including its Board, its independent legal counsel and its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in Section 1, nor the fact that there has been an actual determination by the

17

Corporation (including its Board, its independent legal counsel and its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct.

SECTION 6.Survival; Preservation of Other Rights.  The foregoing indemnification provisions shall be deemed to be a contract between the Corporation and each director, officer, employee and agent who serves in any such capacity at any time while these provisions as well as the relevant provisions of the DGCL are in effect, and any repeal or modification thereof shall not affect any right or obligation then existing with respect to any state of facts then or previously existing or any action, suit or proceeding previously or thereafter brought or threatened based in whole or in part upon any such state of facts.  Such a right may not be modified retroactively without the consent of such director, officer, employee or agent.

The indemnification and advancement of expenses provided by, or granted pursuant to,  this Article IX shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any By-law, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his or her official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person.

SECTION 7.Insurance.  The Corporation may purchase and maintain insurance on behalf of any person who is or was or has agreed to become a director or officer of the Corporation, or is or was serving at the request of the Corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise, including an employee benefit plan, against any liability asserted against him or her and incurred by him or her or on his

18

or her behalf in any such capacity, or arising out of his or her status as such, whether or not the Corporation would have the power to indemnify him or her against such liability under the provisions of this Article.

SECTION 8.Severability.  If this Article or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Corporation shall nevertheless indemnify each director or officer and may indemnify each employee or agent of the Corporation as to costs, charges and expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement with respect to any action, suit or proceeding, whether civil, criminal, administrative or investigative, including an action by or in the right of the Corporation, to the fullest extent permitted by any applicable portion of this Article IX that shall not have been invalidated and to the fullest extent permitted by applicable law.

ARTICLE X

Shares and Their Transfer

SECTION 1.Certificates for Shares.  Every holder of stock of the Corporation shall be entitled to have a certificate certifying the number of shares owned by him or her or it in the  Corporation and designating the class of stock to which such shares belong, which shall otherwise be in such form as the Board shall prescribe.  Each such certificate shall be signed by, or in the name of the Corporation, by the President or a Vice President and the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary of the Corporation.  In case any officer who has signed any such certificate shall have ceased to be such officer before such certificate is issued, such certificate may be issued by the Corporation with the same effect as if he or she were such officer at the date of issue.

SECTION 2.Record.  A record shall be kept of the name of the person, firm or corporation owning the stock represented by each certificate for stock of the Corporation issued,

19

the number of shares represented by each such certificate, and the date thereof, and, in the case of cancelation, the date of cancelation.  Except as otherwise expressly required by law, the person in whose name shares of stock stand on the books of the Corporation shall be deemed the owner thereof for all purposes as regards the Corporation.

SECTION 3.Transfer and Registration of Stock.  The transfer of stock and certificates of stock that represent the shares of stock of the Corporation shall be governed by Article 8 of Title 6 of the Delaware Code (the Uniform Commercial Code — Investment Securities, as amended from time to time).  Registration of transfers of shares of the stock of the Corporation shall be made only on the books of the Corporation by the registered holder thereof, or by his or her attorney thereunto authorized by power of attorney duly executed and filed with the Secretary of the  Corporation, and on the surrender of the certificate or certificates for such shares properly endorsed or accompanied by a stock power properly executed.

SECTION 4.Lost, Destroyed or Mutilated Certificates.  In case of the alleged loss or destruction or the mutilation of a certificate representing stock of the Corporation, a new  certificate may be issued in place thereof, in the manner and upon such terms as the Board may prescribe.

ARTICLE XI

Waivers of Notice

Whenever notice is required to be given under any provision of the laws of the State of Delaware or of the Certificate of Incorporation or these By-laws, a written waiver thereof, signed by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice.

Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the

20

beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened.  Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders, directors, or members of a committee of directors, need be specified in any written waiver of notice thereof.

ARTICLE XII

Amendments

These By-laws, or any of them, may be altered, amended or repealed by the Board at any meeting thereof or by written consent of the Board in lieu of a meeting or by the stockholders entitled to vote thereon at any annual or special meeting thereof or in accordance with Section 5 of Article II of these By-laws.

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EX-4.1

Exhibit 4.1

EXECUTION COPY

INDENTURE

Dated as of March 2, 2007

Among

THE READER’S DIGEST ASSOCIATION, INC.,

THE GUARANTORS NAMED ON THE SIGNATURE PAGES HERETO

and

THE BANK OF NEW YORK,

as Trustee

9% SENIOR SUBORDINATED NOTES DUE 2017

CROSS-REFERENCE TABLE*

Trust Indenture Act Section		Indenture Section
310	(a)(1)	7.10
	(a)(2)	7.10
	(a)(3)	N.A.
	(a)(4)	N.A.
	(a)(5)	7.10
	(b)	7.10
	(c)	N.A.
311	(a)	7.11
	(b)	7.11
	(c)	N.A.
312	(a)	2.05
	(b)	14.03
	(c)	14.03
313	(a)	7.06
	(b)(1)	N.A.
	(b)(2)	7.06;7.07
	(c)	7.06;14.02
	(d)	7.06
314	(a)	4.03;14.02; 14.05
	(b)	N.A.
	(c)(1)	14.04
	(c)(2)	14.04
	(c)(3)	N.A.
	(d)	N.A.
	(e)	14.05
	(f)	N.A.
315	(a)	7.01
	(b)	7.05;14.02
	(c)	7.01
	(d)	7.01
	(e)	6.14
316	(a)(last sentence)	2.09
	(a)(1)(A)	6.05
	(a)(1)(B)	6.04
	(a)(2)	N.A.
	(b)	6.07
	(c)	2.12;9.04
317	(a)(1)	6.08
	(a)(2)	6.12
	(b)	2.04
318	(a)	14.01
	(b)	N.A.
	(c)	14.01

N.A. means not applicable.

*  This Cross-Reference Table is not part of the Indenture.

TABLE OF CONTENTS

		Page
ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE		1
Section 1.01	Definitions.	1
Section 1.02	Other Definitions.	27
Section 1.03	Incorporation by Reference of Trust Indenture Act.	29
Section 1.04	Rules of Construction.	29
Section 1.05	Acts of Holders.	30
ARTICLE 2 THE NOTES		31
Section 2.01	Form and Dating; Terms.	31
Section 2.02	Execution and Authentication.	32
Section 2.03	Registrar and Paying Agent.	32
Section 2.04	Paying Agent to Hold Money in Trust.	33
Section 2.05	Holder Lists.	33
Section 2.06	Transfer and Exchange.	33
Section 2.07	Replacement Notes.	34
Section 2.08	Outstanding Notes.	35
Section 2.09	Treasury Notes.	35
Section 2.10	Temporary Notes.	35
Section 2.11	Cancellation.	35
Section 2.12	Defaulted Interest.	36
Section 2.13	CUSIP Numbers	36
ARTICLE 3 REDEMPTION		36
Section 3.01	Notices to Trustee.	36
Section 3.02	Selection of Notes to Be Redeemed or Purchased.	37
Section 3.03	Notice of Redemption.	37
Section 3.04	Effect of Notice of Redemption.	38
Section 3.05	Deposit of Redemption or Purchase Price.	38
Section 3.06	Notes Redeemed or Purchased in Part.	38
Section 3.07	Optional Redemption.	39
Section 3.08	Mandatory Redemption.	40
Section 3.09	Offers to Repurchase by Application of Excess Proceeds.	40
ARTICLE 4 COVENANTS		41
Section 4.01	Payment of Notes.	41
Section 4.02	Maintenance of Office or Agency.	42
Section 4.03	Reports and Other Information.	42
Section 4.04	Compliance Certificate.	44
Section 4.05	Taxes.	44
Section 4.06	Stay, Extension and Usury Laws.	44
Section 4.07	Limitation on Restricted Payments.	45
Section 4.08	Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries.	51

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		Page
Section 4.09	Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock.	53
Section 4.10	Asset Sales.	58
Section 4.11	Transactions with Affiliates.	61
Section 4.12	Liens.	63
Section 4.13	Corporate Existence.	63
Section 4.14	Offer to Repurchase Upon Change of Control.	63
Section 4.15	Additional Subsidiary Guarantees.	65
Section 4.16	Limitation on Layering.	66
ARTICLE 5 SUCCESSORS		66
Section 5.01	Merger, Consolidation or Sale of All or Substantially All Assets.	66
Section 5.02	Successor Entity Substituted.	68
ARTICLE 6 DEFAULTS AND REMEDIES		68
Section 6.01	Events of Default.	68
Section 6.02	Acceleration.	71
Section 6.03	Other Remedies.	71
Section 6.04	Waiver of Past Defaults.	72
Section 6.05	Control by Majority.	72
Section 6.06	Limitation on Suits.	72
Section 6.07	Rights of Holders of Notes to Receive Payment.	73
Section 6.08	Collection Suit by Trustee.	73
Section 6.09	Restoration of Rights and Remedies.	73
Section 6.10	Rights and Remedies Cumulative.	73
Section 6.11	Delay or Omission Not Waiver.	73
Section 6.12	Trustee May File Proofs of Claim.	73
Section 6.13	Priorities.	74
Section 6.14	Undertaking for Costs.	74
ARTICLE 7 TRUSTEE		75
Section 7.01	Duties of Trustee.	75
Section 7.02	Rights of Trustee.	75
Section 7.03	Individual Rights of Trustee.	77
Section 7.04	Trustee’s Disclaimer.	77
Section 7.05	Notice of Defaults.	77
Section 7.06	Reports by Trustee to Holders of the Notes.	77
Section 7.07	Compensation and Indemnity.	78
Section 7.08	Replacement of Trustee.	78
Section 7.09	Successor Trustee by Merger, etc.	79
Section 7.10	Eligibility; Disqualification.	79
Section 7.11	Preferential Collection of Claims Against the Issuer.	80
ARTICLE 8 LEGAL DEFEASANCE AND COVENANT DEFEASANCE		80
Section 8.01	Option to Effect Legal Defeasance or Covenant Defeasance.	80
Section 8.02	Legal Defeasance and Discharge.	80
Section 8.03	Covenant Defeasance.	80

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		Page
Section 8.04	Conditions to Legal or Covenant Defeasance.	81
Section 8.05	Deposited Money and Government Securities to Be Held in Trust; Other Miscellaneous Provisions.	82
Section 8.06	Repayment to the Issuer.	83
Section 8.07	Reinstatement.	83
ARTICLE 9 AMENDMENT, SUPPLEMENT AND WAIVER		83
Section 9.01	Without Consent of Holders of Notes.	83
Section 9.02	With Consent of Holders of Notes.	84
Section 9.03	Compliance with Trust Indenture Act.	86
Section 9.04	Revocation and Effect of Consents.	86
Section 9.05	Notation on or Exchange of Notes.	86
Section 9.06	Trustee to Sign Amendments, etc.	87
Section 9.07	Payment for Consent.	87
ARTICLE 10 SUBORDINATION		87
Section 10.01	Agreement To Subordinate.	87
Section 10.02	Liquidation, Dissolution, Bankruptcy.	87
Section 10.03	Default on Senior Indebtedness of the Issuer.	88
Section 10.04	Acceleration of Payment of Notes.	89
Section 10.05	When Distribution Must Be Paid Over.	89
Section 10.06	Subrogation.	89
Section 10.07	Relative Rights.	89
Section 10.08	Subordination May Not Be Impaired by the Issuer.	90
Section 10.09	Rights of Trustee and Paying Agent.	90
Section 10.10	Distribution or Notice to Representative.	90
Section 10.11	Article 10 Not To Prevent Events of Default or Limit Right To Accelerate.	90
Section 10.12	Trust Moneys Not Subordinated.	90
Section 10.13	Trustee Entitled To Rely.	91
Section 10.14	Trustee To Effectuate Subordination.	91
Section 10.15	Trustee Not Fiduciary for Holders of Senior Indebtedness of the Issuer.	91
Section 10.16	Reliance by Holders of Senior Indebtedness of the Issuer on Subordination Provisions.	91
ARTICLE 11 GUARANTEES		92
Section 11.01	Guarantee.	92
Section 11.02	Limitation on Guarantor Liability.	93
Section 11.03	Execution and Delivery.	94
Section 11.04	Subrogation.	94
Section 11.05	Benefits Acknowledged.	94
Section 11.06	Release of Guarantees.	94
ARTICLE 12 SUBORDINATION OF GUARANTEES		95
Section 12.01	Agreement To Subordinate.	95
Section 12.02	Liquidation, Dissolution, Bankruptcy.	95
Section 12.03	Default on Senior Indebtedness of a Guarantor.	96
Section 12.04	Demand for Payment.	97

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		Page
Section 12.05	When Distribution Must Be Paid Over.	97
Section 12.06	Subrogation.	97
Section 12.07	Relative Rights.	97
Section 12.08	Subordination May Not Be Impaired by a Guarantor.	98
Section 12.09	Rights of Trustee and Paying Agent.	98
Section 12.10	Distribution or Notice to Representative.	98
Section 12.11	Article 12 Not To Prevent Events of Default or Limit Right To Demand Payment.	98
Section 12.12	Trust Moneys Not Subordinated.	98
Section 12.13	Trustee Entitled To Rely.	99
Section 12.14	Trustee To Effectuate Subordination.	99
Section 12.15	Trustee Not Fiduciary for Holders of Senior Indebtedness of Guarantors.	99
Section 12.16	Reliance by Holders of Senior Indebtedness of a Guarantor on Subordination Provisions.	99
ARTICLE 13 SATISFACTION AND DISCHARGE		100
Section 13.01	Satisfaction and Discharge.	100
Section 13.02	Application of Trust Money.	101
ARTICLE 14 MISCELLANEOUS		101
Section 14.01	Trust Indenture Act Controls.	101
Section 14.02	Notices.	101
Section 14.03	Communication by Holders of Notes with Other Holders of Notes.	102
Section 14.04	Certificate and Opinion as to Conditions Precedent.	102
Section 14.05	Statements Required in Certificate or Opinion.	103
Section 14.06	Rules by Trustee and Agents.	103
Section 14.07	No Personal Liability of Directors, Officers, Employees and Stockholders.	103
Section 14.08	Governing Law.	103
Section 14.09	Waiver of Jury Trial.	103
Section 14.10	Force Majeure.	104
Section 14.11	No Adverse Interpretation of Other Agreements.	104
Section 14.12	Successors.	104
Section 14.13	Severability.	104
Section 14.14	Counterpart Originals.	104
Section 14.15	Table of Contents, Headings, etc.	104
Section 14.16	Qualification of Indenture.	104
Appendix A	Provisions Relating to Initial Notes, Additional Notes and Exchange Notes
Exhibit A	Form of Initial Note
Exhibit B	Form of Exchange Note
Exhibit C	Form of Transferee Letter of Representation
Exhibit D	Form of Supplemental Indenture to Be Delivered by Subsequent Guarantors

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INDENTURE, dated as of March 2, 2007, among The Reader’s Digest Association, Inc., a Delaware corporation (“Reader’s Digest”), the Guarantors (as defined herein) listed on the signature pages hereto and The Bank of New York, as Trustee.

WITNESSETH

WHEREAS, in connection with the Transactions (as defined herein), Doctor Acquisition Co., a Delaware corporation (“Acquisition Co.”), has been merged with and into Reader’s Digest in accordance with the terms of the Merger Agreement (as defined herein);

WHEREAS, Reader’s Digest and the Guarantors have executed a Joinder Agreement to the Purchase Agreement dated the date hereof pursuant to which Reader’s Digest and the Guarantors have become party to the Purchase Agreement dated February 27, 2007, among Acquisition Co. and the Initial Purchasers (as defined herein), relating to the initial sale and issuance of the Initial Notes (as defined below);

WHEREAS, Reader’s Digest has duly authorized the creation of and issue of $600,000,000 aggregate principal amount of 9% Senior Subordinated Notes due 2017 (the “Initial Notes”);  and

WHEREAS, Reader’s Digest and each of the Guarantors has duly authorized the execution and delivery of this Indenture.

NOW, THEREFORE, Reader’s Digest, the Guarantors and the Trustee agree as follows for the benefit of each other and for the equal and ratable benefit of the Holders of the Notes.

ARTICLE 1

DEFINITIONS AND INCORPORATION BY REFERENCE

Section 1.01Definitions.

“Acquired Indebtedness” means, with respect to any specified Person,

(1)Indebtedness of any other Person existing at the time such other Person is merged with or into or became a Restricted Subsidiary of such specified Person, including Indebtedness incurred in connection with, or in contemplation of, such other Person merging with or into or becoming a Restricted Subsidiary of such specified Person, and

(2)Indebtedness secured by a Lien encumbering any asset acquired by such specified Person.

“Additional Interest” means all additional interest then owing pursuant to the Registration Rights Agreement.

“Additional Notes” means additional Notes (other than the Initial Notes and other than Exchange Notes for such Initial Notes) issued from time to time under this Indenture in accordance with Sections 2.01 and 4.09 hereof.

“Affiliate” of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person.  For purposes of this definition, “control” (including, with correlative meanings, the terms “controlling,” “controlled by” and “under common control with”), as used with respect to any Person, shall mean the

possession, directly or indirectly, 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 agreement or otherwise.

“Agent” means any Registrar or Paying Agent.

“Applicable Premium” means, with respect to any Note on any Redemption Date, the greater of:

(1)1.0% of the principal amount of such Note; and

(2)the excess, if any, of (a) the present value at such Redemption Date of (i) the redemption price of such Note at February 15, 2012 (such redemption price being set forth in Section 3.07 hereof), plus (ii) all required interest payments due on such Note through February 15, 2012 (excluding accrued but unpaid interest to the Redemption Date), computed using a discount rate equal to the Treasury Rate as of such Redemption Date plus 50 basis points; over (b) the principal amount of such Note.

“Asset Sale” means:

(1)the sale, conveyance, transfer or other disposition, whether in a single transaction or a series of related transactions, of property or assets (including by way of a Sale and Lease-Back Transaction) of the Issuer or any of its Restricted Subsidiaries (each referred to in this definition as a “disposition”); or

(2)the issuance or sale of Equity Interests of any Restricted Subsidiary, whether in a single transaction or a series of related transactions;

in each case, other than:

(a)any disposition of Cash Equivalents or Investment Grade Securities or obsolete or worn out equipment in the ordinary course of business or any disposition of inventory or goods (or other assets) held for sale in the ordinary course of business;

(b)the disposition of all or substantially all of the assets of the Issuer in a manner permitted pursuant to the provisions described under Section 5.01 hereof or any disposition that constitutes a Change of Control pursuant to this Indenture;

(c)the making of any Restricted Payment or Permitted Investment that is permitted to be made, and is made, under Section 4.07 hereof;

(d)any transaction or series of related transactions for which an aggregate fair market value of less than $5.0 million is received; provided that the aggregate fair market value of such dispositions shall not exceed $15.0 million in the aggregate during any fiscal year;

(e)any disposition of property or assets or issuance of securities by a Restricted Subsidiary of the Issuer to the Issuer or by the Issuer or a Restricted Subsidiary of the Issuer to another Restricted Subsidiary of the Issuer;

(f)to the extent allowable under Section 1031 of the Internal Revenue Code of 1986, any exchange of like property (excluding any boot thereon) for use in a Similar Business;

(g)the lease, assignment or sub-lease of any real or personal property in the ordinary course of business;

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(h)any issuance or sale of Equity Interests in, or Indebtedness or other securities of, or assets of an Unrestricted Subsidiary;

(i)foreclosures on assets;

(j)any financing transaction with respect to property built or acquired by the Issuer or any Restricted Subsidiary after the Issue Date, including Sale and Lease-Back Transactions and asset securitizations, permitted by this Indenture;

(k)the issuance by a Restricted Subsidiary of Preferred Stock that is permitted to be made under Section 4.09 hereof; and

(l)the licensing of intellectual property.

“Bankruptcy Law” means Title 11, U.S. Code or any similar federal or state law for the relief of debtors.

“beneficial ownership” has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating the beneficial ownership of any particular “person” (as such term is used in Section 13(d)(3) of the Exchange Act), such “person” shall be deemed to have beneficial ownership of all securities that such “person” has the right to acquire, whether such right is currently exercisable or is exercisable only after the passage of time.

“Business Day” means each day which is not a Legal Holiday.

“Capital Stock” means:

(1)in the case of a corporation, corporate stock;

(2)in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock;

(3)in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited); and

(4)any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person.

“Capitalized Lease Obligation” means, at the time any determination thereof is to be made, the amount of the liability in respect of a capital lease that would at such time be required to be capitalized and reflected as a liability on a balance sheet (excluding the footnotes thereto) in accordance with GAAP.

“Cash Equivalents” means:

(1)United States dollars, Euros or any national currency of any participating member state of the EMU, or such local currencies held by the Company and its Restricted Subsidiaries from time to time in the ordinary course of business;

(2)securities issued or directly and fully and unconditionally guaranteed or insured by the U.S. government or a member nation of the European Union (or any agency or instrumentality thereof the securities of which are unconditionally guaranteed as a full faith and

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credit obligation of the U.S. government) with maturities of not more than 12 months from the date of acquisition;

(3)certificates of deposit, time deposits and eurodollar time deposits with maturities of 12 months or less from the date of acquisition, bankers’ acceptances with maturities not exceeding 12 months and overnight bank deposits, in each case with any commercial bank having capital and surplus in excess of $250.0 million, or the U.S. dollar equivalent in the case of non-U.S. banks;

(4)fully collateralized repurchase obligations for underlying securities of the types described in clauses (2) and (3) above entered into with any financial institution meeting the qualifications specified in clause (3) above;

(5)commercial paper maturing within 12 months after the date of acquisition and having a rating of at least P-2 from Moody’s or A-2 from S&P or carrying an equivalent rating by a nationally recognized rating agency if both of the two named rating agencies cease publishing ratings of investments;

(6)readily marketable direct obligations issued by any state, commonwealth or territory of the United States or any political subdivision thereof having one of the two highest rating categories obtainable from either Moody’s or S&P (or one of the two highest rating categories obtainable from a nationally recognized rating agency if both of the two named rating agencies cease publishing ratings of investments) with maturities of 12 months or less from the date of acquisition;

(7)instruments equivalent to those referred to in clauses (1) through (6) of this definition denominated in euros or any other foreign currency comparable in credit quality and tenor to those referred to in such clauses and customarily used by corporations for cash management purposes in any jurisdiction outside the United States to the extent reasonably required in connection with any business conducted by any Restricted Subsidiary organized in such jurisdiction;

(8)Investments in funds investing substantially all of their assets in Cash Equivalents of the types described in clauses (1) through (7) of this definition; and

(9)Investments with average maturities of 12 months or less from the date of acquisition in money market funds rated AAA- (or the equivalent thereof) or better by S&P or Aaa3 (or the equivalent thereof) or better by Moody’s.

“Change of Control” means the occurrence of any of the following:

(1)the sale, assignment, transfer, lease, conveyance or other disposition, in one or more related transactions, of all or substantially all of the properties and assets of the Issuer and its Subsidiaries, taken as a whole, to any Person other than a Permitted Holder; or

(2)the Issuer becomes aware of (by way of a report or any other filing pursuant to Section 13(d) of the Exchange Act, proxy, vote, written notice or otherwise) the acquisition by (x) any Person (other than one or more Permitted Holders) or (y) any Persons that together (i) are a group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, or any successor provision), or (ii) are acting, for the purpose of acquiring, holding or disposing of securities (within the meaning of Rule 13d-5(b)(1) under the Exchange Act) (other than, in the case of clauses (i) and (ii), Permitted Holders), in a single transaction or in a related series of

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transactions, by way of merger, consolidation or other business combination or purchase of beneficial ownership, directly or indirectly, of 50% or more of the total voting power of the Voting Stock of the Issuer or any of its direct or indirect parent entities.

“Consolidated Depreciation and Amortization Expense” means with respect to any Person for any period, the total amount of depreciation and amortization expense, including the amortization of deferred financing fees of such Person and its Restricted Subsidiaries for such period on a consolidated basis and otherwise determined in accordance with GAAP.

“Consolidated Interest Expense” means, with respect to any Person for any period, without duplication, the sum of:

(1)consolidated interest expense of such Person and its Restricted Subsidiaries for such period, to the extent such expense was deducted (and not added back) in computing Consolidated Net Income (including (a) amortization of original issue discount resulting from the issuance of Indebtedness at less than par, (b) all commissions, discounts and other fees and charges owed with respect to letters of credit or bankers’ acceptances, (c) non-cash interest payments (but excluding any non-cash interest expense attributable to the movement in the mark to market valuation of Hedging Obligations or other derivative instruments pursuant to GAAP), (d) the interest component of Capitalized Lease Obligations, and (e) net settlement payments, if any, made pursuant to interest rate Hedging Obligations with respect to Indebtedness (less any net settlement payments, if any, received pursuant to interest rate Hedging Obligations with respect to Indebtedness), and excluding (A) any Additional Interest, (B) amortization of deferred financing fees, debt issuance costs, commissions, fees and expenses, (C) any expensing of bridge, commitment and other financing fees relating to any financings and (D) any annual agency or similar fees paid under any Credit Facilities; plus

(2)consolidated capitalized interest of such Person and its Restricted Subsidiaries for such period, whether paid or accrued; less

(3)interest income for such period of such Person and its Restricted Subsidiaries.

For purposes of this definition, interest on a Capitalized Lease Obligation shall be deemed to accrue at an interest rate reasonably determined by such Person to be the rate of interest implicit in such Capitalized Lease Obligation in accordance with GAAP.

“Consolidated Leverage Ratio”, with respect to any Person as of any date of determination, means the ratio of (x) Consolidated Total Indebtedness of such Person as of the end of the most recent fiscal quarter for which internal financial statements are available to (y) the aggregate amount of EBITDA of such Person for the period of the most recently ended four full consecutive fiscal quarters for which internal financial statements are available. In the event that the Issuer or any Restricted Subsidiary incurs, assumes, guarantees, redeems, retires or extinguishes any Indebtedness (other than Indebtedness incurred under any revolving credit facility unless such Indebtedness has been permanently repaid and has not been replaced) or issues or redeems Disqualified Stock or Preferred Stock subsequent to the commencement of the period for which the Consolidated Leverage Ratio is being calculated but prior to or simultaneously with the event for which the calculation of the Consolidated Leverage Ratio is made (the “Consolidated Leverage Ratio Calculation Date”), then the Consolidated Leverage Ratio shall be calculated giving pro forma effect to such incurrence, assumption, guarantee, redemption, retirement or extinguishment of Indebtedness, or such issuance or redemption of Disqualified Stock or Preferred Stock, as if the same had occurred at the beginning of the applicable four-quarter period.

5

For purposes of making the computation referred to above, Investments, acquisitions, dispositions, mergers, consolidations and disposed operations (as determined in accordance with GAAP) that have been made by the Issuer or any of its Restricted Subsidiaries during the four-quarter reference period or subsequent to such reference period and on or prior to or simultaneously with the Consolidated Leverage Ratio Calculation Date shall be calculated on a pro forma basis assuming that all such Investments, acquisitions, dispositions, mergers, consolidations and disposed operations (and the change in any associated fixed charge obligations and the change in EBITDA resulting therefrom) had occurred on the first day of the four-quarter reference period. If since the beginning of such period any Person that subsequently became a Restricted Subsidiary or was merged with or into the Issuer or any of its Restricted Subsidiaries since the beginning of such period shall have made any Investment, acquisition, disposition, merger, consolidation or disposed operation that would have required adjustment pursuant to this definition, then the Consolidated Leverage Ratio shall be calculated giving pro forma effect thereto for such period as if such Investment, acquisition, disposition, merger, consolidation or disposed operation had occurred at the beginning of the applicable four-quarter period.

For purposes of this definition, whenever pro forma effect is to be given to an investment, acquisition, disposition, merger or consolidation (including the Transactions) and the amount of income or earnings relating thereto, the pro forma calculations shall be determined in good faith by a responsible financial or accounting Officer of the Issuer; provided that such calculations are set forth in an Officer’s Certificate signed by the Issuer’s chief financial officer stating (i) that such calculations are based on the reasonable good faith beliefs of the Officers executing such Officer’s Certificate at the time of such execution and (ii) that any related incurrence of Indebtedness is permitted pursuant to this Indenture.

“Consolidated Net Income” means, with respect to any Person for any period, the aggregate of the Net Income of such Person and its Restricted Subsidiaries for such period, on a consolidated basis, and otherwise determined in accordance with GAAP; provided, however, that, without duplication,

(1)any after-tax effect of extraordinary, non-recurring or unusual gains or losses (less all fees and expenses relating thereto) or expenses (including relating to the Transactions to the extent incurred on or prior to December 31, 2007), severance, relocation costs and curtailments or modifications to pension and post-retirement employee benefit plans shall be excluded,

(2)the cumulative effect of a change in accounting principles during such period shall be excluded,

(3)any after-tax effect of income (loss) from disposed, abandoned or discontinued operations and any net after-tax gains or losses on disposal of disposed, abandoned or discontinued operations shall be excluded,

(4)any after-tax effect of gains or losses (less all fees and expenses relating thereto) attributable to asset dispositions other than in the ordinary course of business, as determined in good faith by the Board of Directors of the Issuer, shall be excluded,

(5)the Net Income for such period of any Person that is not a Subsidiary, or that is an Unrestricted Subsidiary, or that is accounted for by the equity method of accounting, shall be excluded; provided that Consolidated Net Income of the Issuer shall be increased by the Net Income of such Person to the extent of the amount of dividends or distributions or other payments made by such Person that are actually paid in cash (or to the extent converted into cash) to the referent Person or a Restricted Subsidiary thereof in respect of such period; provided further, that

6

such increase shall not apply for purposes of determining the amount payable for Restricted Payments under clause 3(a) of Section 4.07(a) hereof, to the extent such dividends or distributions or other payments are included in clause 3(d) of Section 4.07(a) hereof,

(6)solely for the purpose of determining the amount available for Restricted Payments under clause (3)(a) of Section 4.07(a), the Net Income for such period of any Restricted Subsidiary (other than any Guarantor) shall be excluded to the extent the declaration or payment of dividends or similar distributions by that Restricted Subsidiary of its Net Income is not at the date of determination wholly permitted without any prior governmental approval (which has not been obtained) or, directly or indirectly, by the operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule, or governmental regulation applicable to that Restricted Subsidiary or its stockholders, unless such restriction with respect to the payment of dividends or similar distributions has been legally waived; provided that Consolidated Net Income of the Issuer shall be increased by the Net Income of such person to the extent of the amount of dividends or other distributions or other payments actually paid in cash (or to the extent converted into cash) by such Person to the Issuer or a Restricted Subsidiary thereof in respect of such period, to the extent not already included therein,

(7)any impairment charge or asset write-off pursuant to Financial Accounting Standards Board Statements No. 142 and No. 144 and the amortization of intangibles arising pursuant to Financial Accounting Standards Board Statement No. 141 shall be excluded,

(8)effects of adjustments (including the effects of such adjustments pushed down to the Issuer and its Restricted Subsidiaries) in any line item in such Person’s consolidated financial statements pursuant to GAAP resulting from the application of purchase accounting in relation to the Transactions or any consummated acquisition shall be excluded,

(9)any after-tax effect of income (loss) from the early extinguishment of Indebtedness or Hedging Obligations or other derivative instruments shall be excluded,

(10)any fees and expenses incurred during such period, or any amortization thereof for such period, in connection with any acquisition, Investment, Asset Sale, issuance or repayment of Indebtedness, issuance of Equity Interests, refinancing transaction or amendment or modification of any debt instrument (in each case, including any such transaction consummated prior to the Issue Date and any such transaction undertaken but not completed) and any charges or non-recurring merger costs incurred during such period as a result of any such transaction shall be excluded,

(11)non-cash income or charges resulting from mark-to-market accounting under Financial Accounting Standard No. 52 relating to Indebtedness denominated in foreign currencies shall be excluded,

(12)any non-cash compensation expense recorded from grants of stock appreciation or similar rights, stock options, restricted stock or other rights shall be excluded, and

(13)accruals and reserves that are established within 12 months after the Issue Date that are required to be established in accordance with GAAP as a result of the Transactions shall be excluded.

Notwithstanding the foregoing, for the purpose of the covenant described under Section 4.07 hereof only (other than clause (3)(d) thereof), there shall be excluded from Consolidated Net Income any income arising from any sale or other disposition of Restricted Investments made by the Issuer and its

7

Restricted Subsidiaries, any repurchases and redemptions of Restricted Investments from the Issuer and its Restricted Subsidiaries, any repayments of loans and advances which constitute Restricted Investments by the Issuer or any of its Restricted Subsidiaries, any sale of the stock of an Unrestricted Subsidiary or any distribution or dividend from an Unrestricted Subsidiary, in each case only to the extent such amounts increase the amount of Restricted Payments permitted under such covenant pursuant to clause (3)(d) thereof. For purposes of this definition, amounts distributed, dividended, loaned or otherwise transferred to any direct or indirect parent pursuant to clause (14) of Section 4.07(b) hereof shall be deducted in calculating Consolidated Net Income without duplication of other expenses reflected in Consolidated Net Income.

“Consolidated Total Indebtedness” means, as at any date of determination, an amount equal to the sum of (1) the aggregate amount of all outstanding Indebtedness of the Issuer and its Restricted Subsidiaries on a consolidated basis consisting of Indebtedness for borrowed money, Obligations in respect of Capitalized Lease Obligations and debt obligations evidenced by promissory notes and similar instruments and (2) the aggregate amount of all outstanding Disqualified Stock of the Issuer and all Preferred Stock of its Restricted Subsidiaries on a consolidated basis, with the amount of such Disqualified Stock and Preferred Stock equal to the greater of their respective voluntary or involuntary liquidation preferences and maximum fixed repurchase prices, in each case determined on a consolidated basis in accordance with GAAP. For purposes hereof, the “maximum fixed repurchase price” of any Disqualified Stock or Preferred Stock that does not have a fixed repurchase price shall be calculated in accordance with the terms of such Disqualified Stock or Preferred Stock as if such Disqualified Stock or Preferred Stock were purchased on any date on which Consolidated Total Indebtedness shall be required to be determined pursuant to this Indenture, and if such price is based upon, or measured by, the fair market value of such Disqualified Stock or Preferred Stock, such fair market value shall be determined reasonably and in good faith by the Issuer.

“Contingent Obligations” means, with respect to any Person, any obligation of such Person guaranteeing any leases, dividends or other obligations that do not constitute Indebtedness (“primary obligations”) of any other Person (the “primary obligor”) in any manner, whether directly or indirectly, including, without limitation, any obligation of such Person, whether or not contingent,

(1)to purchase any such primary obligation or any property constituting direct or indirect security therefor,

(2)to advance or supply funds

(a)for the purchase or payment of any such primary obligation, or

(b)to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, or

(3)to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation against loss in respect thereof.

“Corporate Trust Office of the Trustee” shall be at the address of the Trustee specified in Section 14.02 hereof or such other address as to which the Trustee may give notice to the Holders and the Issuer.

“Contribution Agreements” means, collectively, (i) the Agreement and Plan of Merger, dated as of January 23, 2007, among RDA Holding Co., WRC Acquisition Co. and WRC Media Inc., and

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(ii) the Stock Acquisition Agreement, dated as of January 23, 2007, among Direct Holdings U.S. Corp., RDA Holding Co. and the members of Direct Holdings Worldwide L.L.C. named therein.

“Credit Facilities” means, with respect to the Issuer or any of its Restricted Subsidiaries, one or more debt facilities, including the Senior Credit Facility, or other financing arrangements (including, without limitation, commercial paper facilities or indentures) providing for revolving credit loans, term loans, letters of credit or other long-term indebtedness, including any notes, mortgages, guarantees, collateral documents, instruments and agreements executed in connection therewith, and any amendments, supplements, modifications, extensions, renewals, restatements or refundings thereof and any indentures or credit facilities or commercial paper facilities that replace, refund or refinance any part of the loans, notes, other credit facilities or commitments thereunder, including any such replacement, refunding or refinancing facility or indenture that increases the amount permitted to be borrowed thereunder or alters the maturity thereof (provided that such increase in borrowings is permitted under Section 4.09 hereof) or adds Restricted Subsidiaries as additional borrowers or guarantors thereunder and whether by the same or any other agent, lender or group of lenders.

“Custodian” means the Trustee, as custodian with respect to the Notes in global form, or any successor entity thereto.

“Default” means any event that is, or with the passage of time or the giving of notice or both would be, an Event of Default.

“Definitive Note” means a certificated Initial Note, Additional Note or Exchange Note (bearing the Restricted Notes Legend if the transfer of such Note is restricted by applicable law) that does not include the Global Notes Legend.

“Depositary” means, with respect to the Notes issuable or issued in whole or in part in global form, the Person specified in Section 2.03 hereof as the Depositary with respect to the Notes, and any and all successors thereto appointed as Depositary hereunder and having become such pursuant to the applicable provision of this Indenture.

“Designated Non-cash Consideration” means the fair market value of non-cash consideration received by the Issuer or a Restricted Subsidiary in connection with an Asset Sale that is so designated as Designated Non-cash Consideration pursuant to an Officer’s Certificate, setting forth the basis of such valuation, executed by the principal financial officer of the Issuer, less the amount of cash or Cash Equivalents received in connection with a subsequent sale of or collection on such Designated Non-cash Consideration.

“Designated Preferred Stock” means Preferred Stock of the Issuer or any parent entity thereof (in each case other than Disqualified Stock) that is issued for cash after the Issue Date (other than to a Restricted Subsidiary, the Issuer or an employee stock ownership plan or trust established by the Issuer or any of its Subsidiaries) and is so designated as Designated Preferred Stock, pursuant to an Officer’s Certificate executed by the principal financial officer of the Issuer or the applicable parent corporation thereof, as the case may be, on the issuance date thereof, the cash proceeds of which are excluded from the calculation set forth in clause (3) of Section 4.07(a) hereof.

“Designated Senior Indebtedness” means:

(1)any Indebtedness outstanding under the Senior Credit Facility; and

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(2)any other Senior Indebtedness permitted under this Indenture, the principal amount of which is $50.0 million or more and that has been designated by the Issuer as “Designated Senior Indebtedness.”

“Direct Holdings” means Direct Holdings U.S. Corp., a Delaware corporation and a Subsidiary of the Issuer.

“Disqualified Stock” means, with respect to any Person, any Capital Stock of such Person which, by its terms, or by the terms of any security into which it is convertible or for which it is putable or exchangeable, or upon the happening of any event, matures or is mandatorily redeemable pursuant to a sinking fund obligation or otherwise, or is redeemable at the option of the holder thereof, in whole or in part, or is convertible into or exchangeable for Indebtedness or Disqualified Stock (excluding Capital Stock which is convertible or exchangeable solely at the option of the Issuer or a Restricted Subsidiary (it being understood that upon such conversion or exchange it shall be an incurrence of such Indebtedness or Disqualified Stock)), in each case prior to the date 91 days after the earlier of the maturity date of the Notes or the date the Notes are no longer outstanding; provided, however, that (x) if such Capital Stock is issued to any plan for the benefit of employees of the Issuer or its Subsidiaries or by any such plan to such employees, such Capital Stock shall not constitute Disqualified Stock solely because it may be required to be repurchased by the Issuer or its Subsidiaries in order to satisfy applicable statutory or regulatory obligations and (y) such Capital Stock shall not constitute Disqualified Stock if such Capital Stock matures or is mandatorily redeemable or is redeemed at the option of the holders thereof as a result of a change of control or asset sale so long as the relevant change of control or asset sale provisions taken as a whole, are no more favorable in any material respect to holders of such Capital Stock than the asset sale and change of control provisions applicable to the Notes and any purchase requirement triggered thereby may not become operative until compliance with the asset sale and change of control provisions applicable to the Notes.

“Domestic Subsidiary” means, with respect to any Person, any subsidiary of such Person that is organized or existing under the laws of the United States, any state thereof, or the District of Columbia.

“EBITDA” means, with respect to any Person for any period, the Consolidated Net Income of such Person for such period

(1)increased (without duplication) by:

(a)provision for taxes based on income or profits or capital, including, without limitation, state, franchise and similar taxes and foreign withholding taxes of such Person paid or accrued during such period deducted (and not added back) in computing Consolidated Net Income; plus

(b)Consolidated Interest Expense of such Person for such period (including (x) net losses or Hedging Obligations or other derivative instruments entered into for the purpose of hedging interest rate risk and (y) costs of surety bonds in connection with financing activities, in each case, to the extent included in Consolidated Interest Expense) to the extent the same was deducted (and not added back) in calculating such Consolidated Net Income; plus

(c)Consolidated Depreciation and Amortization Expense of such Person for such period to the extent the same were deducted (and not added back) in computing Consolidated Net Income; plus

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(d)any expenses or charges (other than depreciation or amortization expense) related to any Equity Offering, Permitted Investment, acquisition, disposition, recapitalization or the incurrence of Indebtedness permitted to be incurred by this Indenture (including a refinancing thereof) (whether or not successful), including (i) such fees, expenses or charges related to the offering of the Notes and the Credit Facilities and (ii) any amendment or other modification of the Notes, and, in each case, deducted (and not added back) in computing Consolidated Net Income; plus

(e)the amount of any restructuring charge or reserve deducted (and not added back) in such period in computing Consolidated Net Income, including any one-time costs incurred in connection with acquisitions after the Issue Date and costs related to the closure and/or consolidation of facilities; plus

(f)any other non-cash charges, including any write-offs or write-downs, reducing Consolidated Net Income for such period (excluding any such non-cash charge that represents an accrual or reserve for potential cash items in any future period); plus

(g)the amount of management, monitoring, consulting and advisory fees and related expenses paid in such period to the Investors to the extent otherwise permitted under Section 4.11 hereof; plus

(h)any costs or expense incurred by the Issuer or a Restricted Subsidiary pursuant to any management equity plan or stock option plan or any other management or employee benefit plan or agreement or any stock subscription or shareholder agreement, to the extent that such cost or expenses are funded with cash proceeds contributed to the capital of the Issuer or net cash proceeds of an issuance of Equity Interest of the Issuer (other than Disqualified Stock) solely to the extent that such net cash proceeds are excluded from the calculation set forth in clause (3) of Section 4.07(a) hereof;

(2)decreased by (without duplication) non-cash items increasing Consolidated Net Income of such Person for such period, excluding any non-cash items to the extent they represent the reversal of an accrual or reserve for a potential cash item that reduced EBITDA in any prior period, and

(3)increased or decreased by (without duplication):

(a)any net gain or loss resulting in such period from Hedging Obligations and the application of Statement of Financial Accounting Standards No. 133; plus or minus, as applicable,

(b)any net gain or loss resulting in such period from currency translation gains or losses related to currency remeasurements of Indebtedness (including any net loss or gain resulting from Hedging Obligations for currency exchange risk).

“EMU” means economic and monetary union as contemplated in the Treaty on European Union.

“Equity Interests” means Capital Stock and all warrants, options or other rights to acquire Capital Stock, but excluding any debt security that is convertible into, or exchangeable for, Capital Stock.

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“Equity Offering” means any public or private sale of common stock or Preferred Stock of the Issuer or (to the extent the net cash proceeds thereof are contributed to the Issuer) any of its direct or indirect parent companies (excluding Disqualified Stock), other than:

(1)public offerings with respect to the Issuer’s or any direct or indirect parent entity’s common stock registered on Form S-4 or Form S-8;

(2)issuances to any Subsidiary of the Issuer;

(3)any such public or private sale that constitutes an Excluded Contribution or representing Designated Preferred Stock; and

(4)any offering of common stock or Preferred Stock issued in connection with a transaction that constitutes a Change of Control.

“Euro” means the single currency of participating member states of the EMU.

“Event of Default” has the meaning set forth under Section 6.01 hereof.

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC promulgated thereunder.

“Exchange Notes” means the Notes issued in exchange for the Notes pursuant to the Registration Rights Agreement or similar agreement.

“Exchange Offer” has the meaning set forth in the Registration Rights Agreement.

“Exchange Offer Registration Statement” has the meaning set forth in the Registration Rights Agreement.

“Excluded Contribution” means net cash proceeds, marketable securities or Qualified Proceeds received by the Issuer after the Issue Date from

(1)contributions to its common equity capital, and

(2)the sale (other than to a Subsidiary of the Issuer or to any management equity plan or stock option plan or any other management or employee benefit plan or agreement of the Issuer) of Capital Stock (other than Disqualified Stock and Designated Preferred Stock) of the Issuer,

in each case designated as Excluded Contributions pursuant to an Officer’s Certificate executed by the principal financial officer of the Issuer on the date such capital contributions are made or the date such Equity Interests are sold, as the case may be, which are excluded from the calculation set forth in clause (3) of Section 4.07(a) hereof.

“Existing Issuer Preferred Stock” means the existing Preferred Stock, Second Preferred Stock and Third Subordinated Preferred Stock of the Issuer outstanding on the Issue Date.

“Foreign Subsidiary” means, with respect to any Person, any Restricted Subsidiary of such Person that is not organized or existing under the laws of the United States, any state thereof, the District of Columbia, and any Restricted Subsidiary of such Foreign Subsidiary.

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“GAAP” means generally accepted accounting principles in the United States which are in effect on the Issue Date.

“Global Notes Legend” means the legend set forth under that caption in Exhibit A to this Indenture.

“Government Securities” means securities that are:

(1)direct obligations of the United States of America for the timely payment of which its full faith and credit is pledged; or

(2)obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America the timely payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America,

which, in either case, are not callable or redeemable at the option of the issuers thereof, and shall also include a depository receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act), as custodian with respect to any such Government Securities or a specific payment of principal of or interest on any such Government Securities held by such custodian for the account of the holder of such depository receipt; provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the Government Securities or the specific payment of principal of or interest on the Government Securities evidenced by such depository receipt.

“guarantee” means a guarantee (other than by endorsement of negotiable instruments for collection in the ordinary course of business), direct or indirect, in any manner (including letters of credit and reimbursement agreements in respect thereof), of all or any part of any Indebtedness or other obligations.

“Guarantee” means the guarantee by any Guarantor of the Issuer’s Obligations under this Indenture.  When used as a verb, “Guarantee” shall have a corresponding meaning.

“Guarantor” means each Restricted Subsidiary that Guarantees the Notes in accordance with the terms of this Indenture.

“Hedging Obligations” means, with respect to any Person, the obligations of such Person under any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, commodity swap agreement, commodity cap agreement, commodity collar agreement, foreign exchange contract, currency swap agreement or similar agreement providing for the transfer or mitigation of interest rate or currency risks either generally or under specific contingencies.

“Holder” means the Person in whose name a Note is registered on the Registrar’s books.

“Indebtedness” means, with respect to any Person, without duplication:

(1)any indebtedness (including principal and premium) of such Person, whether or not contingent:

(a)in respect of borrowed money;

(b)evidenced by bonds, notes, debentures or similar instruments or letters of credit or bankers’ acceptances (or, without duplication, reimbursement agreements in respect thereof);

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(c)representing the balance deferred and unpaid of the purchase price of any property (including Capitalized Lease Obligations), except (i) any such balance that constitutes a trade payable or similar obligation to a trade creditor, in each case accrued in the ordinary course of business and (ii) any earn-out obligation until the amount of such obligation becomes a liability on the balance sheet of such Person in accordance with GAAP; or

(d)representing any Hedging Obligations;

if and to the extent that any of the foregoing Indebtedness (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet (excluding the footnotes thereto) of such Person prepared in accordance with GAAP;

(2)to the extent not otherwise included, any obligation by such Person to be liable for, or to pay, as obligor, guarantor or otherwise, on the obligations of the type referred to in clause (1) of a third Person (whether or not such items would appear upon the balance sheet of the such obligor or guarantor), other than by endorsement of negotiable instruments for collection in the ordinary course of business; and

(3)to the extent not otherwise included, the obligations of the type referred to in clause (1) of a third Person secured by a Lien on any asset owned by such first Person, whether or not such Indebtedness is assumed by such first Person;

provided, however, that notwithstanding the foregoing, Indebtedness shall be deemed not to include Contingent Obligations incurred in the ordinary course of business.

“Indenture” means this Indenture, as amended or supplemented from time to time.

“Independent Financial Advisor” means an accounting, appraisal, investment banking firm or consultant to Persons engaged in Similar Businesses of nationally recognized standing that is, in the good faith judgment of the Issuer, qualified to perform the task for which it has been engaged.

“Initial Notes” has the meaning set forth in the recitals hereto.

“Initial Purchasers” means J.P. Morgan Securities Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Citigroup Global Markets Inc. and Greenwich Capital Markets, Inc.

“Interest Payment Date” means February 15 and August 15 of each year to stated maturity.

“Investment Grade Rating” means a rating equal to or higher than Baa3 (or the equivalent) by Moody’s and BBB (or the equivalent) by S&P, or an equivalent rating by any other Rating Agency.

“Investment Grade Securities” means:

(1)securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality thereof (other than Cash Equivalents);

(2)debt securities or debt instruments with an Investment Grade Rating, but excluding any debt securities or instruments constituting loans or advances among the Issuer and its Subsidiaries;

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(3)investments in any fund that invests exclusively in investments of the type described in clauses (1) and (2), which fund may also hold immaterial amounts of cash pending investment or distribution; and

(4)corresponding instruments in countries other than the United States customarily utilized for high quality investments.

“Investments” means, with respect to any Person, all investments by such Person in other Persons (including Affiliates) in the form of loans (including guarantees), advances or capital contributions (excluding accounts receivable, trade credit, advances to customers, commissions, travel and similar advances to officers and employees, in each case made in the ordinary course of business), purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities issued by any other Person and investments that are required by GAAP to be classified on the balance sheet (excluding the footnotes) of such Person in the same manner as the other investments included in this definition to the extent such transactions involve the transfer of cash or other property.  For purposes of the definition of “Unrestricted Subsidiary” and Section 4.07 hereof:

(1)“Investments” shall include the portion (proportionate to the Issuer’s equity interest in such Subsidiary) of the fair market value of the net assets of a Subsidiary of the Issuer at the time that such Subsidiary is designated an Unrestricted Subsidiary; provided, however, that upon a redesignation of such Subsidiary as a Restricted Subsidiary, the Issuer shall be deemed to continue to have a permanent “Investment” in an Unrestricted Subsidiary in an amount (if positive) equal to:

(a)the Issuer’s “Investment” in such Subsidiary at the time of such redesignation; less

(b)the portion (proportionate to the Issuer’s equity interest in such Subsidiary) of the fair market value of the net assets of such Subsidiary at the time of such redesignation; and

(2)any property transferred to or from an Unrestricted Subsidiary shall be valued at its fair market value at the time of such transfer, in each case as determined in good faith by the Issuer.

“Investors” means Ripplewood Holdings L.L.C., J. Rothschild Group Ltd., GoldenTree Asset Management, L.P., GSO Capital Partners, Merrill Lynch Capital Corporation, Magnetar Capital and their respective Affiliates but not including, however, any portfolio companies thereof.

“Issue Date” means March 2, 2007.

“Issuer” means, from and after the consummation of the Transactions, Reader’s Digest and not any of its Subsidiaries; provided that when used in the context of determining the fair market value of an asset or liability under this Indenture, “Issuer” shall be deemed to mean the board of directors of the Issuer when the fair market value is equal to or in excess of $10.0 million (unless otherwise expressly stated).

“Issuer Order” means a written request or order signed on behalf of the Issuer by an Officer of the Issuer, who must be the principal executive officer, the principal financial officer, the treasurer or the principal accounting officer of such Issuer, and delivered to the Trustee.

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“Legal Holiday” means a Saturday, a Sunday or a day on which commercial banking institutions are not required to be open in the State of New York.

“Lien” means, with respect to any asset, any mortgage, lien (statutory or otherwise), pledge, hypothecation, charge, security interest, preference, priority or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law, including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction; provided that in no event shall an operating lease be deemed to constitute a Lien.

“Merger Agreement” means the Agreement and Plan of Merger, dated as of November 16, 2006, among RDA Holding Co., Acquisition Co. and Reader’s Digest, as the same may be amended prior to the Issue Date.

“Moody’s” means Moody’s Investors Service, Inc. and any successor to its rating agency business.

“Net Income” means, with respect to any Person, the net income (loss) of such Person, determined in accordance with GAAP and before any reduction in respect of Preferred Stock dividends.

“Net Proceeds” means the aggregate cash proceeds and Cash Equivalents received by the Issuer or any of its Restricted Subsidiaries in respect of any Asset Sale, including any cash and Cash Equivalents received in a Permitted Asset Swap or upon the sale or other disposition or collection of any Designated Non-cash Consideration or securities received in any Asset Sale, net of the direct costs relating to such Asset Sale and the sale or disposition of such Designated Non-cash Consideration, including legal, accounting and investment banking fees, and brokerage and sales commissions, any relocation expenses incurred as a result thereof, taxes paid or payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements), amounts required to be applied to the repayment of principal, premium, if any, and interest on Senior Indebtedness required (other than required by clause (1) of Section 4.10(b) hereof) to be paid as a result of such transaction and any deduction of appropriate amounts to be provided by the Issuer or any of its Restricted Subsidiaries as a reserve in accordance with GAAP against any liabilities associated with the asset disposed of in such transaction and retained by the Issuer or any of its Restricted Subsidiaries after such sale or other disposition thereof, including pension and other post-employment benefit liabilities and liabilities related to environmental matters or against any indemnification obligations associated with such transaction.

“Notes” means the Initial Notes and more particularly means any Note authenticated and delivered under this Indenture.  For all purposes of this Indenture, the term “Notes” shall also include any Additional Notes that may be issued under a supplemental indenture.  For purposes of this Indenture, all references to Notes to be issued or authenticated upon transfer, replacement or exchange shall be deemed to refer to Notes of the applicable series.

“Obligations” means any principal, interest (including any interest accruing subsequent to the filing of a petition in bankruptcy, reorganization or similar proceeding at the rate provided for in the documentation with respect thereto, whether or not such interest is an allowed claim under applicable state, federal or foreign law), other monetary obligations, penalties, fees, indemnifications, reimbursements (including reimbursement obligations with respect to letters of credit and banker’s acceptances), damages and other liabilities, and guarantees of payment of such principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities, payable under the documentation governing any Indebtedness.

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“Offering Memorandum” means the offering memorandum, dated February 27, 2007, relating to the sale of the Initial Notes.

“Officer” means the Chairman of the Board, the Chief Executive Officer, the Chief Financial Officer, the President, any Executive Vice President, Senior Vice President or Vice President, the Treasurer or the Secretary of the Issuer. “Officer” of any Guarantor has a correlative meaning.

“Officer’s Certificate” means a certificate signed on behalf of the Issuer or Guarantor, as the case may be, who must be the principal executive officer, the principal financial officer, the treasurer or the principal accounting officer of the Issuer or Guarantor, that meets the requirements set forth in this Indenture.

“Opinion of Counsel” means a written opinion from legal counsel who is acceptable to the Trustee.  The counsel may be an employee of or counsel to the Issuer.

“Permitted Asset Swap” means the concurrent purchase and sale or exchange of Related Business Assets or a combination of Related Business Assets and cash or Cash Equivalents between the Issuer or any of its Restricted Subsidiaries and another Person; provided, that any cash or Cash Equivalents received must be applied in accordance with Section 4.10 hereof; provided, further, that, in the good faith determination of the Issuer, the aggregate fair market value of the property or assets being transferred by the Issuer or such Restricted Subsidiary is not greater than the aggregate fair market value of the property or assets received by the Issuer or such Restricted Subsidiary in such exchange (provided, however, that in the event such aggregate fair market value of the property or assets being transferred or received by the Issuer is greater than or equal to $15.0 million, such determination shall be made in good faith by senior management of the Issuer).

“Permitted Holders” means each of the Investors and members of management of the Issuer (or its direct parent) who are holders of Equity Interests of the Issuer (or any of its direct or indirect parent companies) on the Issue Date and any group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act or any successor provision) of which any of the foregoing are members; provided, that, in the case of such group and without giving effect to the existence of such group or any other group, such Investors and members of management, collectively, have beneficial ownership of more than 50% of the total voting power of the Voting Stock of the Issuer.  Any person or group where acquisition of beneficial ownership constitutes a Change of Control in respect of which a Change of Control Offer is made in accordance with the requirements of this Indenture shall thereafter, together with its Affiliates, constitute a Permitted Holder.

“Permitted Investments” means:

(1)any Investment in the Issuer or any of its Restricted Subsidiaries;

(2)any Investment in cash and Cash Equivalents or Investment Grade Securities;

(3)any Investment by the Issuer or any of its Restricted Subsidiaries in a Person that is engaged in a Similar Business if as a result of such Investment:

(a)such Person becomes a Restricted Subsidiary; or

(b)such Person, in one transaction or a series of related transactions, is merged or consolidated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, the Issuer or a Restricted Subsidiary,

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and, in each case, any Investment held by such Person; provided, that such Investment was not acquired by such Person in contemplation of such acquisition, merger, consolidation or transfer;

(4)any Investment in securities or other assets not constituting cash, Cash Equivalents or Investment Grade Securities and received in connection with an Asset Sale made pursuant to the provisions of Section 4.10 hereof or any other disposition of assets not constituting an Asset Sale;

(5)any Investment existing on the Issue Date;

(6)any Investment acquired by the Issuer or any of its Restricted Subsidiaries:

(a)in exchange for any other Investment or accounts receivable held by the Issuer or any such Restricted Subsidiary in connection with or as a result of a bankruptcy, workout, reorganization or recapitalization of the issuer of such other Investment or accounts receivable; or

(b)as a result of a foreclosure by the Issuer or any of its Restricted Subsidiaries with respect to any secured Investment or other transfer of title with respect to any secured Investment in default;

(7)Hedging Obligations permitted under clause (9) of Section 4.09(b) hereof ;

(8)Investments the payment for which consists of Equity Interests (exclusive of Disqualified Stock) of the Issuer or any of its direct or indirect parent companies; provided, however, that such Equity Interests shall not increase the amount available for Restricted Payments under clause (3) of Section 4.07(a);

(9)guarantees of Indebtedness permitted under Section 4.09 hereof;

(10)any transaction to the extent it constitutes an Investment that is permitted and made in accordance with the provisions of Section 4.11(b) hereof (except transactions described in clauses (2), (5) and (9) of Section 4.11(b) hereof);

(11)Investments consisting of purchases and acquisitions of inventory, supplies, material or equipment;

(12)additional Investments having an aggregate fair market value, taken together with all other Investments made pursuant to this clause (12) that are at that time outstanding (without giving effect to the sale of an Unrestricted Subsidiary to the extent the proceeds of such sale do not consist of cash or marketable securities), not to exceed the greater of (x) $50.0 million and (y) 3% of Total Tangible Assets (with the fair market value of each Investment being measured at the time made and without giving effect to subsequent changes in value);

(13)Investments made in connection with the funding of contributions under any non-qualified employee retirement plan or similar employee compensation plan in an amount not to exceed the amount of compensation expense recognized by the Issuer and any Restricted Subsidiary in connection with such plans;

(14)advances to, or guarantees of Indebtedness of, employees not in excess of $10.0 million outstanding at any one time, in the aggregate; provided that amounts that are forgiven shall continue to be deemed outstanding; and

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(15)loans and advances to officers, directors and employees for business-related travel expenses, moving expenses and other similar expenses, in each case incurred in the ordinary course of business or consistent with past practices or to fund such Person’s purchase of Equity Interests of the Issuer or any direct or indirect parent entity thereof.

“Permitted Junior Securities” means:

(1)Equity Interests in the Issuer, any Guarantor or any direct or indirect parent of the Issuer; or

(2)unsecured debt securities that are subordinated to all Senior Indebtedness (and any debt securities issued in exchange for Senior Indebtedness) to substantially the same extent as, or to a greater extent than, the Notes and the related Guarantees are subordinated to Senior Indebtedness under this Indenture;

provided that the term “Permitted Junior Securities” shall not include any securities distributed pursuant to a plan of reorganization if the Indebtedness under the Senior Credit Facility is treated as part of the same class as the Notes for purposes of such plan of reorganization; provided, further, that to the extent that any Senior Indebtedness of the Issuer or the Guarantors outstanding on the date of consummation of any such plan of reorganization is not paid in full in cash on such date, the holders of any such Senior Indebtedness not so paid in full in cash have consented to the terms of such plan of reorganization.

“Permitted Liens” means, with respect to any Person:

(1)pledges or deposits by such Person under workmen’s compensation laws, unemployment insurance laws or similar legislation, or good faith deposits in connection with bids, tenders, contracts (other than for the payment of Indebtedness) or leases to which such Person is a party, or deposits to secure public or statutory obligations of such Person or deposits of cash or U.S. government bonds to secure surety or appeal bonds to which such Person is a party, or deposits as security for contested taxes or import duties or for the payment of rent, in each case incurred in the ordinary course of business;

(2)Liens imposed by law, such as carriers’, warehousemen’s and mechanics’ Liens, in each case for sums not yet overdue for a period of more than 30 days or being contested in good faith by appropriate proceedings or other Liens arising out of judgments or awards against such Person with respect to which such Person shall then be proceeding with an appeal or other proceedings for review if adequate reserves with respect thereto are maintained on the books of such Person in accordance with GAAP;

(3)Liens for taxes, assessments or other governmental charges not yet overdue for a period of more than 30 days or payable or subject to penalties for nonpayment or which are being contested in good faith by appropriate proceedings diligently conducted, if adequate reserves with respect thereto are maintained on the books of such Person in accordance with GAAP;

(4)Liens in favor of issuers of performance and surety bonds or bid bonds or with respect to other regulatory requirements or letters of credit issued pursuant to the request of and for the account of such Person in the ordinary course of its business;

(5)minor survey exceptions, minor encumbrances, easements or reservations of, or rights of others for, licenses, rights-of-way, sewers, electric lines, telegraph and telephone lines and other similar purposes, or zoning or other restrictions as to the use of real properties or Liens incidental to the conduct of the business of such Person or to the ownership of its properties

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which were not incurred in connection with Indebtedness and which do not in the aggregate materially adversely affect the value of said properties or materially impair their use in the operation of the business of such Person;

(6)Liens securing Indebtedness permitted to be incurred or issued pursuant to clause (11), (17) or (20) of Section 4.09(b) hereof; provided that Liens securing Indebtedness permitted to be incurred pursuant to clause (17) are solely on the assets acquired, and Liens on Indebtedness incurred pursuant to clause (20) are solely on the assets of Foreign Subsidiaries;

(7)Liens existing on the Issue Date (excluding Liens under the Senior Credit Facility);

(8)Liens on property or shares of stock of a Person at the time such Person becomes a Subsidiary; provided, however, that such Liens are not created or incurred in connection with, or in contemplation of, such other Person becoming such a Subsidiary; provided, further, however, that such Liens may not extend to any other property owned by the Issuer or any of its Restricted Subsidiaries;

(9)Liens on property at the time the Issuer or a Restricted Subsidiary acquired the property, including any acquisition by means of a merger or consolidation with or into the Issuer or any of its Restricted Subsidiaries; provided, however, that such Liens are not created or incurred in connection with, or in contemplation of, such acquisition; provided, further, however, that the Liens may not extend to any other property owned by the Issuer or any of its Restricted Subsidiaries;

(10)Liens securing Indebtedness or other obligations of a Restricted Subsidiary owing to the Issuer or another Restricted Subsidiary permitted to be incurred in accordance with Section 4.09 hereof;

(11)Liens securing Hedging Obligations so long as the related Indebtedness is, and is permitted to be under this Indenture, secured by a Lien on the same property securing such Hedging Obligations;

(12)Liens on specific items of inventory or other goods and proceeds of any Person securing such Person’s obligations in respect of bankers’ acceptances issued or created for the account of such Person to facilitate the purchase, shipment or storage of such inventory or other goods;

(13)leases, subleases, licenses or sublicenses granted to others in the ordinary course of business which do not materially interfere with the ordinary conduct of the business of the Issuer or any of its Restricted Subsidiaries and do not secure any Indebtedness;

(14)Liens arising from Uniform Commercial Code financing statement filings regarding operating leases entered into by the Issuer and its Restricted Subsidiaries in the ordinary course of business;

(15)Liens in favor of the Issuer or any Guarantor;

(16)Liens to secure any refinancing, refunding, extension, renewal or replacement (or successive refinancing, refunding, extensions, renewals or replacements) as a whole, or in part, of any Indebtedness secured by any Lien referred to in the foregoing clauses (6), (7), (8) and (9); provided, however, that (a) such new Lien shall be limited to all or part of the same property that

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secured the original Lien (plus improvements on such property), and (b) the Indebtedness secured by such Lien at such time is not increased to any amount greater than the sum of (i) the outstanding principal amount or, if greater, committed amount of the Indebtedness described under clauses (6), (7), (8) and (9) at the time the original Lien became a Permitted Lien under this Indenture, and (ii) an amount necessary to pay any fees and expenses, including premiums, related to such refinancing, refunding, extension, renewal or replacement;

(17)deposits made in the ordinary course of business to secure liability to insurance carriers;

(18)other Liens securing obligations incurred in the ordinary course of business which obligations do not exceed $25.0 million at any one time outstanding;

(19)Liens securing judgments for the payment of money not constituting an Event of Default under clause (5) under Section 6.01 hereof so long as such Liens are adequately bonded and any appropriate legal proceedings that may have been duly initiated for the review of such judgment have not been finally terminated or the period within which such proceedings may be initiated has not expired;

(20)Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods in the ordinary course of business;

(21)Liens (i) of a collection bank arising under Section 4-210 of the Uniform Commercial Code, or any comparable or successor provision, on items in the course of collection, (ii) attaching to commodity trading accounts or other commodity brokerage accounts incurred in the ordinary course of business, and (iii) in favor of banking institutions arising as a matter of law encumbering deposits (including the right of set-off) and which are within the general parameters customary in the banking industry;

(22)Liens deemed to exist in connection with Investments in repurchase agreements permitted under Section 4.09 hereof; provided that such Liens do not extend to any assets other than those that are the subject of such repurchase agreements;

(23)Liens encumbering reasonable customary initial deposits and margin deposits and similar Liens attaching to commodity trading accounts or other brokerage accounts incurred in the ordinary course of business and not for speculative purposes;

(24)Liens that are contractual rights of set-off (i) relating to the establishment of depository relations with banks not given in connection with the issuance of Indebtedness, (ii) relating to pooled deposit or sweep accounts of the Issuer or any of its Restricted Subsidiaries to permit satisfaction of overdraft or similar obligations incurred in the ordinary course of business of the Issuer and its Restricted Subsidiaries or (iii) relating to purchase orders and other agreements entered into with customers of the Issuer or any of its Restricted Subsidiaries in the ordinary course of business; and

(25)Liens arising out of conditional sale, title retention, consignment or similar arrangements for the sale or purchase of goods entered into by the Issuer or any Restricted Subsidiary in the ordinary course of business.

For purposes of this definition, the term “Indebtedness” shall be deemed to include interest on such Indebtedness.

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“Person” means any individual, corporation, limited liability company, partnership, joint venture, association, joint stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity.

“Preferred Stock” means any Equity Interest with preferential rights of payment of dividends or upon liquidation, dissolution or winding up.

“Qualified Proceeds” means assets that are used or useful in, or Capital Stock of any Person engaged in, a Similar Business; provided that the fair market value of any such assets or Capital Stock shall be determined by the Issuer in good faith.

“Rating Agencies” means Moody’s and S&P or if Moody’s or S&P or both shall not make a rating on the Notes publicly available, a nationally recognized statistical rating agency or agencies, as the case may be, selected by the Issuer which shall be substituted for Moody’s or S&P or both, as the case may be.

“Reader’s Digest” has the meaning set forth in the preamble hereto.

“Record Date” for the interest or Additional Interest, if any, payable on any applicable Interest Payment Date means February 1 or August 1 (whether or not a Business Day) next preceding such Interest Payment Date.

“Registration Rights Agreement” means the Registration Rights Agreement with respect to the Notes dated as of the Issue Date, among the Issuer, the Guarantors and the Initial Purchasers.

“Related Business Assets” means assets (other than cash or Cash Equivalents) used or useful in a Similar Business; provided that any assets received by the Issuer or a Restricted Subsidiary in exchange for assets transferred by the Issuer or a Restricted Subsidiary shall not be deemed to be Related Business Assets if they consist of securities of a Person, unless upon receipt of the securities of such Person, such Person would become a Restricted Subsidiary.

“Representative” means any trustee, agent or representative (if any) for an issue of Senior Indebtedness of the Issuer.

“Responsible Officer” means, when used with respect to the Trustee, any officer within the corporate trust department of the Trustee having direct responsibility for the administration of this Indenture, or any other officer to whom any corporate trust matter is referred because of such officer’s knowledge of and familiarity with the particular subject.

“Restricted Investment” means an Investment other than a Permitted Investment.

“Restricted Notes Legend” means the legend set forth in Section 2.3(e)(i) of Appendix A to this Indenture.

“Restricted Subsidiary” means, at any time, any direct or indirect Subsidiary of the Issuer (including any Foreign Subsidiary) that is not then an Unrestricted Subsidiary; provided, however, that upon an Unrestricted Subsidiary’s ceasing to be an Unrestricted Subsidiary, such Subsidiary shall be included in the definition of “Restricted Subsidiary.”

“S&P” means Standard & Poor’s, a division of The McGraw-Hill Companies, Inc., and any successor to its rating agency business.

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“Sale and Lease-Back Transaction” means any arrangement providing for the leasing by the Issuer or any of its Restricted Subsidiaries of any real or tangible personal property, which property has been or is to be sold or transferred by the Issuer or such Restricted Subsidiary to a third Person in contemplation of such leasing.

“SEC” means the U.S. Securities and Exchange Commission.

“Secured Indebtedness” means any Indebtedness of the Issuer or any of its Restricted Subsidiaries secured by a Lien.

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations of the SEC promulgated thereunder.

“Senior Credit Facility” means the Credit Facility under the Credit Agreement to be entered into as of the Issue Date by and among Acquisition Co., RDA Holding Co., Reader’s Digest, the overseas borrowers party thereto, the lenders party thereto in their capacities as lenders thereunder, JPMorgan Chase Bank, N.A., as administrative agent, Citicorp North America, Inc., as co-syndication agent, Merrill Lynch, Pierce, Fenner & Smith, as co-syndication agent, and The Royal Bank of Scotland plc, as documentation agent, including any guarantees, collateral documents, instruments and agreements executed in connection therewith, and any amendments, supplements, modifications, extensions, renewals, restatements, refundings or refinancings thereof and any indentures or credit facilities or commercial paper facilities with banks or other institutional lenders or investors that replace, refund or refinance any part of the loans, notes, other credit facilities or commitments thereunder, including any such replacement, refunding or refinancing facility or indenture that increases the amount borrowable thereunder or alters the maturity thereof (provided that such increase in borrowings is permitted under Section 4.09 hereof).

“Senior Indebtedness” means:

(1)all Indebtedness of the Issuer or any Guarantor outstanding under the Senior Credit Facility and related Guarantees (including interest accruing on or after the filing of any petition in bankruptcy or similar proceeding or for reorganization of the Issuer or any Guarantor (at the rate provided for in the documentation with respect thereto, regardless of whether or not a claim for post filing interest is allowed in such proceedings)), and any and all other fees, expense reimbursement obligations, indemnification amounts, penalties, and other amounts (whether existing on the Issue Date or thereafter created or incurred) and all obligations of the Issuer or any Guarantor to reimburse any bank or other Person in respect of amounts paid under letters of credit, acceptances or other similar instruments;

(2)all Hedging Obligations (and guarantees thereof) owing to a Lender (as defined in the Senior Credit Facility) or any Affiliate of such Lender (or any Person that was a Lender or an Affiliate of such Lender at the time the applicable agreement giving rise to such Hedging Obligation was entered into); provided that such Hedging Obligations are permitted to be incurred under the terms of this Indenture;

(3)any other Indebtedness of the Issuer or any Guarantor permitted to be incurred under the terms of this Indenture, unless the instrument under which such Indebtedness is incurred expressly provides that it is on a parity with or subordinated in right of payment to the Notes or any related Guarantee; and

(4)all Obligations with respect to the items listed in the preceding clauses (1), (2) and (3);

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provided, however, that Senior Indebtedness shall not include:

(a)any obligation of such Person to the Issuer or any of its Subsidiaries;

(b)any liability for federal, state, local or other taxes owed or owing by such Person;

(c)any accounts payable or other liability to trade creditors arising in the ordinary course of business;

(d)any Indebtedness or other Obligation of such Person which is subordinate or junior in any respect to any other Indebtedness or other Obligation of such Person; or

(e)that portion of any Indebtedness which at the time of incurrence is incurred in violation of this Indenture; provided, however, that such Indebtedness shall be deemed not to have been incurred in violation of this Indenture for purposes of this clause if such Indebtedness consists of Designated Senior Indebtedness and the holder(s) of such Indebtedness of their agent or representative (a) had no actual knowledge at the time of incurrence that the incurrence of such Indebtedness violated this Indenture and (b) shall have receive a certificate from an Officer of the Issuer to the effect that the incurrence of such Indebtedness does not violate the provisions of this Indenture.

“Senior Subordinated Indebtedness” means:

(1)with respect to the Issuer, Indebtedness which ranks equal in right of payment to the Notes issued by the Issuer; and

(2)with respect to any Guarantor, Indebtedness which ranks equal in right of payment to the Guarantee of such entity of the Notes.

“Shelf Registration Statement” means the Shelf Registration Statement as defined in the Registration Rights Agreement.

“Significant Subsidiary” means any Restricted Subsidiary that would be a “significant subsidiary” as defined in Article 1, Rule 1-02 of Regulation S-X promulgated pursuant to the Securities Act, as such regulation is in effect on the Issue Date.

“Similar Business” means any business conducted or proposed to be conducted by the Issuer and its Restricted Subsidiaries on the Issue Date or any business that is similar, reasonably related, incidental or ancillary thereto.

“Sponsor Management Agreement” means the management agreement between certain of the management companies associated with the Investors and Reader’s Digest.

“Subordinated Indebtedness” means,

(1)with respect to the Issuer, any Indebtedness of the Issuer which is by its terms subordinated in right of payment to the Notes, and

(2)with respect to any Guarantor, any Indebtedness of any Guarantor which is by its terms subordinated in right of payment to the Guarantee of such entity of the Notes.

“Subsidiary” means, with respect to any Person:

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(1)any corporation, association, or other business entity (other than a partnership, joint venture, limited liability company or similar entity) of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time of determination owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person or a combination thereof or is consolidated under GAAP with such Person at such time; and

(2)any partnership, joint venture, limited liability company or similar entity of which

(x)more than 50% of the capital accounts, distribution rights, total equity and voting interests or general or limited partnership interests, as applicable, are owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person or a combination thereof whether in the form of membership, general, special or limited partnership or otherwise, and

(y)such Person or any Restricted Subsidiary of such Person is a controlling general partner or otherwise controls such entity.

“Total Assets” means the total assets of the Issuer and its Restricted Subsidiaries on a consolidated basis determined in accordance with GAAP, as shown on the most recent balance sheet of the Issuer or such other Person as may be expressly stated.

“Total Tangible Assets” means Total Assets after deducting accumulated depreciation and amortization, allowances for doubtful accounts, other applicable reserves and other similar items of the Issuer and its Restricted Subsidiaries and after deducting, to the extent otherwise included therein, the amounts of (without duplication):

(1)the excess of cost of the fair market value of assets or business acquired, as determined by the Issuer in good faith (or if such fair market value exceeds $50.0 million, in writing by an Independent Financial Advisor);

(2)any revaluation or other write-up in book value of assets subsequent to the last day of the fiscal quarter of the Issuer immediately preceding the Issue Date as a result of a change in the method of valuation in accordance with GAAP;

(3)unamortized debt discount and expenses and other unamortized deferred charges, goodwill, patents, trademarks, service marks, trade names, copyrights, licenses, organization or developmental expenses and other intangible items;

(4)minority interest in consolidated Subsidiaries held by Persons other than the Company or any Restricted Subsidiary;

(5)treasury stock;

(6)cash or securities set aside and held in a sinking or other analogous fund established for the purpose of redemption or other retirement of Capital Stock; and

(7)Investments in and assets of Unrestricted Subsidiaries.

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“Transactions” means the transactions contemplated by the Merger Agreement and the Contribution Agreements, the issuance of the Notes and borrowings under the Senior Credit Facility as in effect on the Issue Date.

“Transfer Restricted Notes” means Definitive Notes and any other Notes that bear or are required to bear the Restricted Notes Legend.

“Treasury Rate” means, as of any Redemption Date, the yield to maturity as of such Redemption Date of United States Treasury securities with a constant maturity (as compiled and published in the most recent Federal Reserve Statistical Release H.15 (519) that has become publicly available at least two Business Days prior to the Redemption Date (or, if such Statistical Release is no longer published, any publicly available source of similar market data)) most nearly equal to the period from the Redemption Date to February 15, 2012; provided, however, that if the period from the Redemption Date to February 15, 2012 is less than one year, the weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year will be used.

“Trust Indenture Act” means the Trust Indenture Act of 1939, as amended (15 U.S.C. §§ 77aaa-777bbbb).

“Trustee” means The Bank of New York, as trustee, until a successor replaces it in accordance with the applicable provisions of this Indenture and thereafter means the successor serving hereunder.

“Unrestricted Subsidiary” means:

(1)any Subsidiary of the Issuer which at the time of determination is an Unrestricted Subsidiary (as designated by the Issuer, as provided below); and

(2)any Subsidiary of an Unrestricted Subsidiary.

The Board of Directors of the Issuer may designate any Subsidiary of the Issuer (including any existing Subsidiary and any newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary unless such Subsidiary or any of its Subsidiaries owns any Equity Interests or Indebtedness of, or owns or holds any Lien on, any property of, the Issuer or any Subsidiary of the Issuer (other than solely any Subsidiary of the Subsidiary to be so designated); provided that

(1)any Unrestricted Subsidiary must be an entity of which the Equity Interests entitled to cast at least a majority of the votes that may be cast by all Equity Interests having ordinary voting power for the election of directors or Persons performing a similar function are owned, directly or indirectly, by the Issuer;

(2)such designation complies with Section 4.07 hereof; and

(3)each of:

(a)the Subsidiary to be so designated; and

(b)its Subsidiaries

has not at the time of designation, and does not thereafter, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable with respect to any Indebtedness pursuant to which the lender has recourse to any of the assets of the Issuer or any Restricted Subsidiary.

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The Board of Directors of the Issuer may designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided that, immediately after giving effect to such designation, no Default shall have occurred and be continuing and either:

(1)the Issuer could incur at least $1.00 of additional Indebtedness pursuant to the Consolidated Leverage Ratio test described in Section 4.09(a) hereof; or

(2)the Consolidated Leverage Ratio for the Issuer its Restricted Subsidiaries would be lower than such ratio for the Issuer and its Restricted Subsidiaries immediately prior to such designation,

in each case on a pro forma basis taking into account such designation.

Any such designation by the Issuer shall be notified by the Issuer to the Trustee by promptly filing with the Trustee a copy of the resolution of the board of directors of the Issuer or any committee thereof giving effect to such designation and an Officer’s Certificate certifying that such designation complied with the foregoing provisions.

“Voting Stock” of any Person as of any date means the Capital Stock of such Person that is at the time entitled to vote in the election of the board of directors of such Person.

“Weighted Average Life to Maturity” means, when applied to any Indebtedness, Disqualified Stock or Preferred Stock, as the case may be, at any date, the quotient obtained by dividing:

(1)the sum of the products of the number of years from the date of determination to the date of each successive scheduled principal payment of such Indebtedness or redemption or similar payment with respect to such Disqualified Stock or Preferred Stock multiplied by the amount of such payment; by

(2)the sum of all such payments.

“Wholly-Owned Subsidiary” of any Person means a Subsidiary of such Person, 100% of the outstanding Equity Interests of which (other than directors’ qualifying shares and shares issued to foreign nationals under applicable law) shall at the time be owned by such Person or by one or more Wholly-Owned Subsidiaries of such Person.

“WRC Media” means WRC Media Inc., a Delaware corporation and a Subsidiary of the Issuer.

Section 1.02Other Definitions.

Term	Defined in Section
“Acceptable Commitment”	4.10
“Agent Members”	2.1(c) of Appendix A
“Affiliate Transaction”	4.11
“Applicable Procedures”	1.1(a) of Appendix A
“Asset Sale Offer”	4.10
“Authentication Order”	2.02
“Blockage Notice”	10.03

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Term	Defined in Section
“Change of Control Offer”	4.14
“Change of Control Payment”	4.14
“Change of Control Payment Date”	4.14
“Clearstream”	1.1(a) of Appendix A
“Covenant Defeasance”	8.03
“DTC”	2.03
“Event of Default”	6.01
“Excess Proceeds”	4.10
“Global Note”	2.1(b) of Appendix A
“Guarantee Blockage Notice”	12.03
“Guarantee Payment Blockage Period”	12.03
“Guarantor Non-Payment Default”	12.03
“Guarantor Payment Default”	12.03
“incur”	4.09
“IAI”	1.1(a) of Appendix A
“IAI Global Note”	2.1(b) of Appendix A
“Legal Defeasance”	8.02
“Non-Payment Default”	10.03
“Note Register”	2.03
“Offer Amount”	3.09
“Offer Period”	3.09
“Pari Passu Indebtedness”	4.10
“pay its Guarantee”	12.03
“pay the Notes”	10.03
“Paying Agent”	2.03
“Payment Blockage Period”	10.03
“Payment Default”	10.03
“Purchase Date”	3.09
“QIB”	1.1(a) of Appendix A
“Redemption Date”	3.07
“Refinancing Indebtedness”	4.09
“Refunding Capital Stock”	4.07
“Registrar”	2.03
“Regulation S”	1.1(a) of Appendix A
“Regulation S Global Note”	2.1(b) of Appendix A
“Regulation S Notes”	1.1(a) of Appendix A
“Restricted Payments”	4.07
“Restricted Period”	1.1(a) of Appendix A
“Rule 501”	1.1(a) of Appendix A

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Term	Defined in Section
“Rule 144”	1.1(a) of Appendix A
“Rule 144A”	1.1(a) of Appendix A
“Rule 144A Global Note”	2.1(b) of Appendix A
“Rule 144A Notes”	1.1(a) of Appendix A
“Rule 904”	1.1(a) of Appendix A
“Second Commitment”	4.10
“Successor Company”	5.01
“Successor Person”	5.01
“Treasury Capital Stock”	4.07

Section 1.03Incorporation by Reference of Trust Indenture Act.

Whenever this Indenture refers to a provision of the Trust Indenture Act, the provision is incorporated by reference in and made a part of this Indenture.

The following Trust Indenture Act terms used in this Indenture have the following meanings:

“Commission” means the SEC;

“indenture securities” means the Notes;

“indenture security Holder” means a Holder of a Note;

“indenture to be qualified” means this Indenture;

“indenture trustee” or “institutional trustee” means the Trustee; and

“obligor” on the Notes and the Guarantees means the Issuer and the Guarantors, respectively, and any successor obligor upon the Notes and the Guarantees, respectively.

All other terms used in this Indenture that are defined by the Trust Indenture Act, defined by Trust Indenture Act reference to another statute or defined by SEC rule under the Trust Indenture Act have the meanings so assigned to them.

Section 1.04Rules of Construction.

Unless the context otherwise requires:

(a)a term has the meaning assigned to it;

(b)an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP;

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(c)“or” is not exclusive;

(d)words in the singular include the plural, and in the plural include the singular;

(e)“will” shall be interpreted to express a command;

(f)provisions apply to successive events and transactions;

(g)references to sections of, or rules under, the Securities Act shall be deemed to include substitute, replacement or successor sections or rules adopted by the SEC from time to time;

(h)unless the context otherwise requires, any reference to an “Article,” “Section” or “clause” refers to an Article, Section or clause, as the case may be, of this Indenture; and

(i)the words “herein,” “hereof” and “hereunder” and other words of similar import refer to this Indenture as a whole and not any particular Article, Section, clause or other subdivision.

Section 1.05Acts of Holders.

(a)Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by an agent duly appointed in writing.  Except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments or record or both are delivered to the Trustee and, where it is hereby expressly required, to the Issuer.  Proof of execution of any such instrument or of a writing appointing any such agent, or the holding by any Person of a Note, shall be sufficient for any purpose of this Indenture and (subject to Section 7.01) conclusive in favor of the Trustee and the Issuer, if made in the manner provided in this Section 1.05.

(b)The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by the certificate of any notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof.  Where such execution is by or on behalf of any legal entity other than an individual, such certificate or affidavit shall also constitute proof of the authority of the Person executing the same.  The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner that the Trustee deems sufficient.

(c)The ownership of Notes shall be proved by the Note Register.

(d)Any request, demand, authorization, direction, notice, consent, waiver or other action by the Holder of any Note shall bind every future Holder of the same Note and the Holder of every Note issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof, in respect of any action taken, suffered or omitted by the Trustee or the Issuer in reliance thereon, whether or not notation of such action is made upon such Note.

(e)The Issuer may, in the circumstances permitted by the Trust Indenture Act, set a record date for purposes of determining the identity of Holders entitled to give any request, demand, authorization, direction, notice, consent, waiver or take any other act, or to vote or consent to any action by vote or consent authorized or permitted to be given or taken by Holders.  Unless otherwise specified, if

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not set by the Issuer prior to the first solicitation of a Holder made by any Person in respect of any such action, or in the case of any such vote, prior to such vote, any such record date shall be the later of 30 days prior to the first solicitation of such consent or the date of the most recent list of Holders furnished to the Trustee prior to such solicitation.

(f)Without limiting the foregoing, a Holder entitled to take any action hereunder with regard to any particular Note may do so with regard to all or any part of the principal amount of such Note or by one or more duly appointed agents, each of which may do so pursuant to such appointment with regard to all or any part of such principal amount.  Any notice given or action taken by a Holder or its agents with regard to different parts of such principal amount pursuant to this paragraph shall have the same effect as if given or taken by separate Holders of each such different part.

(g)Without limiting the generality of the foregoing, a Holder, including DTC that is the Holder of a Global Note, may make, give or take, by a proxy or proxies duly appointed in writing, any request, demand, authorization, direction, notice, consent, waiver or other action provided in this Indenture to be made, given or taken by Holders, and DTC that is the Holder of a Global Note may provide its proxy or proxies to the beneficial owners of interests in any such Global Note through such depositary’s standing instructions and customary practices.

(h)The Issuer may fix a record date for the purpose of determining the Persons who are beneficial owners of interests in any Global Note held by DTC entitled under the procedures of such depositary to make, give or take, by a proxy or proxies duly appointed in writing, any request, demand, authorization, direction, notice, consent, waiver or other action provided in this Indenture to be made, given or taken by Holders.  If such a record date is fixed, the Holders on such record date or their duly appointed proxy or proxies, and only such Persons, shall be entitled to make, give or take such request, demand, authorization, direction, notice, consent, waiver or other action, whether or not such Holders remain Holders after such record date.  No such request, demand, authorization, direction, notice, consent, waiver or other action shall be valid or effective if made, given or taken more than 90 days after such record date.

ARTICLE 2

THE NOTES

Section 2.01Form and Dating; Terms.

(a)General.  Provisions relating to the Initial Notes, Additional Notes and Exchange Notes are set forth in Appendix A, which is hereby incorporated in and expressly made a part of this Indenture.  The (a) Initial Notes and the Trustee’s certificate of authentication and (b) any Additional Notes (if issued as Transfer Restricted Notes) and the Trustee’s certificate of authentication shall each be substantially in the form of Exhibit A hereto, which is hereby incorporated in and expressly made a part of this Indenture.  The Exchange Notes and any Additional Notes issued other than as Transfer Restricted Notes and the Trustee’s certificate of authentication shall each be substantially in the form of Exhibit B hereto, which is hereby incorporated in and expressly made a part of this Indenture.  The Notes may have notations, legends or endorsements required by law, stock exchange rule, agreements to which the Issuer or any Guarantor is subject, if any, or usage (provided that any such notation, legend or endorsement is in a form acceptable to the Issuer).  Each Note shall be dated the date of its authentication.  The Notes shall be in denominations of $2,000 and integral multiples of $1,000 in excess thereof.

(b)Terms.  The aggregate principal amount of Notes that may be authenticated and delivered under this Indenture is unlimited.

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The terms and provisions contained in the Notes shall constitute, and are hereby expressly made, a part of this Indenture and the Issuer, the Guarantors and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby.  However, to the extent any provision of any Note conflicts with the express provisions of this Indenture, the provisions of this Indenture shall govern and be controlling.

The Notes shall be subject to repurchase by the Issuer pursuant to an Asset Sale Offer as provided in Section 4.10 hereof or a Change of Control Offer as provided in Section 4.14 hereof.  The Notes shall not be redeemable, other than as provided in Article 3.

Additional Notes ranking pari passu with the Initial Notes may be created and issued from time to time by the Issuer without notice to or consent of the Holders and shall be consolidated with and form a single class with the Initial Notes and shall have the same terms as to status, redemption or otherwise as the Initial Notes; provided that the Issuer’s ability to issue Additional Notes shall be subject to the Issuer’s compliance with Section 4.09 hereof.

Section 2.02Execution and Authentication.

At least one Officer shall execute the Notes on behalf of each Issuer by manual or facsimile signature.

If an Officer whose signature is on a Note no longer holds that office at the time a Note is authenticated, the Note shall nevertheless be valid.

A Note shall not be entitled to any benefit under this Indenture or be valid or obligatory for any purpose until authenticated substantially in the form of Exhibit A or Exhibit B attached hereto, as the case may be, by the manual signature of the Trustee.  The signature shall be conclusive evidence that the Note has been duly authenticated and delivered under this Indenture.

On the Issue Date, the Trustee shall, upon receipt of an Issuer Order (an “Authentication Order”), authenticate and deliver the Initial Notes.  In addition, at any time, from time to time, the Trustee shall upon an Authentication Order authenticate and deliver any Additional Notes and Exchange Notes for an aggregate principal amount specified in such Authentication Order for such Additional Notes or Exchange Notes issued hereunder.

The Trustee shall not be required to authenticate any Additional Notes, nor will it be liable for its refusal to authenticate any Additional Notes, if the issue of such Additional Notes will affect the Trustee’s own rights, duties or immunities under the Notes and this Indenture or otherwise in a manner which is not reasonably acceptable to the Trustee or if the Trustee, being advised by counsel, determines that such action may not lawfully be taken or may expose the Trustee to personal liability to existing Holders or others.

The Trustee may appoint an authenticating agent acceptable to the Issuer to authenticate Notes.  An authenticating agent may authenticate Notes whenever the Trustee may do so.  Each reference in this Indenture to authentication by the Trustee includes authentication by such agent.  An authenticating agent has the same rights as an Agent to deal with Holders or an Affiliate of the Issuer.

Section 2.03Registrar and Paying Agent.

The Issuer shall maintain an office or agency where Notes may be presented for registration of transfer or for exchange (“Registrar”) and an office or agency where Notes may be presented for payment (“Paying Agent”), each in the Borough of Manhattan in the City of New York.

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The Registrar shall keep a register of the Notes (“Note Register”) and of their transfer and exchange.  The Issuer may appoint one or more co-registrars and one or more additional paying agents.  The term “Registrar” includes any co-registrar, and the term “Paying Agent” includes any additional paying agent.  The Issuer may change any Paying Agent or Registrar without prior notice to any Holder.  The Issuer shall notify the Trustee in writing of the name and address of any Agent not a party to this Indenture.  If the Issuer fails to appoint or maintain another entity as Registrar or Paying Agent, the Trustee shall act as such.  The Issuer or any of its Subsidiaries may act as Paying Agent or Registrar.

The Issuer initially appoints The Depository Trust Company (“DTC”) to act as Depositary with respect to the Global Notes.

The Issuer initially appoints the Trustee to act as the Paying Agent and Registrar for the Notes and to act as Custodian with respect to the Global Notes.

Section 2.04Paying Agent to Hold Money in Trust.

The Issuer shall require each Paying Agent other than the Trustee to agree in writing that the Paying Agent shall hold in trust for the benefit of Holders or the Trustee all money held by the Paying Agent for the payment of principal, premium, if any, or Additional Interest, if any, or interest on the Notes, and will notify the Trustee of any default by the Issuer in making any such payment. While any such default continues, the Trustee may require a Paying Agent to pay all money held by it to the Trustee.  The Issuer at any time may require a Paying Agent to pay all money held by it to the Trustee.  Upon payment over to the Trustee, the Paying Agent (if other than the Issuer or a Subsidiary) shall have no further liability for the money.  If the Issuer or a Subsidiary acts as Paying Agent, it shall segregate and hold in a separate trust fund for the benefit of the Holders all money held by it as Paying Agent.  Upon any bankruptcy or reorganization proceedings relating to the Issuer, the Trustee shall serve as Paying Agent for the Notes.

Section 2.05Holder Lists.

The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of all Holders and shall otherwise comply with Trust Indenture Act Section 312(a).  If the Trustee is not the Registrar, the Issuer shall furnish to the Trustee at least two Business Days before each Interest Payment Date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of the Holders of Notes, and the Issuer shall otherwise comply with Trust Indenture Act Section 312(a).

Section 2.06Transfer and Exchange.

(a)The Notes shall be issued in registered form and shall be transferable only upon the surrender of a Note for registration of transfer and in compliance with Appendix A.

(b)To permit registrations of transfers and exchanges, the Issuer shall execute and the Trustee shall authenticate Global Notes and Definitive Notes upon receipt of an Authentication Order in accordance with Section 2.02 hereof or at the Registrar’s request.

(c)No service charge shall be made to a holder of a beneficial interest in a Global Note or to a Holder of a Definitive Note for any registration of transfer or exchange, but the Holders shall be required to pay any transfer tax or similar governmental charge payable in connection therewith (other than any such transfer taxes or similar governmental charge payable upon exchange or transfer pursuant to Sections 2.07, 2.10, 3.06, 3.09, 4.10, 4.14 and 9.05 hereof).

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(d)Neither the Registrar nor the Issuer shall be required to register the transfer of or exchange any Note selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part.

(e)All Global Notes and Definitive Notes issued upon any registration of transfer or exchange of Global Notes or Definitive Notes shall be the valid obligations of the Issuer, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Global Notes or Definitive Notes surrendered upon such registration of transfer or exchange.

(f)The Issuer shall not be required (A) to issue, to register the transfer of or to exchange any Notes during a period beginning at the opening of business 15 days before the day of any selection of Notes for redemption under Section 3.02 hereof and ending at the close of business on the day of selection, (B) to register the transfer of or to exchange any Note so selected for redemption in whole or in part, except the unredeemed portion of any Note being redeemed in part or (C) to register the transfer of or to exchange a Note between a Record Date and the next succeeding Interest Payment Date.

(g)Prior to due presentment for the registration of a transfer of any Note, the Trustee, any Agent and the Issuer may deem and treat the Person in whose name any Note is registered as the absolute owner of such Note for the purpose of receiving payment of principal of (and premium, if any) and interest (including Additional Interest, if any) on such Notes and for all other purposes, and none of the Trustee, any Agent or the Issuer shall be affected by notice to the contrary.

(h)Upon surrender for registration of transfer of any Note at the office or agency of the Issuer designated pursuant to Section 4.02 hereof, the Issuer shall execute, and the Trustee shall authenticate and mail, in the name of the designated transferee or transferees, one or more replacement Notes of any authorized denomination or denominations of a like aggregate principal amount.

(i)At the option of the Holder, Notes may be exchanged for other Notes of any authorized denomination or denominations of a like aggregate principal amount upon surrender of the Notes to be exchanged at such office or agency.  Whenever any Global Notes or Definitive Notes are so surrendered for exchange, the Issuer shall execute, and the Trustee shall authenticate and mail, the replacement Global Notes and Definitive Notes which the Holder making the exchange is entitled to in accordance with the provisions of Section 2.02 hereof.

(j)All certifications, certificates and Opinions of Counsel required to be submitted to the Registrar pursuant to this Section 2.06 to effect a registration of transfer or exchange may be submitted by facsimile.

Section 2.07Replacement Notes.

If any mutilated Note is surrendered to the Trustee, the Registrar or the Issuer and the Trustee receives evidence to its satisfaction of the ownership and destruction, loss or theft of any Note, the Issuer shall issue and the Trustee, upon receipt of an Authentication Order, shall authenticate a replacement Note if the Trustee’s requirements are met.  If required by the Trustee or the Issuer, an indemnity bond must be supplied by the Holder that is sufficient in the judgment of the Trustee and the Issuer to protect the Issuer, the Trustee, any Agent and any authenticating agent from any loss that any of them may suffer if a Note is replaced.  The Issuer and the Trustee may charge for their expenses in replacing a Note.

Every replacement Note is a contractual obligation of the Issuer and shall be entitled to all of the benefits of this Indenture equally and proportionately with all other Notes duly issued hereunder.

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Section 2.08Outstanding Notes.

The Notes outstanding at any time are all the Notes authenticated by the Trustee except for those canceled by it, those delivered to it for cancellation, those reductions in the interest in a Global Note effected by the Trustee in accordance with the provisions hereof, and those described in this Section 2.08 as not outstanding.  Except as set forth in Section 2.09 hereof, a Note does not cease to be outstanding because the Issuer or an Affiliate of the Issuer holds the Note.

If a Note is replaced pursuant to Section 2.07 hereof, it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Note is held by a protected purchaser.

If the principal amount of any Note is considered paid under Section 4.01 hereof, it ceases to be outstanding and interest on it ceases to accrue.

If the Paying Agent (other than the Issuer, a Subsidiary or an Affiliate of any thereof) holds, on a redemption date or maturity date, money sufficient to pay Notes payable on that date, then on and after that date such Notes shall be deemed to be no longer outstanding and shall cease to accrue interest.

Section 2.09Treasury Notes.

In determining whether the Holders of the required principal amount of Notes have concurred in any direction, waiver or consent, Notes owned by the Issuer, or by any Affiliate of the Issuer, shall be considered as though not outstanding, except that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Notes that a Responsible Officer of the Trustee knows are so owned shall be so disregarded.  Notes so owned which have been pledged in good faith shall not be disregarded if the pledgee establishes to the satisfaction of the Trustee the pledgee’s right to deliver any such direction, waiver or consent with respect to the Notes and that the pledgee is not the Issuer or any obligor upon the Notes or any Affiliate of the Issuer or of such other obligor.

Section 2.10Temporary Notes.

Until certificates representing Notes are ready for delivery, the Issuer may prepare and the Trustee, upon receipt of an Authentication Order, shall authenticate temporary Notes.  Temporary Notes shall be substantially in the form of certificated Notes but may have variations that the Issuer considers appropriate for temporary Notes and as shall be reasonably acceptable to the Trustee.  Without unreasonable delay, the Issuer shall prepare and the Trustee shall authenticate definitive Notes in exchange for temporary Notes.

Holders and beneficial holders, as the case may be, of temporary Notes shall be entitled to all of the benefits accorded to Holders, or beneficial holders, respectively, of Notes under this Indenture.

Section 2.11Cancellation.

The Issuer at any time may deliver Notes to the Trustee for cancellation. The Registrar and Paying Agent shall forward to the Trustee any Notes surrendered to them for registration of transfer, exchange or payment.  The Trustee or, at the direction of the Trustee, the Registrar or the Paying Agent and no one else shall cancel all Notes surrendered for registration of transfer, exchange, payment, replacement or cancellation and shall destroy cancelled Notes in accordance with its customary procedures (subject to the record retention requirement of the Exchange Act).  Certification of the

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destruction of all cancelled Notes shall upon the written request of the Issuer be delivered to the Issuer.  The Issuer may not issue new Notes to replace Notes that it has paid or that have been delivered to the Trustee for cancellation.

Section 2.12Defaulted Interest.

If the Issuer defaults in a payment of interest on the Notes, it shall pay the defaulted interest in any lawful manner plus, to the extent lawful, interest payable on the defaulted interest to the Persons who are Holders on a subsequent special record date, in each case at the rate provided in the Notes and in Section 4.01 hereof.  The Issuer shall notify the Trustee in writing of the amount of defaulted interest proposed to be paid on each Note and the date of the proposed payment, and at the same time the Issuer shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such defaulted interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such defaulted interest as provided in this Section 2.12.  The Trustee shall fix or cause to be fixed each such special record date and payment date; provided that no such special record date shall be less than 10 days prior to the related payment date for such defaulted interest.  The Trustee shall promptly notify the Issuer of such special record date.  At least 15 days before the special record date, the Issuer (or, upon the written request of the Issuer, the Trustee in the name and at the expense of the Issuer) shall mail or cause to be mailed, first-class postage prepaid, to each Holder a notice at his or her address as it appears in the Note Register that states the special record date, the related payment date and the amount of such interest to be paid.

Subject to the foregoing provisions of this Section 2.12 and for greater certainty, each Note delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Note shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Note.

Section 2.13CUSIP Numbers

The Issuer in issuing the Notes may use CUSIP numbers (if then generally in use) and, if so, the Trustee shall use CUSIP numbers in notices of redemption as a convenience to Holders; provided, that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Notes or as contained in any notice of redemption and that reliance may be placed only on the other identification numbers printed on the Notes, and any such redemption shall not be affected by any defect in or omission of such numbers.  The Issuer will as promptly as practicable notify the Trustee in writing of any change in the CUSIP numbers.

ARTICLE 3

REDEMPTION

Section 3.01Notices to Trustee.

If the Issuer elects to redeem Notes pursuant to Section 3.07 hereof, it shall furnish to the Trustee, at least 5 Business Days before notice of redemption is required to be mailed or caused to be mailed to Holders pursuant to Section 3.03 hereof but not more than 60 days before a redemption date, an Officer’s Certificate setting forth (i) the paragraph or subparagraph of such Note and/or Section of this Indenture pursuant to which the redemption shall occur, (ii) the redemption date, (iii) the principal amount of the Notes to be redeemed and (iv) the redemption price.

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Section 3.02Selection of Notes to Be Redeemed or Purchased.

If less than all of the Notes are to be redeemed or purchased in an offer to purchase at any time, the Trustee shall select the Notes to be redeemed or purchased (a) if the Notes are listed on any national securities exchange, in compliance with the requirements of the principal national securities exchange on which the Notes are listed or (b) on a pro rata basis or, to the extent that selection on a pro rata basis is not practicable, by lot or by such other method the Trustee shall deem fair and appropriate in accordance with the procedures of DTC.  In the event of partial redemption or purchase by lot, the particular Notes to be redeemed or purchased shall be selected, unless otherwise provided herein, not less than 30 nor more than 60 days prior to the redemption date by the Trustee from the outstanding Notes not previously called for redemption or purchase.

The Trustee shall promptly notify the Issuer in writing of the Notes selected for redemption or purchase and, in the case of any Note selected for partial redemption or purchase, the principal amount thereof to be redeemed or purchased.  Notes and portions of Notes selected shall be in amounts of $2,000 or whole multiples of $1,000 on excess thereof; no Notes of $2,000 or less can be redeemed in part, except that if all of the Notes of a Holder are to be redeemed or purchased, the entire outstanding amount of Notes held by such Holder, even if not $2,000 or a multiple of $1,000 in excess thereof, shall be redeemed or purchased.  Except as provided in the preceding sentence, provisions of this Indenture that apply to Notes called for redemption or purchase also apply to portions of Notes called for redemption or purchase.

Section 3.03Notice of Redemption.

Subject to Section 3.09 hereof, the Issuer shall mail or cause to be mailed by first-class mail, postage prepaid, notices of redemption at least 30 days but not more than 60 days before the redemption date to each Holder of Notes to be redeemed at such Holder’s registered address or otherwise in accordance with the procedures of DTC, except that redemption notices may be mailed more than 60 days prior to a redemption date if the notice is issued in connection with Article 8 or Article 13 hereof.  Except as set forth in Section 3.07(c) hereof, notices of redemption may not be conditional.

The notice shall identify the Notes to be redeemed and shall state:

(a)the redemption date;

(b)the redemption price;

(c)if any Note is to be redeemed in part only, the portion of the principal amount of that Note that is to be redeemed and that, after the redemption date upon surrender of such Note, a new Note or Notes in principal amount equal to the unredeemed portion of the original Note representing the same indebtedness to the extent not redeemed will be issued in the name of the Holder of the Notes upon cancellation of the original Note;

(d)the name and address of the Paying Agent;

(e)that Notes called for redemption must be surrendered to the Paying Agent to collect the redemption price;

(f)that, unless the Issuer defaults in making such redemption payment, interest on Notes called for redemption ceases to accrue on and after the redemption date;

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(g)the paragraph or subparagraph of the Notes and/or Section of this Indenture pursuant to which the Notes called for redemption are being redeemed;

(h)that no representation is made as to the correctness or accuracy of the CUSIP number, if any, listed in such notice or printed on the Notes; and

(i)if in connection with a redemption pursuant to Section 3.07(c) hereof, any condition to such redemption.

At the Issuer’s request, the Trustee shall give the notice of redemption in the Issuer’s name and at the Issuer’s expense; provided that the Issuer shall have delivered to the Trustee, at least 5 Business Days before notice of redemption is required to be mailed or caused to be mailed to Holders pursuant to this Section 3.03 (unless a shorter notice shall be agreed to by the Trustee), an Officer’s Certificate requesting that the Trustee give such notice and setting forth the information to be stated in such notice as provided in the preceding paragraph.

Section 3.04Effect of Notice of Redemption.

Once notice of redemption is mailed in accordance with Section 3.03 hereof, Notes called for redemption become irrevocably due and payable on the redemption date at the redemption price (except as provided for in Section 3.07(c) hereof).  The notice, if mailed in a manner herein provided, shall be conclusively presumed to have been given, whether or not the Holder receives such notice.  In any case, failure to give such notice by mail or any defect in the notice to the Holder of any Note designated for redemption in whole or in part shall not affect the validity of the proceedings for the redemption of any other Note.  Subject to Section 3.05 hereof, on and after the redemption date, interest ceases to accrue on Notes or portions of Notes called for redemption.

Section 3.05Deposit of Redemption or Purchase Price.

Prior to 10:00 a.m. (New York City time) on the redemption or purchase date, the Issuer shall deposit with the Trustee or with the Paying Agent money sufficient to pay the redemption or purchase price of and accrued and unpaid interest (including Additional Interest, if any) on all Notes to be redeemed or purchased on that date.  The Trustee or the Paying Agent shall promptly return to the Issuer any money deposited with the Trustee or the Paying Agent by the Issuer in excess of the amounts necessary to pay the redemption price of, and accrued and unpaid interest on, all Notes to be redeemed or purchased.

If the Issuer complies with the provisions of the preceding paragraph, on and after the redemption or purchase date, interest shall cease to accrue on the Notes or the portions of Notes called for redemption or purchase.  If a Note is redeemed or purchased on or after a Record Date but on or prior to the related Interest Payment Date, then any accrued and unpaid interest to the redemption or purchase date shall be paid to the Person in whose name such Note was registered at the close of business on such Record Date.  If any Note called for redemption or purchase shall not be so paid upon surrender for redemption or purchase because of the failure of the Issuer to comply with the preceding paragraph, interest shall be paid on the unpaid principal, from the redemption or purchase date until such principal is paid, and to the extent lawful on any interest accrued to the redemption or purchase date not paid on such unpaid principal, in each case at the rate provided in the Notes and in Section 4.01 hereof.

Section 3.06Notes Redeemed or Purchased in Part.

Upon surrender of a Note that is redeemed or purchased in part, the Issuer shall issue and the Trustee shall authenticate for the Holder at the expense of the Issuer a new Note equal in principal

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amount to the unredeemed or unpurchased portion of the Note surrendered representing the same indebtedness to the extent not redeemed or purchased; provided that each new Note will be in a principal amount of $2,000 or an integral multiple of $1,000 in excess thereof.  It is understood that, notwithstanding anything in this Indenture to the contrary, only an Authentication Order and not an Opinion of Counsel or Officer’s Certificate is required for the Trustee to authenticate such new Note.

Section 3.07Optional Redemption.

(a)At any time prior to February 15, 2012, the Issuer may redeem all or a part of the Notes, upon not less than 30 nor more than 60 days’ prior notice mailed by first class mail to the registered address of each Holder or otherwise in accordance with the procedures of DTC, at a redemption price equal to 100% of the principal amount of the Notes redeemed plus the Applicable Premium as of, and accrued and unpaid interest and Additional Interest, if any, to the date of redemption (the “Redemption Date”), subject to the rights of Holders on the relevant Record Date to receive interest due on the relevant Interest Payment Date.

(b)Until February 15, 2010, the Issuer may, at its option, redeem up to 35% of the aggregate principal amount of Notes issued by it at a redemption price equal to 109% of the aggregate principal amount thereof, plus accrued and unpaid interest thereon and Additional Interest, if any, to the applicable Redemption Date, subject to the right of Holders of record on the relevant Record Date to receive interest due on the relevant Interest Payment Date, with the net cash proceeds of one or more Equity Offerings; provided that at least 65% of the sum of the original aggregate principal amount of Notes issued under the Indenture and the original aggregate principal amount any Additional Notes that are Notes issued under Indenture after the Issue Date remains outstanding immediately after the occurrence of each such redemption; provided further that each such redemption occurs within 90 days of the date of closing of each such Equity Offering. Any notice of redemption upon any Equity Offering may be given prior to the completion of such Equity Offering, and any such redemption or notice may, at the Issuer’s discretion, be subject to one or more conditions precedent, including, but not limited to, completion of the related Equity Offering.

(c)Except pursuant to clause (a) or (b) of this Section 3.07, the Notes will not be redeemable at the Issuers’ option prior to February 15, 2012.

(d)On and after February 15, 2012, the Issuer may redeem the Notes, in whole or in part, upon notice pursuant to Section 3.02 hereof at the redemption prices (expressed as percentages of principal amount of the Notes to be redeemed) set forth below, plus accrued and unpaid interest thereon and Additional Interest, if any, to the applicable Redemption Date, subject to the right of Holders of record on the relevant Record Date to receive interest due on the relevant Interest Payment Date, if redeemed during the twelve-month period beginning on February 15 of each of the years indicated below:

Year	Percentage
2012	104.500	%
2013	103.000	%
2014	101.500	%
2015 and thereafter	100.000	%

(e)Any redemption pursuant to this Section 3.07 shall be made pursuant to the provisions of Sections 3.01 through 3.06 hereof.

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Section 3.08Mandatory Redemption.

The Issuer shall not be required to make mandatory redemption or sinking fund payments with respect to the Notes.

Section 3.09Offers to Repurchase by Application of Excess Proceeds.

(a)In the event that, pursuant to Section 4.10 hereof, the Issuer shall be required to commence an Asset Sale Offer, they shall follow the procedures specified below.

(b)The Asset Sale Offer shall remain open for a period of 20 Business Days following its commencement and no longer, except to the extent that a longer period is required by applicable law (the “Offer Period”).  No later than five Business Days after the termination of the Offer Period (the “Purchase Date”), the Issuer shall apply all Excess Proceeds (the “Offer Amount”) to the purchase of Notes and, if required, Pari Passu Indebtedness (on a pro rata basis, if applicable), or, if less than the Offer Amount has been tendered, all Notes and Pari Passu Indebtedness tendered in response to the Asset Sale Offer.  Payment for any Notes so purchased shall be made in the same manner as interest payments are made.

(c)If the Purchase Date is on or after a Record Date and on or before the related Interest Payment Date, any accrued and unpaid interest and Additional Interest, if any, up to but excluding the Purchase Date, shall be paid to the Person in whose name a Note is registered at the close of business on such Record Date, and no additional interest shall be payable to Holders who tender Notes pursuant to the Asset Sale Offer.

(d)Upon the commencement of an Asset Sale Offer, the Issuer shall send, by first-class mail, a notice to each of the Holders, with a copy to the Trustee. The notice shall contain all instructions and materials necessary to enable such Holders to tender Notes pursuant to the Asset Sale Offer.  The Asset Sale Offer shall be made to all Holders and holders of Pari Passu Indebtedness.  The notice, which shall govern the terms of the Asset Sale Offer, shall state:

(i)that the Asset Sale Offer is being made pursuant to this Section 3.09 and Section 4.10 hereof and the length of time the Asset Sale Offer shall remain open;

(ii)the Offer Amount, the purchase price and the Purchase Date;

(iii)that any Note not tendered or accepted for payment shall continue to accrue interest;

(iv)that, unless the Issuer defaults in making such payment, any Note accepted for payment pursuant to the Asset Sale Offer shall cease to accrue interest after the Purchase Date;

(v)that Holders electing to have a Note purchased pursuant to an Asset Sale Offer may elect to have Notes purchased in amounts of $2,000 or in integral multiples of $1,000 in excess thereof only;

(vi)that Holders electing to have a Note purchased pursuant to any Asset Sale Offer shall be required to surrender the Note, with the form entitled “Option of Holder to Elect Purchase” attached to the Note completed, or transfer by book-entry transfer, to the Issuer, the Depositary, if appointed by the Issuer, or a Paying Agent at the address specified in the notice at least three days before the Purchase Date;

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(vii)that Holders shall be entitled to withdraw their election if the Issuer, the Depositary or the Paying Agent, as the case may be, receives, not later than the expiration of the Offer Period, a telegram, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Note the Holder delivered for purchase and a statement that such Holder is withdrawing his election to have such Note purchased;

(viii)that, if the aggregate principal amount of Notes and Pari Passu Indebtedness surrendered by the holders thereof exceeds the Offer Amount, the Trustee shall select the Notes and such Pari Passu Indebtedness to be purchased on a pro rata basis based on the accreted value or principal amount of the Notes or such Pari Passu Indebtedness tendered (with such adjustments as may be deemed appropriate by the Trustee so that only Notes in denominations of $2,000 or in integral multiples of $1,000 in excess thereof, shall be purchased); and

(ix)that Holders whose Notes were purchased only in part shall be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered (or transferred by book-entry transfer) representing the same indebtedness to the extent not repurchased.

(e)On or before the Purchase Date, the Issuer shall, to the extent lawful, (1) accept for payment, on a pro rata basis to the extent necessary, the Offer Amount of Notes or portions thereof validly tendered pursuant to the Asset Sale Offer, or if less than the Offer Amount has been tendered, all Notes tendered and (2) deliver or cause to be delivered to the Trustee the Notes properly accepted together with an Officer’s Certificate stating the aggregate principal amount of Notes or portions thereof so tendered.

(f)The Issuer, the Depositary or the Paying Agent, as the case may be, shall promptly mail or deliver to each tendering Holder an amount equal to the purchase price of the Notes properly tendered by such Holder and accepted by the Issuer for purchase, and the Issuer shall promptly issue a new Note, and the Trustee, upon receipt of an Authentication Order, shall authenticate and mail or deliver (or cause to be transferred by book-entry) such new Note to such Holder (it being understood that, notwithstanding anything in this Indenture to the contrary, no Opinion of Counsel or Officer’s Certificate is required for the Trustee to authenticate and mail or deliver such new Note) in a principal amount equal to any unpurchased portion of the Note surrendered representing the same indebtedness to the extent not repurchased; provided, that each such new Note shall be in a principal amount of $2,000 or an integral multiple of $1,000 in excess thereof.  Any Note not so accepted shall be promptly mailed or delivered by the Issuer to the Holder thereof.  The Issuer shall publicly announce the results of the Asset Sale Offer on or as soon as practicable after the Purchase Date.

Other than as specifically provided in this Section 3.09 or Section 4.10 hereof, any purchase pursuant to this Section 3.09 shall be made pursuant to the applicable provisions of Sections 3.01 through 3.06 hereof.

ARTICLE 4

COVENANTS

Section 4.01Payment of Notes.

The Issuer shall pay or cause to be paid the principal of, premium, if any, Additional Interest, if any, and interest on the Notes on the dates and in the manner provided in the Notes.  Principal, premium, if any, Additional Interest, if any, and interest shall be considered paid on the date due if the Paying Agent, if other than one of the Issuer or a Subsidiary, holds as of noon Eastern Time on the due

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date money deposited by the Issuer in immediately available funds and designated for and sufficient to pay all principal, premium, if any, and interest then due.

The Issuer shall pay all Additional Interest, if any, in the same manner on the dates and in the amounts set forth in the Registration Rights Agreement.

The Issuer shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal at the rate equal to the then applicable interest rate on the Notes to the extent lawful; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest and Additional Interest (without regard to any applicable grace period) at the same rate to the extent lawful.

Section 4.02Maintenance of Office or Agency.

The Issuer shall maintain in the Borough of Manhattan in the City of New York an office or agency (which may be an office of the Trustee or an affiliate of the Trustee, Registrar or co-registrar) where Notes may be surrendered for registration of transfer or for exchange and where notices and demands to or upon the Issuer in respect of the Notes and this Indenture may be served.  The Issuer shall give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency.  If at any time the Issuer shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee.

The Issuer may also from time to time designate one or more other offices or agencies where the Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided that no such designation or rescission shall in any manner relieve the Issuer of its obligation to maintain an office or agency in the Borough of Manhattan in the City of New York for such purposes.  The Issuer shall give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency.

The Issuer hereby designates the Corporate Trust Office of the Trustee as one such office or agency of the Issuer in accordance with Section 2.03 hereof.

Section 4.03Reports and Other Information.

(a)Notwithstanding that the Issuer may not be subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act or otherwise report on an annual and quarterly basis on forms provided for such annual and quarterly reporting pursuant to rules and regulations promulgated by the SEC, the Issuer shall file with the SEC (and make available to the Trustee and Holders of the Notes (without exhibits), without cost to any Holder, within 15 days after the Issuer files them with the SEC) from and after the Issue Date,

(1)within 90 days (or any other time period then in effect under the rules and regulations of the Exchange Act with respect to the filing of a Form 10-K by a non-accelerated filer) after the end of each fiscal year, annual reports on Form 10-K, or any successor or comparable form, containing the information required to be contained therein for a non-accelerated filer, or required in such successor or comparable form;

(2)within 45 days after the end of each of the first three fiscal quarters of each fiscal year, reports on Form 10-Q, or any successor or comparable form, containing the information required to be contained therein, or required in such successor or comparable form; and

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(3)promptly from time to time after the occurrence of an event required to be therein reported, current reports on Form 8-K, or any successor or comparable form; and

(4)any other information, documents and other reports that the Issuer would be required to file with the SEC if it were subject to Section 13 or 15(d) of the Exchange Act,

in each case in a manner that complies in all material respects with the requirements specified in such form; provided that (1) the Issuer shall not be so obligated to file such reports with the SEC if the SEC does not permit such filing, in which event the Issuer shall make available such information to prospective purchasers of Notes, in addition to providing such information to the Trustee and the Holders of the Notes, in each case within 15 days after the time the Issuer would be required to file such information with the SEC if it were subject to Section 13 or 15(d) of the Exchange Act, which obligation to provide such information may be satisfied by posting such information on its website within the time periods specified by this Section 4.03, and (2) that with respect to the periods ended March 31, 2007 and June 30, 2007, such reports (A) need only be filed within 90 days (in the case of the quarterly report for the period ended March 31, 2007) or 120 days (in the case of the annual report for the fiscal year ended June 30, 2007), (B) for any period prior to the Issue Date for which financial information is being disclosed need only contain financial information of Reader’s Digest, WRC Media and Direct Holdings that is substantially consistent, as determined in good faith by the Issuer, with the financial information contained in the Offering Memorandum and (C) need only be posted by the Issuer on its website within the time periods specified by this Section 4.03 and not filed with the SEC. In addition, to the extent not satisfied by the foregoing, the Issuer shall furnish, for so long as any Notes are outstanding, to Holders and to securities analysts and prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.  Delivery of such reports, information and documents to the Trustee is for informational purposes only, and the Trustee’s receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Issuer’s or the Guarantor’s, as the case may be, compliance with any of their covenants hereunder (as to which the Trustee is entitled to conclusively rely exclusively on the Officer’s Certificate).

(b)In the event that any direct or indirect parent entity of the Issuer becomes a Guarantor of the Notes, the Issuer may satisfy its obligations under this Section 4.03 with respect to financial information relating to the Issuer by furnishing financial information relating to such parent; provided that the same is accompanied by consolidating information that explains in reasonable detail, as determined in good faith by the Issuer, the differences between the information relating to such parent, on the one hand, and the information relating to the Issuer and its Restricted Subsidiaries on a standalone basis, on the other hand.

(c)If the Issuer has designated any of its Subsidiaries as Unrestricted Subsidiaries and such Unrestricted Subsidiaries, either individually or collectively, would otherwise have been a Significant Subsidiary, then the quarterly and annual financial information required by clauses (a) and (b) of this Section 4.03 shall include a reasonably detailed, as determined in good faith by senior management of the Issuer, unaudited presentation, either on the face of the financial statements or in the footnotes to the financial statements or in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of the financial condition and results of operations of the Issuer and the Restricted Subsidiaries of the Issuer separate from the financial condition and results of operations of the Unrestricted Subsidiaries.

(d)Prior to the commencement of the Exchange Offer or the effectiveness of the Shelf Registration Statement, the requirements of this Section 4.03 may be satisfied by (1) the filing with the SEC of the Exchange Offer Registration Statement or Shelf Registration Statement (or any other

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similar registration statement), and any amendments thereto, with such financial information that satisfies Regulation S-X under the Securities Act or (2) posting reports that would be required to be filed substantially in the form required by the SEC on the Issuer’s website (or that of any of its parent entities), subject to exceptions consistent with the presentation of financial information in the Offering Memorandum.

Section 4.04Compliance Certificate.

(a)The Issuer and each Guarantor (to the extent that such Guarantor is so required under the Trust Indenture Act) shall deliver to the Trustee, within 90 days after the end of each fiscal year ending after the Issue Date, a certificate from the principal executive officer, principal financial officer or principal accounting officer stating that a review of the activities of the Issuer and its Restricted Subsidiaries during the preceding fiscal year has been made under the supervision of the signing Officer with a view to determining whether the Issuer has kept, observed, performed and fulfilled its obligations under this Indenture, and further stating, as to such Officer signing such certificate, that to the best of his or her knowledge, the Issuer has kept, observed, performed and fulfilled each and every condition and covenant contained in this Indenture and is not in default in the performance or observance of any of the terms, provisions, covenants and conditions of this Indenture (or, if a Default shall have occurred, describing all such Defaults of which he or she may have knowledge and what action the Issuer is taking or proposes to take with respect thereto).

(b)When any Default has occurred and is continuing under this Indenture, or if the Trustee or the holder of any other evidence of Indebtedness of the Issuer or any Subsidiary gives any notice or takes any other action with respect to a claimed Default, the Issuer shall promptly (which shall be no more than five (5) Business Days upon becoming aware of such Default) deliver to the Trustee by registered or certified mail or by facsimile transmission an Officer’s Certificate specifying such event and what action the Issuer proposes to take with respect thereto.

Section 4.05Taxes.

The Issuer shall pay, and shall cause each of its Restricted Subsidiaries to pay, prior to delinquency, all material taxes, assessments and governmental levies except such as are contested in good faith and by appropriate negotiations or proceedings or where the failure to effect such payment is not adverse in any material respect to the Holders of the Notes.

Section 4.06Stay, Extension and Usury Laws.

The Issuer and each of the Guarantors covenant (to the extent that they may lawfully do so) that they shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of this Indenture; and the Issuer and each of the Guarantors (to the extent that they may lawfully do so) hereby expressly waive all benefit or advantage of any such law, and covenant that they shall not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Trustee, but shall suffer and permit the execution of every such power as though no such law has been enacted.

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Section 4.07Limitation on Restricted Payments.

(a)The Issuer shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly:

(I)declare or pay any dividend or make any payment or distribution on account of the Issuer’s, or any of its Restricted Subsidiaries’ Equity Interests, including any dividend or distribution payable in connection with any merger or consolidation other than:

(A)dividends or distributions by the Issuer payable solely in Equity Interests (other than Disqualified Stock) of the Issuer; or

(B)dividends or distributions by a Restricted Subsidiary so long as, in the case of any dividend or distribution payable on or in respect of any class or series of securities issued by a Restricted Subsidiary other than a Wholly-Owned Subsidiary, the Issuer or a Restricted Subsidiary receives at least its pro rata share of such dividend or distribution in accordance with its Equity Interests in such class or series of securities;

(II)purchase, redeem, defease or otherwise acquire or retire for value any Equity Interests of the Issuer or any direct or indirect parent of the Issuer, including in connection with any merger or consolidation;

(III)make any principal payment on, or redeem, repurchase, defease or otherwise acquire or retire for value in each case, prior to any scheduled repayment, sinking fund payment or maturity, any Subordinated Indebtedness, other than:

(A)Indebtedness permitted under clauses (6) and (7) of Section 4.09(b) hereof; or

(B)the purchase, repurchase or other acquisition of Subordinated Indebtedness purchased in anticipation of satisfying a sinking fund obligation, principal installment or final maturity, in each case due within one year of the date of purchase, repurchase or acquisition; or

(IV)make any Restricted Investment

(all such payments and other actions set forth in clauses (I) through (IV) above (other than any exception thereto) being collectively referred to as “Restricted Payments”), unless, at the time of and after giving effect to such Restricted Payment:

(1)no Default shall have occurred and be continuing or would occur as a consequence thereof;

(2)immediately after giving effect to such transaction on a pro forma basis, the Issuer could incur $1.00 of additional Indebtedness under Section 4.09(a) hereof; and

(3)such Restricted Payment, together with the aggregate amount of all other Restricted Payments made by the Issuer and its Restricted Subsidiaries after the Issue Date (including Restricted Payments permitted by clauses (1), (2) (with respect to the payment of dividends on Refunding Capital Stock pursuant to clause (b) thereof only), (5), (6)(c), (9) and (13) of Section 4.07(b) hereof, but excluding all other Restricted Payments permitted by Section 4.07(b) hereof), is less than the sum of (without duplication):

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(a)the sum of (1) 100% of EBITDA of the Issuer (with Reader’s Digest prior to the Transactions treated as the predecessor to the Issuer for all periods prior to the Issue Date) for the period (taken as one accounting period) from January 1, 2007 to the end of the Issuer’s most recently ended fiscal quarter for which internal financial statements are available at the time of such Restricted Payment, or, in the case such EBITDA for such period is a deficit, minus 100% of such deficit, minus (2) 140% of Consolidated Interest Expense of the Issuer for such period; plus

(b)100% of the aggregate net cash proceeds and the fair market value, as determined in good faith by the Issuer, of marketable securities or other property received by the Issuer since immediately after the Issue Date (other than net cash proceeds to the extent such net cash proceeds have been used to incur Indebtedness, Disqualified Stock or Preferred Stock pursuant to clause (11)(a) of Section 4.09(b) hereof and other than cash proceeds and marketable securities received from Equity Offerings to the extent used to redeem Notes in compliance with the provisions set forth under Section 3.07(b) hereof, from the issue and sale of:

(i)(A)Equity Interests of the Issuer, including Treasury Capital Stock, but excluding cash proceeds and the fair market value, as determined in good faith by the Issuer, of marketable securities or other property received from the sale of:

(x)Equity Interests to members of management, directors or consultants of the Issuer, any direct or indirect parent company of the Issuer and the Issuer’s Subsidiaries after the Issue Date to the extent such amounts have been applied to Restricted Payments made in accordance with clause (4) of Section 4.07(b) hereof; and

(y)Designated Preferred Stock; and

(B) to the extent such net cash proceeds are actually contributed to the Issuer, Equity Interests of the Issuer’s direct or indirect parent entities (excluding contributions of the proceeds from the sale of Designated Preferred Stock of such entities or contributions to the extent such amounts have been applied to Restricted Payments made in accordance with clause (4) of Section 4.07(b) hereof); or

(ii)debt securities of the Issuer that have been converted into or exchanged for such Equity Interests of the Issuer (other than debt securities that have been converted or exchanged for Disqualified Stock or Designated Preferred Stock);

provided, however, that this clause (b) shall not include the proceeds from (W) Refunding Capital Stock, (X) Equity Interests or convertible debt securities of the Issuer sold to a Restricted Subsidiary or to an employee stock ownership plan or any trust established by the Issuer or any of its Subsidiaries, as the case may be, (Y) Disqualified Stock or debt securities that have been converted into or exchanged for Disqualified Stock or (Z) Excluded Contributions; plus

(c)100% of the aggregate amount of cash and the fair market value, as determined in good faith by the Issuer, of marketable securities or other property contributed to the capital of the Issuer following the Issue Date (other than (i) net cash

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proceeds to the extent such net cash proceeds have been used to incur Indebtedness, Disqualified Stock or Preferred Stock pursuant to clause (11)(a) of Section 4.09(b) hereof, (ii) cash proceeds and marketable securities received from Equity Offerings to the extent used to redeem Notes in compliance with the provisions set forth under Section 3.07(b) hereof, (iii) cash and the fair market value of marketable securities or property contributed in exchange for Disqualified Stock or Designated Preferred Stock, (iv) by a Restricted Subsidiary and (v) from any Excluded Contributions); plus

(d)100% of the aggregate amount received in cash and the fair market value, as determined in good faith by the Issuer, of marketable securities or other property received by means of:

(i)the sale or other disposition (other than to the Issuer or a Restricted Subsidiary or to an employee stock ownership plan or any trust established by the Issuer or any of its Subsidiaries) of Restricted Investments made by the Issuer or its Restricted Subsidiaries and repurchases and redemptions of such Restricted Investments from the Issuer or its Restricted Subsidiaries and repayments of loans or advances and releases of guarantees that constitute Restricted Investments by the Issuer or its Restricted Subsidiaries, in each case after the Issue Date; or

(ii)the sale (other than to the Issuer or a Restricted Subsidiary) of the stock of an Unrestricted Subsidiary or a distribution from an Unrestricted Subsidiary (other than in each case to the extent the Investment in such Unrestricted Subsidiary was made by the Issuer or a Restricted Subsidiary pursuant to clause (7) of Section 4.07(b) hereof or to the extent such Investment constituted a Permitted Investment) or a dividend from an Unrestricted Subsidiary after the Issue Date; plus

(e)in the case of the redesignation of an Unrestricted Subsidiary as a Restricted Subsidiary after the Issue Date, the fair market value of the Investment in such Unrestricted Subsidiary, as determined by the Issuer in good faith (or if such fair market value exceeds $50.0 million, in writing by an Independent Financial Advisor), at the time of the redesignation of such Unrestricted Subsidiary as a Restricted Subsidiary other than to the extent the Investment in such Unrestricted Subsidiary was made by the Issuer or a Restricted Subsidiary pursuant to clause (7) of Section 4.07(b) hereof or to the extent such Investment constituted a Permitted Investment.

(b)The foregoing provisions of Section 4.07(a) hereof shall not prohibit:

(1)the payment of any dividend within 60 days after the date of declaration thereof, if at the date of declaration such payment would have complied with the provisions of this Indenture;

(2)(a) the redemption, repurchase, retirement or other acquisition of any Equity Interests (“Treasury Capital Stock”) or Subordinated Indebtedness of the Issuer or any Equity Interests of any direct or indirect parent entity of the Issuer, in exchange for, or out of the proceeds of the substantially concurrent sale (other than to a Restricted Subsidiary or the Issuer or to an employee stock ownership plan or any trust established by the Issuer or any of its Subsidiaries) of, Equity Interests of the Issuer or any direct or indirect parent entity of the Issuer to the extent contributed to the Issuer (in each case, other than any Disqualified Stock) (“Refunding Capital Stock”) and (b) if immediately prior to the retirement of Treasury Capital

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Stock, the declaration and payment of dividends thereon was permitted under clause (6)(a) or (b) of this Section 4.07(b), the declaration and payment of dividends on the Refunding Capital Stock (other than Refunding Capital Stock the proceeds of which were used to redeem, repurchase, retire or otherwise acquire any Equity Interests of any direct or indirect parent entity of the Issuer) in an aggregate amount per year no greater than the aggregate amount of dividends per annum that were declarable and payable on such Treasury Capital Stock immediately prior to such retirement;

(3)the redemption, repurchase or other acquisition or retirement of Subordinated Indebtedness of the Issuer or a Guarantor made in exchange for, or out of the proceeds of the substantially concurrent sale of, new Indebtedness of the Issuer or a Guarantor, as the case may be, which is incurred in compliance with Section 4.09 hereof so long as:

(a)the principal amount (or accreted value) of such new Indebtedness does not exceed the principal amount of (or accreted value, if applicable), plus any accrued and unpaid interest on, the Subordinated Indebtedness being so redeemed, repurchased, acquired or retired for value, plus the amount of any reasonable, as determined in good faith by the Issuer, premium (including reasonable, as determined in good faith by the Issuer, tender premiums), defeasance costs and any reasonable, as determined in good faith by the Issuer, fees and expenses incurred in connection with the issuance of such new Indebtedness;

(b)such new Indebtedness is subordinated to the Notes or the applicable Guarantee at least to the same extent as such Subordinated Indebtedness so purchased, exchanged, redeemed, repurchased, acquired or retired for value;

(c)such new Indebtedness has a final scheduled maturity date equal to or later than the final scheduled maturity date of the Subordinated Indebtedness being so purchased, exchanged, redeemed, repurchased, acquired or retired for value; and

(d)such new Indebtedness has a Weighted Average Life to Maturity equal to or greater than the remaining Weighted Average Life to Maturity of the Subordinated Indebtedness being so purchased, exchanged, redeemed, repurchased, acquired or retired for value;

(4)a Restricted Payment to pay for the repurchase, retirement or other acquisition or retirement for value of Equity Interests (other than Disqualified Stock) of the Issuer or any of its direct or indirect parent entities held by any future, present or former employee, director or consultant of the Issuer, any of its Subsidiaries or any of its direct or indirect parent entities pursuant to any management equity plan or stock option plan or any other management or employee benefit plan or agreement; provided, however, that the aggregate Restricted Payments made under this clause (4) do not exceed $15.0 million in any fiscal year; provided, further, that such amount in any calendar year may be increased by an amount not to exceed:

(a)the cash proceeds from the sale of Equity Interests (other than Disqualified Stock) of the Issuer and, to the extent contributed to the Issuer, Equity Interests of any of the Issuer’s direct or indirect parent entities, in each case to members of management, directors or consultants of the Issuer, any of its Subsidiaries or any of its direct or indirect parent entities that occurs after the Issue Date, to the extent the cash proceeds from the sale of such Equity Interests have not otherwise been applied to the payment of Restricted Payments by virtue of clause (3) of Section 4.07(a) hereof and to the extent such contribution is not an Excluded Contribution; plus

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(b)the cash proceeds of key man life insurance policies received by the Issuer or its Restricted Subsidiaries after the Issue Date; less

(c)the amount of any Restricted Payments previously made with the cash proceeds described in clauses (a) and (b) of this clause (4);

and provided, further, that cancellation of Indebtedness owing to the Issuer or any Restricted Subsidiary from members of management of the Issuer, any of the Issuer’s direct or indirect parent entities or any of the Issuer’s Restricted Subsidiaries in connection with a repurchase of Equity Interests of the Issuer or any of its direct or indirect parent entities shall not be deemed to constitute a Restricted Payment for purposes of this Section 4.07 or any other provision of this Indenture, provided, further, that the aggregate amount of Restricted Payments made pursuant to this clause (4) shall not exceed $50.0 million in the aggregate;

(5)the declaration and payment of dividends to holders of any class or series of Disqualified Stock of the Issuer or any of its Restricted Subsidiaries issued in accordance with Section 4.09 hereof;

(6)(a) the declaration and payment of dividends to holders of any class or series of Designated Preferred Stock (other than Disqualified Stock) issued by the Issuer after the Issue Date; provided that the amount of dividends paid pursuant to this clause (a) shall not exceed the aggregate amount of cash actually received by the Issuer from the sale of such Designated Preferred Stock;

(b)the declaration and payment of dividends to a direct or indirect parent entity of the Issuer, the proceeds of which shall be used to fund the payment of dividends to holders of any class or series of Designated Preferred Stock (other than Disqualified Stock) of such parent entity issued after the Issue Date; provided that the amount of dividends paid pursuant to this clause (b) shall not exceed the aggregate amount of cash actually contributed to the Issuer from the sale of such Designated Preferred Stock; or

(c)the declaration and payment of dividends on Refunding Capital Stock that is Preferred Stock in excess of the dividends declarable and payable thereon pursuant to clause (2) of this Section 4.07(b);

provided, however, that in the case of each of (a), (b) and (c) of this clause (6), that for the most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date of issuance of such Designated Preferred Stock or the declaration of such dividends on Refunding Capital Stock that is Preferred Stock, after giving effect to such issuance or declaration on a pro forma basis, the Issuer would be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Consolidated Leverage Ratio test in Section 4.09(a) hereof;

(7)Investments in Unrestricted Subsidiaries having an aggregate fair market value, taken together with all other Investments made pursuant to this clause (7) that are at the time outstanding, without giving effect to the sale of an Unrestricted Subsidiary to the extent the proceeds of such sale do not consist of cash or marketable securities, not to exceed $25.0 million (with the fair market value of each outstanding Investment being measured at the time made and without giving effect to subsequent changes in value);

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(8)repurchases of Equity Interests deemed to occur upon exercise of stock options, warrants or other rights to purchase Equity Interests if such Equity Interests represent a portion of the exercise price of such options, warrants or other rights to purchase Equity Interests;

(9)(a)  the declaration and payment of regular quarterly dividends on the Existing Issuer Preferred Stock and (b) the declaration and payment of dividends on the Issuer’s common stock (or the payment of dividends to any direct or indirect parent entity to fund a payment of dividends on such entity’s common stock), following consummation of the first public offering of the Issuer’s common stock or the common stock of any of its direct or indirect parent entities after the Issue Date, of up to 6% per annum of the net cash proceeds received by or contributed to the Issuer in or from any such public offering, other than public offerings with respect to the Issuer’s or any of its direct or indirect parent entities’ common stock registered on Form S-4 or Form S-8 and other than any public sale constituting an Excluded Contribution;

(10)Restricted Payments that are made with Excluded Contributions;

(11)other Restricted Payments in an aggregate amount which, when taken together with all other Restricted Payments made pursuant to this clause (11) (as reduced by the amount of capital returned from any such Restricted Payments that constituted Restricted Investments in the form of cash and Cash Equivalents (exclusive of items reflected in Consolidated Net Income)), not to exceed $50.0 million;

(12)any Restricted Payment (i) used to fund the Transactions and the fees and expenses related thereto or (ii) owed to Affiliates but, in the case of clause (ii), only to the extent permitted by Section 4.11 hereof;

(13)the repurchase, redemption or other acquisition or retirement for value of any Subordinated Indebtedness pursuant to provisions similar to those described under Sections 4.10 and 4.14; provided that a Change of Control Offer or Asset Sale Offer, as applicable, has been made and all Notes tendered by Holders in connection with such Change of Control Offer or Asset Sale Offer, as applicable, have been repurchased, redeemed or acquired for value;

(14)the declaration and payment of dividends by the Issuer to, or the making of loans to, any direct or indirect parent in amounts required for any direct or indirect parent companies to pay, in each case without duplication,

(a)franchise taxes and other fees, taxes and expenses required to maintain their corporate existence;

(b)foreign, federal, state and local income taxes, to the extent such income taxes are attributable to the income of the Issuer and its Restricted Subsidiaries and, to the extent of the amount actually received from its Unrestricted Subsidiaries, in amounts required to pay such taxes to the extent attributable to the income of such Unrestricted Subsidiaries; provided that in each case the amount of such payments in any fiscal year does not exceed the amount that the Issuer and its Restricted Subsidiaries would be required to pay in respect of foreign, federal, state and local taxes for such fiscal year were the Issuer, its Restricted Subsidiaries and its Unrestricted Subsidiaries (to the extent described above) to pay such taxes separately from any such parent entity;

(c)customary salary, bonus and other benefits payable to officers and employees of any direct or indirect parent entity of the Issuer to the extent such salaries,

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bonuses and other benefits are attributable to the ownership or operation of the Issuer and its Restricted Subsidiaries;

(d)general corporate operating and overhead costs and expenses of any direct or indirect parent entity of the Issuer to the extent such costs and expenses are attributable to the ownership or operation of the Issuer and its Restricted Subsidiaries, including, without limitation, in respect of director fees and expenses, insurance, administrative, legal and accounting services provided by third parties and other costs and expenses, including all costs and expenses with respect to filings with the SEC and any indemnification claims made by directors or officers of any direct or indirect parent attributable to the ownership or operation of the Issuer and its Restricted Subsidiaries; and

(e)fees and expenses other than to Affiliates of the Issuer related to any unsuccessful equity or debt offering or other financing transaction of such parent entity;

(15)the distribution, by dividend or otherwise, of shares of Capital Stock of, or Indebtedness owed to the Issuer or a Restricted Subsidiary by, Unrestricted Subsidiaries (other than Unrestricted Subsidiaries, the primary assets of which are cash and/or Cash Equivalents); and

(16)the payment by the Company or its Restricted Subsidiaries of any amounts required to be paid in connection with the exercise of appraisal rights by holders of the Existing Issuer Preferred Stock arising as a result of the Transactions;

provided, however, that at the time of, and after giving effect to, any Restricted Payment permitted under clauses (7), (11) and (15) of this Section 4.07(b), no Default shall have occurred and be continuing or would occur as a consequence thereof.

(c)The amount of all Restricted Payments (other than cash) shall be the fair market value on the date of the Restricted Payment of the assets or securities proposed to be transferred or issued by the Issuer or such Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair market value of any assets or securities that are required to be valued by this Section 4.07 shall be determined in good faith by the Issuer. The Issuer’s determination must be based upon an opinion or appraisal issued by an Independent Financial Advisor if the fair market value exceeds $50.0 million.

(d)The Issuer shall not permit any Unrestricted Subsidiary to become a Restricted Subsidiary except pursuant to the last sentence of the definition of “Unrestricted Subsidiary.” For purposes of designating any Restricted Subsidiary as an Unrestricted Subsidiary, all outstanding Investments by the Issuer and its Restricted Subsidiaries (except to the extent repaid) in the Subsidiary so designated shall be deemed to be Restricted Payments in an amount determined as set forth in the last sentence of the definition of “Investment.” Such designation shall be permitted only if a Restricted Payment in such amount would be permitted at such time, whether pursuant to Section 4.07(a) hereof or under clause (7), (10) or (11) of Section 4.07(b) hereof, or pursuant to the definition of “Permitted Investments,” and if such Subsidiary otherwise meets the definition of an Unrestricted Subsidiary. Unrestricted Subsidiaries shall not be subject to any of the restrictive covenants set forth in this Indenture.

Section 4.08Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries.

(a)The Issuer shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any consensual encumbrance or consensual restriction on the ability of any such Restricted Subsidiary to:

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(1)(A)  pay dividends or make any other distributions to the Issuer or any of its Restricted Subsidiaries on its Capital Stock or with respect to any other interest or participation in, or measured by, its profits, or

(B)pay any Indebtedness owed to the Issuer or any of its Restricted Subsidiaries;

(2)make loans or advances to the Issuer or any of its Restricted Subsidiaries; or

(3)sell, lease or transfer any of its properties or assets to the Issuer or any of its Restricted Subsidiaries.

(b)The restrictions in Section 4.08(a) hereof shall not apply to encumbrances or restrictions existing under or by reason of:

(1)contractual encumbrances or restrictions in effect on the Issue Date, including pursuant to the Senior Credit Facility and the related documentation;

(2)this Indenture and the Notes;

(3)purchase money obligations for property acquired in the ordinary course of business permitted by Section 4.09 hereof that impose restrictions of the nature referred to in clause (3) of Section 4.08(a) hereof on the property so acquired;

(4)applicable law or any applicable rule, regulation or order;

(5)any agreement or other instrument of a Person acquired by the Issuer or any of its Restricted Subsidiaries in existence at the time of such acquisition (but not created in contemplation thereof), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person and its Subsidiaries, or the property or assets of the Person and its Subsidiaries, so acquired;

(6)contracts for the sale of assets, including customary restrictions with respect to a Subsidiary of the Issuer pursuant to an agreement that has been entered into for the sale or disposition of all or substantially all of the Capital Stock or assets of such Subsidiary;

(7)Secured Indebtedness otherwise permitted to be incurred pursuant to Sections 4.09 and 4.12 hereof that limit the right of the debtor to dispose of the assets securing such Indebtedness;

(8)restrictions on cash or other deposits or net worth imposed by customers under contracts entered into in the ordinary course of business;

(9)other Indebtedness, Disqualified Stock or Preferred Stock of any Restricted Subsidiary that is a Guarantor, Foreign Subsidiaries, or provided that such encumbrances or restrictions shall not materially affect the Issuer’s ability to make anticipated principal and interest payments on the Notes (as determined in good faith by the Board of Directors of the Issuer), other domestic Restricted Subsidiaries of the Issuer that are not Guarantors, in each case permitted to be incurred subsequent to the Issue Date pursuant to the provisions of Section 4.09 hereof;

(10)customary provisions in joint venture agreements and other similar agreements relating solely to such joint venture;

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(11)customary provisions contained in leases or licenses of intellectual property and other agreements, in each case entered into in the ordinary course of business; and

(12)any encumbrances or restrictions of the type referred to in clauses (1), (2) and (3) of Section 4.08(a) hereof imposed by any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings of the contracts, instruments or obligations referred to in clauses (1) through (11) of this Section 4.08(b); provided that such amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings are, in the good faith judgment of the Issuer, no more restrictive with respect to such encumbrance and other restrictions taken as a whole than those prior to such amendment, modification, restatement, renewal, increase, supplement, refunding, replacement or refinancing.

Section 4.09Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock and Preferred Stock.

(a)The Issuer shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable, contingently or otherwise (collectively, “incur” and collectively, an “incurrence”) with respect to any Indebtedness (including Acquired Indebtedness), and the Issuer shall not issue any shares of Disqualified Stock and shall not permit any Restricted Subsidiary to issue any shares of Disqualified Stock or Preferred Stock; provided, however, that the Issuer may incur Indebtedness (including Acquired Indebtedness) or issue shares of Disqualified Stock, and any of its Restricted Subsidiaries may incur Indebtedness (including Acquired Indebtedness), issue shares of Disqualified Stock and issue shares of Preferred Stock, if the Consolidated Leverage Ratio on a consolidated basis for the Issuer and its Restricted Subsidiaries’ most recently ended four fiscal quarters for which internal financial statements are available immediately preceding the date on which such additional Indebtedness is incurred or such Disqualified Stock or Preferred Stock is issued shall not be greater than 7.5 to 1.00, determined on a pro forma basis (including a pro forma application of the net proceeds therefrom), as if the additional Indebtedness had been incurred, or the Disqualified Stock or Preferred Stock had been issued, as the case may be, and the application of proceeds therefrom had occurred at the beginning of such four-quarter period; provided, further, that Restricted Subsidiaries that are not Guarantors may not incur Indebtedness or issue Disqualified Stock or Preferred Stock if, after giving pro forma effect to such incurrence or issuance (including a pro forma application of the net proceeds therefrom), more than an aggregate of the greater of (x) $50.0 million and (y) 3.0% of Total Tangible Assets of Indebtedness or Disqualified Stock or Preferred Stock of Restricted Subsidiaries that are not Guarantors would be outstanding pursuant to this Section 4.09(a) and clauses (11) and (17) of Section 4.09(b) hereof at such time.

(b)The provisions of Section 4.09(a) hereof shall not apply to:

(1)the incurrence of (A) Indebtedness under Credit Facilities by the Issuer or any of the Guarantors and the issuance and creation of letters of credit and bankers’ acceptances thereunder (with letters of credit and bankers’ acceptances being deemed to have a principal amount equal to the face amount thereof) and (B) Indebtedness under Credit Facilities of Foreign Subsidiaries in an aggregate principal amount not to exceed $400.0 million; provided that the aggregate principal amount of Indebtedness Incurred under clauses (A) and (B) outstanding at any one time shall not exceed $1,710.0 million less the sum of all principal payments with respect to such Indebtedness made pursuant to Section 4.10(b)(1)(A) in satisfaction of the requirements of Section 4.10;

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(2)the incurrence by the Issuer and any Guarantor of Indebtedness represented by the Notes (including any Guarantee) (other than any Additional Notes) and any Exchange Notes (including any Guarantee thereof);

(3)Indebtedness of the Issuer and its Restricted Subsidiaries in existence on the Issue Date (other than Indebtedness described in clauses (1) and (2) of this Section 4.09(b));

(4)Indebtedness incurred by the Issuer or any of its Restricted Subsidiaries in respect of letters of credit, bank guarantees, bankers’ acceptances or similar instruments issued or created in the ordinary course of business, including in respect of workers’ compensation claims, health, disability or other employee benefits or property, casualty or liability insurance or self-insurance or other Indebtedness with respect to reimbursement-type obligations regarding workers’ compensation claims; provided, however, that any reimbursement obligations in respect thereof are reimbursed within 30 days following the incurrence thereof;

(5)Indebtedness arising from agreements of the Issuer or its Restricted Subsidiaries providing for indemnification, adjustment of purchase price or similar obligations, in each case incurred or assumed in connection with the disposition of any business, assets or a Subsidiary, other than guarantees of Indebtedness incurred by any Person acquiring all or any portion of such business, assets or a Subsidiary for the purpose of financing such acquisition; provided, however, that

(A)such Indebtedness is not reflected on the balance sheet of the Issuer, or any of its Restricted Subsidiaries (contingent obligations referred to in a footnote to financial statements and not otherwise reflected on the balance sheet shall not be deemed to be reflected on such balance sheet for purposes of this clause (5)(A)); and

(B)the maximum assumable liability in respect of all such Indebtedness shall at no time exceed the gross proceeds including non-cash proceeds (the fair market value of such non-cash proceeds being measured at the time received and without giving effect to any subsequent changes in value) actually received by the Issuer and its Restricted Subsidiaries in connection with such disposition;

(6)Indebtedness of the Issuer to a Restricted Subsidiary; provided that any such Indebtedness owing to a Restricted Subsidiary that is not a Guarantor is expressly subordinated in right of payment to the Notes; provided, further, that any subsequent issuance or transfer of any Capital Stock or any other event which results in any Restricted Subsidiary ceasing to be a Restricted Subsidiary or any other subsequent transfer of any such Indebtedness (except to the Issuer or another Restricted Subsidiary) shall be deemed, in each case, to be an incurrence of such Indebtedness not permitted by this clause (6);

(7)Indebtedness of a Restricted Subsidiary to the Issuer or another Restricted Subsidiary; provided that if a Guarantor incurs such Indebtedness to a Restricted Subsidiary that is not a Guarantor, such Indebtedness is expressly subordinated in right of payment to the Guarantee of the Notes of such Guarantor; provided, further, that any subsequent transfer of any such Indebtedness (except to the Issuer or another Restricted Subsidiary), directly or through the disposition of the Restricted Subsidiary holding such Indebtedness, shall be deemed, in each case, to be an incurrence of such Indebtedness not permitted by this clause (7);

(8)shares of Preferred Stock of a Restricted Subsidiary issued to the Issuer or another Restricted Subsidiary; provided that any subsequent issuance or transfer of any Capital Stock or any other event which results in any such Restricted Subsidiary ceasing to be a

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Restricted Subsidiary or any other subsequent transfer of any such shares of Preferred Stock (except to the Issuer or another of its Restricted Subsidiaries) shall be deemed in each case to be an issuance of such shares of Preferred Stock not permitted by this clause (8);

(9)Hedging Obligations (excluding Hedging Obligations entered into for speculative purposes) for the purpose of hedging interest rate risk with respect to any Indebtedness permitted to be incurred pursuant to this Section 4.09, exchange rate risk or commodity pricing risk;

(10)obligations in respect of performance, bid, appeal and surety bonds and completion guarantees provided by the Issuer or any of its Restricted Subsidiaries in the ordinary course of business;

(11)(a) Indebtedness or Disqualified Stock of the Issuer and Indebtedness, Disqualified Stock or Preferred Stock of any Restricted Subsidiary equal to 100% of the net cash proceeds received by the Issuer since immediately after the Issue Date from the issue or sale of Equity Interests of the Issuer or cash contributed to the capital of the Issuer (in each case, other than Excluded Contributions or proceeds of Disqualified Stock or Designated Preferred Stock or sales of Equity Interests to the Issuer or any of its Subsidiaries or to an employee stock ownership plan or any trust established by the Issuer or any of its Subsidiaries) as determined in accordance with clauses (3)(b) and (3)(c) of Section 4.07(a) hereof to the extent such net cash proceeds or cash have not been applied pursuant to such clauses to make Restricted Payments or to make other Investments, payments or exchanges pursuant to Section 4.07(b) hereof or to make Permitted Investments (other than Permitted Investments specified in clauses (1) and (3) of the definition thereof) and (b) Indebtedness or Disqualified Stock of the Issuer and Indebtedness, Disqualified Stock or Preferred Stock of any Restricted Subsidiary not otherwise permitted hereunder in an aggregate principal amount or liquidation preference, which when aggregated with the principal amount and liquidation preference of all other Indebtedness, Disqualified Stock and Preferred Stock then outstanding and incurred pursuant to this clause (11)(b), does not at any one time outstanding exceed $100.0 million (it being understood that any Indebtedness, Disqualified Stock or Preferred Stock incurred pursuant to this clause (11)(b) shall cease to be deemed incurred or outstanding for purposes of this clause (11)(b) but shall be deemed incurred for the purposes of Section 4.09(a) hereof from and after the first date on which the Issuer or such Restricted Subsidiary could have incurred such Indebtedness, Disqualified Stock or Preferred Stock under Section 4.09(a) hereof without reliance on this clause (11)(b));

(12)the incurrence or issuance by the Issuer or any Restricted Subsidiary of Indebtedness, Disqualified Stock or Preferred Stock which serves to refund or refinance any Indebtedness, Disqualified Stock or Preferred Stock incurred as permitted under Section 4.09(a) and clauses (2), (3) and (11)(a) of this Section 4.09(b), this clause (12) and clause (13) of this Section 4.09(b) or any Indebtedness, Disqualified Stock or Preferred Stock issued to so refund or refinance such Indebtedness, Disqualified Stock or Preferred Stock, including additional Indebtedness, Disqualified Stock or Preferred Stock incurred to pay premiums (including reasonable, as determined in good faith by the Issuer, tender premiums), defeasance costs, accrued interest and fees and expenses in connection therewith (the “Refinancing Indebtedness”) prior to its respective maturity; provided, however, that such Refinancing Indebtedness:

(A)has a Weighted Average Life to Maturity at the time such Refinancing Indebtedness is incurred which is not less than the remaining Weighted Average Life to Maturity of the Indebtedness, Disqualified Stock or Preferred Stock being refunded or refinanced,

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(B)to the extent such Refinancing Indebtedness refinances (i) Indebtedness subordinated or pari passu to the Notes or any Guarantee thereof, such Refinancing Indebtedness is subordinated or pari passu to the Notes or the Guarantee at least to the same extent as the Indebtedness being refinanced or refunded or (ii) Disqualified Stock or Preferred Stock, such Refinancing Indebtedness must be Disqualified Stock or Preferred Stock, respectively, and

(C)shall not include:

(i)Indebtedness, Disqualified Stock or Preferred Stock of a Subsidiary of the Issuer that is not a Guarantor that refinances Indebtedness, Disqualified Stock or Preferred Stock of the Issuer or a Guarantor; or

(ii)Indebtedness, Disqualified Stock or Preferred Stock of the Issuer or a Restricted Subsidiary that refinances Indebtedness, Disqualified Stock or Preferred Stock of an Unrestricted Subsidiary,

(D)shall not be in a principal amount in excess of the principal amount of, premium (including reasonable, as determined in good faith by the Issuer, tender premium and defeasance costs), if any, accrued interest on, and related fees and expenses of the Indebtedness being refunded or refinanced; and

(E)shall not have a stated maturity date prior to the stated maturity of the Indebtedness being refunded or refinanced;

and provided, further, that subclause (A) of this clause (12) shall not apply to any refunding or refinancing of any Indebtedness outstanding under any Senior Indebtedness;

(13)Indebtedness, Disqualified Stock or Preferred Stock of Persons (other than Indebtedness, Disqualified Stock or Preferred Stock incurred in anticipation of such acquisition or merger) that are acquired by the Issuer or any Restricted Subsidiary or merged into the Issuer or a Restricted Subsidiary in accordance with the terms of this Indenture; provided that after giving effect to such acquisition or merger, either

(a)the Issuer would be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Consolidated Leverage Ratio test set forth in Section 4.09(a), or

(b)the Consolidated Leverage Ratio of the Issuer and the Restricted Subsidiaries is lower than immediately prior to such acquisition or merger;

(14)Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument drawn against insufficient funds in the ordinary course of business; provided that such Indebtedness is extinguished within two Business Days of its incurrence;

(15)Indebtedness of the Issuer or any of its Restricted Subsidiaries supported by a letter of credit issued pursuant to any Credit Facility, in a principal amount not in excess of the stated amount of such letter of credit;

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(16)(a) any guarantee by the Issuer or a Restricted Subsidiary of Indebtedness or other obligations of any Restricted Subsidiary so long as the incurrence of such Indebtedness incurred by such Restricted Subsidiary is permitted under the terms of this Indenture, or

(b)any guarantee by a Restricted Subsidiary of Indebtedness of the Issuer; provided that such guarantee is incurred in accordance with Section 4.15 hereof;

(17)Indebtedness (including Capitalized Lease Obligations), Disqualified Stock or Preferred Stock of the Issuer or a Restricted Subsidiary incurred to finance the purchase, lease or improvement of any property or equipment, whether through the direct purchase of such property or equipment or the purchase of Capital Stock of any Person owning such property or equipment (but no other material assets), and any Indebtedness, Disqualified Stock or Preferred Stock of a Restricted Subsidiary which serves to refund or refinance any Indebtedness, Disqualified Stock or Preferred Stock incurred pursuant to this clause (17), in a principal amount not to exceed the greater of (x) $25.0 million and (y) 1.5% of Total Tangible Assets in the aggregate at any one time outstanding together with all other Indebtedness, Disqualified Stock and/or Preferred Stock issued under this clause (17) (it being understood that any Indebtedness, Disqualified Stock or Preferred Stock incurred pursuant to this clause (17) shall cease to be deemed incurred or outstanding for purposes of this clause (17) but shall be deemed incurred for the purpose of Section 4.09(a) hereof from and after the first date on which such Restricted Subsidiary could have incurred such Indebtedness, Disqualified Stock or Preferred Stock under  Section 4.09(a) without reliance on this clause (17));

(18)Indebtedness of the Issuer or any of its Restricted Subsidiaries consisting of (i) the financing of insurance premiums or (ii) take-or-pay obligations contained in supply arrangements in each case, incurred in the ordinary course of business;

(19)Indebtedness consisting of Indebtedness issued by the Issuer or any of its Restricted Subsidiaries to current or former officers, directors and employees thereof, their respective estates, spouses or former spouses, in each case to finance the purchase or redemption of Equity Interests of the Issuer or any direct or indirect parent company of the Issuer to the extent described in clause (4) of Section 4.07(b) hereof; and

(20)Indebtedness of Foreign Subsidiaries of the Issuer in an aggregate principal amount not to exceed at any one time outstanding (and together with any other Indebtedness incurred under this clause (20)) of $50.0 million (it being understood that any Indebtedness incurred pursuant to this clause (20) shall cease to be deemed incurred or outstanding for purposes of this clause (20) but shall be deemed incurred for the purposes of Section 4.09(a) hereof from and after the first date on which the Issuer or such Foreign Subsidiary could have incurred such indebtedness under Section 4.09(a) without reliance on this clause (20)).

(c)For purposes of determining compliance with this Section 4.09:

(1)in the event that an item of Indebtedness, Disqualified Stock or Preferred Stock (or any portion thereof) meets the criteria of more than one of the categories of permitted Indebtedness, Disqualified Stock or Preferred Stock described in clauses (1) through (20) of Section 4.09(b) hereof or is entitled to be incurred pursuant to Section 4.09(a) hereof, the Issuer, in its sole discretion, may classify or reclassify such item of Indebtedness, Disqualified Stock or Preferred Stock (or any portion thereof) and shall only be required to include the amount and type of such Indebtedness, Disqualified Stock or Preferred Stock in one of the above clauses; provided that all Indebtedness outstanding under the Credit Facilities on the Issue Date shall be treated as

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incurred on the Issue Date under clause (1) of Section 4.09(b) and such amounts outstanding under clause (1) on the Issue Date may not be later reclassified; and

(2)at the time of incurrence, the Issuer shall be entitled to divide and classify an item of Indebtedness in more than one of the types of Indebtedness described in Sections 4.09(a) and 4.09(b) hereof.

Accrual of interest, the accretion of accreted value and the payment of interest in the form of additional Indebtedness, Disqualified Stock or Preferred Stock of the same class shall not be deemed to be an incurrence of Indebtedness, Disqualified Stock or Preferred Stock for purposes of this Section 4.09. The amount of any Indebtedness outstanding as of any date shall be (i) the accreted value thereof in the case of any Indebtedness issued with original issue discount and (ii) the principal amount or liquidation preference thereof, in the case of any other Indebtedness. The principal amount of any Disqualified Stock of the Issuer or a Restricted Subsidiary, or Preferred Stock of a Restricted Subsidiary, shall be equal to the greater of the maximum mandatory redemption or repurchase price (not including, in either case, any redemption or repurchase premium) or the liquidation preference thereof.

For purposes of determining compliance with any U.S. dollar-denominated restriction on the incurrence of Indebtedness, the U.S. dollar-equivalent principal amount of Indebtedness denominated in a foreign currency shall be calculated based on the relevant currency exchange rate in effect on the date such Indebtedness was incurred, in the case of term debt, or first committed, in the case of revolving credit debt; provided that if such Indebtedness is incurred to refinance other Indebtedness denominated in a foreign currency, and such refinancing would cause the applicable U.S. dollar denominated restriction to be exceeded if calculated at the relevant currency exchange rate in effect on the date of such refinancing, such U.S. dollar-denominated restriction shall be deemed not to have been exceeded so long as the principal amount of such refinancing Indebtedness does not exceed the principal amount of such Indebtedness being refinanced.

The principal amount of any Indebtedness incurred to refinance other Indebtedness, if incurred in a different currency from the Indebtedness being refinanced, shall be calculated based on the currency exchange rate applicable to the currencies in which such respective Indebtedness is denominated that is in effect on the date of such refinancing.

Section 4.10Asset Sales.

(a)The Issuer shall not, and shall not permit any of its Restricted Subsidiaries to, cause, make or suffer to exist an Asset Sale, unless:

(1)the Issuer or such Restricted Subsidiary, as the case may be, receives consideration at the time of such Asset Sale at least equal to the fair market value (as determined in good faith by the Issuer) of the assets sold or otherwise disposed of; and

(2)except in the case of a Permitted Asset Swap, at least 75% of the consideration therefor received by the Issuer or such Restricted Subsidiary, as the case may be, is in the form of cash or Cash Equivalents; provided that the amount of:

(A)any liabilities (as shown on the Issuer’s or a Restricted Subsidiary’s most recent balance sheet) of the Issuer or such Restricted Subsidiary, other than liabilities that are by their terms subordinated to the Notes or the Guarantees, that are assumed by the transferee of any such assets and for which the Issuer and all of its Restricted Subsidiaries have been validly released by all creditors in writing,

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(B)any notes, securities or other obligations received by the Issuer or a Restricted Subsidiary from such transferee that are converted by the Issuer or such Restricted Subsidiary into cash (to the extent of the cash received) within 180 days following the closing of such Asset Sale, and

(C)any Designated Non-cash Consideration received by the Issuer or a Restricted Subsidiary in such Asset Sale having an aggregate fair market value (as determined in good faith by the Issuer), taken together with all other Designated Non-cash Consideration received pursuant to this clause (C) that is at that time outstanding, not to exceed the greater of (x) $75.0 million and (y) 4.5% of Total Tangible Assets at the time of the receipt of such Designated Non-cash Consideration, with the fair market value of each item of Designated Non-cash Consideration being measured at the time received and without giving effect to subsequent changes in value,

shall be deemed to be cash for purposes of this provision and for no other purpose.

(b)Within 360 days after the receipt of any Net Proceeds of any Asset Sale, the Issuer or such Restricted Subsidiary, at its option, may apply the Net Proceeds from such Asset Sale,

(1)to permanently reduce:

(A)Obligations under Senior Indebtedness and, in the cash of revolving Obligations, to correspondingly reduce commitments with respect thereto,

(B)Obligations under Senior Subordinated Indebtedness (and, in the case of revolving Obligations, to correspondingly reduce commitments with respect thereto), including Obligations under the Notes; provided that if the Issuer or a Restricted Subsidiary shall reduce Obligations under Senior Subordinated Indebtedness other than the Notes, the Issuer shall equally and ratably reduce Obligations under the Notes as provided under Section 3.07 hereof, through open-market purchases (to the extent such purchases are at or above 100% of the principal amount thereof) or by making an offer (in accordance with the procedures set forth under Section 4.10(c) hereof) to all Holders of Notes to purchase their Notes at 100% of the principal amount thereof, plus the amount of accrued but unpaid interest, if any, on the amount of Notes that would otherwise be prepaid, or

(C)Indebtedness of a Restricted Subsidiary that is not a Guarantor, other than Indebtedness owed to the Issuer or another Restricted Subsidiary,

(2)to make (A) an Investment in any one or more businesses that is a Similar Business; provided that if such Investment is in the form of the acquisition of Capital Stock, such acquisition results in the Issuer or another of its Restricted Subsidiaries, as the case may be, owning an amount of the Capital Stock of such business such that it constitutes a Restricted Subsidiary, (B) capital expenditures used or useful in a Similar Business or (C) acquisitions of other assets used or useful in a Similar Business, or

(3)to make an Investment in (A) any one or more businesses; provided that if such Investment is in the form of the acquisition of Capital Stock, such acquisition results in the Issuer or another of its Restricted Subsidiaries, as the case may be, owning an amount of the Capital Stock of such business such that it constitutes a Restricted Subsidiary, (B) properties or (C) acquisitions of other assets that, in each of (A), (B) and (C), replace the businesses, properties and/or assets that are the subject of such Asset Sale;

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provided that, in the case of clauses (2) and (3) above, a binding commitment shall be treated as a permitted application of the Net Proceeds from the date of such commitment so long as the Issuer, or such other Restricted Subsidiary enters into such commitment with the good faith expectation that such Net Proceeds shall be applied to satisfy such commitment within 360 days of such commitment (an “Acceptable Commitment”) and, in the event any Acceptable Commitment is later cancelled or terminated for any reason before the Net Proceeds are applied in connection therewith, the Issuer or such Restricted Subsidiary enters into another Acceptable Commitment (a “Second Commitment”) within 180 days of such cancellation or termination; provided, further, that if any Second Commitment is later cancelled or terminated for any reason before such Net Proceeds are applied, then such Net Proceeds shall constitute Excess Proceeds.

(c)Any Net Proceeds from the Asset Sale that are not invested or applied as provided and within the time period set forth in Section 4.10(b) shall be deemed to constitute “Excess Proceeds.” When the aggregate amount of Excess Proceeds exceeds $20.0 million, the Issuer shall make an offer to all Holders of the Notes and, if required by the terms of any Indebtedness that is pari passu with the Notes (“Pari Passu Indebtedness”), to the holders of such Pari Passu Indebtedness (an “Asset Sale Offer”), to purchase the maximum aggregate principal amount of the Notes and such Pari Passu Indebtedness that is a minimum of $2,000 or an integral multiple of $1,000 in excess thereof that may be purchased out of the Excess Proceeds at an offer price in cash in an amount equal to 100% of the principal amount thereof, plus accrued and unpaid interest and Additional Interest, if any, to the date fixed for the closing of such offer, in accordance with the procedures set forth in this Indenture. The Issuer shall commence an Asset Sale Offer with respect to Excess Proceeds within ten Business Days after the date that Excess Proceeds exceed $20.0 million by mailing (or otherwise communicating in accordance with the procedures of DTC) the notice required pursuant to the terms of this Indenture, with a copy to the Trustee.

To the extent that the aggregate amount of Notes and such Pari Passu Indebtedness tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the Issuer may use any remaining Excess Proceeds for any purpose, subject to other covenants contained in this Indenture. If the aggregate principal amount of Notes or the Pari Passu Indebtedness surrendered by such holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select the Notes and such Pari Passu Indebtedness to be purchased on a pro rata basis based on the accreted value or principal amount of the Notes or such Pari Passu Indebtedness tendered. Upon completion of any such Asset Sale Offer, the amount of Excess Proceeds shall be reset at zero. Additionally, the Issuer may, at its option, make an Asset Sale Offer using proceeds from any Asset Sale at any time after consummation of such Asset Sale; provided that such Asset Sale Offer shall be in an aggregate amount of not less than $10.0 million. Upon consummation of such Asset Sale Offer, any Net Proceeds not required to be used to purchase Notes shall not be deemed Excess Proceeds.

(d)Pending the final application of any Net Proceeds pursuant to this Section 4.10, the holder of such Net Proceeds may apply such Net Proceeds temporarily to reduce Indebtedness outstanding under a revolving credit facility or otherwise invest such Net Proceeds in any manner not prohibited by this Indenture.

(e)The Issuer shall comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws or regulations are applicable in connection with the repurchase of the Notes pursuant to an Asset Sale Offer.  To the extent that the provisions of any securities laws or regulations conflict with the provisions of this Indenture, the Issuer shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations described in this Indenture by virtue thereof.

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Section 4.11Transactions with Affiliates.

(a)The Issuer shall not, and shall not permit any of its Restricted Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into or make or amend any transaction, contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate of the Issuer (each of the foregoing, an “Affiliate Transaction”) involving aggregate payments or consideration in excess of $10.0 million, unless:

(1)such Affiliate Transaction is on terms that are not materially less favorable to the Issuer or its relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction by the Issuer or such Restricted Subsidiary with an unrelated Person on an arm’s-length basis; and

(2)the Issuer delivers to the Trustee with respect to any Affiliate Transaction or series of related Affiliate Transactions (a) involving aggregate payments or consideration in excess of $15.0 million, a resolution adopted by the majority of the board of directors of the Issuer approving such Affiliate Transaction and set forth in an Officer’s Certificate certifying that such Affiliate Transaction complies with clause (1) of this Section 4.11(a) and (b) involving aggregate payments or consideration in excess of $50.0 million, an opinion as to the fairness to the holders of such Affiliate Transaction from a financial point of view issued by an Independent Financial Advisor.

(b)The provisions of Section 4.11(a) hereof shall not apply to the following:

(1)transactions between or among the Issuer or any of its Restricted Subsidiaries;

(2)Restricted Payments permitted by Section 4.07 hereof (other than clause (7) of Section 4.07(b) hereof) and the definition of “Permitted Investments” (other than pursuant to clause (3) thereof) ;

(3)the payment of management, consulting, monitoring and advisory fees and related expenses and termination fees pursuant to the Sponsor Management Agreement not to exceed the amount set forth in the Sponsor Management Agreement as in effect on the Issue Date or any amendment thereto (so long as any such amendment is not disadvantageous to the Holders in the good faith judgment of the board of directors of the Issuer when taken as a whole as compared to the Sponsor Management Agreement as in effect on the Issue Date);

(4)the payment of customary compensation, benefits and reimbursement of reasonable out-of-pocket costs to, and indemnities provided for the benefit of, officers, directors, employees or consultants of the Issuer, any of its direct or indirect parent companies or any of its Restricted Subsidiaries;

(5)transactions in which the Issuer or any of its Restricted Subsidiaries, as the case may be, delivers to the Trustee a letter from an Independent Financial Advisor stating that such transaction is fair to the Issuer or such Restricted Subsidiary from a financial point of view or stating that the terms are not materially less favorable to the Issuer or its relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction by the Issuer or such Restricted Subsidiary with an unrelated Person on an arm’s-length basis;

(6)any agreement as in effect as of the Issue Date, or any amendment thereto (so long as any such amendment is not disadvantageous to the Holders in any material respect in the

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good faith judgment of the board of directors of the Issuer when taken as a whole as compared to the applicable agreement as in effect on the Issue Date);

(7)the existence of, or the performance by the Issuer or any of its Restricted Subsidiaries of its obligations under the terms of, any stockholders agreement (including any registration rights agreement or purchase agreement related thereto) to which it is a party as of the Issue Date and any similar agreements which it may enter into thereafter; provided, however, that the existence of, or the performance by the Issuer or any of its Restricted Subsidiaries of obligations under any future amendment to any such existing agreement or under any similar agreement entered into after the Issue Date shall only be permitted by this clause (7) to the extent that the terms of any such amendment or new agreement are not otherwise disadvantageous to the Holders in the good faith judgment of the board of directors of the Issuer when taken as a whole;

(8)the Transactions and the payment of all fees and expenses related to the Transactions, in each case as disclosed in the Offering Memorandum;

(9)any agreement between any Person and an Affiliate of such Person existing at the time such Person is acquired by or merged into the Issuer or a Restricted Subsidiary; provided, that such agreement was not entered into contemplation of such acquisition or merger, or any amendment thereto (so long as any such amendment is not disadvantageous to the Holders in the good faith judgment of the board of directors of the Issuer when taken as a whole as compared to the applicable agreement as in effect on the date of such acquisition or merger);

(10)transactions with customers, clients, suppliers, joint venture partners, authors or purchasers or sellers of goods or services, in each case in the ordinary course of business and otherwise in compliance with the terms of this Indenture which are fair to the Issuer and its Restricted Subsidiaries, in the reasonable determination of the board of directors of the Issuer or the senior management thereof, or are on terms at least as favorable as would reasonably have been obtained at such time from an unaffiliated party;

(11)the issuance of Equity Interests (other than Disqualified Stock) of the Issuer to any Affiliate;

(12)payments by the Issuer or any of its Restricted Subsidiaries to any of the Investors made for any financial advisory, financing, underwriting or placement services or in respect of other investment banking activities, including, without limitation, in connection with acquisitions or divestitures which payments are approved by a majority of the board of directors of the Issuer in good faith;

(13)payments or loans (or cancellation of loans) to employees or consultants of the Issuer, any of its direct or indirect parent companies or any of its Restricted Subsidiaries and employment agreements, stock option plans and other similar arrangements with such employees or consultants which, in each case, are approved by the Issuer in good faith; and

(14)investments by the Investors in securities of the Issuer so long as (i) the investment is being offered generally to other investors on the same or more favorable terms and (ii) the investment constitutes less than 5% of the proposed or outstanding issue amount of such class of securities.

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Section 4.12Liens.

The Issuer shall not, and shall not permit any Guarantor to, directly or indirectly, create, incur, assume or suffer to exist any Lien (except Permitted Liens) that secures obligations under any Indebtedness ranking pari passu with or subordinated to the Notes or any related Guarantee, on any asset or property of the Issuer or any Guarantor, or any income or profits therefrom, or assign or convey any right to receive income therefrom, unless:

(1)in the case of Liens securing Subordinated Indebtedness, the Notes and related Guarantees are secured by a Lien on such property, assets or proceeds that is senior in priority to such Liens; or

(2)in all other cases, the Notes and the Guarantees are equally and ratably secured or are secured by a Lien on such property, assets or proceeds that is senior in priority to such Liens.

Any Lien created for the benefit of holders of the Notes pursuant to this Section 4.12 shall be deemed automatically and unconditionally released and discharged upon the release and discharge of each of the Liens described in clauses (1) and (2) above.

Section 4.13Corporate Existence.

Subject to Article 5 hereof, the Issuer shall do or cause to be done all things necessary to preserve and keep in full force and effect (i) its corporate existence and the corporate, partnership, limited liability company or other existence of each of its Restricted Subsidiaries, in accordance with the respective organizational documents (as the same may be amended from time to time) of the Issuer or any such Restricted Subsidiary and (ii) the rights (charter and statutory), licenses and franchises of the Issuer and its Restricted Subsidiaries; provided that the Issuer shall not be required to preserve any such right, license or franchise, or the corporate, partnership, limited liability company or other existence of any of its Restricted Subsidiaries, if the Issuer in good faith shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Issuer and its Restricted Subsidiaries, taken as a whole.

Section 4.14Offer to Repurchase Upon Change of Control.

(a)If a Change of Control occurs, unless the Issuer has previously or concurrently mailed a redemption notice with respect to all the outstanding Notes pursuant to Section 3.07 hereof, the Issuer shall make an offer to purchase all of the Notes pursuant to the offer described below (the “Change of Control Offer”) at a price in cash (the “Change of Control Payment”) equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest and Additional Interest, if any, to the date of purchase, subject to the right of Holders of the Notes of record on the relevant Record Date to receive interest due on the relevant Interest Payment Date.  Within 30 days following any Change of Control, the Issuer shall send notice of such Change of Control Offer by first-class mail, with a copy to the Trustee, to each Holder of Notes to the address of such Holder appearing in the security register with a copy to the Trustee, or otherwise in accordance with the procedures of DTC, with the following information:

(1)that a Change of Control Offer is being made pursuant to this Section 4.14 and that all Notes properly tendered pursuant to such Change of Control Offer will be accepted for payment by the Issuer;

(2)the purchase price and the purchase date, which will be no earlier than 30 days nor later than 60 days from the date such notice is mailed (the “Change of Control Payment Date”);

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(3)that any Note not properly tendered will remain outstanding and continue to accrue interest;

(4)that unless the Issuer defaults in the payment of the Change of Control Payment, all Notes accepted for payment pursuant to the Change of Control Offer will cease to accrue interest on the Change of Control Payment Date;

(5)that Holders electing to have any Notes purchased pursuant to a Change of Control Offer will be required to surrender such Notes, with the form entitled “Option of Holder to Elect Purchase” on the reverse of such Notes completed, to the Paying Agent specified in the notice at the address specified in the notice prior to the close of business on the third Business Day preceding the Change of Control Payment Date;

(6)that Holders shall be entitled to withdraw their tendered Notes and their election to require the Issuer to purchase such Notes; provided that the Paying Agent receives, not later than the close of business on the 30th day following the date of the Change of Control notice, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder of the Notes, the principal amount of Notes tendered for purchase, and a statement that such Holder is withdrawing its tendered Notes and its election to have such Notes purchased;

(7)that if the Issuer is redeeming less than all of the Notes, the Holders of the remaining Notes will be issued new Notes and such new Notes will be equal in principal amount to the unpurchased portion of the Notes surrendered; the unpurchased portion of the Notes must be equal to $2,000 or an integral multiple of $1,000 in excess thereof; and

(8)the other instructions, as determined by the Issuer, consistent with this Section 4.14, that a Holder must follow.

The notice, if mailed in a manner herein provided, shall be conclusively presumed to have been given, whether or not the Holder receives such notice.  If (a) the notice is mailed in a manner herein provided and (b) any Holder fails to receive such notice or a Holder receives such notice but it is defective, such Holder’s failure to receive such notice or such defect shall not affect the validity of the proceedings for the purchase of the Notes as to all other Holders that properly received such notice without defect.  The Issuer shall comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws or regulations are applicable in connection with the repurchase of Notes pursuant to a Change of Control Offer.  To the extent that the provisions of any securities laws or regulations conflict with the provisions of this Indenture, the Issuer shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under this Indenture by virtue thereof.

(b)On the Change of Control Payment Date, the Issuer shall, to the extent permitted by law,

(1)accept for payment all Notes issued by it or portions thereof properly tendered pursuant to the Change of Control Offer;

(2)deposit with the Paying Agent an amount equal to the aggregate Change of Control Payment in respect of all Notes or portions thereof so tendered; and

(3)deliver, or cause to be delivered, to the Trustee for cancellation the Notes so accepted together with an Officer’s Certificate to the Trustee stating that such Notes or portions thereof have been tendered to and purchased by the Issuer.

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(c)The Issuer shall not be required to make a Change of Control Offer following a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in this Section 4.14 applicable to a Change of Control Offer made by the Issuer and purchases all Notes validly tendered and not withdrawn under such Change of Control Offer. Notwithstanding anything to the contrary herein, a Change of Control Offer may be made in advance of a Change of Control, conditional upon such Change of Control, if a definitive agreement is in place for the Change of Control at the time of making of the Change of Control Offer.

(d)Other than as specifically provided in this Section 4.14, any purchase pursuant to this Section 4.14 shall be made pursuant to the provisions of Sections 3.02, 3.05 and 3.06 hereof.

Section 4.15Additional Subsidiary Guarantees.

The Issuer shall not permit any of its Wholly-Owned Subsidiaries that are Restricted Subsidiaries (and non-Wholly-Owned Subsidiaries if such non-Wholly-Owned Subsidiaries guarantee other capital markets debt securities), other than a Guarantor, to guarantee the payment of any Indebtedness of the Issuer or any other Guarantor unless:

(1)such Restricted Subsidiary within 30 days executes and delivers a supplemental indenture to this Indenture, the form of which is attached as Exhibit D hereto, providing for a Guarantee by such Restricted Subsidiary, except that with respect to a guarantee of Indebtedness of the Issuer or any Guarantor:

(a)if the Notes or such Guarantor’s Guarantee of the Notes is subordinated in right of payment to such Indebtedness, the Guarantee under the supplemental indenture shall be subordinated to such Restricted Subsidiary’s guarantee with respect to such Indebtedness substantially to the same extent as the Notes or the Guarantee of the Notes are subordinated to such Indebtedness; and

(b)if such Indebtedness is by its express terms subordinated in right of payment to the Notes or such Guarantor’s Guarantee of the Notes, any such guarantee by such Restricted Subsidiary with respect to such Indebtedness shall be subordinated in right of payment to the Guarantee of the Notes pursuant to the supplemental indenture substantially to the same extent as such Indebtedness is subordinated to the Notes or the Guarantor’s Guarantee of the Notes;

(2)such Restricted Subsidiary waives, and shall not in any manner whatsoever claim or take the benefit or advantage of, any rights of reimbursement, indemnity or subrogation or any other rights against the Issuer or any other Restricted Subsidiary as a result of any payment by such Restricted Subsidiary under its Guarantee; and

(3)such Restricted Subsidiary shall deliver to the Trustee an Opinion of Counsel to the effect that:

(a)such Guarantee has been duly executed and authorized; and

(b)such Guarantee constitutes a valid, binding and enforceable obligation of such Restricted Subsidiary, except insofar as enforcement thereof may be limited by bankruptcy, insolvency or similar laws (including, without limitation, all laws relating to fraudulent transfers) and except insofar as enforcement thereof is subject to general principles of equity;

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provided that this Section 4.15 shall not be applicable to (x) any guarantee of any Restricted Subsidiary that existed at the time such Person became a Restricted Subsidiary and was not incurred in connection with, or in contemplation of, such Person becoming a Restricted Subsidiary (y) a Guarantee by a Foreign Subsidiary of Indebtedness of a Foreign Subsidiary.

Section 4.16Limitation on Layering.

Notwithstanding anything to the contrary, the Issuer shall not, and shall not permit any Guarantor to, directly or indirectly, incur any Indebtedness (including Acquired Indebtedness) that is subordinate in right of payment to any Senior Indebtedness of the Issuer or such Guarantor, as the case may be, unless such Indebtedness is either:

(a)equal in right of payment with the Notes or such Guarantor’s Guarantee of the Notes, as the case may be; or

(b)expressly subordinated in right of payment to the Notes or such Guarantor’s Guarantee of the Notes, as the case may be.

For the purposes of this Indenture, (1) Indebtedness that is unsecured is not deemed to be subordinated or junior to Secured Indebtedness merely because it is unsecured, and (2) Senior Indebtedness is not deemed to be subordinated or junior to any other Senior Indebtedness merely because it has a junior priority with respect to the same collateral.

ARTICLE 5

SUCCESSORS

Section 5.01Merger, Consolidation or Sale of All or Substantially All Assets.

(a)The Issuer may not consolidate or merge with or into or wind up into (whether or not the Issuer is the surviving corporation), or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets, in one or more related transactions, to any Person unless:

(1)the Issuer is the surviving corporation or the Person formed by or surviving any such consolidation or merger (if other than the Issuer) or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made is a corporation organized or existing under the laws of the jurisdiction of organization of the Issuer or the laws of the United States, any state thereof, the District of Columbia, or any territory thereof (such Person, as the case may be, being herein called the “Successor Company”);

(2)the Successor Company, if other than the Issuer, expressly assumes all the obligations of the Issuer under the Notes and this Indenture pursuant to a supplemental indenture or other documents or instruments in form reasonably satisfactory to the Trustee;

(3)immediately after such transaction, no Default exists;

(4)immediately after giving pro forma effect to such transaction and any related financing transactions, as if such transactions had occurred at the beginning of the applicable four-quarter period,

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(A)the Successor Company would be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Consolidated Leverage Ratio test set forth in Section 4.09(a) hereof, or

(B)the Consolidated Leverage Ratio for the Successor Company, the Issuer and its Restricted Subsidiaries would be less than such ratio for the Issuer and its Restricted Subsidiaries immediately prior to such transaction;

(5)each Guarantor, unless it is the other party to the transactions described above, shall have by supplemental indenture confirmed that its Guarantee shall apply to such Person’s obligations under this Indenture, the Notes and the Registration Rights Agreement; and

(6)the Issuer shall have delivered to the Trustee an Officer’s Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer and such supplemental indentures, if any, comply with this Indenture.

(b)The Successor Company shall succeed to, and be substituted for the Issuer under this Indenture, the Guarantees and the Notes, as applicable, except that in the case of a lease of all or substantially all of its assets, the predecessor shall not be released from the obligation to pay principal of and interest on the Notes. Notwithstanding clauses (3) and (4) of Section 5.01(a) hereof,

(x)any Restricted Subsidiary may consolidate with or merge into or transfer all or part of its properties and assets to the Issuer, and

(y)the Issuer may merge with an Affiliate of the Issuer solely for the purpose of reincorporating the Issuer in a State of the United States, the District of Columbia or any territory of the United States, so long as the amount of Indebtedness, Disqualified Stock and Preferred Stock of the Issuer and its Restricted Subsidiaries is not increased thereby.

(c)Subject to certain limitations described in this Indenture governing release of a Guarantee upon the sale, disposition or transfer of a Guarantor, no Guarantor shall, and the Issuer shall not permit any Guarantor to, consolidate or merge with or into or wind up into (whether or not the Issuer or Guarantor is the surviving corporation), or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets, in one or more related transactions, to any Person unless:

(1)(A) such Guarantor is the surviving corporation or the Person formed by or surviving any such consolidation or merger (if other than such Guarantor) or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made is a corporation, partnership, limited partnership, limited liability company or trust organized or existing under the laws of the jurisdiction of organization of such Guarantor, as the case may be, or the laws of the United States, any state thereof, the District of Columbia, or any territory thereof (such Guarantor or such Person, as the case may be, being herein called the “Successor Person”);

(B)the Successor Person, if other than such Guarantor, expressly assumes all the obligations of such Guarantor under this Indenture and such Guarantor’s related Guarantee pursuant to a supplemental indenture or other documents or instruments in form reasonably satisfactory to the Trustee;

(C)immediately after such transaction, no Default exists; and

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(D)the Issuer shall have delivered to the Trustee an Officer’s Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer and such supplemental indenture, if any, comply with this Indenture; or

(2)if the transaction constitutes an Asset Sale, such transaction is made in compliance with Section 4.10 hereof.

(d)Subject to certain limitations described in this Indenture, the Successor Person shall succeed to, and be substituted for, such Guarantor under this Indenture and such Guarantor’s Guarantee.  Notwithstanding the foregoing, any Guarantor may merge into or transfer all or part of its properties and assets to another Guarantor or the Issuer or merge with a Restricted Subsidiary of the Issuer solely for the purpose of reincorporating the Guarantor in a State of the United States, the District of Columbia or any territory of the United States, as long as the amount of Indebtedness, Preferred Stock and Disqualified Stock of such Guarantor is not increased thereby.

(e)Notwithstanding anything to the contrary, the mergers contemplated by the Transaction Agreement shall be permitted without compliance with this Section 5.01.

(f)For purposes of this Section 5.01, the sale, lease, conveyance, assignment, transfer or other disposition of all or substantially all of the properties and assets of one or more Subsidiaries of the Issuer, which properties and assets, if held by the Issuer instead of such Subsidiaries, would constitute all or substantially all of the properties and assets of the Issuer on a consolidated basis, shall be deemed to be the transfer of all or substantially all of the properties and assets of the Issuer.

Section 5.02Successor Entity Substituted.

Upon any consolidation or merger, or any sale, assignment, transfer, lease, conveyance or other disposition of all or substantially all of the assets of the Issuer in accordance with Section 5.01 hereof, the successor corporation, limited liability company or limited partnership, as the case may be, formed by such consolidation or into or with which the Issuer is merged or to which such sale, assignment, transfer, lease, conveyance or other disposition is made shall succeed to, and be substituted for (so that from and after the date of such consolidation, merger, sale, lease, conveyance or other disposition, the provisions of this Indenture referring to the Issuer shall refer instead to the successor entity and not to the Issuer), and may exercise every right and power of the Issuer under this Indenture with the same effect as if such successor Person had been named as the Issuer herein; provided that the predecessor Issuer shall not be relieved from the obligation to pay the principal of and interest and Additional Interest, if any, on the Notes except in the case of a sale, assignment, transfer, conveyance or other disposition of all of the Issuer’s assets that meets the requirements of Section 5.01 hereof.

ARTICLE 6

DEFAULTS AND REMEDIES

Section 6.01Events of Default.

(a)An “Event of Default” wherever used herein, means any one of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body):

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(1)default in payment when due and payable, upon redemption, acceleration or otherwise, of principal of, or premium, if any, on the Notes (whether or not prohibited by the subordination provisions of this Indenture);

(2)default for 30 days or more in the payment when due of interest or Additional Interest on or with respect to the Notes (whether or not prohibited by the subordination provisions of this Indenture);

(3)failure by the Issuer or any Guarantor for 60 days after receipt of written notice given by the Trustee or the Holders of not less 25% in principal amount of the Notes to comply with any of its obligations, covenants or agreements (other than a default referred to in clauses (1) and (2) above) contained in this Indenture or the Notes (except that in the case of a default with respect to Section 5.01 hereof, such default shall constitute an Event of Default with such notice requirement but without such passage of time requirement);

(4)default under any mortgage, indenture or instrument under which there is issued or by which there is secured or evidenced any Indebtedness for money borrowed by the Issuer or any of its Restricted Subsidiaries or the payment of which is guaranteed by the Issuer or any of its Restricted Subsidiaries, other than Indebtedness owed to the Issuer or a Restricted Subsidiary, whether such Indebtedness or guarantee now exists or is created after the issuance of the Notes, if both:

(a)such default either results from the failure to pay any principal of such Indebtedness at its stated final maturity (after giving effect to any applicable grace periods) or relates to an obligation other than the obligation to pay principal of any such Indebtedness at its stated final maturity and results in the holder or holders of such Indebtedness causing such Indebtedness to become due prior to its stated maturity; and

(b)the principal amount of such Indebtedness, together with the principal amount of any other such Indebtedness in default for failure to pay principal at stated final maturity (after giving effect to any applicable grace periods), or the maturity of which has been so accelerated, aggregate $25.0 million (or its foreign currency equivalent) or more at any one time outstanding;

(5)failure by the Issuer or any Significant Subsidiary or any group of Subsidiaries that, taken together as of the date of the most recent audited financial statements of the Issuer, would constitute a Significant Subsidiary to pay final judgments aggregating in excess of $25.0 million (or its foreign currency equivalent), which final judgments remain unpaid, undischarged and unstayed for a period of more than 60 days after such judgment becomes final, and in the event such judgment is covered by insurance, an enforcement proceeding has been commenced by any creditor upon such judgment or decree which is not promptly stayed;

(6)the Issuer, any Restricted Subsidiary that is a Significant Subsidiary or any group of Subsidiaries that, taken together as of the date of the most recent audited financial statements of the Issuer, would constitute a Significant Subsidiary, pursuant to or within the meaning of any Bankruptcy Law:

(i)commences proceedings to be adjudicated bankrupt or insolvent;

(ii)consents to the institution of bankruptcy or insolvency proceedings against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under applicable Bankruptcy law;

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(iii)consents to the appointment of a receiver, liquidator, assignee, trustee, sequestrator or other similar official of it or for all or substantially all of its property;

(iv)makes a general assignment for the benefit of its creditors; or

(v)generally is not paying its debts as they become due;

(7)a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that:

(i)is for relief against the Issuer, any Restricted Subsidiary that is a Significant Subsidiary or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary, in a proceeding in which the Issuer, any such Restricted Subsidiary that is a Significant Subsidiary or any group of Subsidiaries that, taken together as of the date of the most recent audited financial statements of the Issuer, would constitute a Significant Subsidiary, is to be adjudicated bankrupt or insolvent;

(ii)appoints a receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Issuer, any Restricted Subsidiary that is a Significant Subsidiary or any group of Subsidiaries that, taken together as of the date of the most recent audited financial statements of the Issuer, would constitute a Significant Subsidiary, or for all or substantially all of the property of the Issuer, any Restricted Subsidiary that is a Significant Subsidiary or any group of Subsidiaries that, taken together as of the date of the most recent audited financial statements of the Issuer, would constitute a Significant Subsidiary; or

(iii)orders the liquidation of the Issuer, or any Restricted Subsidiary that is a Significant Subsidiary or any group of Subsidiaries that, taken together as of the date of the most recent audited financial statements of the Issuer, would constitute a Significant Subsidiary;

and the order or decree remains unstayed and in effect for 60 consecutive days; or

(8)the Guarantee of any Significant Subsidiary or any group of Subsidiaries that, taken together as of the date of the most recent audited financial statements of the Issuer, would constitute a Significant Subsidiary shall for any reason cease to be in full force and effect or be declared null and void or any responsible officer of any Guarantor that is a Significant Subsidiary, as the case may be, denies that it has any further liability under its Guarantee or gives notice to such effect, other than by reason of the termination of this Indenture or the release of any such Guarantee in accordance with this Indenture.

(b)In the event of any Event of Default specified in clause (4) of Section 6.01(a) hereof, such Event of Default and all consequences thereof (excluding any resulting payment default, other than as a result of acceleration of the Notes) shall be annulled, waived and rescinded, automatically and without any action by the Trustee or the Holders, if within 20 days after such Event of Default arose:

(1)the Indebtedness or guarantee that is the basis for such Event of Default has been discharged; or

(2)holders thereof have rescinded or waived the acceleration, notice or action (as the case may be) giving rise to such Event of Default; or

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(3)the default that is the basis for such Event of Default has been cured.

Section 6.02Acceleration.

(a)If any Event of Default (other than of a type specified in clause (6) or (7) of Section 6.01(a) hereof) occurs and is continuing under this Indenture, the Trustee or the Holders of at least 25% in principal amount of the then total outstanding Notes may declare the principal, premium, if any, interest and any other monetary obligations on all the then outstanding Notes to be due and payable immediately; provided, however, that so long as any Indebtedness permitted to be incurred under this Indenture as part of the Senior Credit Facility shall be outstanding, no such acceleration shall be effective until the earlier of:

(1) acceleration of any such Indebtedness under the Senior Credit Facility; or

(2) five Business Days after the giving of written notice of such acceleration to the Issuer and the administrative agent under the Senior Credit Facility.

Upon the effectiveness of such declaration, such principal and interest shall be due and payable immediately. Notwithstanding the foregoing, in the case of an Event of Default arising under clause (6) or (7) of Section 6.01(a) hereof, all outstanding Notes will become due and payable without further action or notice. The Trustee may withhold from the Holders notice of any continuing Default, except a Default relating to the payment of principal, premium, if any, or interest, if it determines that withholding notice is in their interest. In addition, the Trustee shall have no obligation to accelerate the Notes if in the best judgment of the Trustee acceleration is not in the best interest of the Holders of the Notes.

(b)At any time after a declaration of acceleration with respect to the Notes, the Holders of a majority in principal amount of the Notes may rescind and cancel such declaration and its consequences:

(1)if the rescission would not conflict with any judgment or decree;

(2)if all existing Events of Default have been cured or waived except nonpayment of principal or interest that has become due solely because of the acceleration;

(3)to the extent the payment of such interest is lawful, interest on overdue installments of interest and overdue principal, which has become due otherwise than by such declaration of acceleration, has been paid;

(4)if the Issuer has paid the Trustee its reasonable compensation and reimbursed the Trustee for its expenses, disbursements and advances; and

(5)in the event of the cure or waiver of an Event of Default of the type described in clause (4) of Section 6.01(a) hereof, the Trustee shall have received an Officer’s Certificate and an Opinion of Counsel that such Event of Default has been cured or waived.

No such rescission shall affect any subsequent Default or impair any right consequent thereto.

Section 6.03Other Remedies.

If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal, premium, if any, and interest on the Notes or to enforce the performance of any provision of the Notes or this Indenture.

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The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding.  A delay or omission by the Trustee or any Holder of a Note in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default.  All remedies are cumulative to the extent permitted by law.

Section 6.04Waiver of Past Defaults.

Subject to Section 6.02 hereof, Holders of not less than a majority in aggregate principal amount of the then outstanding Notes by notice to the Trustee may on behalf of the Holders of all of the Notes waive any existing Default and its consequences hereunder, except a continuing Default in the payment of the principal of, premium, if any, Additional Interest, if any, or interest on, any Note held by a non-consenting Holder (including in connection with an Asset Sale Offer or a Change of Control Offer); provided, subject to Section 6.02 hereof, that the Holders of a majority in aggregate principal amount of the then outstanding Notes may rescind an acceleration and its consequences, including any related payment default that resulted from such acceleration.  Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereon.

Section 6.05Control by Majority.

Subject to Sections 7.01(e), 7.02(f), 7.02(k) and 7.07, Holders of a majority in principal amount of the then total outstanding Notes may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee.  The Trustee, however, may refuse to follow any direction that conflicts with law or this Indenture or that the Trustee determines is unduly prejudicial to the rights of any other Holder of a Note or that would involve the Trustee in personal liability.

Section 6.06Limitation on Suits.

Subject to Section 6.07 hereof, no Holder of a Note may pursue any remedy with respect to this Indenture or the Notes unless:

(1)such Holder has previously given the Trustee notice that an Event of Default is continuing;

(2)Holders of at least 25% in principal amount of the total outstanding Notes have requested the Trustee to pursue the remedy;

(3)Holders of the Notes have offered the Trustee reasonable security or indemnity against any loss, liability or expense;

(4)the Trustee has not complied with such request within 60 days after the receipt thereof and the offer of security or indemnity; and

(5)Holders of a majority in principal amount of the total outstanding Notes have not given the Trustee a direction inconsistent with such request within such 60-day period.

A Holder of a Note may not use this Indenture to prejudice the rights of another Holder of a Note or to obtain a preference or priority over another Holder of a Note.

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Section 6.07Rights of Holders of Notes to Receive Payment.

Notwithstanding any other provision of this Indenture, the right of any Holder of a Note to receive payment of principal, premium, if any, and Additional Interest, if any, and interest on the Note, on or after the respective due dates expressed in the Note (including in connection with an Asset Sale Offer or a Change of Control Offer), or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder.

Section 6.08Collection Suit by Trustee.

If an Event of Default specified in Section 6.01(a)(1) or (2) hereof occurs and is continuing, the Trustee is authorized to recover judgment in its own name and as trustee of an express trust against the Issuer for the whole amount of principal of, premium, if any, and Additional Interest, if any, and interest remaining unpaid on the Notes and interest on overdue principal and, to the extent lawful, interest and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel.

Section 6.09Restoration of Rights and Remedies.

If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case, subject to any determination in such proceedings, the Issuer, the Trustee and the Holders shall be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding has been instituted.

Section 6.10Rights and Remedies Cumulative.

Except as otherwise provided with respect to the replacement or payment of mutilated, destroyed, lost or stolen Notes in Section 2.07 hereof, no right or remedy herein conferred upon or reserved to the Trustee or to the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise.  The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy.

Section 6.11Delay or Omission Not Waiver.

No delay or omission of the Trustee or of any Holder of any Note to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein.  Every right and remedy given by this Article or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be.

Section 6.12Trustee May File Proofs of Claim.

The Trustee is authorized to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and the Holders of the Notes allowed in any judicial proceedings relative to the Issuer (or any other obligor upon the Notes including the Guarantors), their creditors or their property and shall be entitled

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and empowered to participate as a member in any official committee of creditors appointed in such matter and to collect, receive and distribute any money or other property payable or deliverable on any such claims and any custodian in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee, and in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof.  To the extent that the payment of any such compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof out of the estate in any such proceeding, shall be denied for any reason, payment of the same shall be secured by a Lien on, and shall be paid out of, any and all distributions, dividends, money, securities and other properties that the Holders may be entitled to receive in such proceeding whether in liquidation or under any plan of reorganization or arrangement or otherwise.  Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding.

Section 6.13Priorities.

If the Trustee collects any money pursuant to this Article 6, it shall pay out the money in the following order:

(i)to the Trustee, its agents and attorneys for amounts due under Section 7.07 hereof, including payment of all compensation, expenses and liabilities incurred, and all advances made, by the Trustee and the costs and expenses of collection;

(ii)to holders of Senior Indebtedness of the Issuer known to the Trustee and, if such money or property has been collected from a Guarantor, to holders of Senior Indebtedness of such Guarantor, in each case to the extent required by Article 10 and/or Article 12 hereof, as applicable;

(iii)to Holders of Notes for amounts due and unpaid on the Notes for principal, premium, if any, and Additional Interest, if any, and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal, premium, if any, and Additional Interest, if any, and interest, respectively; and

(iv)to the Issuer or to such party as a court of competent jurisdiction shall direct including a Guarantor, if applicable.

The Trustee may fix a record date and payment date for any payment to Holders of Notes pursuant to this Section 6.13.

Section 6.14Undertaking for Costs.

In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as a Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys’ fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant.  This Section 6.14 does not apply to a suit by the Trustee, a suit by a Holder of a Note pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in principal amount of the then outstanding Notes.

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ARTICLE 7

TRUSTEE

Section 7.01Duties of Trustee.

(a)If an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in its exercise, as a prudent person would exercise or use under the circumstances in the conduct of such person’s own affairs.

(b)Except during the continuance of an Event of Default:

(i)the duties of the Trustee shall be determined solely by the express provisions of this Indenture and the Trustee need perform only those duties that are specifically set forth in this Indenture and no others, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and

(ii)in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture.  However, in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture (but need not confirm or investigate the accuracy of mathematical calculations or other facts stated therein).

(c)The Trustee may not be relieved from liabilities for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that:

(i)this paragraph does not limit the effect of paragraph (b) of this Section 7.01;

(ii)the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it is proved in a court of competent jurisdiction that the Trustee was negligent in ascertaining the pertinent facts; and

(iii)the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05 hereof.

(d)Whether or not therein expressly so provided, every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b) and (c) of this Section 7.01.

(e)The Trustee shall be under no obligation to exercise any of its rights or powers under this Indenture at the request or direction of any of the Holders of the Notes unless the Holders have offered to the Trustee reasonable indemnity or security against any loss, liability or expense.

(f)The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Issuer.  Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law.

Section 7.02Rights of Trustee.

(a)The Trustee may conclusively rely upon any document believed by it to be genuine and to have been signed or presented by the proper Person.  The Trustee need not investigate any

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fact or matter stated in the document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Issuer, personally or by agent or attorney at the sole cost of the Issuer and shall incur no liability or additional liability of any kind by reason of such inquiry or investigation.  Any permissive right or authority granted to the Trustee shall not be construed as a mandatory duty.

(b)Before the Trustee acts or refrains from acting, it may require an Officer’s Certificate or an Opinion of Counsel or both subject to the other provisions of this Indenture.  The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officer’s Certificate or Opinion of Counsel.  The Trustee may consult with counsel of its selection and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection from liability in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon.

(c)The Trustee may act through its attorneys and agents and shall not be responsible for the misconduct or negligence of any agent or attorney appointed with due care.

(d)The Trustee shall not be liable for any action it takes or omits to take in good faith that it believes to be authorized or within the rights or powers conferred upon it by this Indenture.

(e)Unless otherwise specifically provided in this Indenture, any demand, request, direction or notice from the Issuer shall be sufficient if signed by an Officer of the Issuer.  The Trustee shall have no duty to inquire as to the performance of the Issuer’s or any Guarantor’s covenants herein.

(f)None of the provisions of this Indenture shall require the Trustee to expend or risk its own funds or otherwise to incur any liability, financial or otherwise, in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers if it shall have reasonable grounds for believing that repayment of such funds or indemnity satisfactory to it against such risk or liability is not assured to it.

(g)The Trustee shall not be deemed to have notice of any Default or Event of Default unless a Responsible Officer of the Trustee has actual knowledge thereof or unless written notice of any event which is in fact such a Default is received by the Trustee at the Corporate Trust Office of the Trustee, and such notice references the existence of a Default or Event of Default, the Notes and this Indenture.

(h)In no event shall the Trustee be responsible or liable for special, indirect, or consequential loss or damage of any kind whatsoever (including, but not limited to, loss of profit) irrespective of whether the Trustee has been advised of the likelihood of such loss or damage and regardless of the form of action.

(i)The rights, privileges, protections, immunities and benefits given to the Trustee, including, without limitation, its right to be indemnified, are extended to, and shall be enforceable by, the Trustee in each of its capacities hereunder, and each agent, custodian and other Person employed to act hereunder.

(j)In the event the Issuer is required to pay Additional Interest, the Issuer will provide written notice to the Trustee of the Issuer’s obligation to pay Additional Interest no later than 15 days prior to the next Interest Payment Date, which notice shall set forth the amount of the Additional Interest to be paid by the Issuer.  The Trustee shall not at any time be under any duty or responsibility to any Holders to determine whether the Additional Interest is payable and the amount thereof.

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(k)The Trustee shall not be required to give any bond or surety in respect of the performance of its powers or duties.

(l)The Trustee may request that the Issuer deliver an Officer’s Certificate setting forth the names of individuals and/or titles of officers authorized at such time to take specified actions pursuant to this Indenture, which Officer’s Certificate may be signed by any person authorized to sign an Officer’s Certificate, including any Person specified as so authorized in any such certificate previously delivered and not superseded.

(m)The permissive rights of the Trustee enumerated herein shall not be construed as duties.

Section 7.03Individual Rights of Trustee.

The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Issuer or any Affiliate of the Issuer with the same rights it would have if it were not Trustee.  However, in the event that the Trustee acquires any conflicting interest it must eliminate such conflict within 90 days, apply to the SEC for permission to continue as trustee or resign.  Any Agent may do the same with like rights and duties.  The Trustee is also subject to Sections 7.10 and 7.11 hereof.

Section 7.04Trustee’s Disclaimer.

The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Notes, it shall not be accountable for the Issuer’s use of the proceeds from the Notes or any money paid to the Issuer or upon the Issuer’s direction under any provision of this Indenture, it shall not be responsible for the use or application of any money received by any Paying Agent other than the Trustee, and it shall not be responsible for any statement or recital herein or any statement in the Notes or any other document in connection with the sale of the Notes or pursuant to this Indenture other than its certificate of authentication.

Section 7.05Notice of Defaults.

If a Default occurs and is continuing and if it is known to the Trustee, the Trustee shall mail to Holders of Notes a notice of the Default within 90 days after it occurs.  Except in the case of a Default relating to the payment of principal, premium, if any, or interest on any Note, the Trustee may withhold from the Holders notice of any continuing Default if and so long as a committee of its Responsible Officers in good faith determines that withholding the notice is in the interests of the Holders of the Notes.  The Trustee shall not be deemed to know of any Default unless a Responsible Officer of the Trustee has actual knowledge thereof or unless written notice of any event which is in fact such a Default is received by the Trustee at the Corporate Trust Office of the Trustee and references a Default or Event of Default.

Section 7.06Reports by Trustee to Holders of the Notes.

Within 60 days after each May 15, beginning with the May 15 following the date of this Indenture, and for so long as Notes remain outstanding, the Trustee shall mail to the Holders of the Notes a brief report dated as of such reporting date that complies with Trust Indenture Act Section 313(a) (but if no event described in Trust Indenture Act Section 313(a) has occurred within the twelve months preceding the reporting date, no report need be transmitted).  The Trustee also shall comply with Trust Indenture Act Section 313(b)(2).  The Trustee shall also transmit by mail all reports as required by Trust Indenture Act Section 313(c).

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A copy of each report at the time of its mailing to the Holders of Notes shall be mailed to the Issuer and filed with the SEC and each stock exchange on which the Notes are listed in accordance with Trust Indenture Act Section 313(d).  The Issuer shall promptly notify the Trustee when the Notes are listed on any stock exchange.

Section 7.07Compensation and Indemnity.

The Issuer and the Guarantors, jointly and severally, shall pay to the Trustee from time to time such compensation for its acceptance of this Indenture and services hereunder as the parties shall agree in writing from time to time.  The Trustee’s compensation shall not be limited by any law on compensation of a trustee of an express trust.  The Issuer shall reimburse the Trustee promptly upon request for all reasonable disbursements, advances and expenses incurred or made by it in addition to the compensation for its services.  Such expenses shall include the reasonable compensation, disbursements and expenses of the Trustee’s agents and counsel.

The Issuer and the Guarantors, jointly and severally, shall indemnify the Trustee for, and hold the Trustee harmless against, any and all loss, damage, claims, liability or expense (including attorneys’ fees) incurred by it in connection with the acceptance or administration of this trust and the performance of its duties hereunder (including the costs and expenses of enforcing this Indenture against the Issuer or any of the Guarantors (including this Section 7.07) or defending itself against any claim whether asserted by any Holder, the Issuer or any Guarantor, or liability in connective with the acceptance, exercise or performance of any of its powers or duties hereunder).  The Trustee shall notify the Issuer promptly of any claim for which it may seek indemnity.  Failure by the Trustee to so notify the Issuer shall not relieve the Issuer of its obligations hereunder.  The Issuer shall defend the claim and the Trustee may have separate counsel and the Issuer shall pay the fees and expenses of such counsel.  The Issuer needs not reimburse any expense or indemnify against any loss, liability or expense incurred by the Trustee through the Trustee’s own willful misconduct, negligence or bad faith.

The obligations of the Issuer under this Section 7.07 shall survive the satisfaction and discharge of this Indenture or the earlier resignation or removal of the Trustee.

To secure the payment obligations of the Issuer and the Guarantors in this Section 7.07, the Trustee shall have a Lien prior to the Notes on all money or property held or collected by the Trustee, except that held in trust to pay principal and interest on particular Notes.  Such Lien shall survive the satisfaction and discharge of this Indenture.

When the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.01(a)(6) or (7) hereof occurs, the expenses and the compensation for the services (including the fees and expenses of its agents and counsel) are intended to constitute expenses of administration under any Bankruptcy Law.

The Trustee shall comply with the provisions of Trust Indenture Act Section 313(b)(2) to the extent applicable.

Section 7.08Replacement of Trustee.

A resignation or removal of the Trustee and appointment of a successor Trustee shall become effective only upon the successor Trustee’s acceptance of appointment as provided in this Section 7.08.  The Trustee may resign in writing at any time and be discharged from the trust hereby created by so notifying the Issuer.  The Holders of a majority in principal amount of the then outstanding Notes may remove the Trustee by so notifying the Trustee and the Issuer in writing.  The Issuer may remove the Trustee if:

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(a)the Trustee fails to comply with Section 7.10 hereof;

(b)the Trustee is adjudged a bankrupt or an insolvent or an order for relief is entered with respect to the Trustee under any Bankruptcy Law;

(c)a custodian or public officer takes charge of the Trustee or its property; or

(d)the Trustee becomes incapable of acting.

If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Issuer shall promptly appoint a successor Trustee.  Within one year after the successor Trustee takes office, the Holders of a majority in principal amount of the then outstanding Notes may appoint a successor Trustee to replace the successor Trustee appointed by the Issuer.

If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee (at the Issuer’s expense), the Issuer or the Holders of at least 10% in principal amount of the then outstanding Notes may petition any court of competent jurisdiction for the appointment of a successor Trustee.

If the Trustee, after written request by any Holder who has been a Holder for at least six months, fails to comply with Section 7.10 hereof, such Holder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee.

A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Issuer.  Thereupon, the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture.  The successor Trustee shall mail a notice of its succession to Holders.  The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee; provided all sums owing to the Trustee hereunder have been paid and subject to the Lien provided for in Section 7.07 hereof.  Notwithstanding replacement of the Trustee pursuant to this Section 7.08, the Issuer’s obligations under Section 7.07 hereof shall continue for the benefit of the retiring Trustee.

Section 7.09Successor Trustee by Merger, etc.

If the Trustee consolidates, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation, the successor corporation without any further act shall be the successor Trustee.

Section 7.10Eligibility; Disqualification.

There shall at all times be a Trustee hereunder that is a corporation organized and doing business under the laws of the United States of America or of any state thereof that is authorized under such laws to exercise corporate trustee power, that is subject to supervision or examination by federal or state authorities and that has a combined capital and surplus of at least $50,000,000 as set forth in its most recent published annual report of condition.

This Indenture shall always have a Trustee who satisfies the requirements of Trust Indenture Act Sections 310(a)(1), (2) and (5).  The Trustee is subject to Trust Indenture Act Section 310(b).

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Section 7.11Preferential Collection of Claims Against the Issuer.

The Trustee is subject to Trust Indenture Act Section 311(a), excluding any creditor relationship listed in Trust Indenture Act Section 311(b).  A Trustee who has resigned or been removed shall be subject to Trust Indenture Act Section 311(a) to the extent indicated therein.

ARTICLE 8

LEGAL DEFEASANCE AND COVENANT DEFEASANCE

Section 8.01Option to Effect Legal Defeasance or Covenant Defeasance.

The Issuer may, at its option and at any time, elect to have either Section 8.02 or 8.03 hereof applied to all outstanding Notes upon compliance with the conditions set forth below in this Article 8.

Section 8.02Legal Defeasance and Discharge.

Upon the Issuer’s exercise under Section 8.01 hereof of the option applicable to this Section 8.02, the Issuer and the Guarantors shall, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be deemed to have been discharged from their obligations with respect to all outstanding Notes and Guarantees on the date the conditions set forth below are satisfied (“Legal Defeasance”).  For this purpose, Legal Defeasance means that the Issuer shall be deemed to have paid and discharged the entire Indebtedness represented by the outstanding Notes, which shall thereafter be deemed to be “outstanding” only for the purposes of Section 8.05 hereof and the other Sections of this Indenture referred to in (a) and (b) below, and to have satisfied all of its other obligations under such Notes and this Indenture including that of the Guarantors (and the Trustee, on demand of and at the expense of the Issuer, shall execute proper instruments acknowledging the same), except for the following provisions which shall survive until otherwise terminated or discharged hereunder:

(a)the rights of Holders of Notes to receive payments in respect of the principal of, premium, if any, and interest on the Notes when such payments are due, solely out of the trust created pursuant to this Indenture referred to in Section 8.04 hereof;

(b)the Issuer’s obligations with respect to Notes concerning issuing temporary Notes, registration of such Notes, mutilated, destroyed, lost or stolen Notes and the maintenance of an office or agency for payment and money for security payments held in trust;

(c)the rights, powers, trusts, duties and immunities of the Trustee, and the Issuer’s obligations in connection therewith; and

(d)this Section 8.02.

Subject to compliance with this Article 8, the Issuer may exercise its option under this Section 8.02 notwithstanding the prior exercise of its option under Section 8.03 hereof.

Section 8.03Covenant Defeasance.

Upon the Issuer’s exercise under Section 8.01 hereof of the option applicable to this Section 8.03, the Issuer and the Guarantors shall, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, be released from their obligations under the covenants contained in Sections 4.03, 4.04, 4.05, 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.14, 4.15 and 4.16 hereof and clauses (4) and (5) of

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Section 5.01(a), Sections 5.01(c), 5.01(d) and 5.01(f) hereof with respect to the outstanding Notes on and after the date the conditions set forth in Section 8.04 hereof are satisfied (“Covenant Defeasance”), and the Notes shall thereafter be deemed not “outstanding” for the purposes of any direction, waiver, consent or declaration or act of Holders (and the consequences of any thereof) in connection with such covenants, but shall continue to be deemed “outstanding” for all other purposes hereunder (it being understood that such Notes shall not be deemed outstanding for accounting purposes).  For this purpose, Covenant Defeasance means that, with respect to the outstanding Notes, the Issuer may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply shall not constitute a Default or an Event of Default under Section 6.01 hereof, but, except as specified above, the remainder of this Indenture and such Notes shall be unaffected thereby.  In addition, upon the Issuer’s exercise under Section 8.01 hereof of the option applicable to this Section 8.03 hereof, subject to the satisfaction of the conditions set forth in Section 8.04 hereof, Sections 6.01(3), 6.01(4), 6.01(5), 6.01(6) (solely with respect to Restricted Subsidiaries that are Significant Subsidiaries or a group of Restricted Subsidiaries that, taken together as of the date of the most recent audited financial statements of the Issuer, would constitute a Restricted Subsidiary), 6.01(7) (solely with respect to Restricted Subsidiaries that are Significant Subsidiaries or a group of Restricted Subsidiaries that, taken together as of the date of the most recent audited financial statements of the Issuer, would constitute a Restricted Subsidiary) and 6.01(8) hereof shall not constitute Events of Default.

Section 8.04Conditions to Legal or Covenant Defeasance.

The following shall be the conditions to the application of either Section 8.02 or 8.03 hereof to the outstanding Notes:

In order to exercise either Legal Defeasance or Covenant Defeasance with respect to the Notes:

(1)the Issuer must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders of the Notes, cash in U.S. dollars, Government Securities, or a combination thereof, in such amounts as shall be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of, premium, if any, and interest due on the Notes on the stated maturity date or on the redemption date, as the case may be, of such principal, premium, if any, or interest on such Notes, and the Issuer must specify whether such Notes are being defeased to maturity or to a particular redemption date;

(2)in the case of Legal Defeasance, the Issuer shall have delivered to the Trustee an Opinion of Counsel reasonably acceptable to the Trustee confirming that, subject to customary assumptions and exclusions,

(a)the Issuer has received from, or there has been published by, the United States Internal Revenue Service a ruling, or

(b)since the issuance of the Notes, there has been a change in the applicable U.S. federal income tax law,

in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, subject to customary assumptions and exclusions, the Holders of the Notes will not recognize income, gain or loss for U.S. federal income tax purposes, as applicable, as a result of such Legal Defeasance and will be subject to U.S. federal income tax on the same amounts, in the same

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manner and at the same times as would have been the case if such Legal Defeasance had not occurred;

(3)in the case of Covenant Defeasance, the Issuer shall have delivered to the Trustee an Opinion of Counsel reasonably acceptable to the Trustee confirming that, subject to customary assumptions and exclusions, the Holders of the Notes will not recognize income, gain or loss for U.S. federal income tax purposes as a result of such Covenant Defeasance and will be subject to such tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred;

(4)no Default (other than that resulting from borrowing funds to be applied to make such deposit and any similar and simultaneous deposit relating to other Indebtedness and, in each case, the granting of Liens in connection therewith) shall have occurred and be continuing on the date of such deposit;

(5)such Legal Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a default under the Senior Credit Facility or any other material agreement or instrument (other than this Indenture) to which the Issuer or any Restricted Subsidiary is a party or by which the Issuer or any Restricted Subsidiary is bound (other than that resulting from borrowing funds to be applied to make such deposit and any similar and simultaneous deposit relating to other Indebtedness and, in each case, the granting of Liens in connection therewith);

(6)the Issuer shall have delivered to the Trustee an Opinion of Counsel to the effect that, as of the date of such opinion and subject to customary assumptions and exclusions following the deposit, the trust funds will not be subject to the effect of Section 547 of Title 11 of the United States Code;

(7)the Issuer shall have delivered to the Trustee an Officer’s Certificate stating that the deposit was not made by the Issuer with the intent of defeating, hindering, delaying or defrauding any creditors of the Issuer or any Guarantor or others; and

(8)the Issuer shall have delivered to the Trustee an Officer’s Certificate and an Opinion of Counsel (which Opinion of Counsel may be subject to customary assumptions and exclusions), each stating that all conditions precedent provided for or relating to the Legal Defeasance or the Covenant Defeasance, as the case may be, have been complied with.

Section 8.05Deposited Money and Government Securities to Be Held in Trust; Other Miscellaneous Provisions.

Subject to Section 8.06 hereof, all money and Government Securities (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee, collectively for purposes of this Section 8.05, the “Trustee”) pursuant to Section 8.04 hereof in respect of the outstanding Notes shall be held in trust and applied by the Trustee, in accordance with the provisions of such Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Issuer or a Guarantor acting as Paying Agent) as the Trustee may determine, to the Holders of such Notes of all sums due and to become due thereon in respect of principal, premium and Additional Interest, if any, and interest, but such money need not be segregated from other funds except to the extent required by law.  Money and Government Securities so held in trust are not subject to Article 10 or Article 12 hereof.

The Issuer shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the cash or Government Securities deposited pursuant to Section 8.04

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hereof or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the outstanding Notes.

Anything in this Article 8 to the contrary notwithstanding, the Trustee shall deliver or pay to the Issuer from time to time upon the request of the Issuer any money or Government Securities held by it as provided in Section 8.04 hereof which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee (which may be the opinion delivered under Section 8.04(1) hereof), are in excess of the amount thereof that would then be required to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance.

Section 8.06Repayment to the Issuer.

Any money deposited with the Trustee or any Paying Agent, or then held by the Issuer, in trust for the payment of the principal of, premium and Additional Interest, if any, or interest on any Note and remaining unclaimed for two years after such principal, and premium and Additional Interest, if any, or interest has become due and payable shall be paid to the Issuer on its request or (if then held by the Issuer) shall be discharged from such trust; and the Holder of such Note shall thereafter look only to the Issuer for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Issuer as trustee thereof, shall thereupon cease.

Section 8.07Reinstatement.

If the Trustee or Paying Agent is unable to apply any United States dollars or Government Securities in accordance with Section 8.02 or 8.03 hereof, as the case may be, by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Issuer’s obligations under this Indenture and the Notes shall be revived and reinstated as though no deposit had occurred pursuant to Section 8.02 or 8.03 hereof until such time as the Trustee or Paying Agent is permitted to apply all such money in accordance with Section 8.02 or 8.03 hereof, as the case may be; provided that, if the Issuer makes any payment of principal of, premium and Additional Interest, if any, or interest on any Note following the reinstatement of its obligations, the Issuer shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money held by the Trustee or Paying Agent.

ARTICLE 9

AMENDMENT, SUPPLEMENT AND WAIVER

Section 9.01Without Consent of Holders of Notes.

Notwithstanding Section 9.02 hereof, the Issuer, any Guarantor (with respect to its Guarantee or this Indenture) and the Trustee may amend or supplement this Indenture and any Guarantee or Notes without the consent of any Holder:

(1)to cure any ambiguity, omission, mistake, defect or inconsistency;

(2)to provide for uncertificated Notes of such series in addition to or in place of certificated Notes;

(3)to comply with Section 5.01 hereof;

(4)to provide the assumption of the Issuer’s or any Guarantor’s obligations to the Holders;

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(5)to make any change that would provide any additional rights or benefits to the Holders or that does not adversely affect the legal rights under this Indenture of any such Holder;

(6)to add covenants for the benefit of the Holders or to surrender any right or power conferred upon the Issuer or any Guarantor;

(7)to comply with requirements of the SEC in order to effect or maintain the qualification of this Indenture under the Trust Indenture Act;

(8)to evidence and provide for the acceptance and appointment under this Indenture of a successor Trustee thereunder pursuant to the requirements thereof;

(9)to provide for the issuance of Exchange Notes or private exchange notes, which are identical to Exchange Notes except that they are not freely transferable;

(10)to add a Guarantor under this Indenture;

(11)to secure the Notes;

(12)to conform the text of this Indenture, Guarantees or the Notes to any provision of the “Description of notes” section of the Offering Memorandum to the extent that such provision in such “Description of notes” section was intended to be a verbatim recitation of a provision of this Indenture, Guarantee or Notes;

(13)to make any amendment to the provisions of this Indenture relating to the transfer and legending of Notes as permitted by this Indenture, including, without limitation to facilitate the issuance and administration of the Notes; provided, however, that (i) compliance with this Indenture as so amended would not result in Notes being transferred in violation of the Securities Act or any applicable securities law and (ii) such amendment does not materially and adversely affect the rights of Holders to transfer Notes; or

(14)to make any change that does not adversely affect the Holders in any material respect.

Upon the request of the Issuer accompanied by a resolution of its board of directors authorizing the execution of any such amended or supplemental indenture, and upon receipt by the Trustee of the documents described in Section 7.02 hereof, the Trustee shall join with the Issuer and the Guarantors in the execution of any amended or supplemental indenture authorized or permitted by the terms of this Indenture and to make any further appropriate agreements and stipulations that may be therein contained, but the Trustee shall not be obligated to enter into such amended or supplemental indenture that affects its own rights, duties or immunities under this Indenture or otherwise.  Notwithstanding the foregoing, no Opinion of Counsel shall be required in connection with the addition of a Guarantor under this Indenture upon execution and delivery by such Guarantor and the Trustee of a supplemental indenture to this Indenture, the form of which is attached as Exhibit D hereto, and delivery of an Officer’s Certificate, except as provided in Section 5.01(c).

Section 9.02With Consent of Holders of Notes.

Except as provided below in this Section 9.02, the Issuer and the Trustee may amend or supplement this Indenture, any Guarantee and the Notes with the consent of the Holders of at least a majority in principal amount of the Notes (including Additional Notes, if any) then outstanding voting as a single class (including, without limitation, consents obtained in connection with a purchase of, or tender

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offer or exchange offer for, Notes), and, subject to Sections 6.04 and 6.07 hereof, any existing Default or Event of Default (other than a Default or Event of Default in the payment of the principal of, premium and Additional Interest, if any, or interest on the Notes, except a payment default resulting from an acceleration that has been rescinded) or compliance with any provision of this Indenture, the Guarantees or the Notes may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes (including Additional Notes, if any) voting as a single class (including consents obtained in connection with the purchase of, or tender offer or exchange offer for, Notes).  Section 2.08 hereof and Section 2.09 hereof shall determine which Notes are considered to be “outstanding” for the purposes of this Section 9.02.

Upon the request of the Issuer accompanied by a resolution of its board of directors authorizing the execution of any such amended or supplemental indenture, and upon the filing with the Trustee of evidence satisfactory to the Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt by the Trustee of the documents described in Section 7.02 hereof, the Trustee shall join with the Issuer in the execution of such amended or supplemental indenture unless such amended or supplemental indenture directly affects the Trustee’s own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion, but shall not be obligated to, enter into such amended or supplemental indenture.

It shall not be necessary for the consent of the Holders of Notes under this Section 9.02 to approve the particular form of any proposed amendment or waiver, but it shall be sufficient if such consent approves the substance thereof.

After an amendment, supplement or waiver under this Section 9.02 becomes effective, the Issuer shall mail to the Holders of Notes affected thereby a notice briefly describing the amendment, supplement or waiver.  Any failure of the Issuer to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such amended or supplemental indenture or waiver.

Without the consent of each affected Holder of Notes, an amendment or waiver under this Section 9.02 may not (with respect to any Notes held by a non-consenting Holder):

(1)reduce the principal amount of such Notes whose Holders must consent to an amendment, supplement or waiver;

(2)reduce the principal of or change the fixed final maturity of any such Note, reduce the premium payable upon redemption or repurchase of any Note or change the time at which any Note may be redeemed under Section 3.07 hereof (other than the notice periods relating to an optional redemption of the Notes, so long as such notice periods comply with DTC’s procedures);

(3)reduce the rate of or change the time for payment of interest on any Note;

(4)waive a Default in the payment of principal of or premium, if any, or interest on the Notes, except a rescission of acceleration of the Notes by the Holders of at least a majority in aggregate principal amount of the Notes with respect to a non payment default and a waiver of the payment default that resulted from such acceleration, or in respect of a covenant or provision contained in this Indenture or any Guarantee that cannot be amended or modified without the consent of all Holders;

(5)make any Note payable in money other than that stated therein;

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(6)make any change in the provisions of this Indenture relating to waivers of past Defaults or the rights of Holders to receive payments of principal of or premium, if any, or interest on the Notes;

(7)make any change in these amendment and waiver provisions;

(8)impair the right of any Holder to receive payment of principal of, or interest on such Holder’s Notes on or after the due dates therefor or to institute suit for the enforcement of any payment on or with respect to such Holder’s Notes;

(9)make any change in the subordination provisions hereof that would adversely affect the Holders; or

(10)except as expressly permitted by this Indenture, modify the Guarantees of any Significant Subsidiary or any group of Subsidiaries that, taken together as of the date of the most recent audited financial statements of the Issuer, would constitute a Significant Subsidiary in any manner adverse to the Holders of the Notes.

Section 9.03Compliance with Trust Indenture Act.

Every amendment or supplement to this Indenture or the Notes shall be set forth in an amended or supplemental indenture that complies with the Trust Indenture Act as then in effect.

Section 9.04Revocation and Effect of Consents.

Until an amendment, supplement or waiver becomes effective, a consent to it by a Holder of a Note is a continuing consent by the Holder of a Note and every subsequent Holder of a Note or portion of a Note that evidences the same debt as the consenting Holder’s Note, even if notation of the consent is not made on any Note.  However, any such Holder of a Note or subsequent Holder of a Note may revoke the consent as to its Note if the Trustee receives written notice of revocation before the date the waiver, supplement or amendment becomes effective.  An amendment, supplement or waiver becomes effective in accordance with its terms and thereafter binds every Holder.

The Issuer may, but shall not be obligated to, fix a record date for the purpose of determining the Holders entitled to consent to any amendment, supplement, or waiver.  If a record date is fixed, then, notwithstanding the preceding paragraph, those Persons who were Holders at such record date (or their duly designated proxies), and only such Persons, shall be entitled to consent to such amendment, supplement, or waiver or to revoke any consent previously given, whether or not such Persons continue to be Holders after such record date.  No such consent shall be valid or effective for more than 120 days after such record date unless the consent of the requisite number of Holders has been obtained.

Section 9.05Notation on or Exchange of Notes.

The Trustee may place an appropriate notation about an amendment, supplement or waiver on any Note thereafter authenticated.  The Issuer in exchange for all Notes may issue and the Trustee shall, upon receipt of an Authentication Order, authenticate new Notes that reflect the amendment, supplement or waiver.

Failure to make the appropriate notation or issue a new Note shall not affect the validity and effect of such amendment, supplement or waiver.

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Section 9.06Trustee to Sign Amendments, etc.

The Trustee shall sign any amendment, supplement or waiver authorized pursuant to this Article 9 if the amendment or supplement does not adversely affect the rights, duties, liabilities or immunities of the Trustee.  The Issuer may not sign an amendment, supplement or waiver until its board of directors approves it.  In executing any amendment, supplement or waiver, the Trustee shall be entitled to receive and (subject to Section 7.01 hereof) shall be fully protected in relying upon, in addition to the documents required by Section 14.04 hereof, an Officer’s Certificate and an Opinion of Counsel stating that the execution of such amended or supplemental indenture is authorized or permitted by this Indenture and that such amendment, supplement or waiver is the legal, valid and binding obligation of the Issuer and any Guarantors party thereto, enforceable against them in accordance with its terms, subject to customary exceptions, and complies with the provisions hereof (including Section 9.03).  Notwithstanding the foregoing, no Opinion of Counsel will be required for the Trustee to execute any amendment or supplement adding a new Guarantor under this Indenture.

Section 9.07Payment for Consent.

The Issuer shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, pay or cause to be paid any consideration to or for the benefit of any Holder of Notes for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of this Indenture or the Notes unless such consideration is offered to be paid and is paid to all Holders of the Notes that consent, waive or agree to amend in the time frame set forth in the solicitation documents relating to such consent, waiver or agreement.

ARTICLE 10

SUBORDINATION

Section 10.01Agreement To Subordinate.

The Issuer agrees, and each Holder by accepting a Note agrees, that the payment of all Obligations owing in respect of the Notes is subordinated in right of payment, to the extent and in the manner provided in this Article 10, to the prior payment in full of all existing and future Senior Indebtedness of the Issuer and that the subordination is for the benefit of and enforceable by the holders of such Senior Indebtedness.  The Notes shall in all respects rank pari passu in right of payment with all existing and future Senior Subordinated Indebtedness of the Issuer, and will be senior in right of payment to all existing and future Subordinated Indebtedness of the Issuer; and only Indebtedness of the Issuer that is Senior Indebtedness shall rank senior to the Notes in accordance with the provisions set forth herein.  All provisions of this Article 10 shall be subject to Section 10.12.

Section 10.02Liquidation, Dissolution, Bankruptcy.

Upon any payment or distribution of the assets of the Issuer to creditors upon a total or partial liquidation or a total or partial dissolution of the Issuer or in a reorganization of or similar proceeding relating to the Issuer or its property:

(i)the holders of Senior Indebtedness of the Issuer shall be entitled to receive payment in full in cash of such Senior Indebtedness before Holders shall be entitled to receive any payment; and

(ii)until the Senior Indebtedness of the Issuer is paid in full in cash, any payment or distribution to which Holders of the Notes would be entitled but for the subordination provisions

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of this Indenture shall be made to holders of such Senior Indebtedness as their interests may appear, except that Holders of Notes may receive Permitted Junior Securities; and

(iii)if a distribution is made to Holders of the Notes that, due to the subordination provisions, should not have been made to them, such Holders of the Notes are required to hold it in trust for the holders of Senior Indebtedness of the Issuer and pay it over to them as their interests may appear.

Section 10.03Default on Senior Indebtedness of the Issuer.

The Issuer shall not pay principal of, premium, if any, or interest on the Notes (or pay any other Obligations relating to the Notes, including Additional Interest, fees, costs, expenses, indemnities and rescission or damage claims) or make any deposit pursuant to Article 8 or Article 13 hereof and may not purchase, redeem or otherwise retire any Notes (collectively, “pay the Notes”) (except in the form of Permitted Junior Securities), if either of the following occurs (a “Payment Default”):

(i)any Obligation on any Designated Senior Indebtedness of the Issuer is not paid in full in cash when due (after giving effect to any applicable grace period); or

(ii)any other default on Designated Senior Indebtedness of the Issuer occurs and the maturity of such Designated Senior Indebtedness is accelerated in accordance with its terms;

unless, in either case, the Payment Default has been cured or waived and any such acceleration has been rescinded or such Designated Senior Indebtedness has been paid in full in cash; provided, however, that the Issuer shall be entitled to pay the Notes without regard to the foregoing if the Issuer and the Trustee receive written notice approving such payment from the Representatives of all Designated Senior Indebtedness with respect to which the Payment Default has occurred and is continuing.

During the continuance of any default (other than a Payment Default) (a “Non-Payment Default”) with respect to any Designated Senior Indebtedness of the Issuer pursuant to which the maturity thereof may be accelerated without further notice (except such notice as may be required to effect such acceleration) or the expiration of any applicable grace periods, the Issuer shall not pay the Notes (except in the form of Permitted Junior Securities) for a period (a “Payment Blockage Period”) commencing upon the receipt by the Trustee (with a copy to the Issuer) of written notice (a “Blockage Notice”) of such Non-Payment Default from the Representative of such Designated Senior Indebtedness specifying an election to effect a Payment Blockage Period and ending 179 days thereafter.  So long as there shall remain outstanding any Senior Indebtedness under the Senior Credit Facility, a Blockage Notice may be given only by the administrative agent thereunder unless otherwise agreed to in writing by the requisite lenders named therein.  The Payment Blockage Period shall end earlier if such Payment Blockage Period is terminated (i) by written notice to the Trustee and the Issuer from the Person or Persons who gave such Blockage Notice; (ii) because the default giving rise to such Blockage Notice is cured, waived or otherwise no longer continuing; or (iii) because such Designated Senior Indebtedness has been discharged or repaid in full in cash.

Notwithstanding the provisions described in the immediately preceding paragraph (but subject to the provisions contained in the first sentence of this Section 10.03 and Section 10.02 hereof), unless the holders of such Designated Senior Indebtedness or the Representative of such Designated Senior Indebtedness shall have accelerated the maturity of such Designated Senior Indebtedness or a Payment Default has occurred and is continuing, the Issuer shall be permitted to resume paying the Notes after the end of such Payment Blockage Period (including any missed payments). The Notes shall not be subject to more than one Payment Blockage Period in any consecutive 360-day period, irrespective of the number of defaults with respect to Designated Senior Indebtedness during such period; provided that if

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any Blockage Notice is delivered to the Trustee by or on behalf of the holders of Designated Senior Indebtedness of the Issuer (other than the holders of Indebtedness under the Senior Credit Facility), a Representative of holders of Indebtedness under the Senior Credit Facility may give another Blockage Notice within such period. However, in no event shall the total number of days during which any Payment Blockage Period or Periods on the Notes is in effect exceed 179 days in the aggregate during any consecutive 360-day period, and there must be at least 181 days during any consecutive 360-day period during which no Payment Blockage Period is in effect. Notwithstanding the foregoing, however, no default that existed or was continuing on the date of delivery of any Blockage Notice to the Trustee shall be, or be made, the basis for a subsequent Blockage Notice unless such default shall have been cured or waived for a period of not less than 90 consecutive days (it being acknowledged that any subsequent action, or any breach of any financial covenants during the period after the date of delivery of a Blockage Notice, that, in either case, would give rise to a Non-Payment Default pursuant to any provisions under which a Non-Payment Default previously existed or was continuing shall constitute a new Non-Payment Default for this purpose).

Section 10.04Acceleration of Payment of Notes.

If payment of the Notes is accelerated because of an Event of Default, the Issuer shall promptly notify the holders of the Designated Senior Indebtedness of the Issuer or the Representative of such Designated Senior Indebtedness of the acceleration; provided that any failure to give such notice shall have no effect whatsoever on the provisions of this Article 10.  If any Designated Senior Indebtedness of the Issuer is outstanding, the Issuer may not pay the Notes until five Business Days after the Representatives of all the issuers of such Designated Senior Indebtedness receive notice of such acceleration and, thereafter, may pay the Notes only if this Indenture otherwise permits payment at that time.

Section 10.05When Distribution Must Be Paid Over.

If a distribution is made to Holders that, due to the subordination provisions, should not have been made to them, such Holders are required to hold it in trust for the holders of Senior Indebtedness of the Issuer, and pay it over to them as their interests may appear.

Section 10.06Subrogation.

After all Senior Indebtedness of the Issuer is paid in full and until the Notes are paid in full, Holders shall be subrogated to the rights of holders of such Senior Indebtedness to receive distributions applicable to such Senior Indebtedness.  A distribution made under this Article 10 to holders of such Senior Indebtedness which otherwise would have been made to Holders is not, as between the Issuer and Holders, a payment by the Issuer on such Senior Indebtedness.

Section 10.07Relative Rights.

This Article 10 defines the relative rights of Holders and holders of Senior Indebtedness of the Issuer.  Nothing in this Indenture shall:

(i)impair, as between the Issuer and Holders, the obligation of the Issuer, which is absolute and unconditional, to pay principal of and interest on the Notes in accordance with their terms;

(ii)prevent the Trustee or any Holder from exercising its available remedies upon a Default, subject to the rights of holders of Senior Indebtedness of the Issuer to receive payments

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or distributions otherwise payable to Holders and such other rights of such holders of Senior Indebtedness as set forth herein; or

(iii)affect the relative rights of Holders and creditors of the Issuer other than their rights in relation to holders of Senior Indebtedness.

Section 10.08Subordination May Not Be Impaired by the Issuer.

No right of any holder of Senior Indebtedness of the Issuer to enforce the subordination of the Indebtedness evidenced by the Notes shall be impaired by any act or failure to act by the Issuer or by their failure to comply with this Indenture.

Section 10.09Rights of Trustee and Paying Agent.

Notwithstanding Section 10.03 hereof, the Trustee or any Paying Agent may continue to make payments on the Notes and shall not be charged with knowledge of the existence of facts that would prohibit the making of any payments unless, not less than three Business Days prior to the date of such payment, a Responsible Officer at the Corporate Trust Office of the Trustee receives notice satisfactory to him that payments may not be made under this Article 10.  The Issuer, the Registrar, the Paying Agent, a Representative or a holder of Senior Indebtedness of the Issuer shall be entitled to give the notice; provided, however, that, if an issue of Senior Indebtedness of the Issuer has a Representative, only the Representative shall be entitled to give the notice.

The Trustee in its individual or any other capacity shall be entitled to hold Senior Indebtedness of the Issuer with the same rights it would have if it were not Trustee.  The Registrar and the Paying Agent shall be entitled to do the same with like rights.  The Trustee shall be entitled to all the rights set forth in this Article 10 with respect to any Senior Indebtedness of the Issuer which may at any time be held by it, to the same extent as any other holder of such Senior Indebtedness; and nothing in Article 7 shall deprive the Trustee of any of its rights as such holder.  Nothing in this Article 10 shall apply to claims of, or payments to, the Trustee under or pursuant to Section 7.07 hereof or any other Section of this Indenture.

Section 10.10Distribution or Notice to Representative.

Whenever a distribution is to be made or a notice given to holders of Senior Indebtedness of the Issuer, the distribution may be made and the notice given to their Representative (if any).

Section 10.11Article 10 Not To Prevent Events of Default or Limit Right To Accelerate.

The failure to make a payment pursuant to the Notes by reason of any provision in this Article 10 shall not be construed as preventing the occurrence of a Default.  Nothing in this Article 10 shall have any effect on the right of the Holders or the Trustee to accelerate the maturity of the Notes.

Section 10.12Trust Moneys Not Subordinated.

Notwithstanding anything contained herein to the contrary, payments from money or the proceeds of Government Securities held in trust by the Trustee for the payment of principal of and interest on the Notes pursuant to Article 8 or Article 13 hereof shall not be subordinated to the prior payment of any Senior Indebtedness of the Issuer or subject to the restrictions set forth in this Article 10, and none of the Holders shall be obligated to pay over any such amount to the Issuer or any holder of Senior Indebtedness of the Issuer or any other creditor of the Issuer; provided that the subordination provisions

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of this Article 10 were not violated at the time the applicable amounts were deposited in trust pursuant to Article 8 or Article 13 hereof, as the case may be.

Section 10.13Trustee Entitled To Rely.

Upon any payment or distribution pursuant to this Article 10, the Trustee and the Holders shall be entitled to rely (a) upon any order or decree of a court of competent jurisdiction in which any proceedings of the nature referred to in Section 10.02 hereof are pending, (b) upon a certificate of the liquidating trustee or agent or other Person making such payment or distribution to the Trustee or to the Holders or (c) upon the Representatives of Senior Indebtedness of the Issuer for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of such Senior Indebtedness and other Indebtedness of the Issuer, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article 10.  In the event that the Trustee determines, in good faith, that evidence is required with respect to the right of any Person as a holder of Senior Indebtedness of the Issuer to participate in any payment or distribution pursuant to this Article 10, the Trustee shall be entitled to request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of such Senior Indebtedness held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and other facts pertinent to the rights of such Person under this Article 10, and, if such evidence is not furnished, the Trustee shall be entitled to defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment.  The provisions of Sections 7.01 and 7.02 hereof shall be applicable to all actions or omissions of actions by the Trustee pursuant to this Article 10.

Section 10.14Trustee To Effectuate Subordination.

A Holder by its acceptance of a Note agrees to be bound by this Article 10 and authorizes and expressly directs the Trustee, on his behalf, to take such action as may be necessary or appropriate to effectuate the subordination between the Holders and the holders of Senior Indebtedness of the Issuer as provided in this Article 10 and appoints the Trustee as attorney-in-fact for any and all such purposes.

Section 10.15Trustee Not Fiduciary for Holders of Senior Indebtedness of the Issuer.

The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness of the Issuer and shall not be liable to any such holders if it shall mistakenly pay over or distribute to Holders or the Issuer or any other Person, money or assets to which any holders of Senior Indebtedness of the Issuer shall be entitled by virtue of this Article 10 or otherwise.

Section 10.16Reliance by Holders of Senior Indebtedness of the Issuer on Subordination Provisions.

Each Holder by accepting a Note acknowledges and agrees that the foregoing subordination provisions are, and are intended to be, an inducement and a consideration to each holder of any Senior Indebtedness of the Issuer, whether such Senior Indebtedness was created or acquired before or after the issuance of the Notes, to acquire and continue to hold, or to continue to hold, such Senior Indebtedness and such holder of such Senior Indebtedness shall be deemed conclusively to have relied on such subordination provisions in acquiring and continuing to hold, or in continuing to hold, such Senior Indebtedness.

Without in any way limiting the generality of the foregoing paragraph, the holders of Senior Indebtedness of the Issuer may, at any time and from time to time, without the consent of or notice to the Trustee or the Holders, without incurring responsibility to the Trustee or the Holders and without impairing or releasing the subordination provided in this Article 10 or the obligations hereunder of the Holders to the holders of the Senior Indebtedness of the Issuer, do any one or more of the following:  (i)

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change the manner, place or terms of payment or extend the time of payment of, or renew or alter, Senior Indebtedness of the Issuer, or otherwise amend or supplement in any manner Senior Indebtedness of the Issuer, or any instrument evidencing the same or any agreement under which Senior Indebtedness of the Issuer is outstanding; (ii) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing Senior Indebtedness of the Issuer; (iii) release any Person liable in any manner for the payment or collection of Senior Indebtedness of the Issuer; and (iv) exercise or refrain from exercising any rights against the Issuer and any other Person.

ARTICLE 11

GUARANTEES

Section 11.01Guarantee.

Subject to this Article 11, each of the Guarantors hereby, jointly and severally irrevocably and unconditionally guarantee, on an unsecured senior subordinated basis, to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, irrespective of the validity and enforceability of this Indenture, the Notes or the obligations of the Issuer hereunder or thereunder, that: (a) the principal of, premium, if any, or interest on or Additional Interest, if any, on the Notes shall be promptly paid in full when due, whether at maturity, by acceleration, redemption or otherwise, and interest on the overdue principal of and interest on the Notes, if any, if lawful, and all other Obligations of the Issuer to the Holders or the Trustee hereunder or thereunder shall be promptly paid in full or performed, all in accordance with the terms hereof and thereof; and (b) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that same shall be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise.  Failing payment when due of any amount so guaranteed or any performance so guaranteed for whatever reason, the Guarantors shall be jointly and severally obligated to pay the same immediately.  Each Guarantor agrees that this is a guarantee of payment and not a guarantee of collection.

The Guarantors hereby agree that their obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Notes or this Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Notes with respect to any provisions hereof or thereof, the recovery of any judgment against the Issuer, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor.  Each Guarantor hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Issuer, any right to require a proceeding first against the Issuer, protest, notice and all demands whatsoever and covenants that this Guarantee shall not be discharged except by complete performance of the obligations contained in the Notes and this Indenture.

Each Guarantor also agrees to pay any and all costs and expenses (including reasonable attorneys’ fees) incurred by the Trustee or any Holder in enforcing any rights under this Section 11.01.

If any Holder or the Trustee is required by any court or otherwise to return to the Issuer, the Guarantors or any custodian, trustee, liquidator or other similar official acting in relation to the Issuer or the Guarantors, any amount paid either to the Trustee or such Holder, this Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect.

Each Guarantor agrees that it shall not be entitled to any right of subrogation in relation to the Holders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby.  Each Guarantor further agrees that, as between the Guarantors, on the one hand, and

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the Holders and the Trustee, on the other hand, (x) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article 6 hereof for the purposes of this Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (y) in the event of any declaration of acceleration of such obligations as provided in Article 6 hereof, such obligations (whether or not due and payable) shall forthwith become due and payable by the Guarantors for the purpose of this Guarantee.  The Guarantors shall have the right to seek contribution from any non-paying Guarantor so long as the exercise of such right does not impair the rights of the Holders under the Guarantees.

Each Guarantee shall remain in full force and effect and continue to be effective should any petition be filed by or against the Issuer for liquidation, reorganization, should the Issuer become insolvent or make an assignment for the benefit of creditors or should a receiver or trustee be appointed for all or any significant part of the Issuer’s assets, and shall, to the fullest extent permitted by law, continue to be effective or be reinstated, as the case may be, if at any time payment and performance of the Notes are, pursuant to applicable law, rescinded or reduced in amount, or must otherwise be restored or returned by any obligee on the Notes or Guarantees, whether as a “voidable preference,” “fraudulent transfer” or otherwise, all as though such payment or performance had not been made.  In the event that any payment or any part thereof, is rescinded, reduced, restored or returned, the Notes shall, to the fullest extent permitted by law, be reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored or returned.

In case any provision of any Guarantee shall be invalid, illegal or unenforceable, the validity, legality, and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

The Guarantee issued by any Guarantor shall be a general unsecured senior subordinated obligation of such Guarantor and shall be subordinated in right of payment to all existing and future Senior Indebtedness of such Guarantor, if any.

Each payment to be made by a Guarantor in respect of its Guarantee shall be made without set-off, counterclaim, reduction or diminution of any kind or nature.

Section 11.02Limitation on Guarantor Liability.

Each Guarantor, and by its acceptance of Notes, each Holder, hereby confirms that it is the intention of all such parties that the Guarantee of such Guarantor not constitute a fraudulent transfer or conveyance for purposes of Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar federal or state law to the extent applicable to any Guarantee.  To effectuate the foregoing intention, the Trustee, the Holders and the Guarantors hereby irrevocably agree that the obligations of each Guarantor shall be limited to the maximum amount as will, after giving effect to such maximum amount and all other contingent and fixed liabilities of such Guarantor that are relevant under such laws and after giving effect to any collections from, rights to receive contribution from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under this Article 11, result in the obligations of such Guarantor under its Guarantee not constituting a fraudulent conveyance or fraudulent transfer under applicable law.  Each Guarantor that makes a payment under its Guarantee shall be entitled upon payment in full of all guaranteed obligations under this Indenture to a contribution from each other Guarantor in an amount equal to such other Guarantor’s pro rata portion of such payment based on the respective net assets of all the Guarantors at the time of such payment determined in accordance with GAAP.

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Section 11.03Execution and Delivery.

To evidence its Guarantee set forth in Section 11.01 hereof, each Guarantor hereby agrees that this Indenture shall be executed on behalf of such Guarantor by its President, its Chief Financial Officer, its Treasurer, one of its Vice Presidents or one of its Assistant Vice Presidents.

Each Guarantor hereby agrees that its Guarantee set forth in Section 11.01 hereof shall remain in full force and effect notwithstanding the absence of the endorsement of any notation of such Guarantee on the Notes.

If an Officer whose signature is on this Indenture no longer holds that office at the time the Trustee authenticates the Note, the Guarantee shall be valid nevertheless.

The delivery of any Note by the Trustee, after the authentication thereof hereunder, shall constitute due delivery of the Guarantee set forth in this Indenture on behalf of the Guarantors.

If required by Section 4.15 hereof, the Issuer shall cause any newly created or acquired Restricted Subsidiary to comply with the provisions of Section 4.15 hereof and this Article 11, to the extent applicable.

Section 11.04Subrogation.

Each Guarantor shall be subrogated to all rights of Holders of Notes against the Issuer in respect of any amounts paid by any Guarantor pursuant to the provisions of Section 11.01 hereof; provided that, if an Event of Default has occurred and is continuing, no Guarantor shall be entitled to enforce or receive any payments arising out of, or based upon, such right of subrogation until all amounts then due and payable by the Issuer under this Indenture or the Notes shall have been paid in full.

Section 11.05Benefits Acknowledged.

Each Guarantor acknowledges that it will receive direct and indirect benefits from the financing arrangements contemplated by this Indenture and that the guarantee and waivers made by it pursuant to its Guarantee are knowingly made in contemplation of such benefits.

Section 11.06Release of Guarantees.

A Guarantee by a Guarantor shall be automatically and unconditionally released and discharged, and no further action by such Guarantor, the Issuer or the Trustee is required for the release of such Guarantor’s Guarantee, upon:

(1)(A)  any sale, exchange or transfer (by merger or otherwise) of the Capital Stock of such Guarantor (including any sale, exchange or transfer), after which the applicable Guarantor is no longer a Restricted Subsidiary, or all or substantially all the assets of such Guarantor, which sale, exchange or transfer is made in compliance with the applicable provisions of this Indenture;

(B)the release or discharge of such Guarantor from its guarantee of Indebtedness of the Issuer and the Guarantors under the Senior Credit Facility (including by reason of the termination of the Senior Credit Facility) or the guarantee that resulted in the obligation of such Guarantor to guarantee the Notes, if such Guarantor would not then otherwise be required to guarantee the Notes pursuant to this Indenture (and treating any guarantees of such Guarantor that remain outstanding as incurred at least 30 days prior to such release or discharge), except a discharge or release by or as a result of payment under such guarantee; provided, that if such

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Person has incurred any Indebtedness or issued any Preferred Stock or Disqualified Stock in reliance on its status as a Guarantor under Section 4.09 hereof, such Guarantor’s obligations under such Indebtedness, Disqualified Stock or Preferred Stock, as the case may be, so incurred are satisfied in full and discharged or are otherwise permitted to be incurred under Section 4.09 hereof.

(C)the proper designation of any Restricted Subsidiary that is a Guarantor as an Unrestricted Subsidiary; or

(D)the Issuer exercising its Legal Defeasance option or Covenant Defeasance option in accordance with Article 8 hereof or the Issuer’s obligations under this Indenture being discharged in accordance with the terms of this Indenture; and

(2)such Guarantor delivering to the Trustee an Officer’s Certificate and an Opinion of Counsel, each stating that all conditions precedent provided for in this Indenture relating to such transaction have been complied with.

ARTICLE 12

SUBORDINATION OF GUARANTEES

Section 12.01Agreement To Subordinate.

Each Guarantor agrees, and each Holder by accepting a Note agrees, that the obligations of such Guarantor under its Guarantee are subordinated in right of payment, to the extent and in the manner provided in this Article 12, to the prior payment in full of all existing and future Senior Indebtedness of such Guarantor and that the subordination is for the benefit of and enforceable by the holders of such Senior Indebtedness.  A Guarantor’s obligations under its Guarantee shall in all respects rank pari passu in right of payment with all existing and future Senior Subordinated Indebtedness of such Guarantor, and will be senior in right of payment to all existing and future Subordinated Indebtedness of such Guarantor; and only Indebtedness of such Guarantor that is Senior Indebtedness shall rank senior to the obligations of such Guarantor under its Guarantee in accordance with the provisions set forth herein.  All provisions of this Article 12 shall be subject to Section 12.12.

Section 12.02Liquidation, Dissolution, Bankruptcy.

Upon any payment or distribution of the assets of a Guarantor to creditors upon a total or partial liquidation or a total or partial dissolution of such Guarantor or in a reorganization of or similar proceeding relating to such Guarantor or its property:

(i)the holders of Senior Indebtedness of such Guarantor shall be entitled to receive payment in full in cash of such Senior Indebtedness before Holders shall be entitled to receive any payment; and

(ii)until the Senior Indebtedness of such Guarantor is paid in full in cash, any payment or distribution to which Holders of the Notes would be entitled but for the subordination provisions of this Indenture shall be made to holders of such Senior Indebtedness as their interests may appear, except that Holders of the Notes may receive Permitted Junior Securities; and

(iii)if a distribution is made to Holders of the Notes that, due to the subordination provisions, should not have been made to them, such Holders of the Notes are required to hold it

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in trust for holders of Senior Indebtedness of such Guarantor and pay it over to them as their interests may appear.

Section 12.03Default on Senior Indebtedness of a Guarantor.

A Guarantor shall not make any payment pursuant to its Guarantee (or pay any other Obligations relating to its Guarantee, including Additional Interest, fees, costs, expenses, indemnities and rescission or damage claims) and may not purchase, redeem or otherwise retire any Notes (collectively, “pay its Guarantee”) (except in the form of Permitted Junior Securities), if either of the following occurs (a “Guarantor Payment Default”):

(i)any Obligation on any Designated Senior Indebtedness of such Guarantor is not paid in full in cash when due (after giving effect to any applicable grace period); or

(ii)any other default on Designated Senior Indebtedness of such Guarantor occurs and the maturity of such Designated Senior Indebtedness is accelerated in accordance with its terms;

unless, in either case, the Guarantor Payment Default has been cured or waived and any such acceleration has been rescinded or such Designated Senior Indebtedness has been paid in full in cash; provided, however, that such Guarantor shall be entitled to pay its Guarantee without regard to the foregoing if such Guarantor and the Trustee receive written notice approving such payment from the Representatives of all Designated Senior Indebtedness with respect to which the Guarantor Payment Default has occurred and is continuing.

During the continuance of any default (other than a Guarantor Payment Default) (a “Guarantor Non-Payment Default”) with respect to any Designated Senior Indebtedness of a Guarantor pursuant to which the maturity thereof may be accelerated without further notice (except such notice as may be required to effect such acceleration) or the expiration of any applicable grace periods, such Guarantor shall not pay its Guarantee (except in the form of Permitted Junior Securities) for a period (a “Guarantee Payment Blockage Period”) commencing upon the receipt by the Trustee (with a copy to such Guarantor and the Issuer) of written notice (a “Guarantee Blockage Notice”) of such Guarantor Non-Payment Default from the Representative of such Designated Senior Indebtedness specifying an election to effect a Guarantee Payment Blockage Period and ending 179 days thereafter.  So long as there shall remain outstanding any Senior Indebtedness under the Senior Credit Facility, a Guarantee Blockage Notice may be given only by the administrative agent thereunder unless otherwise agreed to in writing by the requisite lenders named therein.  The Guarantee Payment Blockage Period shall end earlier if such Guarantee Payment Blockage Period is terminated (i) by written notice to the Trustee, the relevant Guarantor and the Issuer from the Person or Persons who gave such Guarantee Blockage Notice; (ii) because the default giving rise to such Guarantee Blockage Notice is cured, waived or otherwise no longer continuing; or (iii) because such Designated Senior Indebtedness has been discharged or repaid in full in cash.

Notwithstanding the provisions described in the immediately preceding paragraph (but subject to the provisions contained in the first sentence of this Section 12.03 and Section 12.02 hereof), unless the holders of such Designated Senior Indebtedness or the Representative of such Designated Senior Indebtedness shall have accelerated the maturity of such Designated Senior Indebtedness or a Guarantor Payment Default has occurred and is continuing, the relevant Guarantor shall be permitted to resume paying its Guarantee after the end of such Guarantee Payment Blockage Period.  Each Guarantee shall not be subject to more than one Guarantee Payment Blockage Period in any consecutive 360-day period, irrespective of the number of defaults with respect to Designated Senior Indebtedness of the relevant Guarantor during such period; provided that if any Guarantee Blockage Notice is delivered to the

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Trustee by or on behalf of the holders of Designated Senior Indebtedness of such Guarantor (other than the holders of Indebtedness under the Senior Credit Facility), a Representative of holders of Indebtedness under the Senior Credit Facility may give another Guarantee Blockage Notice within such period.  However, in no event shall the total number of days during which any Guarantee Payment Blockage Period or Periods on a Guarantee is in effect exceed 179 days in the aggregate during any consecutive 360-day period, and there must be at least 181 days during any consecutive 360-day period during which no Guarantee Payment Blockage Period is in effect.  Notwithstanding the foregoing, however, no default that existed or was continuing on the date of delivery of any Guarantee Blockage Notice to the Trustee shall be, or be made, the basis for a subsequent Guarantee Blockage Notice unless such default shall have been cured or waived for a period of not less than 90 consecutive days (it being acknowledged that any subsequent action, or any breach of any financial covenants during the period after the date of delivery of a Guarantee Blockage Notice, that, in either case, would give rise to a Guarantor Non-Payment Default pursuant to any provisions under which a Guarantor Non-Payment Default previously existed or was continuing shall constitute a new Guarantor Non-Payment Default for this purpose).

Section 12.04Demand for Payment.

If payment of the Notes is accelerated because of an Event of Default and a demand for payment is made on a Guarantor pursuant to Article 11 hereof, the Issuer or such Guarantor shall promptly notify the holders of the Designated Senior Indebtedness of such Guarantor or the Representative of such Designated Senior Indebtedness of such demand; provided that any failure to give such notice shall have no effect whatsoever on the provisions of this Article 12.  If any Designated Senior Indebtedness of a Guarantor is outstanding, such Guarantor may not pay its Guarantee until five Business Days after the Representatives of all the issuers of such Designated Senior Indebtedness receive notice of such acceleration and, thereafter, may pay its Guarantee only if this Indenture otherwise permits payment at that time.

Section 12.05When Distribution Must Be Paid Over.

If a distribution is made to Holders that, due to the subordination provisions, should not have been made to them, such Holders are required to hold it in trust for the holders of Senior Indebtedness of the relevant Guarantor and pay it over to them as their interests may appear.

Section 12.06Subrogation.

After all Senior Indebtedness of a Guarantor is paid in full and until the Notes are paid in full, Holders shall be subrogated to the rights of holders of such Senior Indebtedness to receive distributions applicable to such Senior Indebtedness.  A distribution made under this Article 12 to holders of such Senior Indebtedness which otherwise would have been made to Holders is not, as between the relevant Guarantor and Holders, a payment by such Guarantor on such Senior Indebtedness.

Section 12.07Relative Rights.

This Article 12 defines the relative rights of Holders and holders of Senior Indebtedness of a Guarantor.  Nothing in this Indenture shall:

(i)impair, as between such Guarantor and Holders, the obligation of such Guarantor, which is absolute and unconditional, to make payments under its Guarantee in accordance with its terms;

(ii)prevent the Trustee or any Holder from exercising its available remedies upon a default by such Guarantor under its obligations with respect to its Guarantee, subject to the rights

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of holders of Senior Indebtedness of such Guarantor to receive payments or distributions otherwise payable to Holders and such other rights of such holders of Senior Indebtedness as set forth herein; or

(iii)affect the relative rights of Holders and creditors of such Guarantor other than their rights in relation to holders of Senior Indebtedness.

Section 12.08Subordination May Not Be Impaired by a Guarantor.

No right of any holder of Senior Indebtedness of a Guarantor to enforce the subordination of the obligations of such Guarantor under its Guarantee shall be impaired by any act or failure to act by such Guarantor or by its failure to comply with this Indenture.

Section 12.09Rights of Trustee and Paying Agent.

Notwithstanding Section 12.03 hereof, the Trustee or any Paying Agent may continue to make payments on the Notes and shall not be charged with knowledge of the existence of facts that would prohibit the making of any payments unless, not less than three Business Days prior to the date of such payment, a Responsible Officer at the Corporate Trust Office of the Trustee receives notice satisfactory to him that payments may not be made under this Article 12.  A Guarantor, the Registrar, the Paying Agent, a Representative or a holder of Senior Indebtedness of such Guarantor shall be entitled to give the notice; provided, however, that, if an issue of Senior Indebtedness of such Guarantor has a Representative, only the Representative shall be entitled to give the notice.

The Trustee in its individual or any other capacity shall be entitled to hold Senior Indebtedness of a Guarantor with the same rights it would have if it were not Trustee.  The Registrar and the Paying Agent shall be entitled to do the same with like rights.  The Trustee shall be entitled to all the rights set forth in this Article 12 with respect to any Senior Indebtedness of a Guarantor which may at any time be held by it, to the same extent as any other holder of such Senior Indebtedness; and nothing in Article 7 shall deprive the Trustee of any of its rights as such holder.  Nothing in this Article 12 shall apply to claims of, or payments to, the Trustee under or pursuant to Section 7.07 hereof or any other Section of this Indenture.

Section 12.10Distribution or Notice to Representative.

Whenever a distribution is to be made or a notice given to holders of Senior Indebtedness of a Guarantor, the distribution may be made and the notice given to their Representative (if any).

Section 12.11Article 12 Not To Prevent Events of Default or Limit Right To Demand Payment.

The failure of a Guarantor to make a payment pursuant its Guarantee by reason of any provision in this Article 12 shall not be construed as preventing the occurrence of a default by such Guarantor under its Guarantee.  Nothing in this Article 12 shall have any effect on the right of the Holders or the Trustee to make a demand for payment on a Guarantor pursuant to Article 11 hereof.

Section 12.12Trust Moneys Not Subordinated.

Notwithstanding anything contained herein to the contrary, payments from money or the proceeds of  Government Securities held in trust by the Trustee for the payment of principal of and interest on the Notes pursuant to Article 8 or Article 13 hereof shall not be subordinated to the prior payment of any Senior Indebtedness of any Guarantor or subject to the restrictions set forth in this Article 12, and none of the Holders shall be obligated to pay over any such amount to such Guarantor or any

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holder of Senior Indebtedness of such Guarantor or any other creditor of such Guarantor, provided that the subordination provisions of this Article 12 were not violated at the time the applicable amounts were deposited in trust pursuant to Article 8 or Article 13 hereof, as the case may be.

Section 12.13Trustee Entitled To Rely.

Upon any payment or distribution pursuant to this Article 12, the Trustee and the Holders shall be entitled to rely (a) upon any order or decree of a court of competent jurisdiction in which any proceedings of the nature referred to in Section 12.02 hereof are pending, (b) upon a certificate of the liquidating trustee or agent or other Person making such payment or distribution to the Trustee or to the Holders or (c) upon the Representatives of Senior Indebtedness of a Guarantor for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of such Senior Indebtedness and other Indebtedness of such Guarantor, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article 12.  In the event that the Trustee determines, in good faith, that evidence is required with respect to the right of any Person as a holder of Senior Indebtedness of a Guarantor to participate in any payment or distribution pursuant to this Article 12, the Trustee shall be entitled to request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of such Senior Indebtedness held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and other facts pertinent to the rights of such Person under this Article 12, and, if such evidence is not furnished, the Trustee shall be entitled to defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment.  The provisions of Sections 7.01 and 7.02 hereof shall be applicable to all actions or omissions of actions by the Trustee pursuant to this Article 12.

Section 12.14Trustee To Effectuate Subordination.

A Holder by its acceptance of a Note agrees to be bound by this Article 12 and authorizes and expressly directs the Trustee, on his behalf, to take such action as may be necessary or appropriate to effectuate the subordination between the Holders and the holders of Senior Indebtedness of a Guarantor as provided in this Article 12 and appoints the Trustee as attorney-in-fact for any and all such purposes.

Section 12.15Trustee Not Fiduciary for Holders of Senior Indebtedness of Guarantors.

The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness of a Guarantor and shall not be liable to any such holders if it shall mistakenly pay over or distribute to Holders or such Guarantor or any other Person, money or assets to which any holders of Senior Indebtedness of such Guarantor shall be entitled by virtue of this Article 12 or otherwise.

Section 12.16Reliance by Holders of Senior Indebtedness of a Guarantor on Subordination Provisions.

Each Holder by accepting a Note acknowledges and agrees that the foregoing subordination provisions are, and are intended to be, an inducement and a consideration to each holder of any Senior Indebtedness of a Guarantor, whether such Senior Indebtedness was created or acquired before or after the issuance of the Notes, to acquire and continue to hold, or to continue to hold, such Senior Indebtedness and such holder of such Senior Indebtedness shall be deemed conclusively to have relied on such subordination provisions in acquiring and continuing to hold, or in continuing to hold, such Senior Indebtedness.

Without in any way limiting the generality of the foregoing paragraph, the holders of Senior Indebtedness of a Guarantor may, at any time and from time to time, without the consent of or notice to the Trustee or the Holders, without incurring responsibility to the Trustee or the Holders and without impairing or releasing the subordination provided in this Article 12 or the obligations hereunder

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of the Holders to the holders of the Senior Indebtedness of such Guarantor, do any one or more of the following:  (i) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, Senior Indebtedness of such Guarantor, or otherwise amend or supplement in any manner Senior Indebtedness of such Guarantor, or any instrument evidencing the same or any agreement under which Senior Indebtedness of such Guarantor is outstanding; (ii) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing Senior Indebtedness of such Guarantor; (iii) release any Person liable in any manner for the payment or collection of Senior Indebtedness of such Guarantor; and (iv) exercise or refrain from exercising any rights against such Guarantor and any other Person.

ARTICLE 13

SATISFACTION AND DISCHARGE

Section 13.01Satisfaction and Discharge.

This Indenture shall be discharged and shall cease to be of further effect as to all Notes when either:

(1)all Notes theretofore authenticated and delivered, except lost, stolen or destroyed Notes which have been replaced or paid and Notes for whose payment money has theretofore been deposited in trust, have been delivered to the Trustee for cancellation; or

(2)(A)  all Notes not theretofore delivered to the Trustee for cancellation have become due and payable by reason of the making of a notice of redemption or otherwise, will become due and payable within one year or may be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Issuer, and the Issuer or any Guarantor has irrevocably deposited or caused to be deposited with the Trustee, as trust funds in trust solely for the benefit of the Holders of the Notes, cash in U.S. dollars, Government Securities, or a combination thereof, in such amounts as will be sufficient without consideration of any reinvestment of interest to pay and discharge the entire indebtedness on the Notes not theretofore delivered to the Trustee for cancellation for principal, premium, if any, and accrued interest to the date of maturity or redemption;

(B)no Default (other than that resulting from borrowing funds to be applied to make such deposit and any similar and simultaneous deposit relating to other Indebtedness and, in each case, the granting of Liens in connection therewith) with respect to this Indenture or the Notes shall have occurred and be continuing on the date of such deposit or shall occur as a result of such deposit, and such deposit will not result in a breach or violation of, or constitute a default under the Senior Credit Facility or any other material agreement or instrument (other than this Indenture) to which the Issuer or any Guarantor is a party or by which the Issuer or any Guarantor is bound (other than that resulting from borrowing funds to be applied to make such deposit and any similar and simultaneous deposit relating to other Indebtedness and, in each case, the granting of Liens in connection therewith);

(C)the Issuer has paid or caused to be paid all sums payable by it under this Indenture; and

(D)the Issuer has delivered irrevocable instructions to the Trustee to apply the deposited money toward the payment of the Notes at maturity or the redemption date, as the case may be.

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In addition, the Issuer must deliver an Officer’s Certificate and an Opinion of Counsel to the Trustee stating that all conditions precedent to satisfaction and discharge have been satisfied.  Notwithstanding the satisfaction and discharge of this Indenture, if money shall have been deposited with the Trustee pursuant to subclause (A) of clause (2) of this Section 13.01, the provisions of Section 13.02 and Section 8.06 shall survive.

Section 13.02Application of Trust Money.

Subject to the provisions of Section 8.06 hereof, all money deposited with the Trustee pursuant to Section 13.01 hereof shall be held in trust and applied by it, in accordance with the provisions of the Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Issuer acting as its own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal (and premium and Additional Interest, if any) and interest for whose payment such money has been deposited with the Trustee; but such money need not be segregated from other funds except to the extent required by law.

If the Trustee or Paying Agent is unable to apply any money or Government Securities in accordance with Section 13.01 hereof by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Issuer’s and any Guarantor’s obligations under this Indenture and the Notes shall be revived and reinstated as though no deposit had occurred pursuant to Section 13.01 hereof; provided that if the Issuer has made any payment of principal of, premium and Additional Interest, if any, or interest on any Notes because of the reinstatement of its obligations, the Issuer shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money or Government Securities held by the Trustee or Paying Agent.

ARTICLE 14

MISCELLANEOUS

Section 14.01Trust Indenture Act Controls.

If any provision of this Indenture limits, qualifies or conflicts with the duties imposed by Trust Indenture Act Section 318(c), the imposed duties shall control.

Section 14.02Notices.

Any notice or communication by the Issuer, any Guarantor or the Trustee to the others is duly given if in writing and delivered in person or mailed by first-class mail (registered or certified, return receipt requested), fax or overnight air courier guaranteeing next day delivery, to the others’ addresses:

If to the Issuer and/or any Guarantor:

c/o The Reader’s Digest Association, Inc.
Reader’s Digest Road
Pleasantville, New York 10570
Fax No.: (914) 244-7807
Attention: General Counsel

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If to the Trustee:

The Bank of New York
101 Barclay Street – 8W

New York, New York 10286
Fax No.: (212) 815-5704/3272
Attention:  Global Trust Administration

The Issuer, any Guarantor or the Trustee, by notice to the others, may designate additional or different addresses for subsequent notices or communications.

All notices and communications (other than those sent to Holders) shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five calendar days after being deposited in the mail, postage prepaid, if mailed by first-class mail; when receipt acknowledged, if faxed; and the next Business Day after timely delivery to the courier, if sent by overnight air courier guaranteeing next day delivery; provided that any notice or communication delivered to the Trustee shall be deemed effective upon actual receipt thereof.

Any notice or communication to a Holder shall be mailed by first-class mail, certified or registered, return receipt requested, or by overnight air courier guaranteeing next day delivery to its address shown on the register kept by the Registrar or by other electronic means or such other delivery system as the Trustee agrees to accept.  Any notice or communication shall also be so mailed to any Person described in Trust Indenture Act Section 313(c), to the extent required by the Trust Indenture Act.  Failure to mail a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders.

If a notice or communication is mailed in the manner provided above within the time prescribed, it is duly given, whether or not the addressee receives it.

If the Issuer mails a notice or communication to Holders, they shall mail a copy to the Trustee and each Agent at the same time.

Section 14.03Communication by Holders of Notes with Other Holders of Notes.

Holders may communicate pursuant to Trust Indenture Act Section 312(b) with other Holders with respect to their rights under this Indenture or the Notes.  The Issuer, the Trustee, the Registrar and anyone else shall have the protection of Trust Indenture Act Section 312(c).

Section 14.04Certificate and Opinion as to Conditions Precedent.

Upon any request or application by the Issuer or any of the Guarantors to the Trustee to take any action under this Indenture, the Issuer or such Guarantor, as the case may be, shall furnish to the Trustee:

(a)An Officer’s Certificate in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 14.05 hereof) stating that, in the opinion of the signers, all conditions precedent and covenants, if any, provided for in this Indenture relating to the proposed action have been satisfied; and

(b)An Opinion of Counsel in form and substance reasonably satisfactory to the Trustee (which shall include the statements set forth in Section 14.05 hereof) stating that, in the opinion of such counsel, all such conditions precedent and covenants have been satisfied;

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provided that, subject to Section 5.01(c) hereof, no Opinion of Counsel shall be required in connection with the addition of a Guarantor under this Indenture upon execution and delivery by such Guarantor and the Trustee of a supplemental indenture to this Indenture, the form of which is attached as Exhibit D hereto.

Section 14.05Statements Required in Certificate or Opinion.

Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (other than a certificate provided pursuant to Section 4.04 hereof or Trust Indenture Act Section 314(a)(4)) shall comply with the provisions of Trust Indenture Act Section 314(e) and shall include:

(a)a statement that the Person making such certificate or opinion has read such covenant or condition;

(b)a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based;

(c)a statement that, in the opinion of such Person, he or she has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with (and, in the case of an Opinion of Counsel, may be limited to reliance on an Officer’s Certificate as to matters of fact); and

(d)a statement as to whether or not, in the opinion of such Person, such condition or covenant has been complied with.

Section 14.06Rules by Trustee and Agents.

The Trustee may make reasonable rules for action by or at a meeting of Holders.  The Registrar or Paying Agent may make reasonable rules and set reasonable requirements for its functions.

Section 14.07No Personal Liability of Directors, Officers, Employees and Stockholders.

No director, officer, employee, incorporator or stockholder of the Issuer or any Guarantor or any of their parent entities (other than the Issuer and the Guarantors) shall have any liability for any obligations of the Issuer or the Guarantors under the Notes, the Guarantees or this Indenture or for any claim based on, in respect of, or by reason of such obligations or their creation. Each Holder by accepting Notes waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes.

Section 14.08Governing Law.

THIS INDENTURE, THE NOTES AND ANY GUARANTEE WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

Section 14.09Waiver of Jury Trial.

EACH OF THE ISSUER, THE GUARANTORS AND THE TRUSTEE HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE, THE NOTES OR THE TRANSACTIONS CONTEMPLATED HEREBY.

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Section 14.10Force Majeure.

In no event shall the Trustee be responsible or liable for any failure or delay in the performance of its obligations under this Indenture arising out of or caused by, directly or indirectly, forces beyond its reasonable control, including without limitation strikes, work stoppages, accidents, acts of war or terrorism, civil or military disturbances, nuclear or natural catastrophes or acts of God, and interruptions, loss or malfunctions of utilities, communications or computer (software or hardware) services.

Section 14.11No Adverse Interpretation of Other Agreements.

This Indenture may not be used to interpret any other indenture, loan or debt agreement of the Issuer or its Restricted Subsidiaries or of any other Person.  Any such indenture, loan or debt agreement may not be used to interpret this Indenture.

Section 14.12Successors.

All agreements of the Issuer in this Indenture and the Notes shall bind its successors.  All agreements of the Trustee in this Indenture shall bind its successors.  All agreements of each Guarantor in this Indenture shall bind its successors, except as otherwise provided in Section 11.05 hereof.

Section 14.13Severability.

In case any provision in this Indenture or in the Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

Section 14.14Counterpart Originals.

The parties may sign any number of copies of this Indenture.  Each signed copy shall be an original, but all of them together represent the same agreement.

Section 14.15Table of Contents, Headings, etc.

The Table of Contents, Cross-Reference Table and headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part of this Indenture and shall in no way modify or restrict any of the terms or provisions hereof.

Section 14.16Qualification of Indenture.

The Issuer and the Guarantors shall qualify this Indenture under the Trust Indenture Act in accordance with the terms and conditions of the Registration Rights Agreement and shall pay all reasonable costs and expenses (including attorneys’ fees and expenses for the Issuer, the Guarantors and the Trustee) incurred in connection therewith, including, but not limited to, costs and expenses of qualification of this Indenture and the Notes and printing this Indenture and the Notes.  The Trustee shall be entitled to receive from the Issuer and the Guarantors any such Officer’s Certificates, Opinions of Counsel or other documentation as it may reasonably request in connection with any such qualification of this Indenture under the Trust Indenture Act.

[Signatures on following page]

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THE READER’S DIGEST ASSOCIATION, INC.
By:
	Name: William H. Magill
	Title:Vice President and Treasurer
ALLRECIPES.COM, INC. ARDEE MUSIC PUBLISHING, INC. BOOKS ARE FUN, LTD. CHRISTMAS ANGEL PRODUCTIONS, INC. FAMILY READING PROGRAM CORP. FUNDRAISING.COM, INC. HOME SERVICE PUBLICATIONS, INC. PEGASUS ASIA INVESTMENTS INC. PEGASUS FINANCE CORP. PEGASUS INVESTMENT, INC. PEGASUS SALES, INC. PLEASANTVILLE MUSIC PUBLISHING, INC. QSP DISTRIBUTION SERVICES, LLC QSP PRODUCTS AND PROGRAMS, LLC QSP SALES, LLC QSP SERVICES, LLC QSP VENTURES, LLC QSP, INC. R.D. MANUFACTURING CORPORATION RD LARGE EDITION, INC. RD MAGAZINE VALUE PARTNERS, INC. RD MEMBER SERVICES INC. RD PUBLICATIONS, INC. RD TRADE SHOWS, INC. RD WALKING, INC.
By:
	Name:	William H. Magill
	Title:	Treasurer

Indenture

509335-1044-10908-NY01.2630218

READER’S DIGEST CHILDREN’S         PUBLISHING, INC. READER’S DIGEST CONSUMER SERVICES,         INC. READER’S DIGEST ENTERTAINMENT, INC. READER’S DIGEST FINANCIAL SERVICES,         INC. READER’S DIGEST LATINOAMERICA S.A. READER’S DIGEST SALES AND SERVICES,         INC. READER’S DIGEST SUB NINE, INC. READER’S DIGEST YOUNG FAMILIES, INC. REIMAN MEDIA GROUP, INC. RETIREMENT LIVING PUBLISHING         COMPANY, INC. SMDDMS, INC. TASTE OF HOME ENTERTAINING, INC. TASTE OF HOME MEDIA GROUP, INC. TASTE OF HOME PRODUCTIONS, INC. THE READER’S DIGEST ASSOCIATION         (RUSSIA) INCORPORATED TRAVEL PUBLICATIONS, INC. VIDEOVATION, INC. W.A. PUBLICATIONS, LLC WAPLA, LLC WORLD WIDE COUNTRY TOURS, INC.
By:
	Name:	William H. Magill
	Title:	Treasurer

Indenture

509335-1044-10908-NY01.2630218

WRC MEDIA INC. COMPASSLEARNING, INC. WEEKLY READER CORPORATION LIFETIME LEARNING SYSTEMS, INC. WORLD ALMANAC EDUCATION GROUP,         INC. FUNK & WAGNALLS YEARBOOK CORP. GARETH STEVENS, INC.
By:
	Name: Robert S. Yingling
	Title:   Chief Financial Officer

DIRECT HOLDINGS U.S. CORP. ALEX INC. DIRECT HOLDINGS AMERICAS INC. DIRECT HOLDINGS CUSTOM PUBLISHING         INC. DIRECT HOLDINGS CUSTOMER SERVICE,         INC. DIRECT HOLDINGS EDUCATION INC. DIRECT HOLDINGS LIBRARIES INC.
By:
	Name:	Christopher Hearing
	Title:	Executive Vice President, Chief Financial Officer and Treasurer

Indenture

509335-1044-10908-NY01.2630218

THE BANK OF NEW YORK, as Trustee
By:
	Name:
	Title:

Indenture

509335-1044-10908-NY01.2630218

APPENDIX A

PROVISIONS RELATING TO INITIAL NOTES,
ADDITIONAL NOTES AND EXCHANGE NOTES

Section 1.1Definitions.

(a)  Capitalized Terms.

Capitalized terms used but not defined in this Appendix A have the meanings given to them in the Indenture.  The following capitalized terms have the following meanings:

“Applicable Procedures” means, with respect to any transfer or transaction involving a Regulation S Global Note or beneficial interest therein, the rules and procedures of the Depositary for such Global Note, Euroclear and Clearstream, in each case to the extent applicable to such transaction and as in effect from time to time.

“Clearstream” means Clearstream Banking, Société Anonyme, or any successor securities clearing agency.

“Euroclear” means the Euroclear Clearance System or any successor securities clearing agency.

“IAI” means an institutional “accredited investor” as described in Rule 501(a)(1), (2), (3) or (7) under the Securities Act.

“QIB” means a “qualified institutional buyer” as defined in Rule 144A.

“Regulation S” means Regulation S promulgated under the Securities Act.

“Regulation S Notes” means all Notes offered and sold outside the United States in reliance on Regulation S.

“Restricted Period”, with respect to any Notes, means the period of 40 consecutive days beginning on and including the later of (a) the day on which such Notes are first offered to persons other than distributors (as defined in Regulation S under the Securities Act) in reliance on Regulation S, notice of which day shall be promptly given by the Issuer to the Trustee, and (b) the date of issuance with respect to any such Notes.

“Rule 501” means Rule 501(a)(1), (2), (3) or (7) under the Securities Act.

“Rule 144” means Rule 144 promulgated under the Securities Act.

“Rule 144A” means Rule 144A promulgated under the Securities Act.

“Rule 144A Notes” means all Notes offered and sold to QIBs in reliance on Rule 144A.

“Rule 904” means Rule 904 promulgated under the Securities Act.

(b) Other Definitions.

Term:	Defined in Section:
“Agent Members”	2.1(c)
“Global Note”	2.1(b)
“IAI Global Note”	2.1(b)
“Regulation S Global Note”	2.1(b)
“Rule 144A Global Note”	2.1(b)

Section 2.1Form and Dating

(a)  The Initial Notes issued on the date hereof will be (i) offered and sold by the Issuer to the Initial Purchasers and (ii) resold, initially only to (1) QIBs in reliance on Rule 144A and (2) Persons other than U.S. Persons (as defined in Regulation S) in reliance on Regulation S.  Such Initial Notes may thereafter be transferred to, among others, QIBs, purchasers in reliance on Regulation S and, except as set forth below, IAIs in accordance with Rule 501.

(b)  Global Notes.  Rule 144A Notes shall be issued initially in the form of one or more permanent global Notes in definitive, fully registered form (collectively, the “Rule 144A Global Note”) and Regulation S Notes shall be issued initially in the form of one or more global Notes (collectively, the “Regulation S Global Note”), in each case without interest coupons and bearing the Global Notes Legend and Restricted Notes Legend, which shall be deposited on behalf of the purchasers of the Notes represented thereby with the Custodian, and registered in the name of the Depositary or a nominee of the Depositary, duly executed by the Issuer and authenticated by the Trustee as provided in this Indenture.  One or more global Notes in definitive, fully registered form without interest coupons and bearing the Global Notes Legend and the Restricted Notes Legend (collectively, the “IAI Global Note”) shall also be issued on the Issue Date, deposited with the Custodian, and registered in the name of the Depositary or a nominee of the Depositary, duly executed by the Issuer and authenticated by the Trustee as provided in this Indenture to accommodate transfers of beneficial interests in the Notes to IAIs subsequent to the initial distribution.  Beneficial ownership interests in the Regulation S Global Note shall not be exchangeable for interests in the Rule 144A Global Note, the IAI Global Note or any other Note without a Restricted Notes Legend until the expiration of the Restricted Period.  The Rule 144A Global Note, the IAI Global Note and the Regulation S Global Note are each referred to herein as a “Global Note” and are collectively referred to herein as “Global Notes”, provided that the term “Global Note” when used in Sections 2.1(c), 2.3(f), 2.3(g)(i), 2.3(h)(i), 2.3(h)(ii) and 2.4 shall also include any Note in global form issued in connection with aN Exchange Offer.  The aggregate principal amount of the Global Notes may from time to time be increased or decreased by adjustments made on the records of the Trustee and the Depositary or its nominee and on the schedules thereto as hereinafter provided.

(c)  Book-Entry Provisions.  This Section 2.1(c) shall apply only to a Global Note deposited with or on behalf of the Depositary.

The Issuer shall execute and the Trustee shall, in accordance with this Section 2.1(c) and Section 2.2 and pursuant to an order of the Issuer signed by one Officer of the Issuer, authenticate and deliver initially one or more Global Notes that (i) shall be registered in the name of the Depositary for such Global Note or Global Notes or the nominee of such Depositary and (ii) shall be delivered by the

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Trustee to such Depositary or pursuant to such Depositary’s instructions or held by the Trustee as Custodian.

Members of, or participants in, the Depositary (“Agent Members”) shall have no rights under this Indenture with respect to any Global Note held on their behalf by the Depositary or by the Trustee as Custodian or under such Global Note, and the Depositary may be treated by the Issuer, the Trustee and any agent of the Issuer or the Trustee as the absolute owner of such Global Note for all purposes whatsoever.  Notwithstanding the foregoing, nothing herein shall prevent the Issuer, the Trustee or any agent of the Issuer or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depositary or impair, as between the Depositary and its Agent Members, the operation of customary practices of such Depositary governing the exercise of the rights of a holder of a beneficial interest in any Global Note.

(d)  Definitive Notes.  Except as provided in Section 2.3 or 2.4, owners of beneficial interests in Global Notes will not be entitled to receive physical delivery of certificated Notes.

Section 2.2Authentication.  The Trustee shall authenticate and make available for delivery upon a written order of the Issuer signed by one Officer of the Issuer (a)  Initial Notes for original issue on the date hereof in an aggregate principal amount of $600,000,000, (b) subject to the terms of this Indenture, Additional Notes and (c) the Exchange Notes for issue only in an Exchange Offer and pursuant to the Registration Rights Agreement and for a like principal amount of Initial Notes exchanged pursuant thereto.  Such order shall specify the amount of the Notes to be authenticated, the date on which the original issue of Notes is to be authenticated and whether the Notes are to be Initial Notes, Additional Notes or Exchange Notes.

Section 2.3Transfer and Exchange.

(a)  Transfer and Exchange of Definitive Notes.  When Definitive Notes are presented to the Registrar with a request:

(i)  to register the transfer of such Definitive Notes; or

(ii)  to exchange such Definitive Notes for an equal principal amount of Definitive Notes of other authorized denominations,

the Registrar shall register the transfer or make the exchange as requested if its reasonable requirements for such transaction are met; provided, however, that the Definitive Notes surrendered for transfer or exchange:

(1)  shall be duly endorsed or accompanied by a written instrument of transfer in form reasonably satisfactory to the Issuer and the Registrar, duly executed by the Holder thereof or his attorney duly authorized in writing; and

(2)  in the case of Transfer Restricted Notes, are accompanied by the following additional information and documents, as applicable:

(A)  if such Definitive Notes are being delivered to the Registrar by a Holder for registration in the name of such Holder, without transfer, a certification from such Holder to that effect (in the form set forth on the reverse side of the Initial Note); or

(B)  if such Definitive Notes are being transferred to the Issuer, a certification to that effect (in the form set forth on the reverse side of the Initial Note); or

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(C)  if such Definitive Notes are being transferred pursuant to an exemption from registration in accordance with Rule 144 under the Securities Act or in reliance upon another exemption from the registration requirements of the Securities Act, (x) a certification to that effect (in the form set forth on the reverse side of the Initial  Note) and (y) if the Issuer so requests, an opinion of counsel or other evidence reasonably satisfactory to them as to the compliance with the restrictions set forth in the legend set forth in Section 2.3(e)(i).

(b)  Restrictions on Transfer of a Definitive Note for a Beneficial Interest in a Global Note.  A Definitive Note may not be exchanged for a beneficial interest in a Global Note except upon satisfaction of the requirements set forth below.  Upon receipt by the Trustee of a Definitive Note, duly endorsed or accompanied by a written instrument of transfer in form reasonably satisfactory to the Issuer and the Registrar, together with:

(i) certification (in the form set forth on the reverse side of the Initial Note) that such Definitive Note is being transferred (1) to a QIB in accordance with Rule 144A, (2) to an IAI that has furnished to the Trustee a signed letter substantially in the form of Exhibit C or (3) outside the United States in an offshore transaction within the meaning of Regulation S and in compliance with Rule 904 under the Securities Act; and

(ii) written instructions directing the Trustee to make, or to direct the Custodian to make, an adjustment on its books and records with respect to such Global Note to reflect an increase in the aggregate principal amount of the Notes represented by the Global Note, such instructions to contain information regarding the Depositary account to be credited with such increase, then the Trustee shall cancel such Definitive Note and cause, or direct the Custodian to cause, in accordance with the standing instructions and procedures existing between the Depositary and the Custodian, the aggregate principal amount of Notes represented by the Global Note to be increased by the aggregate principal amount of the Definitive Note to be exchanged and shall credit or cause to be credited to the account of the Person specified in such instructions a beneficial interest in the Global Note equal to the principal amount of the Definitive Note so canceled.  If no Global Notes are then outstanding and the Global Note has not been previously exchanged for certificated securities pursuant to Section 2.4, the Issuer shall issue and the Trustee shall authenticate, upon written order of the Issuer in the form of an Officers’ Certificate, a new Global Note in the appropriate principal amount.

(c)  Transfer and Exchange of Global Notes.  (i)  The transfer and exchange of Global Notes or beneficial interests therein shall be effected through the Depositary, in accordance with this Indenture (including applicable restrictions on transfer set forth herein, if any) and the procedures of the Depositary therefor.  A transferor of a beneficial interest in a Global Note shall deliver a written order given in accordance with the Depositary’s procedures containing information regarding the participant account of the Depositary to be credited with a beneficial interest in such Global Note or another Global Note and such account shall be credited in accordance with such order with a beneficial interest in the applicable Global Note and the account of the Person making the transfer shall be debited by an amount equal to the beneficial interest in the Global Note being transferred.  Transfers by an owner of a beneficial interest in the Rule 144A Global Note or the IAI Global  Note to a transferee who takes delivery of such interest through the Regulation S Global Note, whether before or after the expiration of the Restricted Period, shall be made only upon receipt by the Trustee of a certification in the form provided on the reverse of the Initial Notes from the transferor to the effect that such transfer is being made in accordance with Regulation S or (if available) Rule 144 under the Securities Act and that, if such transfer is being made prior to the expiration of the Restricted Period, the interest transferred shall be held immediately thereafter through Euroclear or Clearstream.  In the case of a transfer of a beneficial interest in either the

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Regulation S Global Note or the Rule 144A Global Note for an interest in the IAI Global Note, the transferee must furnish a signed letter substantially in the form of Exhibit C to the Trustee.

(ii)  If the proposed transfer is a transfer of a beneficial interest in one Global Note to a beneficial interest in another Global Note, the Registrar shall reflect on its books and records the date and an increase in the principal amount of the Global Note to which such interest is being transferred in an amount equal to the principal amount of the interest to be so transferred, and the Registrar shall reflect on its books and records the date and a corresponding decrease in the principal amount of Global Note from which such interest is being transferred.

(iii)  Notwithstanding any other provisions of this Appendix A (other than the provisions set forth in Section 2.4), a Global Note may not be transferred as a whole except by the Depositary to a nominee of the Depositary or by a nominee of the Depositary to the Depositary or another nominee of the Depositary or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary.

(iv)  In the event that a Global  Note is exchanged for Definitive Notes pursuant to Section 2.4 prior to the consummation of the Exchange Offer or the effectiveness of a Shelf Registration Statement with respect to such Notes, such Notes may be exchanged only in accordance with such procedures as are substantially consistent with the provisions of this Section 2.3 (including the certification requirements set forth on the reverse of the Initial Notes intended to ensure that such transfers comply with Rule 144A, Regulation S or such other applicable exemption from registration under the Securities Act, as the case may be) and such other procedures as may from time to time be adopted by the Issuer.

(d)  Restrictions on Transfer of Regulation S Global Note.  (i) Prior to the expiration of the Restricted Period, interests in the Regulation S Global Note may only be held through Euroclear or Clearstream.  During the Restricted Period, beneficial ownership interests in the Regulation S Global Note may only be sold, pledged or transferred through Euroclear or Clearstream in accordance with the Applicable Procedures and only (1) to the Issuer, (2) so long as such security is eligible for resale pursuant to Rule 144A, to a person whom the selling holder reasonably believes is a QIB that purchases for its own account or for the account of a QIB to whom notice is given that the resale, pledge or transfer is being made in reliance on Rule 144A, (3) in an offshore transaction in accordance with Regulation S, (4) pursuant to an exemption from registration under the Securities Act provided by Rule 144 (if applicable) under the Securities Act or another available exemption , (5) to an IAI purchasing for its own account, or for the account of such an IAI, in a minimum principal amount of Notes of $250,000 or (6) pursuant to an effective registration statement under the Securities Act, in each case in accordance with any applicable securities laws of any state of the United States.  Prior to the expiration of the Restricted Period, transfers by an owner of a beneficial interest in the Regulation S Global Note to a transferee who takes delivery of such interest through the Rule 144A Global Note or the IAI Global Note shall be made only in accordance with Applicable Procedures and upon receipt by the Trustee of a written certification from the transferor of the beneficial interest in the form provided on the reverse of the Initial Note to the effect that such transfer is being made to (1) a QIB within the meaning of Rule 144A in a transaction meeting the requirements of Rule 144A or (2) an IAI purchasing for its own account, or for the account of such an IAI, in a minimum principal amount of the Notes of $250,000.  Such written certification shall no longer be required after the expiration of the Restricted Period.  In the case of a transfer of a beneficial interest in the Regulation S Global Note for an interest in the IAI Global Note, the transferee must furnish a signed letter substantially in the form of Exhibit C to the Trustee.

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(ii)  Upon the expiration of the Restricted Period, beneficial ownership interests in the Regulation S Global Note shall be transferable in accordance with applicable law and the other terms of this Indenture.

(e)  Legend.

(i)  Except as permitted by the following paragraphs (ii), (iii) or (iv), each Note certificate evidencing the Global Notes and the Definitive Notes (and all Notes issued in exchange therefor or in substitution thereof) shall bear a legend in substantially the following form (each defined term in the legend being defined as such for purposes of the legend only):

“THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION. THE HOLDER OF THIS SECURITY, BY ITS ACCEPTANCE HEREOF, AGREES ON ITS OWN BEHALF AND ON BEHALF OF ANY INVESTOR ACCOUNT FOR WHICH IT HAS PURCHASED SECURITIES, TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE “RESALE RESTRICTION TERMINATION DATE”) THAT IS [IN THE CASE OF RULE 144A NOTES: TWO YEARS] [IN THE CASE OF REGULATION S NOTES: 40 DAYS] AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE ISSUER OR ANY AFFILIATE OF THE ISSUER WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY), ONLY (A) TO THE ISSUER, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT, TO A PERSON IT REASONABLY BELIEVES IS A “QUALIFIED INSTITUTIONAL BUYER” AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL “ACCREDITED INVESTOR” WITHIN THE MEANING OF RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS AN INSTITUTIONAL ACCREDITED INVESTOR ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN A MINIMUM PRINCIPAL AMOUNT OF THE SECURITIES OF $250,000, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR FOR OFFER OR SALE IN CONNECTION WITH ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE ISSUER’S AND THE TRUSTEE’S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/ OR OTHER

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INFORMATION SATISFACTORY TO EACH OF THEM. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE. [IN THE CASE OF REGULATION S NOTES: BY ITS ACQUISITION HEREOF, THE HOLDER HEREOF REPRESENTS THAT IT IS NOT A U.S. PERSON NOR IS IT PURCHASING FOR THE ACCOUNT OF A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT.]”

Each Definitive Note shall bear the following additional legend:

“IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS.”

(ii)  Upon any sale or transfer of a Transfer Restricted Note that is a Definitive Note, the Registrar shall permit the Holder thereof to exchange such Transfer Restricted Note for a Definitive Note that does not bear the legends set forth above and rescind any restriction on the transfer of such Transfer Restricted Note if the Holder certifies in writing to the Registrar that its request for such exchange was made in reliance on Rule 144 (such certification to be in the form set forth on the reverse of the Initial Note).

(iii)  After a transfer of any Initial Notes or Additional Notes during the period of the effectiveness of a Shelf Registration Statement with respect to such Initial Notes or Additional Notes, as the case may be, all requirements pertaining to the Restricted Notes Legend on such Initial Notes or Additional Notes shall cease to apply and the requirements that any such Initial Notes or Additional Notes be issued in global form shall continue to apply.

(iv)  Upon the consummation of an Exchange Offer with respect to the Initial Notes or Additional Notes pursuant to which Holders of such Initial Notes or Additional Notes are offered Exchange Notes in exchange for their Initial Notes or Additional Notes, all requirements pertaining to Initial Notes or Additional Notes that Initial Notes or Additional Notes be issued in global form shall continue to apply, and Exchange Notes in global form without the Restricted Notes Legend shall be available to Holders that exchange such Initial Notes or Additional Notes in such Exchange Offer.

(v)  Upon a sale or transfer after the expiration of the Restricted Period of any Initial Note or Additional Note acquired pursuant to Regulation S, all requirements that such Initial  Note or Additional Note bear the Restricted Notes Legend shall cease to apply and the requirements requiring any such Initial Note or Additional Note be issued in global form shall continue to apply.

(vi)  Any Additional Notes sold in a registered offering shall not be required to bear the Restricted Notes Legend.

(f)  Cancelation or Adjustment of Global Note.  At such time as all beneficial interests in a Global Note have either been exchanged for Definitive Notes, transferred, redeemed, repurchased or canceled, such Global Note shall be returned by the Depositary to the Trustee for cancelation or retained and canceled by the Trustee.  At any time prior to such cancelation, if any beneficial interest in a Global

8

Note is exchanged for Definitive Notes, transferred in exchange for an interest in another Global Note, redeemed, repurchased or canceled, the principal amount of Notes represented by such Global Note shall be reduced and an adjustment shall be made on the books and records of the Trustee (if it is then the Custodian for such Global Note) with respect to such Global Note, by the Trustee or the Custodian, to reflect such reduction.

(g)  Obligations with Respect to Transfers and Exchanges of Notes.

(i)  To permit registrations of transfers and exchanges, the Issuer shall execute and the Trustee shall authenticate, Definitive Notes and Global Notes at the Registrar’s request.

(ii) No service charge shall be made for any registration of transfer or exchange, but the Issuer may require payment of a sum sufficient to cover any transfer tax, assessments, or similar governmental charge payable in connection therewith (other than any such transfer taxes, assessments or similar governmental charge payable upon exchanges pursuant to Sections 2.07, 2.10, 3.06, 3.09, 4.10, 4.14 and 9.05 of this Indenture).

(iii)  Prior to the due presentation for registration of transfer of any Note, the Issuer, the Trustee, the Paying Agent or the Registrar may deem and treat the person in whose name a Note is registered as the absolute owner of such Note for the purpose of receiving payment of principal of and interest on such Note and for all other purposes whatsoever, whether or not such Note is overdue, and none of the Issuer, the Trustee, the Paying Agent or the Registrar  shall be affected by notice to the contrary.

(iv)  All Notes issued upon any transfer or exchange pursuant to the terms of this Indenture shall evidence the same debt and shall be entitled to the same benefits under this Indenture as the Notes surrendered upon such transfer or exchange.

(h)  No Obligation of the Trustee.

(i)  The Trustee shall have no responsibility or obligation to any beneficial owner of a Global Note, a member of, or a participant in the Depositary or any other Person with respect to the accuracy of the records of the Depositary or its nominee or of any participant or member thereof, with respect to any ownership interest in the Notes or with respect to the delivery to any participant, member, beneficial owner or other Person (other than the Depositary) of any notice (including any notice of redemption or repurchase) or the payment of any amount, under or with respect to such Notes.  All notices and communications to be given to the Holders and all payments to be made to Holders under the Notes shall be given or made only to the registered Holders (which shall be the Depositary or its nominee in the case of a Global Note).  The rights of beneficial owners in any Global Note shall be exercised only through the Depositary subject to the applicable rules and procedures of the Depositary.  The Trustee may rely and shall be fully protected in relying upon information furnished by the Depositary with respect to its members, participants and any beneficial owners.

(ii)  The Trustee shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Indenture or under applicable law with respect to any transfer of any interest in any Note (including any transfers between or among Depositary participants, members or beneficial owners in any Global Note) other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by, the terms of this Indenture, and to examine the same to determine substantial compliance as to form with the express requirements hereof.

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Section 2.4Definitive Notes.

(a)  A Global Note deposited with the Depositary or with the Trustee as Custodian pursuant to Section 2.1 or issued in connection with an Exchange Offer shall be transferred to the beneficial owners thereof in the form of Definitive Notes in an aggregate principal amount equal to the principal amount of such Global Note, in exchange for such Global Note, only if such transfer complies with Section 2.3 and (i) the Depositary notifies the Issuer that it is unwilling or unable to continue as a Depositary for such Global Note or if at any time the Depositary ceases to be a “clearing agency” registered under the Exchange Act and, in each case, a successor depositary is not appointed by the Issuer within 90 days of such notice or after the Issuer becomes aware of such cessation, or (ii) an Event of Default has occurred and is continuing or (iii) the Issuer, in its sole discretion, notifies the Trustee in writing that it elects to cause the issuance of certificated Notes under this Indenture.

(b)  Any Global Note that is transferable to the beneficial owners thereof pursuant to this Section 2.4 shall be surrendered by the Depositary to the Trustee, to be so transferred, in whole or from time to time in part, without charge, and the Trustee shall authenticate and deliver, upon such transfer of each portion of such Global Note, an equal aggregate principal amount of Definitive Notes of authorized denominations.  Any portion of a Global Note transferred pursuant to this Section shall be executed, authenticated and delivered only in denominations of $2,000 and integral multiples of $1,000 in excess thereof and registered in such names as the Depositary shall direct.  Any certificated Initial Note or Additional Note in the form of a Definitive Note delivered in exchange for an interest in the Global Note shall, except as otherwise provided by Section 2.3(e), bear the Restricted Notes Legend.

(c)  Subject to the provisions of Section 2.4(b), the registered Holder of a Global Note may grant proxies and otherwise authorize any Person, including Agent Members and Persons that may hold interests through Agent Members, to take any action which a Holder is entitled to take under this Indenture or the Notes.

(d)  In the event of the occurrence of any of the events specified in Section 2.4(a)(i), (ii) or (iii), the Issuer will promptly make available to the Trustee a reasonable supply of Definitive Notes in fully registered form without interest coupons.

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EXHIBIT A

[FORM OF FACE OF INITIAL NOTE]

[Global Notes Legend]

UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), NEW YORK, NEW YORK, TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO DTC, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR’S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.

[Restricted Notes Legend]

THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION. THE HOLDER OF THIS SECURITY, BY ITS ACCEPTANCE HEREOF, AGREES ON ITS OWN BEHALF AND ON BEHALF OF ANY INVESTOR ACCOUNT FOR WHICH IT HAS PURCHASED SECURITIES, TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE “RESALE RESTRICTION TERMINATION DATE”) THAT IS [IN THE CASE OF RULE 144A NOTES: TWO YEARS] [IN THE CASE OF REGULATION S NOTES: 40 DAYS] AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE ISSUER OR ANY AFFILIATE OF THE ISSUER WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY), ONLY (A) TO THE ISSUER, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT, TO A PERSON IT REASONABLY BELIEVES IS A “QUALIFIED INSTITUTIONAL BUYER” AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL “ACCREDITED INVESTOR” WITHIN THE MEANING OF RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS AN INSTITUTIONAL ACCREDITED

INVESTOR ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN A MINIMUM PRINCIPAL AMOUNT OF THE SECURITIES OF $250,000, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR FOR OFFER OR SALE IN CONNECTION WITH ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE ISSUER’S AND THE TRUSTEE’S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/ OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE. [IN THE CASE OF REGULATION S NOTES: BY ITS ACQUISITION HEREOF, THE HOLDER HEREOF REPRESENTS THAT IT IS NOT A U.S. PERSON NOR IS IT PURCHASING FOR THE ACCOUNT OF A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT.]

Each Definitive Note shall bear the following additional legend:

IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS.

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CUSIP  [                     ]

ISIN  [                     ](1)

[RULE 144A][REGULATION S][IAI][GLOBAL] NOTE

9% Senior Subordinated Notes due 2017

No. Up to [$                    ]

THE READER’S DIGEST ASSOCIATION, INC.

promises to pay to CEDE & CO. or registered assigns, the principal sum [set forth on the Schedule of Exchanges of Interests in the Global Note attached hereto] [of                                                  United States Dollars] on February 15, 2017.

Interest Payment Dates:  February 15 and August 15

Record Dates:  February 1 and August 1

 (1)Rule 144A Note CUSIP:  755267AD3

Rule 144A Note ISIN:   US755267AD36

Regulation S Note CUSIP:  U75338AB6

Regulation S Note ISIN:  USU75338AB62

IAI Note CUSIP:  755267AE1

IAI Note ISIN:  US755267AE19

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IN WITNESS HEREOF, the Issuer has caused this instrument to be duly executed.

Dated:

THE READER’S DIGEST ASSOCIATION, INC.
By:
	Name:
	Title:

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This is one of the Notes referred to in the within-mentioned Indenture:

THE BANK OF NEW YORK, as Trustee
By:
	Authorized Signatory

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[Back of Note]

9% Senior Subordinated Notes due 2017

Capitalized terms used herein shall have the meanings assigned to them in the Indenture referred to below unless otherwise indicated.

1.INTEREST.  The Reader’s Digest Association, Inc., a Delaware corporation, promises to pay interest on the principal amount of this Note at 9% per annum from March 2, 2007 until maturity and shall pay the Additional Interest, if any, payable pursuant to the Registration Rights Agreement referred to below.  The Issuer will pay interest and Additional Interest, if any, semi-annually in arrears on February 15 and August 15 of each year, or if any such day is not a Business Day, on the next succeeding Business Day (each, an “Interest Payment Date”).  Interest on the Notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of issuance; provided that the first Interest Payment Date shall be August 15, 2007.  The Issuer will pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal and premium, if any, from time to time on demand at the interest rate on the Notes; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest and Additional Interest, if any, (without regard to any applicable grace periods) from time to time on demand at the interest rate on the Notes.  Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months.

2.METHOD OF PAYMENT.  The Issuer will pay interest on the Notes and Additional Interest, if any, to the Persons who are registered Holders of Notes at the close of business on February 1 or August 1 (whether or not a Business Day), as the case may be, next preceding the Interest Payment Date, even if such Notes are canceled after such record date and on or before such Interest Payment Date, except as provided in Section 2.12 of the Indenture with respect to defaulted interest.  Principal of, premium, if any, and interest on the Notes will be payable at the office or agency of the Issuer maintained for such purpose in the Borough of Manhattan in the City of New York or, at the option of the Issuer, payment of interest and Additional Interest, if any, may be made by check mailed to the Holders at their respective addresses set forth in the register of Holders; provided that payment by wire transfer of immediately available funds will be required with respect to principal of and interest, premium and Additional Interest, if any, on, all Global Notes and all other Notes the Holders of which shall have provided wire transfer instructions to the Issuer or the Paying Agent.  Such payment shall be in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts.

3.PAYING AGENT AND REGISTRAR.  Initially, The Bank of New York, the Trustee under the Indenture, will act as Paying Agent and Registrar.  The Issuer may change any Paying Agent or Registrar without notice to the Holders.  The Issuer or any of its Subsidiaries may act in any such capacity.

4.INDENTURE.  The Issuer issued the Notes under an Indenture, dated as of March 2, 2007 (the “Indenture”), among The Reader’s Digest Association, Inc., the Guarantors named therein and the Trustee.  This Note is one of a duly authorized issue of notes of the Issuer designated as its 9% Senior Subordinated Notes due 2017.  The Issuer shall be entitled to issue Additional Notes pursuant to Section 2.01 and 4.09 of the Indenture.  The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (the “Trust Indenture Act”).  The Notes are subject to all such terms, and Holders are referred to the Indenture

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and such Act for a statement of such terms.  To the extent any provision of this Note conflicts with the express provisions of the Indenture, the provisions of the Indenture shall govern and be controlling.

5.OPTIONAL REDEMPTION.

(a)Except as described below under clauses 5(b) and 5(c) hereof, the Notes will not be redeemable at the Issuer’s option before February 15, 2012.

(b)At any time prior to February 15, 2012, the Issuer may redeem all or a part of the Notes, upon not less than 30 nor more than 60 days’ prior notice mailed by first-class mail to the registered address of each Holder or otherwise in accordance with the procedures of DTC, at a redemption price equal to 100% of the principal amount of the Notes redeemed plus the Applicable Premium as of, and accrued and unpaid interest and Additional Interest, if any, to the date of redemption (the “Redemption Date”), subject to the rights of Holders on the relevant Record Date to receive interest due on the relevant Interest Payment Date.

(c)Until February 15, 2010, the Issuer may, at its option, redeem up to 35% of the aggregate principal amount of Notes issued by it at a redemption price equal to 109% of the aggregate principal amount thereof, plus accrued and unpaid interest thereon and Additional Interest, if any, to the applicable Redemption Date, subject to the right of Holders of Notes of record on the relevant record date to receive interest due on the relevant Interest Payment Date, with the net cash proceeds of one or more Equity Offerings; provided that at least 65% of the sum of the original aggregate principal amount of Notes issued under the Indenture and the original aggregate principal amount any Additional Notes that are Notes issued under the Indenture after the Issue Date remains outstanding immediately after the occurrence of each such redemption; provided, further, that each such redemption occurs within 90 days of the date of closing of each such Equity Offering.

(d)On and after February 15, 2012, the Issuer may redeem the Notes, in whole or in part, upon notice pursuant to Section 3.02 of the Indenture at the redemption prices (expressed as percentages of principal amount of the Notes to be redeemed) set forth below, plus accrued and unpaid interest thereon and Additional Interest, if any, to the applicable Redemption Date, subject to the right of Holders of record on the relevant record date to receive interest due on the relevant Interest Payment Date, if redeemed during the twelve-month period beginning on February 15 of each of the years indicated below:

Year	Percentage
2012	104.500	%
2013	103.000	%
2014	101.500	%
2015 and thereafter	100.000	%

(e)Any notice of redemption upon any Equity Offering may be given prior to the completion of such Equity Offering, and any such redemption or notice may, at the Issuer’s discretion, be subject to one or more conditions precedent, including, but not limited to, completion of the related Equity Offering.

(f)Any redemption pursuant to this paragraph 5 shall be made pursuant to the provisions of Sections 3.01 through 3.06 of the Indenture.

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6.MANDATORY REDEMPTION.  The Issuer shall not be required to make mandatory redemption or sinking fund payments with respect to the Notes.

7.NOTICE OF REDEMPTION.  Subject to Section 3.03 of the Indenture, notice of redemption will be mailed by first-class mail at least 30 days but not more than 60 days before the redemption date (except that redemption notices may be mailed more than 60 days prior to a redemption date if the notice is issued in connection with Article 8 or Article 13 of the Indenture) to each Holder whose Notes are to be redeemed at its registered address or otherwise in accordance with the procedures of DTC.  Notes in denominations larger than $2,000 may be redeemed in part but only in whole multiples of $1,000 in excess of $2,000, unless all of the Notes held by a Holder are to be redeemed.  On and after the redemption date interest ceases to accrue on Notes or portions thereof called for redemption.

8.OFFERS TO REPURCHASE.

(a)Upon the occurrence of a Change of Control, the Issuer shall make an offer (a “Change of Control Offer”) to each Holder to repurchase all or any part (equal to $2,000 or an integral multiple of $1,000 in excess thereof) of each Holder’s Notes at a purchase price equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest and Additional Interest thereon, if any, to the date of purchase (the “Change of Control Payment”).  The Change of Control Offer shall be made in accordance with Section 4.14 of the Indenture.

(b)If the Issuer or any of its Restricted Subsidiaries consummates an Asset Sale, within 10 Business Days of each date that Excess Proceeds exceed $20.0 million, the Issuer shall commence an offer to all Holders of the Notes and, if required by the terms of any Indebtedness that is pari passu with the Notes (“Pari Passu Indebtedness”), to the holders of such Pari Passu Indebtedness (an “Asset Sale Offer”), to purchase the maximum principal amount of Notes and such other Pari Passu Indebtedness that is a minimum of $2,000 or an integral multiple of $1,000 in excess thereof that may be purchased out of the Excess Proceeds at an offer price in cash in an amount equal to 100% of the principal amount thereof, plus accrued and unpaid interest and Additional Interest, if any, to the date fixed for the closing of such offer, in accordance with the procedures set forth in the Indenture.  To the extent that the aggregate amount of Notes (including any Additional Notes) and such Pari Passu Indebtedness tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the Issuer may use any remaining Excess Proceeds for any purpose, subject to other covenants contained in the Indenture.  If the aggregate principal amount of Notes or the Pari Passu Indebtedness surrendered by such holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select the Notes and such Pari Passu Indebtedness to be purchased on a pro rata basis based on the accreted value or principal amount of the Notes or such Pari Passu Indebtedness tendered.  Upon completion of any such Asset Sale Offer, the amount of Excess Proceeds shall be reset at zero.  Additionally, the Issuer may, at its option, make an Asset Sale Offer using proceeds from any Asset Sale at any time after consummation of such Asset Sale; provided that such Asset Sale Offer shall be in an aggregate amount of not less than $10.0 million.  Upon consummation of such Asset Sale Offer, any Net Proceeds not required to be used to purchase Notes shall not be deemed Excess Proceeds.  Holders of Notes that are the subject of an offer to purchase will receive an Asset Sale Offer from the Issuer prior to any related purchase date and may elect to have such Notes purchased by completing the form entitled “Option of Holder to Elect Purchase” attached to the Notes.

9.DENOMINATIONS, TRANSFER, EXCHANGE.  The Notes are in registered form without coupons in denominations of $2,000 and integral multiples of $1,000 in excess thereof.  The transfer of Notes may be registered and Notes may be exchanged as provided in the Indenture.  The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements

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and transfer documents, and Holders shall be required to pay any taxes and fees required by law or permitted by the Indenture.  The Issuer need not exchange or register the transfer of any Note or portion of a Note selected for redemption, except for the unredeemed portion of any Note being redeemed in part.  Also, the Issuer need not exchange or register the transfer of any Notes for a period of 15 days before a selection of Notes to be redeemed.

10.SUBORDINATION.  The Notes and the Guarantees are subordinated to Senior Indebtedness of the Issuer and the Guarantors on the terms and subject to the conditions set forth in the Indenture.  To the extent provided in the Indenture, Senior Indebtedness must be paid before the Notes and Guarantees may be paid.  The Issuer agrees, and each Holder by accepting a Note agrees, to the subordination provisions contained in the Indenture and authorizes the Trustee to give it effect and appoints the Trustee as attorney-in-fact for such purpose.

11.PERSONS DEEMED OWNERS.  The registered Holder of a Note may be treated as its owner for all purposes.

12.AMENDMENT, SUPPLEMENT AND WAIVER.  The Indenture, the Guarantees or the Notes may be amended or supplemented as provided in the Indenture.

13.DEFAULTS AND REMEDIES.  The Events of Default relating to the Notes are defined in Section 6.01 of the Indenture.  If any Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Notes may declare the principal, premium, if any, interest and any other monetary obligations on all the then outstanding Notes to be due and payable immediately; provided, however, that so long as any Indebtedness permitted to be incurred under the Indenture as part of the Senior Credit Facility shall be outstanding, no such acceleration shall be effective until the earlier of: (1) acceleration of any such Indebtedness under the Senior Credit Facility; or (2) five Business Days after the giving of written notice of such acceleration to the Issuer and the administrative agent under the Senior Credit Facility.  Notwithstanding the foregoing, in the case of an Event of Default arising from certain events of bankruptcy or insolvency, all outstanding Notes will become due and payable immediately without further action or notice.  Holders may not enforce the Indenture, the Notes or the Guarantees except as provided in the Indenture.  Subject to certain limitations, Holders of a majority in aggregate principal amount of the then outstanding Notes may direct the Trustee in its exercise of any trust or power.  The Trustee may withhold from Holders of the Notes notice of any continuing Default (except a Default relating to the payment of principal, premium, if any, Additional Interest, if any, or interest) if it determines that withholding notice is in their interest.  The Holders of a majority in aggregate principal amount of the Notes then outstanding by notice to the Trustee may on behalf of the Holders of all of the Notes waive any existing Default and its consequences under the Indenture except a continuing Default in payment of the principal of, premium, if any, Additional Interest, if any, or interest on, any of the Notes held by a non-consenting Holder.  The Issuer and each Guarantor (to the extent that such Guarantor is so required under the Trust Indenture Act) are required to deliver to the Trustee annually a statement regarding compliance with the Indenture, and the Issuer is required within five (5) Business Days, upon becoming aware of any Default, to deliver to the Trustee a statement specifying such Default and what action the Issuer proposes to take with respect thereto.

14.AUTHENTICATION.  This Note shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose until authenticated by the manual signature of the Trustee.

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15.ADDITIONAL RIGHTS OF HOLDERS OF TRANSFER RESTRICTED NOTES.  In addition to the rights provided to Holders of Notes under the Indenture, Holders of Transfer Restricted Notes shall have all the rights set forth in the Registration Rights Agreement, dated as of March 2, 2007, among The Reader’s Digest Association, Inc., the Guarantors named therein and the other parties named on the signature pages thereof (the “Registration Rights Agreement”), including the right to receive Additional Interest (as defined in the Registration Rights Agreement).

16.GOVERNING LAW.  THE LAWS OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THE INDENTURE, THE NOTES AND THE GUARANTEES.

17.CUSIP NUMBERS.  Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Issuer has caused CUSIP numbers to be printed on the Notes, and the Trustee may use CUSIP numbers in notices of redemption as a convenience to Holders.  No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon.

The Issuer will furnish to any Holder upon written request and without charge a copy of the Indenture and/or the Registration Rights Agreement.  Requests may be made to the Issuers at the following address:

c/o The Reader’s Digest Association, Inc.

Reader’s Digest Road
Pleasantville, New York 10570
Fax No.: (914) 244-7807
Attention: General Counsel

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ASSIGNMENT FORM

To assign this Note, fill in the form below:

(I) or (we) assign and transfer this Note to:
	(Insert assignee’s legal name)
(Insert assignee’s soc. sec. or tax I.D. no.)
(Print or type assignee’s name, address and zip code)
and irrevocably appoint

to transfer this Note on the books of the Issuer. The agent may substitute another to act for him.

Date:
	Your Signature:
		(Sign exactly as your name appears on the face of this Note)
Signature Guarantee*:

* Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor acceptable to the Trustee).

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CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR
REGISTRATIONOF TRANSFER RESTRICTED NOTES

This certificate relates to $                   principal amount of Notes held in (check applicable space)          book-entry or            definitive form by the undersigned.

The undersigned (check one box below):

·has requested the Trustee by written order to deliver in exchange for its beneficial interest in the Global Note held by the Depositary a Note or Notes in definitive, registered form of authorized denominations and an aggregate principal amount equal to its beneficial interest in such Global Note (or the portion thereof indicated above) in accordance with the Indenture; or

·has requested the Trustee by written order to exchange or register the transfer of a Note or Notes.

In connection with any transfer of any of the Notes evidenced by this certificate occurring prior to the expiration of the period referred to in Rule 144(k) under the Securities Act, the undersigned confirms that such Notes are being transferred in accordance with its terms:

CHECK ONE BOX BELOW

(1)·to the Issuer; or

(2)·to the Registrar for registration in the name of the Holder, without transfer; or

(3)·pursuant to an effective registration statement under the Securities Act of 1933; or

(4)·inside the United States to a “qualified institutional buyer” (as defined in Rule 144A under the Securities Act of 1933) that purchases for its own account or for the account of a qualified institutional buyer to whom notice is given that such transfer is being made in reliance on Rule 144A, in each case pursuant to and in compliance with Rule 144A under the Securities Act of 1933; or

(5)·outside the United States in an offshore transaction within the meaning of Regulation S under the Securities Act in compliance with Rule 904 under the Securities Act of 1933; or

(6)·to an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act of 1933) that has furnished to the Trustee a signed letter containing certain representations and agreements; or

(7)·pursuant to another available exemption from registration under the Securities Act of 1933.

Unless one of the boxes is checked, the Trustee will refuse to register any of the Notes evidenced by this certificate in the name of any Person other than the registered Holder thereof; provided, however, that if box (5), (6) or (7) is checked, the Trustee may require, prior to registering any

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such transfer of the Notes, such legal opinions, certifications and other information as the Issuer has reasonably requested to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act of 1933.

Your Signature

Signature Guarantee:
Date:
Signature must be guaranteed by a participant in a recognized signature guaranty medallion program or other signature guarantor acceptable to the Trustee	Signature of Signature         Guarantee

TO BE COMPLETED BY PURCHASER IF (4) ABOVE IS CHECKED.

The undersigned represents and warrants that it is purchasing this Note for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a “qualified institutional buyer” within the meaning of Rule 144A under the Securities Act of 1933, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Issuer as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon the undersigned’s foregoing representations in order to claim the exemption from registration provided by Rule 144A.

Dated:
	NOTICE: To be executed by                  an executive officer

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OPTION OF HOLDER TO ELECT PURCHASE

If you want to elect to have this Note purchased by the Issuer pursuant to Section 4.10 or 4.14 of the Indenture, check the appropriate box below:

[   ] Section 4.10                  [   ] Section 4.14

If you want to elect to have only part of this Note purchased by the Issuer pursuant to Section 4.10 or Section 4.14 of the Indenture, state the amount you elect to have purchased:

	$
Date:
		Your Signature:
			(Sign exactly as your name appears on the face of this Note)
		Tax Identification No.:
Signature Guarantee*:

* Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor acceptable to the Trustee).

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SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE*

The initial outstanding principal amount of this Global Note is $                    .  The following exchanges of a part of this Global Note for an interest in another Global Note or for a Definitive Note, or exchanges of a part of another Global or Definitive Note for an interest in this Global Note, have been made:

Date of Exchange Amount of
decrease
in Principal
Amount Amount of increase
in Principal
Amount of this
Global Note Principal Amount
of
this Global Note
following such
decrease or
increase Signature of
authorized officer
of Trustee or
Custodian

*This schedule should be included only if the Note is issued in global form.

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EXHIBIT B

[FORM OF FACE OF EXCHANGE NOTE]

[Global Notes Legend]

UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), NEW YORK, NEW YORK, TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO DTC, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR’S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.

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CUSIP:  755267AF8

ISIN:  USU755267AF83

[GLOBAL] NOTE

9% Senior Subordinated Notes due 2017

No. Up to [$               ]

THE READER’S DIGEST ASSOCIATION, INC.

promises to pay to CEDE & CO. or registered assigns, the principal sum [set forth on the Schedule of Exchanges of Interests in the Global Note attached hereto] [of                                                  United States Dollars] on February 15, 2017.

Interest Payment Dates:  February 15 and August 15

Record Dates:  February 1 and August 1

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IN WITNESS HEREOF, the Issuer has caused this instrument to be duly executed.

Dated:                    , 20

THE READER’S DIGEST ASSOCIATION, INC.
By:
	Name:
	Title:

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This is one of the Notes referred to in the within-mentioned Indenture:

THE BANK OF NEW YORK, as Trustee
By:
	Authorized Signatory

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[Back of Note]

9% Senior Subordinated Notes due 2017

Capitalized terms used herein shall have the meanings assigned to them in the Indenture referred to below unless otherwise indicated.

1.INTEREST.  The Reader’s Digest Association, Inc., a Delaware corporation, promises to pay interest on the principal amount of this Note at 9% per annum from March 2, 2007 until maturity.  The Issuer will pay interest semi-annually in arrears on February 15 and August 15 of each year, or if any such day is not a Business Day, on the next succeeding Business Day (each, an “Interest Payment Date”).  Interest on the Notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of issuance; provided that the first Interest Payment Date shall be August 15, 2007.  The Issuer will pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal and premium, if any, from time to time on demand at the interest rate on the Notes; it shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue installments of interest (without regard to any applicable grace periods) from time to time on demand at the interest rate on the Notes.  Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months.

2.METHOD OF PAYMENT.  The Issuer will pay interest on the Notes to the Persons who are registered Holders of Notes at the close of business on the February 1 or August 1 (whether or not a Business Day), as the case may be, next preceding the Interest Payment Date, even if such Notes are canceled after such record date and on or before such Interest Payment Date, except as provided in Section 2.12 of the Indenture with respect to defaulted interest.  Principal of, premium, if any, and interest on the Notes will be payable at the office or agency of the Issuer maintained for such purpose in the Borough of Manhattan in the City of New York or, at the option of the Issuer, payment of interest may be made by check mailed to the Holders at their addresses set forth in the register of Holders, provided that payment by wire transfer of immediately available funds will be required with respect to principal of and interest and premium on all Global Notes and all other Notes the Holders of which shall have provided wire transfer instructions to the Issuer or the Paying Agent.  Such payment shall be in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts.

3.PAYING AGENT AND REGISTRAR.  Initially, The Bank of New York, the Trustee under the Indenture, will act as Paying Agent and Registrar.  The Issuer may change any Paying Agent or Registrar without notice to the Holders.  The Issuer or any of its Subsidiaries may act in any such capacity.

4.INDENTURE.  The Issuer issued the Notes under an Indenture, dated as of March 2, 2007 (the “Indenture”), among The Reader’s Digest Association, Inc., the Guarantors named therein and the Trustee.  This Note is one of a duly authorized issue of notes of the Issuer designated as its 9% Senior Subordinated Notes due 2017.  The Issuer shall be entitled to issue Additional Notes pursuant to Section 2.01 and 4.09 of the Indenture.  The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (the “Trust Indenture Act”).  The Notes are subject to all such terms, and Holders are referred to the Indenture and such Act for a statement of such terms.  To the extent any provision of this Note conflicts with the express provisions of the Indenture, the provisions of the Indenture shall govern and be controlling.

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5.OPTIONAL REDEMPTION.

(a)Except as described below under clauses 5(b) and 5(c) hereof, the Notes will not be redeemable at the Issuer’s option before February 15, 2012.

(b)At any time prior to February 15, 2012, the Issuer may redeem all or a part of the Notes, upon not less than 30 nor more than 60 days’ prior notice mailed by first-class mail to the registered address of each Holder or otherwise in accordance with the procedures of DTC, at a redemption price equal to 100% of the principal amount of the Notes redeemed plus the Applicable Premium as of, and accrued and unpaid interest and Additional Interest, if any, to the date of redemption (the “Redemption Date”), subject to the rights of Holders on the relevant Record Date to receive interest due on the relevant Interest Payment Date.

(c)Until February 15, 2010, the Issuer may, at its option, redeem up to 35% of the aggregate principal amount of Notes issued by it at a redemption price equal to 109% of the aggregate principal amount thereof, plus accrued and unpaid interest thereon and Additional Interest, if any, to the applicable Redemption Date, subject to the right of Holders of Notes of record on the relevant record date to receive interest due on the relevant Interest Payment Date, with the net cash proceeds of one or more Equity Offerings; provided that at least 65% of the sum of the original aggregate principal amount of Notes issued under the Indenture and the original aggregate principal amount any Additional Notes that are Notes issued under the Indenture after the Issue Date remains outstanding immediately after the occurrence of each such redemption; provided, further, that each such redemption occurs within 90 days of the date of closing of each such Equity Offering.

(c)On and after February 15, 2012, the Issuer may redeem the Notes, in whole or in part, upon notice pursuant to Section 3.02 of the Indenture, at the redemption prices (expressed as percentages of principal amount of the Notes to be redeemed) set forth below, plus accrued and unpaid interest thereon and Additional Interest, if any, to the applicable Redemption Date, subject to the right of Holders of record on the relevant record date to receive interest due on the relevant Interest Payment Date, if redeemed during the twelve-month period beginning on February 15 of each of the years indicated below:

Year	Percentage
2012	104.500	%
2013	103.000	%
2014	101.500	%
2015 and thereafter	100.000	%

(e)Any notice of redemption upon any Equity Offering may be given prior to the completion of such Equity Offering, and any such redemption or notice may, at the Issuer’s discretion, be subject to one or more conditions precedent, including, but not limited to, completion of the related Equity Offering.

(f)Any redemption pursuant to this paragraph 5 shall be made pursuant to the provisions of Sections 3.01 through 3.06 of the Indenture.

6.MANDATORY REDEMPTION.  The Issuer shall not be required to make mandatory redemption or sinking fund payments with respect to the Notes.

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7.NOTICE OF REDEMPTION.  Subject to Section 3.03 of the Indenture, notice of redemption will be mailed by first-class mail at least 30 days but not more than 60 days before the redemption date (except that redemption notices may be mailed more than 60 days prior to a redemption date if the notice is issued in connection with Article 8 or Article 13 of the Indenture) to each Holder whose Notes are to be redeemed at its registered address or otherwise in accordance with the procedures of DTC.  Notes in denominations larger than $2,000 may be redeemed in part but only in whole multiples of $1,000 in excess of $2,000, unless all of the Notes held by a Holder are to be redeemed.  On and after the redemption date interest ceases to accrue on Notes or portions thereof called for redemption.

8.OFFERS TO REPURCHASE.

(a)Upon the occurrence of a Change of Control, the Issuer shall make an offer (a “Change of Control Offer”) to each Holder to repurchase all or any part (equal to $2,000 or an integral multiple of $1,000 in excess thereof) of each Holder’s Notes at a purchase price equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest to the date of purchase (the “Change of Control Payment”).  The Change of Control Offer shall be made in accordance with Section 4.14 of the Indenture.

(b)If the Issuer or any of its Restricted Subsidiaries consummates an Asset Sale, within 10 Business Days of each date that Excess Proceeds exceed $20.0 million, the Issuer shall commence, an offer to all Holders of the Notes and, if required by the terms of any Indebtedness that is pari passu with the Notes (“Pari Passu Indebtedness”), to the holders of such Pari Passu Indebtedness (an “Asset Sale Offer”), to purchase the maximum principal amount of Notes and such other Pari Passu Indebtedness that is a minimum of $2,000 or an integral multiple of $1,000 in excess thereof that may be purchased out of the Excess Proceeds at an offer price in cash in an amount equal to 100% of the principal amount thereof, plus accrued and unpaid interest to the date fixed for the closing of such offer, in accordance with the procedures set forth in the Indenture.  To the extent that the aggregate amount of Notes (including any Additional Notes) and such Pari Passu Indebtedness tendered pursuant to an Asset Sale Offer is less than the Excess Proceeds, the Issuer may use any remaining Excess Proceeds for any purpose, subject to other covenants contained in the Indenture.  If the aggregate principal amount of Notes or the Pari Passu Indebtedness surrendered by such holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select the Notes and such Pari Passu Indebtedness to be purchased on a pro rata basis based on the accreted value or principal amount of the Notes or such Pari Passu Indebtedness tendered.  Upon completion of any such Asset Sale Offer, the amount of Excess Proceeds shall be reset at zero.  Additionally, the Issuer may, at its option, make an Asset Sale Offer using proceeds from any Asset Sale at any time after consummation of such Asset Sale; provided that such Asset Sale Offer shall be in an aggregate amount of not less than $10.0 million.  Upon consummation of such Asset Sale Offer, any Net Proceeds not required to be used to purchase Notes shall not be deemed Excess Proceeds.  Holders of Notes that are the subject of an offer to purchase will receive an Asset Sale Offer from the Issuer prior to any related purchase date and may elect to have such Notes purchased by completing the form entitled “Option of Holder to Elect Purchase” attached to the Notes.

9.DENOMINATIONS, TRANSFER, EXCHANGE.  The Notes are in registered form without coupons in denominations of $2,000 and integral multiples of $1,000 in excess thereof.  The transfer of Notes may be registered and Notes may be exchanged as provided in the Indenture.  The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents, and Holders shall be required to pay any taxes and fees required by law or permitted by the Indenture.  The Issuer need not exchange or register the transfer of any Note or portion of a Note selected for redemption, except for the unredeemed portion of any Note being redeemed in part.

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Also, the Issuer need not exchange or register the transfer of any Notes for a period of 15 days before a selection of Notes to be redeemed.

10.SUBORDINATION.  The Notes and the Guarantees are subordinated to Senior Indebtedness of the Issuer and the Guarantors on the terms and subject to the conditions set forth in the Indenture.  To the extent provided in the Indenture, Senior Indebtedness must be paid before the Notes and Guarantees may be paid.  The Issuer agrees, and each Holder by accepting a Note agrees, to the subordination provisions contained in the Indenture and authorizes the Trustee to give it effect and appoints the Trustee as attorney-in-fact for such purpose.

11.PERSONS DEEMED OWNERS.  The registered Holder of a Note may be treated as its owner for all purposes.

12.AMENDMENT, SUPPLEMENT AND WAIVER.  The Indenture, the Guarantees or the Notes may be amended or supplemented as provided in the Indenture.

13.DEFAULTS AND REMEDIES.  The Events of Default relating to the Notes are defined in Section 6.01 of the Indenture.  If any Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Notes may declare the principal, premium, if any, interest and any other monetary obligations on all the then outstanding Notes to be due and payable immediately; provided, however, that so long as any Indebtedness permitted to be incurred under the Indenture as part of the Senior Credit Facility shall be outstanding, no such acceleration shall be effective until the earlier of: (1) acceleration of any such Indebtedness under the Senior Credit Facility; or (2) five Business Days after the giving of written notice of such acceleration to the Issuer and the administrative agent under the Senior Credit Facility.  Notwithstanding the foregoing, in the case of an Event of Default arising from certain events of bankruptcy or insolvency, all outstanding Notes will become due and payable immediately without further action or notice.  Holders may not enforce the Indenture, the Notes or the Guarantees except as provided in the Indenture.  Subject to certain limitations, Holders of a majority in aggregate principal amount of the then outstanding Notes may direct the Trustee in its exercise of any trust or power.  The Trustee may withhold from Holders of the Notes notice of any continuing Default (except a Default relating to the payment of principal, premium, if any, or interest) if it determines that withholding notice is in their interest.  The Holders of a majority in aggregate principal amount of the Notes then outstanding by notice to the Trustee may on behalf of the Holders of all of the Notes waive any existing Default or and its consequences under the Indenture except a continuing Default in payment of the principal of, premium, if any, or interest on, any of the Notes held by a non-consenting Holder.  The Issuer and each Guarantor (to the extent that such Guarantor is so required under the Trust Indenture Act) are required to deliver to the Trustee annually a statement regarding compliance with the Indenture, and the Issuer is required within five (5) Business Days, upon becoming aware of any Default, to deliver to the Trustee a statement specifying such Default and what action the Issuer proposes to take with respect thereto.

14.AUTHENTICATION.  This Note shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose until authenticated by the manual signature of the Trustee.

15.GOVERNING LAW.  THE LAWS OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THE INDENTURE, THE NOTES AND THE GUARANTEES.

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16.CUSIP NUMBERS.  Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Issuer has caused CUSIP numbers to be printed on the Notes, and the Trustee may use CUSIP numbers in notices of redemption as a convenience to Holders.  No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon.

The Issuer will furnish to any Holder upon written request and without charge a copy of the Indenture.  Requests may be made to the Issuers at the following address:

c/o The Reader’s Digest Association, Inc.

Reader’s Digest Road
Pleasantville, New York 10570
Fax No.: (914) 244-7807
Attention: General Counsel

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ASSIGNMENT FORM

To assign this Note, fill in the form below:

(I) or (we) assign and transfer this Note to:
	(Insert assignee’s legal name)
(Insert assignee’s soc. sec. or tax I.D. no.)
(Print or type assignee’s name, address and zip code)
and irrevocably appoint

to transfer this Note on the books of the Issuer. The agent may substitute another to act for him.

Date:
	Your Signature:
		(Sign exactly as your name appears on the face of this Note)
Signature Guarantee*:

* Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor acceptable to the Trustee).

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OPTION OF HOLDER TO ELECT PURCHASE

If you want to elect to have this Note purchased by the Issuer pursuant to Section 4.10 or 4.14 of the Indenture, check the appropriate box below:

[   ] Section 4.10         [   ] Section 4.14

If you want to elect to have only part of this Note purchased by the Issuer pursuant to Section 4.10 or Section 4.14 of the Indenture, state the amount you elect to have purchased:

	$
Date:
		Your Signature:
			(Sign exactly as your name appears on the face of this Note)
		Tax Identification No.:
Signature Guarantee*:

* Participant in a recognized Signature Guarantee Medallion Program (or other signature guarantor acceptable to the Trustee).

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SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE*

The initial outstanding principal amount of this Global Note is $                    .  The following exchanges of a part of this Global Note for an interest in another Global Note or for a Definitive Note, or exchanges of a part of another Global or Definitive Note for an interest in this Global Note, have been made:

Date of Exchange Amount of
decrease
in Principal
Amount Amount of increase
in Principal
Amount of this
Global Note Principal Amount
of
this Global Note
following such
decrease or
increase Signature of
authorized officer
of Trustee or
Custodian

*This schedule should be included only if the Note is issued in global form.

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EXHIBIT C

FORM OF
TRANSFEREE LETTER OF REPRESENTATION

The Reader’s Digest Association, Inc.

Reader’s Digest Road
Pleasantville, New York 10570
Fax No.: (914) 244-7807
Attention: General Counsel

In care of
The Bank of New York
101 Barclay Street – 8W

New York, New York 10280
Fax No.: (212) 815-5704/3272
Attention:  Global Trust Administration

Ladies and Gentlemen:

This certificate is delivered to request a transfer of $[       ] principal amount of the 9% Senior Subordinated Notes due 2017 (the “Notes”) of The Reader’s Digest Association, Inc. (the “Issuer”).

Upon transfer, the Notes would be registered in the name of the new beneficial owner as follows:

Name:

Address:

Taxpayer ID Number:

The undersigned represents and warrants to you that:

1.  We are an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as amended (the “Securities Act”)), purchasing for our own account or for the account of such an institutional “accredited investor” at least $250,000 principal amount of the Securities, and we are acquiring the Securities not with a view to, or for offer or sale in connection with, any distribution in violation of the Securities Act.  We have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Notes, and we invest in or purchase securities similar to the Notes in the normal course of our business.  We, and any accounts for which we are acting, are each able to bear the economic risk of our or its investment.

2.  We understand that the Notes have not been registered under the Securities Act and, unless so registered, may not be sold except as permitted in the following sentence.  We agree on our own behalf and on behalf of any investor account for which we are purchasing Notes to offer, sell or otherwise transfer such Notes prior to the date that is two years after the later of the date of original issue and the last date on which the Issuer or any affiliate of the Issuer was the owner of such Notes (or any predecessor thereto) (the “Resale Restriction Termination Date”) only (a) to the Issuer, (b) pursuant to a registration

statement that has been declared effective under the Securities Act, (c) in a transaction complying with the requirements of Rule 144A under the Securities Act (“Rule 144A”), to a person we reasonably believe is a qualified institutional buyer under Rule 144A (a “QIB”) that is purchasing for its own account or for the account of a QIB and to whom notice is given that the transfer is being made in reliance on Rule 144A, (d) pursuant to offers and sales that occur outside the United States within the meaning of Regulation S under the Securities Act, (e) to an institutional “accredited investor” within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act that is purchasing for its own account or for the account of such an institutional “accredited investor,” in each case in a minimum principal amount of Notes of $250,000, or (f) pursuant to any other available exemption from the registration requirements of the Securities Act, subject in each of the foregoing cases to any requirement of law that the disposition of our property or the property of such investor account or accounts be at all times within our or their control and in compliance with any applicable state securities laws.  The foregoing restrictions on resale will not apply subsequent to the Resale Restriction Termination Date.  If any resale or other transfer of the Notes is proposed to be made pursuant to clause (e) above prior to the Resale Restriction Termination Date, the transferor shall deliver a letter from the transferee substantially in the form of this letter to the Issuer and the Trustee, which shall provide, among other things, that the transferee is an institutional “accredited investor” within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act and that it is acquiring such Notes for investment purposes and not for distribution in violation of the Securities Act.  Each purchaser acknowledges that the Issuer and the Trustee reserve the right prior to the offer, sale or other transfer prior to the Resale Restriction Termination Date of the Notes pursuant to clause (d), (e) or (f) above to require the delivery of an opinion of counsel, certifications or other information satisfactory to the Issuer and the Trustee.

TRANSFEREE:		,
	by:

B-3

EXHIBIT D

FORM OF SUPPLEMENTAL INDENTURE
TO BE DELIVERED BY SUBSEQUENT GUARANTORS

Supplemental Indenture (this “Supplemental Indenture”), dated as of                     , among                                      (the “Guaranteeing Subsidiary”), a subsidiary of The Reader’s Digest Association, Inc., a Delaware corporation (the “Issuer”), and The Bank of New York, as trustee (the “Trustee”).

WITNESSETH

WHEREAS, each of the Issuer and the Guarantors (as defined in the Indenture referred to below) has heretofore executed and delivered to the Trustee an indenture (the “Indenture”), dated as of March 2, 2007, providing for the issuance of an unlimited aggregate principal amount of 9% Senior Subordinated Notes due 2017 (the “Notes”);

WHEREAS, the Indenture provides that under certain circumstances the Guaranteeing Subsidiary shall execute and deliver to the Trustee a supplemental indenture pursuant to which the Guaranteeing Subsidiary shall unconditionally guarantee all of the Issuer’s Obligations under the Notes and the Indenture on the terms and conditions set forth herein and under the Indenture (the “Guarantee”); and

WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is authorized to execute and deliver this Supplemental Indenture.

NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties mutually covenant and agree for the equal and ratable benefit of the Holders of the Notes as follows:

(1)Capitalized Terms.  Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture.

(2)Agreement to Guarantee.  The Guaranteeing Subsidiary hereby agrees as follows:

(a)Along with all Guarantors named in the Indenture, to jointly and severally unconditionally guarantee to each Holder of a Note authenticated and delivered by the Trustee and to the Trustee and its successors and assigns, irrespective of the validity and enforceability of the Indenture, the Notes or the obligations of the Issuer hereunder or thereunder, that:

(i)the principal of and interest, premium and Additional Interest, if any, on the Notes will be promptly paid in full when due, whether at maturity, by acceleration, redemption or otherwise, and interest on the overdue principal of and interest on the Notes, if any, if lawful, and all other obligations of the Issuer to the Holders or the Trustee hereunder or thereunder will be promptly paid in full or performed, all in accordance with the terms hereof and thereof; and

(ii)in case of any extension of time of payment or renewal of any Notes or any of such other obligations, that same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise.  Failing payment when due of any amount so guaranteed or any performance so guaranteed for whatever reason, the Guarantors and the Guaranteeing Subsidiary shall be jointly and severally obligated to pay the same immediately.  This is a guarantee of payment and not a guarantee of collection.

D-1

(b)The obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Notes or the Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder of the Notes with respect to any provisions hereof or thereof, the recovery of any judgment against the Issuer, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor.

(c)The following is hereby waived:  diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of either of the Issuer, any right to require a proceeding first against the Issuer, protest, notice and all demands whatsoever.

(d)This Guarantee shall not be discharged except by complete performance of the obligations contained in the Notes, the Indenture and this Supplemental Indenture, and the Guaranteeing Subsidiary accepts all obligations of a Guarantor under the Indenture.

(e)If any Holder or the Trustee is required by any court or otherwise to return to the Issuer, the Guarantors (including the Guaranteeing Subsidiary), or any custodian, trustee, liquidator or other similar official acting in relation to either the Issuer or the Guarantors, any amount paid either to the Trustee or such Holder, this Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect.

(f)The Guaranteeing Subsidiary shall not be entitled to any right of subrogation in relation to the Holders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby.

(g)As between the Guaranteeing Subsidiary, on the one hand, and the Holders and the Trustee, on the other hand, (x) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article 6 of the Indenture for the purposes of this Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (y) in the event of any declaration of acceleration of such obligations as provided in Article 6 of the Indenture, such obligations (whether or not due and payable) shall forthwith become due and payable by the Guaranteeing Subsidiary for the purpose of this Guarantee.

(h)The Guaranteeing Subsidiary shall have the right to seek contribution from any non-paying Guarantor so long as the exercise of such right does not impair the rights of the Holders under this Guarantee.

(i)Pursuant to Section 11.02 of the Indenture, after giving effect to all other contingent and fixed liabilities that are relevant under any applicable Bankruptcy Law or fraudulent conveyance laws, and after giving effect to any collections from, rights to receive contribution from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under Article 11 of the Indenture, this new Guarantee shall be limited to the maximum amount permissible such that the obligations of such Guaranteeing Subsidiary under this Guarantee will not constitute a fraudulent transfer or conveyance.

(j)This Guarantee shall remain in full force and effect and continue to be effective should any petition be filed by or against the Issuer for liquidation, reorganization, should the Issuer become insolvent or make an assignment for the benefit of creditors or should a receiver or

D-2

trustee be appointed for all or any significant part of the Issuer’s assets, and shall, to the fullest extent permitted by law, continue to be effective or be reinstated, as the case may be, if at any time payment and performance of the Notes are, pursuant to applicable law, rescinded or reduced in amount, or must otherwise be restored or returned by any obligee on the Notes and Guarantee, whether as a “voidable preference,” “fraudulent transfer” or otherwise, all as though such payment or performance had not been made.  In the event that any payment or any part thereof, is rescinded, reduced, restored or returned, the Note shall, to the fullest extent permitted by law, be reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored or returned.

(k)In case any provision of this Guarantee shall be invalid, illegal or unenforceable, the validity, legality, and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

(l)This Guarantee shall be a general unsecured senior subordinated obligation of such Guaranteeing Subsidiary, ranking pari passu with any other future Senior Indebtedness of the Guaranteeing Subsidiary, if any.

(m)Each payment to be made by the Guaranteeing Subsidiary in respect of this Guarantee shall be made without set-off, counterclaim, reduction or diminution of any kind or nature.

(3)Execution and Delivery.  The Guaranteeing Subsidiary agrees that the Guarantee shall remain in full force and effect notwithstanding the absence of the endorsement of any notation of such Guarantee on the Notes.

(4)Merger, Consolidation or Sale of All or Substantially All Assets.

(a)Except as otherwise provided in Section 5.01(c) of the Indenture, the Guaranteeing Subsidiary may not consolidate or merge with or into or wind up into (whether or not the Issuer or Guaranteeing Subsidiary is the surviving corporation), or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets, in one or more related transactions, to any Person unless:

(i)(A) the Guaranteeing Subsidiary is the surviving corporation or the Person formed by or surviving any such consolidation or merger (if other than the Guaranteeing Subsidiary) or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made is a corporation, partnership, limited partnership, limited liability company or trust organized or existing under the laws of the jurisdiction of organization of the Guaranteeing Subsidiary, as the case may be, or the laws of the United States, any state thereof, the District of Columbia, or any territory thereof (the Guaranteeing Subsidiary or such Person, as the case may be, being herein called the “Successor Person”);

(B)the Successor Person, if other than the Guaranteeing Subsidiary, expressly assumes all the obligations of the Guaranteeing Subsidiary under the Indenture and the Guaranteeing Subsidiary’s related Guarantee pursuant to a supplemental indenture or other documents or instruments in form reasonably satisfactory to the Trustee;

(C)immediately after such transaction, no Default exists; and

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(D)the Issuer shall have delivered to the Trustee an Officer’s Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer and such supplemental indenture, if any, comply with the Indenture; or

(ii)if the transaction constitutes an Asset Sale, such transaction is made in compliance with Section 4.10 of the Indenture;

(b)Subject to certain limitations described in the Indenture, the Successor Person will succeed to, and be substituted for, the Guaranteeing Subsidiary under the Indenture and the Guaranteeing Subsidiary’s Guarantee.  Notwithstanding the foregoing, the Guaranteeing Subsidiary may merge into or transfer all or part of its properties and assets to another Guarantor or the Issuer or merge with a Restricted Subsidiary of the Issuer solely for the purpose of reincorporating the Guarantor in a State of the United States, the District of Columbia or any territory of the United States, as long as the amount of Indebtedness, Preferred Stock or Disqualified Stock of such Guarantor is not increased thereby.

(5)Releases.

The Guarantee of the Guaranteeing Subsidiary shall be automatically and unconditionally released and discharged, and no further action by the Guaranteeing Subsidiary, the Issuer or the Trustee is required for the release of the Guaranteeing Subsidiary’s Guarantee, upon:

(1)(A)  any sale, exchange or transfer (by merger or otherwise) of the Capital Stock of the Guaranteeing Subsidiary (including any sale, exchange or transfer), after which the Guaranteeing Subsidiary is no longer a Restricted Subsidiary, or all or substantially all the assets of the Guaranteeing Subsidiary, which sale, exchange or transfer is made in compliance with the applicable provisions of the Indenture;

(B)the release or discharge of such Guaranteeing Subsidiary from its guarantee of Indebtedness of the Issuer and the Guarantors under the Senior Credit Facility (including by reason of the termination of the Senior Credit Facility) or the guarantee that resulted in the obligation of such Guaranteeing Subsidiary to guarantee the Notes, if such Guaranteeing Subsidiary would not then otherwise be required to guarantee the Notes pursuant to this Indenture (and treating any guarantees of such Guaranteeing Subsidiary that remain outstanding as incurred at least 30 days prior to such release or discharge), except a discharge or release by or as a result of payment under such guarantee; provided, that if such Person has incurred any Indebtedness or issued any Preferred Stock or Disqualified Stock in reliance on its status as a Guaranteeing Subsidiary under Section 4.09 of the Indenture, such Guaranteeing Subsidiary’s obligations under such Indebtedness, Disqualified Stock or Preferred Stock, as the case may be, so incurred are satisfied in full and discharged or are otherwise permitted to be incurred under Section 4.09 of the Indenture.

(A)the proper designation of any Restricted Subsidiary that is a Guaranteeing Subsidiary as an Unrestricted Subsidiary; or

(B)the Issuer exercising its Legal Defeasance option or Covenant Defeasance option in accordance with Article 8 of the Indenture or the Issuer’s obligations under the Indenture being discharged in accordance with the terms of the Indenture; and

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(2)such Guaranteeing Subsidiary delivering to the Trustee an Officer’s Certificate and an Opinion of Counsel, each stating that all conditions precedent provided for in the Indenture relating to such transaction have been complied with.

(6)No Recourse Against Others.  No director, officer, employee, incorporator or stockholder of the Guaranteeing Subsidiary shall have any liability for any obligations of the Issuer or the Guarantors (including the Guaranteeing Subsidiary) under the Notes, the Guarantees, the Indenture or this Supplemental Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation.  Each Holder by accepting Notes waives and releases all such liability.  The waiver and release are part of the consideration for issuance of the Notes.

(7)Governing Law.  THIS SUPPLEMENTAL INDENTURE WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

(8)Counterparts.  The parties may sign any number of copies of this Supplemental Indenture.  Each signed copy shall be an original, but all of them together represent the same agreement.

(9)Effect of Headings.  The Section headings herein are for convenience only and shall not affect the construction hereof.

(10)The Trustee.  The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Supplemental Indenture or for or in respect of the recitals contained herein, all of which recitals are made solely by the Guaranteeing Subsidiary.

(11)Subrogation.  The Guaranteeing Subsidiary shall be subrogated to all rights of Holders of Notes against the Issuer in respect of any amounts paid by the Guaranteeing Subsidiary pursuant to the provisions of Section 2 hereof and Section 11.01 of the Indenture; provided that, if an Event of Default has occurred and is continuing, the Guaranteeing Subsidiary shall not be entitled to enforce or receive any payments arising out of, or based upon, such right of subrogation until all amounts then due and payable by the Issuer under the Indenture or the Notes shall have been paid in full.

(12)Benefits Acknowledged.  The Guaranteeing Subsidiary’s Guarantee is subject to the terms and conditions set forth in the Indenture.  The Guaranteeing Subsidiary acknowledges that it will receive direct and indirect benefits from the financing arrangements contemplated by the Indenture and this Supplemental Indenture and that the guarantee and waivers made by it pursuant to this Guarantee are knowingly made in contemplation of such benefits.

(13)Successors.  All agreements of the Guaranteeing Subsidiary in this Supplemental Indenture shall bind its Successors, except as otherwise provided in Section 2(k) hereof or elsewhere in this Supplemental Indenture.  All agreements of the Trustee in this Supplemental Indenture shall bind its successors.

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IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed, all as of the date first above written.

[GUARANTEEING SUBSIDIARY]
By:
	Name:
	Title:
THE BANK OF NEW YORK, as Trustee
By:
	Name:
	Title:

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EX-4.2

Exhibit 4.2

EXECUTION COPY

REGISTRATION RIGHTS AGREEMENT

This REGISTRATION RIGHTS AGREEMENT dated as of March 2, 2007 (the “Agreement”) is entered into by and among The Reader’s Digest Association, Inc., a Delaware corporation (the “Company”), the guarantors listed on the signature pages hereto (the “Guarantors”), and J.P. Morgan Securities Inc. (“JPMorgan”), Merrill Lynch, Pierce, Fenner & Smith Incorporated, Citigroup Global Markets Inc. and Greenwich Capital Markets, Inc. (the “Initial Purchasers”).

Doctor Acquisition Co., a Delaware corporation (“Acquisition Co.”) and the Initial Purchasers are parties to the Purchase Agreement dated February 27, 2007 (the “Purchase Agreement”), which provides for the sale by the Company to the Initial Purchasers of $600,000,000 aggregate principal amount of the Company’s 9% Senior Subordinated Notes due 2017 (the “Securities”), which will be guaranteed on an unsecured senior subordinated basis by each of the Guarantors.  Acquisition Co. is a special purpose company and a subsidiary of RDA Holding Co., a Delaware corporation (“Holdings”), formed by Ripplewood Holdings L.L.C. (“Ripplewood”) in connection with the acquisition by Ripplewood and its affiliates and certain other investors of the Company pursuant to the Agreement and Plan of Merger, dated as of November 16, 2006, among Holdings, Acquisition Co. and the Company (the “Merger Agreement”).  Pursuant to the Merger Agreement, Acquisition Co. has merged into the Company with the Company as the surviving corporation.  Immediately following the Merger, the Company and the Guarantors were joined as parties to the Purchase Agreement pursuant to a Joinder Agreement dated as of the date hereof.

As an inducement to the Initial Purchasers to enter into the Purchase Agreement, the Company and the Guarantors have agreed to provide to the Initial Purchasers and their direct and indirect transferees the registration rights set forth in this Agreement.  The execution and delivery of this Agreement is a condition to the closing under the Purchase Agreement.

In consideration of the foregoing, the parties hereto agree as follows:

1.Definitions.  As used in this Agreement, the following terms shall have the following meanings:

“Additional Guarantor” shall mean any subsidiary of the Company that executes a Subsidiary Guarantee under the Indenture after the date of this Agreement.

“Business Day” shall mean any day that is not a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to remain closed.

“Company” shall have the meaning set forth in the preamble and shall also include the Company’s successors.

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended from time to time.

“Exchange Dates” shall have the meaning set forth in Section 2(a)(ii) hereof.

“Exchange Offer” shall mean the exchange offer by the Company and the Guarantors of Exchange Securities for Securities pursuant to Section 2(a) hereof.

“Exchange Offer Registration” shall mean a registration under the Securities Act effected pursuant to Section 2(a) hereof.

“Exchange Offer Registration Statement” shall mean an exchange offer registration statement on Form S-4 (or, if applicable, on another appropriate form) and all amendments and supplements to such registration statement, in each case including the Prospectus contained therein or deemed a part thereof, all exhibits thereto and any document incorporated by reference therein.

“Exchange Securities” shall mean senior subordinated notes issued by the Company and guaranteed by the Guarantors under the Indenture containing terms identical to the Securities (except that the Exchange Securities will not be subject to restrictions on transfer or to any increase in annual interest rate for failure to comply with this Agreement) and to be offered to Holders of Securities in exchange for Securities pursuant to the Exchange Offer.

“Free Writing Prospectus” means each free writing prospectus (as defined in Rule 405 under the Securities Act) prepared by or on behalf of the Company or used or referred to by the Company in connection with the sale of the Securities or the Exchange Securities.

“Guarantors” shall have the meaning set forth in the preamble and shall also include any Guarantor’s successors and any Additional Guarantors.

“Holders” shall mean the Initial Purchasers, for so long as they own any Registrable Securities, and each of their successors, assigns and direct and indirect transferees who become owners of Registrable Securities under the Indenture; provided that for purposes of Sections 4 and 5 of this Agreement, the term “Holders” shall include Participating Broker-Dealers.

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“Indemnified Person” shall have the meaning set forth in Section 5(c) hereof.

“Indemnifying Person” shall have the meaning set forth in Section 5(c) hereof.

“Indenture” shall mean the Indenture relating to the Securities dated as of March 2, 2007, among the Company, the Guarantors and The Bank of New York, as trustee, and as the same may be amended from time to time in accordance with the terms thereof.

“Initial Purchasers” shall have the meaning set forth in the preamble.

“Inspector” shall have the meaning set forth in Section 3(a)(xiii) hereof.

“Issuer Information” shall have the meaning set forth in Section 5(a) hereof.

“JPMorgan” shall have the meaning set forth in the preamble.

“Majority Holders” shall mean the Holders of a majority of the aggregate principal amount of the outstanding Registrable Securities; provided that whenever the consent or approval of Holders of a specified percentage of Registrable Securities is required hereunder, any Registrable Securities owned directly or indirectly by the Company or any of its affiliates shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage or amount; and provided, further, that if the Company shall issue any additional Securities under the Indenture prior to consummation of the Exchange Offer or, if applicable, the effectiveness of any Shelf Registration Statement, such additional Securities and the Registrable Securities to which this Agreement relates shall be treated together as one class for purposes of determining whether the consent or approval of Holders of a specified percentage of Registrable Securities has been obtained.

“Participating Broker-Dealers” shall have the meaning set forth in Section 4(a) hereof.

“Person” shall mean an individual, partnership, limited liability company, corporation, trust or unincorporated organization, or a government or agency or political subdivision thereof.

“Prospectus” shall mean the prospectus included in, or, pursuant to the rules and regulations of the Securities Act, deemed a part of, a Registration Statement, including any preliminary prospectus, and any such prospectus as

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amended or supplemented by any prospectus supplement, including a prospectus supplement with respect to the terms of the offering of any portion of the Registrable Securities covered by a Shelf Registration Statement, and by all other amendments and supplements to such prospectus, and in each case including any document incorporated by reference therein.

“Purchase Agreement” shall have the meaning set forth in the preamble.

“Registrable Securities” shall mean the Securities; provided that the Securities shall cease to be Registrable Securities (i) when a Registration Statement with respect to such Securities has become effective under the Securities Act and such Securities have been exchanged or disposed of pursuant to such Registration Statement, (ii) when such Securities are eligible to be sold pursuant to Rule 144(k) (or any similar provision then in force, but not Rule 144A) under the Securities Act or (iii) when such Securities cease to be outstanding.

“Registration Expenses” shall mean any and all expenses incident to performance of or compliance by the Company and the Guarantors with this Agreement, including without limitation: (i) all SEC, stock exchange or National Association of Securities Dealers, Inc. registration and filing fees, (ii) all fees and expenses incurred in connection with compliance with state securities or blue sky laws (including reasonable fees and disbursements of one firm of counsel for any Underwriters or Holders in connection with blue sky qualification of any Exchange Securities or Registrable Securities, which firm shall be selected by the Underwriters or the Majority Holders), (iii) all expenses of the Company in preparing or assisting in preparing, word processing, printing and distributing any Registration Statement, any Prospectus and any amendments or supplements thereto, any underwriting agreements, securities sales agreements or other similar agreements and any other documents relating to the performance of and compliance with this Agreement, (iv) all rating agency fees, (v) all fees and disbursements relating to the qualification of the Indenture under applicable securities laws, (vi) the fees and disbursements of the Trustee and its counsel, (vii) the fees and disbursements of counsel for the Company and the Guarantors and, in the case of a Shelf Registration Statement, the fees and disbursements of one counsel for the Holders (which counsel shall be selected by the Majority Holders and which counsel may also be counsel for the Initial Purchasers) and (viii) the fees and disbursements of the independent public accountants of the Company and the Guarantors, including the expenses of any special audits or “comfort” letters required by or incident to the performance of and compliance with this Agreement, but excluding fees and expenses of counsel to the Underwriters (other than fees and expenses set forth in clause (ii) above) or the Holders and underwriting discounts and commissions, brokerage commissions and transfer taxes, if any, relating to the sale or disposition of Registrable Securities by a Holder.

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“Registration Statement” shall mean any registration statement of the Company and the Guarantors that covers any of the Exchange Securities or Registrable Securities pursuant to the provisions of this Agreement and all amendments and supplements to any such registration statement, including post-effective amendments, in each case including the Prospectus contained therein or deemed a part thereof, all exhibits thereto and any document incorporated by reference therein.

“SEC” shall mean the United States Securities and Exchange Commission.

“Securities” shall have the meaning set forth in the preamble.

“Securities Act” shall mean the Securities Act of 1933, as amended from time to time.

“Shelf Additional Interest Date” shall have the meaning set forth in Section 2(d) hereof.

“Shelf Effectiveness Period” shall have the meaning set forth in Section 2(b) hereof.

“Shelf Registration” shall mean a registration effected pursuant to Section 2(b) hereof.

“Shelf Registration Statement” shall mean a “shelf” registration statement of the Company and the Guarantors that covers all or a portion of the Registrable Securities (but no other securities unless approved by a majority of the Holders whose Registrable Securities are to be covered by such Shelf Registration Statement) on an appropriate form under Rule 415 under the Securities Act, or any similar rule that may be adopted by the SEC, and all amendments and supplements to such registration statement, including post-effective amendments, in each case including the Prospectus contained therein or deemed a part thereof, all exhibits thereto and any document incorporated by reference therein.

“Shelf Request” shall have the meaning set forth in Section 2(b) hereof.

“Staff” shall mean the staff of the SEC.

“Subsidiary Guarantees” shall mean the guarantees of the Securities and Exchange Securities by the Guarantors under the Indenture.

“Target Registration Date” shall have the meaning set forth in Section 2(d) hereof.

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“Trigger Date” shall have the meaning set forth in Section 2(d) hereof.

“Trust Indenture Act” shall mean the Trust Indenture Act of 1939, as amended from time to time.

“Trustee” shall mean the trustee with respect to the Securities under the Indenture.

“Underwriter” shall have the meaning set forth in Section 3(e) hereof.

“Underwritten Offering” shall mean an offering in which Registrable Securities are sold to an Underwriter for reoffering to the public.

2.Registration Under the Securities Act.  (a)  To the extent not prohibited by any applicable law or applicable interpretations of the Staff, the Company and the Guarantors shall use their reasonable best efforts to (i) cause to be filed an Exchange Offer Registration Statement covering an offer to the Holders to exchange all the Registrable Securities for Exchange Securities and (ii) have such Registration Statement remain effective until 180 days after the last Exchange Date for use by one or more Participating Broker-Dealers.  The Company and the Guarantors shall commence the Exchange Offer promptly after the Exchange Offer Registration Statement is declared effective by the SEC and use their reasonable best efforts to complete the Exchange Offer not later than 60 days after such effective date.

The Company and the Guarantors shall commence the Exchange Offer by mailing the related Prospectus, appropriate letters of transmittal and other accompanying documents to each Holder stating, in addition to such other disclosures as are required by applicable law, substantially the following:

(i)that the Exchange Offer is being made pursuant to this Agreement and that all Registrable Securities validly tendered and not properly withdrawn will be accepted for exchange;

(ii)the dates of acceptance for exchange (which shall be a period of at least 20 Business Days from the date such notice is mailed) (the “Exchange Dates”);

(iii)that any Registrable Security not tendered will remain outstanding and continue to accrue interest but will not retain any rights under this Agreement, except as otherwise specified herein;

(iv)that any Holder electing to have a Registrable Security exchanged pursuant to the Exchange Offer will be required to (A) surrender such

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Registrable Security, together with the appropriate letters of transmittal, to the institution and at the address (located in the Borough of Manhattan, The City of New York) and in the manner specified in the notice, or (B) effect such exchange otherwise in compliance with the applicable procedures of the depositary for such Registrable Security, in each case prior to the close of business on the last Exchange Date; and

(v)that any Holder will be entitled to withdraw its election, not later than the close of business on the last Exchange Date, by (A) sending to the institution and at the address (located in the Borough of Manhattan, The City of New York) specified in the notice, a telegram, telex, facsimile transmission or letter setting forth the name of such Holder, the principal amount of Registrable Securities delivered for exchange, such other information as may be reasonably required to identify the Securities to be withdrawn and a statement that such Holder is withdrawing its election to have such Securities exchanged or (B) effecting such withdrawal in compliance with the applicable procedures of the depositary for the Registrable Securities.

As a condition to participating in the Exchange Offer, a Holder will be required to represent to the Company and the Guarantors that (i) any Exchange Securities to be received by it will be acquired in the ordinary course of its business, (ii) at the time of the commencement of the Exchange Offer it has no arrangement or understanding with any Person to participate in the distribution (within the meaning of the Securities Act) of the Exchange Securities in violation of the Securities Act, (iii) it is not an “affiliate” (within the meaning of Rule 405 under the Securities Act) of the Company or any Guarantor, (iv) if such Holder is not a broker-dealer, that it is not engaged in, and does not intend to engage in, the distribution of the Exchange Securities and (v) if such Holder is a broker-dealer that will receive Exchange Securities for its own account in exchange for Registrable Securities that were acquired as a result of market-making or other trading activities, then such Holder will deliver a Prospectus (or, to the extent permitted by law, make available a Prospectus to purchasers) in connection with any resale of such Exchange Securities.

As soon as practicable after the last Exchange Date, the Company and the Guarantors shall:

(i)accept for exchange Registrable Securities or portions thereof validly tendered and not properly withdrawn pursuant to the Exchange Offer; and

(ii)deliver, or cause to be delivered, to the Trustee for cancellation all Registrable Securities or portions thereof so accepted for exchange by the Company and issue, and cause the Trustee to promptly authenticate and deliver to each Holder, Exchange Securities equal in principal amount to

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the principal amount of the Registrable Securities tendered by such Holder.

The Company and the Guarantors shall use their reasonable best efforts to complete the Exchange Offer as provided above and shall comply with the applicable requirements of the Securities Act, the Exchange Act and other applicable laws and regulations in connection with the Exchange Offer.  The Exchange Offer shall not be subject to any conditions, other than that the Exchange Offer does not violate any applicable law or applicable interpretations of the Staff and customary conditions relating to the delivery of Securities or other actions customarily taken by Holders participating in the Exchange Offer or the execution and delivery of customary documentation relating to the Exchange Offer.

(b)In the event that (i) the Company and the Guarantors determine that the Exchange Offer Registration provided for in Section 2(a) above is not available or may not be completed as soon as practicable after the last Exchange Date because it would violate any applicable law or applicable interpretations of the Staff, (ii) the Exchange Offer is not for any other reason completed by February 24, 2008, (iii) a Holder participating in the Exchange Offer does not receive Exchange Securities on the date of the exchange that may be sold without restriction under state and federal securities laws (other than due solely to the status of such Holder as an affiliate of the Company within the meaning of the Securities Act) and notifies the Company within 30 days after such Holder first becomes aware of such restrictions or (iv) upon receipt of a written request (a “Shelf Request”) from any Initial Purchaser representing that it holds Registrable Securities that are or were ineligible to be exchanged in the Exchange Offer, the Company and the Guarantors shall use their reasonable best efforts to cause to be filed, as soon as practicable after such determination, date or Shelf Request, as the case may be, a Shelf Registration Statement providing for the sale of all the Registrable Securities by the Holders thereof and to have such Shelf Registration Statement become effective.

In the event that the Company and the Guarantors are required to file a Shelf Registration Statement pursuant to clause (iii) of the preceding sentence, the Company and the Guarantors shall use their reasonable best efforts to file and have become effective both an Exchange Offer Registration Statement pursuant to Section 2(a) with respect to all Registrable Securities and a Shelf Registration Statement (which may be a combined Registration Statement with the Exchange Offer Registration Statement) with respect to offers and sales of Registrable Securities held by the Initial Purchasers after completion of the Exchange Offer.

The Company and the Guarantors agree to use their reasonable best efforts to keep the Shelf Registration Statement continuously effective until the

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earliest of (i) the expiration of the period referred to in Rule 144(k) (or any similar rule then in force, but not Rule 144A) under the Securities Act with respect to the Registrable Securities, (ii) the second anniversary of the date hereof and (iii) such time as all the Registrable Securities covered by the Shelf Registration Statement have been sold pursuant to the Shelf Registration Statement (the “Shelf Effectiveness Period”).  The Company and the Guarantors further agree to supplement or amend the Shelf Registration Statement and the related Prospectus if required by the rules, regulations or instructions applicable to the registration form used by the Company for such Shelf Registration Statement or by the Securities Act or by any other rules and regulations thereunder or if reasonably requested by a Holder of Registrable Securities with respect to information relating to such Holder, and to use their reasonable best efforts to cause any such amendment to become effective, if required, and such Shelf Registration Statement and Prospectus to become usable as soon as thereafter practicable.  The Company and the Guarantors agree to furnish to the Holders of Registrable Securities registered on such Shelf Registration Statement copies of any such supplement or amendment  promptly after its being used or filed with the SEC.

(c)The Company and the Guarantors shall pay all Registration Expenses in connection with any registration pursuant to Section 2(a) or Section 2(b) hereof.  Each Holder shall pay all underwriting discounts and commissions, brokerage commissions and transfer taxes, if any, relating to the sale or disposition of such Holder’s Registrable Securities pursuant to the Shelf Registration Statement.

(d)An Exchange Offer Registration Statement pursuant to Section 2(a) hereof will not be deemed to have become effective unless it has been declared effective by the SEC.  A Shelf Registration Statement pursuant to Section 2(b) hereof will not be deemed to have become effective unless it has been declared effective by the SEC or is automatically effective upon filing with the SEC as provided by Rule 462 under the Securities Act.

In the event that either the Exchange Offer is not completed or the Shelf Registration Statement, if required pursuant to Section 2(b)(i) or 2(b)(ii) hereof, is not effective on or prior to February 24, 2008 (the “Target Registration Date”), the interest rate on the Registrable Securities will be increased by (i) 0.25% per annum for the first 90-day period immediately following the Target Registration Date and (ii) an additional 0.25% per annum with respect to each subsequent 90-day period, in each case until the Exchange Offer is completed or the Shelf Registration Statement, if required hereby, becomes effective or the Securities become freely tradable by a non-affiliate under the Securities Act, up to a maximum increase of 1.00% per annum.  In the event that the Company receives a Shelf Request pursuant to Section 2(b)(iii), and the Shelf Registration Statement required to be filed thereby has not become effective by the later of

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February 24, 2008 or (y) 90 days after delivery of such Shelf Request (such later date, the “Shelf Additional Interest Date”), then the interest rate on the Registrable Securities will be increased by (i) 0.25% per annum for the first 90-day period payable commencing from one day after the Shelf Additional Interest Date and (ii) an additional 0.25% per annum with respect to each subsequent 90-day period, in each case until the Shelf Registration Statement is effective or the Securities become freely tradable by a non-affiliate under the Securities Act, up to a maximum increase of 1.00% per annum.

If the Shelf Registration Statement, if required hereby, is effective and thereafter either ceases to be effective or the Prospectus contained therein ceases to be usable, in each case whether or not permitted by this Agreement, at any time during the Shelf Effectiveness Period, and such failure to remain effective or usable exists for more than 30 days (whether or not consecutive) in any 12-month period (the 30th such date, the “Trigger Date”), then the interest rate on the Registrable Securities will be increased by (i) 0.25% per annum for the first 90-day period immediately following the Trigger Date and (ii) an additional 0.25% per annum with respect to each subsequent 90-day period, up to a maximum increase of 1.0% per annum, and ending on such date that the Shelf Registration Statement is again effective or the Prospectus again becomes usable.

(e)Without limiting the remedies available to the Initial Purchasers and the Holders, the Company and the Guarantors acknowledge that any failure by the Company or the Guarantors to comply with their obligations under Section 2(a) and Section 2(b) hereof may result in material irreparable injury to the Initial Purchasers or the Holders for which there is no adequate remedy at law, that it will not be possible to measure damages for such injuries precisely and that, in the event of any such failure, the Initial Purchasers or any Holder may obtain such relief as may be required to specifically enforce the Company’s and the Guarantors’ obligations under Section 2(a) and Section 2(b) hereof.

(f)The Company represents, warrants and covenants that it (including its agents and representatives) will not prepare, make, use, authorize, approve or refer to any Free Writing Prospectus.

3.Registration Procedures.  (a) In connection with their obligations pursuant to Section 2(a) and Section 2(b) hereof, the Company and the Guarantors shall:

(i)prepare and file with the SEC a Registration Statement on the appropriate form under the Securities Act, which form (x) shall be selected by the Company and the Guarantors, (y) shall, in the case of a Shelf Registration, be available for the sale of the Registrable Securities by the Holders thereof and (z) shall comply as to form in all material respects with the requirements of the

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applicable form and include all financial statements required by the SEC to be filed therewith; and use their reasonable best efforts to cause such Registration Statement to become effective and remain effective for the applicable period in accordance with Section 2 hereof;

(ii)prepare and file with the SEC such amendments and post-effective amendments to each Registration Statement as may be necessary to keep such Registration Statement effective for the applicable period in accordance with Section 2 hereof and cause each Prospectus to be supplemented by any required prospectus supplement and, as so supplemented, to be filed pursuant to Rule 424 under the Securities Act; and keep each Prospectus current during the period described in Section 4(3) of and Rule 174 under the Securities Act that is applicable to transactions by brokers or dealers with respect to the Registrable Securities or Exchange Securities;

(iii)in the case of a Shelf Registration, furnish to each Holder of Registrable Securities included on such Shelf Registration Statement, to counsel for the Initial Purchasers, to counsel for such Holders and to each Underwriter of an Underwritten Offering of Registrable Securities, if any, without charge, as many copies of each Prospectus or preliminary prospectus, and any amendment or supplement thereto, as such Holder, counsel or Underwriter may reasonably request in order to facilitate the sale or other disposition of the Registrable Securities thereunder; and the Company and the Guarantors consent to the use of such Prospectus, preliminary prospectus and any amendment or supplement thereto in accordance with applicable law by each of the Holders of Registrable Securities and any such Underwriters in connection with the offering and sale of the Registrable Securities covered by and in the manner described in such Prospectus, preliminary prospectus or any amendment or supplement thereto in accordance with applicable law;

(iv)use their reasonable best efforts to register or qualify the Registrable Securities under all applicable state securities or blue sky laws of such jurisdictions as any Holder of Registrable Securities covered by a Registration Statement shall reasonably request in writing by the time the applicable Registration Statement becomes effective; cooperate with such Holders in connection with any filings required to be made with the National Association of Securities Dealers, Inc.; and do any and all other acts and things that may be reasonably necessary or advisable to enable each Holder to complete the disposition in each such jurisdiction of the Registrable Securities owned by such Holder; provided that neither the Company nor any Guarantor shall be required to (1) qualify as a foreign corporation or other entity or as a dealer in securities in any such jurisdiction where it would not otherwise be required to so qualify, (2) file any general consent to service of process in any such jurisdiction or (3) subject itself to taxation in any such jurisdiction if it is not so subject;

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(v)notify counsel for the Initial Purchasers and, in the case of a Shelf Registration, notify each Holder of Registrable Securities included on such Shelf Registration Statement and counsel for such Holders promptly and, if requested by any such Holder or counsel, confirm such advice in writing (1) when a Registration Statement is effective, when any post-effective amendment thereto has been filed and becomes effective and when any amendment or supplement to the Prospectus has been filed, (2) of any request by the SEC or any state securities authority for amendments and supplements to a Registration Statement or Prospectus or for additional information after the Registration Statement has become effective, (3) of the issuance by the SEC or any state securities authority of any stop order suspending the effectiveness of a Registration Statement or the initiation of any proceedings for that purpose, including the receipt by the Company of any notice of objection of the SEC to the use of a Shelf Registration Statement or any post-effective amendment thereto pursuant to Rule 401(g)(2) under the Securities Act, (4) if, between the applicable effective date of a Shelf Registration Statement and the closing of any sale of Registrable Securities covered thereby, the representations and warranties of the Company or any Guarantor contained in any underwriting agreement, securities sales agreement or other similar agreement, if any, relating to an offering of such Registrable Securities cease to be true and correct in all material respects or if the Company or any Guarantor receives any notification with respect to the suspension of the qualification of the Registrable Securities for sale in any jurisdiction or the initiation of any proceeding for such purpose, (5) of the happening of any event during the period a Registration Statement is effective that makes any statement made in such Registration Statement or the related Prospectus untrue in any material respect or that requires the making of any changes in such Registration Statement or Prospectus in order to make the statements therein not misleading and (6) of any determination by the Company or any Guarantor that a post-effective amendment to a Registration Statement or any amendment or supplement to the Prospectus would be appropriate;

(vi)use their reasonable best efforts to obtain the withdrawal of any order suspending the effectiveness of a Registration Statement or, in the case of a Shelf Registration, the resolution of any objection of the SEC pursuant to Rule 401(g)(2), including by filing an amendment to such Shelf Registration Statement on the proper form, at the earliest possible moment and provide immediate notice to each Holder of the withdrawal of any such order or such resolution;

(vii)in the case of a Shelf Registration, furnish to each Holder of Registrable Securities included on such Shelf Registration Statement, without charge, at least one conformed copy of each Registration Statement and any post-effective amendment thereto (without any documents incorporated therein by reference or exhibits thereto, unless requested in writing);

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(viii)in the case of a Shelf Registration, cooperate with the Holders of Registrable Securities included on such Shelf Registration Statement to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold and not bearing any restrictive legends and enable such Registrable Securities to be issued in such denominations and registered in such names (consistent with the provisions of the Indenture) as such Holders may reasonably request at least one Business Day prior to the closing of any sale of Registrable Securities;

(ix)in the case of a Shelf Registration, upon the occurrence of any event contemplated by Section 3(a)(v)(5) hereof, use their reasonable best efforts to prepare and file with the SEC a supplement or post-effective amendment to such Shelf Registration Statement or the related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered (or, to the extent permitted by law, made available) to purchasers of the Registrable Securities, such Prospectus will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; and the Company and the Guarantors shall notify the Holders of Registrable Securities to suspend use of the Prospectus as promptly as practicable after the occurrence of such an event, and such Holders hereby agree to suspend use of the Prospectus until the Company and the Guarantors have amended or supplemented the Prospectus to correct such misstatement or omission;

(x)a reasonable time prior to the filing of any Registration Statement, any Prospectus, any amendment to a Registration Statement or amendment or supplement to a Prospectus other than any document that is to be incorporated by reference into a Registration Statement or a Prospectus after initial filing of a Registration Statement, provide copies of such document to the Initial Purchasers and their counsel (and, in the case of a Shelf Registration Statement, to the Holders of Registrable Securities included on such Shelf Registration Statement and their counsel) and make such of the representatives of the Company and the Guarantors as shall be reasonably requested by the Initial Purchasers or their counsel (and, in the case of a Shelf Registration Statement, the Holders of Registrable Securities included on such Shelf Registration Statement or their counsel) available for discussion of such document; and the Company and the Guarantors shall not, at any time after initial filing of a Registration Statement, use or file any Prospectus, any amendment of or supplement to a Registration Statement or a Prospectus, or any document that is to be incorporated by reference into a Registration Statement or a Prospectus, of which the Initial Purchasers and their counsel (and, in the case of a Shelf Registration Statement, the Holders of Registrable Securities and their counsel) shall not have previously been advised and furnished a copy or to which the

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Initial Purchasers or their counsel (and, in the case of a Shelf Registration Statement, the Holders of Registrable Securities or their counsel) shall object;

(xi)use reasonable best efforts to obtain a CUSIP number for all Exchange Securities or Registrable Securities, as the case may be, not later than the initial effective date of a Registration Statement;

(xii)use reasonable best efforts to cause the Indenture to be qualified under the Trust Indenture Act in connection with the registration of the Exchange Securities or Registrable Securities, as the case may be; cooperate with the Trustee and the Holders to effect such changes to the Indenture as may be required for the Indenture to be so qualified in accordance with the terms of the Trust Indenture Act; and execute, and use their reasonable best efforts to cause the Trustee to execute, all documents as may be required to effect such changes and all other forms and documents required to be filed with the SEC to enable the Indenture to be so qualified in a timely manner;

(xiii)in the case of a Shelf Registration, make available for inspection by a representative of the Holders of the Registrable Securities (an “Inspector”), any Underwriter participating in any disposition pursuant to such Shelf Registration Statement, any attorneys and accountants designated by a majority of the Holders of Registrable Securities to be included in such Shelf Registration and any attorneys and accountants designated by such Underwriter, at reasonable times and in a reasonable manner, all pertinent financial and other records, documents and properties of the Company and its subsidiaries, and cause the respective officers, directors and employees of the Company and the Guarantors to supply all information reasonably requested by any such Inspector, Underwriter, attorney or accountant in connection with a Shelf Registration Statement; provided that if any such information is identified by the Company or any Guarantor as being confidential or proprietary, each Person receiving such information shall take such actions as are reasonably necessary to protect the confidentiality of such information to the extent such action is otherwise not inconsistent with, an impairment of or in derogation of the rights and interests of any Inspector, Holder or Underwriter);

(xiv)in the case of a Shelf Registration, use their reasonable best efforts to cause all Registrable Securities to be listed on any securities exchange or any automated quotation system on which similar securities issued or guaranteed by the Company or any Guarantor are then listed if requested by the Majority Holders, to the extent such Registrable Securities satisfy applicable listing requirements; (xv) if reasonably requested by any Holder of Registrable Securities covered by a Shelf Registration Statement, promptly include in a Prospectus supplement or post-effective amendment such information with respect to such Holder as such Holder reasonably requests to be included therein and make all required filings of such Prospectus supplement or such

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post-effective amendment as soon as the Company has received notification of the matters to be so included in such filing;

(xv)in the case of a Shelf Registration, enter into such customary agreements and take all such other actions in connection therewith (including those requested by the Holders of a majority in principal amount of the Registrable Securities covered by the Shelf Registration Statement) in order to expedite or facilitate the disposition of such Registrable Securities including, but not limited to, an Underwritten Offering and in such connection, (1) to the extent possible, make such representations and warranties to the Holders and any Underwriters of such Registrable Securities with respect to the business of the Company and its subsidiaries and the Registration Statement, Prospectus and documents incorporated by reference or deemed incorporated by reference, if any, in each case, in form, substance and scope as are customarily made by issuers to underwriters in underwritten offerings and confirm the same if and when requested, (2) obtain opinions of counsel to the Company and the Guarantors (which counsel and opinions, in form, scope and substance, shall be reasonably satisfactory to the Holders and such Underwriters and their respective counsel) addressed to each selling Holder and Underwriter of Registrable Securities, covering the matters customarily covered in opinions requested in underwritten offerings, (3) obtain “comfort” letters from the independent certified public accountants of the Company and the Guarantors (and, if necessary, any other certified public accountant of any subsidiary of the Company or any Guarantor, or of any business acquired by the Company or any Guarantor for which financial statements and financial data are or are required to be included in the Registration Statement) addressed to each selling Holder (to the extent permitted by applicable professional standards) and Underwriter of Registrable Securities, such letters to be in customary form and covering matters of the type customarily covered in “comfort” letters in connection with underwritten offerings, including but not limited to financial information contained in any preliminary prospectus or Prospectus and (4) deliver such documents and certificates as may be reasonably requested by the Holders of a majority in principal amount of the Registrable Securities being sold or the Underwriters, and which are customarily delivered in underwritten offerings, to evidence the continued validity of the representations and warranties of the Company and the Guarantors made pursuant to clause (1) above and to evidence compliance with any customary conditions contained in an underwriting agreement; it being agreed that the representations and warranties, opinions of counsel and comfort letters delivered in connection with the initial offering of the Securities are customary; and

(xvi)so long as any Registrable Securities remain outstanding, cause each Additional Guarantor upon the creation or acquisition by the Company of such Additional Guarantor, to execute a counterpart to this Agreement in the

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form attached hereto as Annex A and to deliver such counterpart to the Initial Purchasers no later than five Business Days following the execution thereof.

(b)In the case of a Shelf Registration Statement, the Company may require each Holder of Registrable Securities to furnish to the Company such information regarding such Holder and the proposed disposition by such Holder of such Registrable Securities as the Company and the Guarantors may from time to time reasonably request in writing; provided that if such Holder fails to provide the requested information within 20 Business Days, the Company may exclude such Holder’s Registrable Securities from such Shelf Registration Statement until such time as the information is provided.

(c)In the case of a Shelf Registration Statement, each Holder of Registrable Securities covered in such Shelf Registration Statement agrees that, upon receipt of any notice from the Company and the Guarantors of the happening of any event of the kind described in Section 3(a)(v)(3) or 3(a)(v)(5) hereof, such Holder will forthwith discontinue disposition of Registrable Securities pursuant to the Shelf Registration Statement until such Holder’s receipt of the copies of the supplemented or amended Prospectus contemplated by Section 3(a)(ix) hereof and, if so directed by the Company and the Guarantors, such Holder will deliver to the Company and the Guarantors all copies in its possession, other than permanent file copies then in such Holder’s possession, of the Prospectus covering such Registrable Securities that is current at the time of receipt of such notice.

(d)If the Company and the Guarantors shall give any notice to suspend the disposition of Registrable Securities pursuant to a Registration Statement, the Company and the Guarantors shall extend the period during which such Registration Statement shall be maintained effective pursuant to this Agreement by the number of days during the period from and including the date of the giving of such notice to and including the date when the Holders of such Registrable Securities shall have received copies of the supplemented or amended Prospectus necessary to resume such dispositions. The Company and the Guarantors may give any such notice only twice during any 365-day period, any such suspensions shall not exceed 45 days for each suspension and there shall not be more than two suspensions in effect during any 365-day period.

(e)The Holders of Registrable Securities covered by a Shelf Registration Statement who desire to do so may sell such Registrable Securities in an Underwritten Offering.  In any such Underwritten Offering, the investment bank or investment banks and manager or managers (each an “Underwriter”) that will administer the offering will be selected by the Holders of a majority in principal amount of the Registrable Securities included in such offering and reasonably acceptable to the Company.  However, each Holder agrees that, neither such Holder nor any Underwriter participating in any disposition pursuant

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to any Registration Statement on such Holder’s behalf, will make any offer relating to the Registrable Securities that would constitute an Issuer Free Writing Prospectus (as defined in Rule 433 under the Act) or that would otherwise constitute a “free writing prospectus” (as defined in Rule 405 under the Act) required to be filed by the Company with the Commission or retained by the Company under Rule 433 of the Securities Act, unless it has obtained the prior written consent of the Company.

4.Participation of Broker-Dealers in Exchange Offer.  (a)  The Company has been advised that the Staff has taken the position that any broker-dealer that receives Exchange Securities for its own account in the Exchange Offer in exchange for Securities that were acquired by such broker-dealer as a result of market-making or other trading activities (a “Participating Broker-Dealer”) may be deemed to be an “underwriter” within the meaning of the Securities Act and must deliver a prospectus  meeting the requirements of the Securities Act in connection with any resale of such Exchange Securities.

The Company and the Guarantors have been advised that it is the Staff’s position that if the Prospectus contained in the Exchange Offer Registration Statement includes a plan of distribution containing a statement to the above effect and the means by which Participating Broker-Dealers may resell the Exchange Securities, without naming the Participating Broker-Dealers or specifying the amount of Exchange Securities owned by them, such Prospectus may be delivered by Participating Broker-Dealers (or, to the extent permitted by law, made available to purchasers) to satisfy their prospectus delivery obligation under the Securities Act in connection with resales of Exchange Securities for their own accounts, so long as the Prospectus otherwise meets the requirements of the Securities Act.

(b)In light of the above, and notwithstanding the other provisions of this Agreement, the Company and the Guarantors agree to amend or supplement the Prospectus contained in the Exchange Offer Registration Statement for a period of up to 180 days after the last Exchange Date (as such period may be extended pursuant to Section 3(d) of this Agreement), in order to expedite or facilitate the disposition of any Exchange Securities by Participating Broker-Dealers consistent with the positions of the Staff recited in Section 4(a) above.  The Company and the Guarantors further agree that Participating Broker-Dealers shall be authorized to deliver such Prospectus (or, to the extent permitted by law, make available) during such period in connection with the resales contemplated by this Section 4.

(c)The Initial Purchasers shall have no liability to the Company, any Guarantor or any Holder with respect to any request that they may make pursuant to Section 4(b) above.

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5.Indemnification and Contribution.  (a)  The Company and each Guarantor, jointly and severally, agree to indemnify and hold harmless each Initial Purchaser and each Holder, their respective affiliates, directors and officers and each Person, if any, who controls any Initial Purchaser or any Holder within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, from and against any and all losses, claims, damages and liabilities (including, without limitation, legal fees and other expenses incurred in connection with any suit, action or proceeding or any claim asserted, as such fees and expenses are incurred), joint or several, that arise out of, or are based upon, (1) any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement or any omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein not misleading, or (2) any untrue statement or alleged untrue statement of a material fact contained in any Prospectus, any Free Writing Prospectus used in violation of this Agreement or any “issuer information” (“Issuer Information”) filed or required to be filed pursuant to Rule 433(d) under the Securities Act, or any omission or alleged omission to state therein a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, in each case except insofar as such losses, claims, damages or liabilities arise out of, or are based upon, any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with any information furnished to the Company in writing through JPMorgan, or any selling Holder, respectively expressly for use therein.  In connection with any Underwritten Offering permitted by Section 3, the Company and the Guarantors, jointly and severally, will also indemnify the Underwriters, if any, selling brokers, dealers and similar securities industry professionals participating in the distribution, their respective affiliates and each Person who controls such Persons (within the meaning of the Securities Act and the Exchange Act) to the same extent as provided above with respect to the indemnification of the Holders, if requested in connection with any Registration Statement, any Prospectus, any Free Writing Prospectus or any Issuer Information.

(b)Each Holder agrees, severally and not jointly, to indemnify and hold harmless the Company, the Guarantors, the Initial Purchasers and the other selling Holders, the directors of the Company and the Guarantors, each officer of the Company and the Guarantors who signed the Registration Statement and each Person, if any, who controls the Company, the Guarantors, any Initial Purchaser and any other selling Holder within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act to the same extent as the indemnity set forth in paragraph (a) above, but only with respect to any losses, claims, damages or liabilities that arise out of, or are based upon, any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with any information furnished to the Company in writing

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by such Holder expressly for use in any Registration Statement and any Prospectus.

(c)If any suit, action, proceeding (including any governmental or regulatory investigation), claim or demand shall be brought or asserted against any Person in respect of which indemnification may be sought pursuant to either paragraph (a) or (b) above, such Person (the “Indemnified Person”) shall promptly notify the Person against whom such indemnification may be sought (the “Indemnifying Person”) in writing; provided that the failure to notify the Indemnifying Person shall not relieve it from any liability that it may have under this Section 5 except to the extent that it has been materially prejudiced (through the forfeiture of substantive rights or defenses) by such failure; and provided, further, that the failure to notify the Indemnifying Person shall not relieve it from any liability that it may have to an Indemnified Person otherwise than under this Section 5.  If any such proceeding shall be brought or asserted against an Indemnified Person and it shall have notified the Indemnifying Person thereof, the Indemnifying Person shall retain counsel reasonably satisfactory to the Indemnified Person to represent the Indemnified Person and any others entitled to indemnification pursuant to this Section 5 that the Indemnifying Person may designate in such proceeding and shall pay the fees and expenses of such counsel related to such proceeding, as incurred.  In any such proceeding, any Indemnified Person shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnified Person unless (i) the Indemnifying Person and the Indemnified Person shall have mutually agreed to the contrary; (ii) the Indemnifying Person has failed within a reasonable time to retain counsel reasonably satisfactory to the Indemnified Person; (iii) the Indemnified Person shall have reasonably concluded that there may be legal defenses available to it that are different from or in addition to those available to the Indemnifying Person; or (iv) the named parties in any such proceeding (including any impleaded parties) include both the Indemnifying Person and the Indemnified Person and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them.  It is understood and agreed that the Indemnifying Person shall not, in connection with any proceeding or related proceeding in the same jurisdiction, be liable for the fees and expenses of more than one separate firm (in addition to any local counsel) for all Indemnified Persons, and that all such fees and expenses shall be reimbursed as they are incurred.  Any such separate firm (x) for any Initial Purchaser, its affiliates, directors and officers and any control Persons of such Initial Purchaser shall be designated in writing by JPMorgan, (y) for any Holder, its directors and officers and any control Persons of such Holder shall be designated in writing by the Majority Holders and (z) in all other cases shall be designated in writing by the Company.  The Indemnifying Person shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, the Indemnifying Person agrees to indemnify each Indemnified Person

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from and against any loss or liability by reason of such settlement or judgment.  No Indemnifying Person shall, without the written consent of the Indemnified Person, effect any settlement of any pending or threatened proceeding in respect of which any Indemnified Person is or could have been a party and indemnification could have been sought hereunder by such Indemnified Person, unless such settlement (A) includes an unconditional release of such Indemnified Person, in form and substance reasonably satisfactory to such Indemnified Person, from all liability on claims that are the subject matter of such proceeding and (B) does not include any statement as to or any admission of fault, culpability or a failure to act by or on behalf of any Indemnified Person.

(d)If the indemnification provided for in paragraphs (a) and (b) above is unavailable to an Indemnified Person or insufficient in respect of any losses, claims, damages or liabilities referred to therein, then each Indemnifying Person under such paragraph, in lieu of indemnifying such Indemnified Person thereunder, shall contribute to the amount paid or payable by such Indemnified Person as a result of such losses, claims, damages or liabilities (i) in such proportion as is appropriate to reflect the relative benefits received by the Company and the Guarantors from the offering of the Securities and the Exchange Securities, on the one hand, and by the Holders from receiving Securities or Exchange Securities registered under the Securities Act, on the other hand, or (ii) if the allocation provided by clause (i) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) but also the relative fault of the Company and the Guarantors on the one hand and the Holders on the other in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations.  The relative fault of the Company and the Guarantors on the one hand and the Holders on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company and the Guarantors or by the Holders and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.

(e)The Company, the Guarantors and the Holders agree that it would not be just and equitable if contribution pursuant to this Section 5 were determined by pro rata allocation (even if the Holders were treated as one entity for such purpose) or by any other method of allocation that does not take account of the equitable considerations referred to in paragraph (d) above.  The amount paid or payable by an Indemnified Person as a result of the losses, claims, damages and liabilities referred to in paragraph (d) above shall be deemed to include, subject to the limitations set forth above, any legal or other expenses incurred by such Indemnified Person in connection with any such action or claim.  Notwithstanding the provisions of this Section 5, in no event shall a Holder be

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required to contribute any amount in excess of the amount by which the total price at which the Securities or Exchange Securities sold by such Holder exceeds the amount of any damages that such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission.  No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation.  The Holders’ obligations to contribute pursuant to this Section 5 are several and not joint.

(f)The remedies provided for in this Section 5 are not exclusive and shall not limit any rights or remedies that may otherwise be available to any Indemnified Person at law or in equity.

(g)The indemnity and contribution provisions contained in this Section 5 shall remain operative and in full force and effect regardless of (i) any termination of this Agreement, (ii) any investigation made by or on behalf of the Initial Purchasers or any Holder or any Person controlling any Initial Purchaser or any Holder, or by or on behalf of the Company or the Guarantors or the officers or directors of or any Person controlling the Company or the Guarantors, (iii) acceptance of any of the Exchange Securities and (iv) any sale of Registrable Securities pursuant to a Shelf Registration Statement.

6.General.

(a)No Inconsistent Agreements.   The Company and the Guarantors represent, warrant and agree that (i) the rights granted to the Holders hereunder do not in any way conflict with and are not inconsistent with the rights granted to the holders of any other outstanding securities issued or guaranteed by the Company or any Guarantor under any other agreement and (ii) neither the Company nor any Guarantor has entered into, or on or after the date of this Agreement will enter into, any agreement that is inconsistent with the rights granted to the Holders of Registrable Securities in this Agreement or otherwise conflicts with the provisions hereof.

(b)Amendments and Waivers.   The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given unless the Company and the Guarantors have obtained the written consent of Holders of at least a majority in aggregate principal amount of the outstanding Registrable Securities affected by such amendment, modification, supplement, waiver or consent; provided that no amendment, modification, supplement, waiver or consent to any departure from the provisions of Section 5 hereof shall be effective as against any Holder of Registrable Securities unless consented to in writing by such Holder.  Any amendments,

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modifications, supplements, waivers or consents pursuant to this Section 6(b) shall be by a writing executed by each of the parties hereto.

(c)Notices.  Except as otherwise specified herein, all notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, registered first-class mail, telex, telecopier, or any courier guaranteeing overnight delivery (i) if to a Holder, at the most current address given by such Holder to the Company by means of a notice given in accordance with the provisions of this Section 6(c), which address initially is, with respect to the Initial Purchasers, the address set forth in the Purchase Agreement; (ii) if to the Company and the Guarantors, initially at the Company’s address set forth in the Purchase Agreement and thereafter at such other address, notice of which is given in accordance with the provisions of this Section 6(c); and (iii) to such other persons at their respective addresses as provided in the Purchase Agreement and thereafter at such other address, notice of which is given in accordance with the provisions of this Section 6(c).  All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; when answered back, if telexed or e-mailed; when receipt is acknowledged, if telecopied; and on the next Business Day if timely delivered to an air courier guaranteeing overnight delivery.  Copies of all such notices, demands or other communications shall be concurrently delivered by the Person giving the same to the Trustee, at the address specified in the Indenture.

(d)Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors, assigns and transferees of each of the parties, including, without limitation and without the need for an express assignment, subsequent Holders; provided that nothing herein shall be deemed to permit any assignment, transfer or other disposition of Registrable Securities in violation of the terms of the Purchase Agreement or the Indenture.  If any transferee of any Holder shall acquire Registrable Securities in any manner, whether by operation of law or otherwise, such Registrable Securities shall be held subject to all the terms of this Agreement, and by taking and holding such Registrable Securities such Person shall be conclusively deemed to have agreed to be bound by and to perform all of the terms and provisions of this Agreement and such Person shall be entitled to receive the benefits hereof.  The Initial Purchasers (in their capacity as Initial Purchasers) shall have no liability or obligation to the Company or the Guarantors with respect to any failure by any other Holder to comply with, or any breach by any other Holder of, any of the obligations of such Holder under this Agreement.

(e)Third-Party Beneficiaries.  Each Holder shall be a third-party beneficiary to the agreements made hereunder between the Company and the Guarantors, on the one hand, and the Initial Purchasers, on the other hand, and shall have the right to enforce such agreements directly to the extent it deems

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such enforcement necessary or advisable to protect its rights or the rights of other Holders hereunder.

(f)Counterparts. This Agreement may be signed on counterparts (which may include counterparts delivered by any standard forum of telecommunication), each of which shall be an original and all of which together shall constitute one and the same instrument.

(g)Headings.  The headings in this Agreement are for convenience of reference only, are not a part of this Agreement and shall not limit or otherwise affect the meaning hereof.

(h)Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of New York.

(i)Entire Agreement; Severability.  This Agreement contains the entire agreement between the parties relating to the subject matter hereof and supersedes all oral statements and prior writings with respect thereto.  If any term, provision, covenant or restriction contained in this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable or against public policy, the remainder of the terms, provisions, covenants and restrictions contained herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated.  The Company, the Guarantors and the Initial Purchasers shall endeavor in good faith negotiations to replace the invalid, void or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, void or unenforceable provisions.

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

THE READER’S DIGEST ASSOCIATION, INC.
By:
	Name: William H. Magill
	Title:   Vice President and Treasurer

ALLRECIPES.COM, INC. ARDEE MUSIC PUBLISHING, INC. BOOKS ARE FUN, LTD. CHRISTMAS ANGEL PRODUCTIONS,       INC. FAMILY READING PROGRAM CORP. FUNDRAISING.COM, INC. HOME SERVICE PUBLICATIONS, INC. PEGASUS ASIA INVESTMENTS INC. PEGASUS FINANCE CORP. PEGASUS INVESTMENT, INC. PEGASUS SALES, INC. PLEASANTVILLE MUSIC PUBLISHING,       INC. QSP DISTRIBUTION SERVICES, LLC QSP PRODUCTS AND PROGRAMS, LLC QSP SALES, LLC QSP SERVICES, LLC QSP VENTURES, LLC QSP, INC. R.D. MANUFACTURING CORPORATION RD LARGE EDITION, INC. RD MAGAZINE VALUE PARTNERS, INC. RD MEMBER SERVICES INC. RD PUBLICATIONS, INC. RD TRADE SHOWS, INC. RD WALKING, INC.
By:
	Name: William H. Magill
	Title:   Treasurer

Registration Rights Agreement

READER’S DIGEST CHILDREN’S       PUBLISHING, INC. READER’S DIGEST CONSUMER       SERVICES, INC. READER’S DIGEST ENTERTAINMENT,       INC. READER’S DIGEST FINANCIAL       SERVICES, INC. READER’S DIGEST LATINOAMERICA S.A. READER’S DIGEST SALES AND       SERVICES, INC. READER’S DIGEST SUB NINE, INC. READER’S DIGEST YOUNG FAMILIES,       INC. REIMAN MEDIA GROUP, INC. RETIREMENT LIVING PUBLISHING       COMPANY, INC. SMDDMS, INC. TASTE OF HOME ENTERTAINING, INC. TASTE OF HOME MEDIA GROUP, INC. TASTE OF HOME PRODUCTIONS, INC. THE READER’S DIGEST ASSOCIATION       (RUSSIA) INCORPORATED TRAVEL PUBLICATIONS, INC. VIDEOVATION, INC. W.A. PUBLICATIONS, LLC WAPLA, LLC WORLD WIDE COUNTRY TOURS, INC.
By:
	Name: William H. Magill
	Title:   Treasurer

Registration Rights Agreement

WRC MEDIA INC. COMPASSLEARNING, INC. WEEKLY READER CORPORATION LIFETIME LEARNING SYSTEMS, INC. WORLD ALMANAC EDUCATION GROUP,       INC. FUNK & WAGNALLS YEARBOOK CORP. GARETH STEVENS, INC.
By:
	Name: Robert S. Yingling
	Title:   Chief Financial Officer

DIRECT HOLDINGS U.S. CORP. ALEX INC. DIRECT HOLDINGS AMERICAS INC. DIRECT HOLDINGS CUSTOM       PUBLISHING INC. DIRECT HOLDINGS CUSTOMER       SERVICE, INC. DIRECT HOLDINGS EDUCATION INC. DIRECT HOLDINGS LIBRARIES INC.
By:
	Name: Christopher Hearing
	Title:   Executive Vice President, Chief           Financial Officer and Treasurer

Registration Rights Agreement

Confirmed and accepted as of the date first above written:

J.P. MORGAN SECURITIES INC.

For itself and on behalf of the

 several Initial Purchasers

By:

Authorized Signatory

Registration Rights Agreement

Annex A

Counterpart to Registration Rights Agreement

The undersigned hereby absolutely, unconditionally and irrevocably agrees as a Guarantor (as defined in the Registration Rights Agreement, dated as of March 2, 2007, by and among the Company, a Delaware corporation, the guarantors party thereto and J.P. Morgan Securities Inc., on behalf of itself and the other Initial Purchasers) to be bound by the terms and provisions of such Registration Rights Agreement.

IN WITNESS WHEREOF, the undersigned has executed this counterpart as of                               .

[NAME]
By:
	Name:
	Title:

EX-5.1

Exhibit 5.1

[Letterhead of]

CRAVATH, SWAINE & MOORE LLP

[New York Office]

February 8, 2008

The Reader’s Digest Association, Inc.
9% Senior Subordinated Notes due 2017
Form S-4 Registration Statement

Ladies and Gentlemen:

We have acted as counsel for The Reader’s Digest Association, Inc., a Delaware corporation (the “Company”), in connection with the filing by the Company with the Securities and Exchange Commission (the “Commission”) of a registration statement on Form S-4 (the “Registration Statement”) under the Securities Act of 1933, as amended (the “Securities Act”), relating to the issuance and exchange of up to $600,000,000 aggregate principal amount of new 9% Senior Subordinated Notes due 2017 (the “Exchange Notes”) for a like aggregate principal amount of outstanding 9% Senior Subordinated Notes due 2017, which have certain transfer restrictions (the “Original Notes”).  The Exchange Notes are to be issued pursuant to the Indenture dated as of March 2, 2007 (the “Indenture”), among the Company, the subsidiary guarantors named therein (the “Subsidiary Guarantors”) and The Bank of New York, as trustee (the “Trustee”).

In that connection, we have examined originals, or copies certified or otherwise identified to our satisfaction, of such documents, corporate records and other instruments as we have deemed necessary or appropriate for the purposes of this opinion, including:  (a) the Indenture and the form of Exchange Note included therein, (b) the Certificate of Incorporation of the Company, as amended, (c) the By-Laws of the Company, as amended, and (d) resolutions adopted by the Board of Directors of the Company on March 2, 2007.

Based on the foregoing and subject to the qualifications set forth herein, we are of opinion as follows:

1.    The Exchange Notes have been duly authorized and, when executed and authenticated in accordance with the provisions of the Indenture and issued and delivered in exchange for the Original Notes, will constitute legal, valid and binding obligations of the Company, entitled to the benefits of the Indenture and enforceable against the Company in accordance with their terms (subject to applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and other similar laws affecting creditors’ rights generally from time to time in effect and to general principles of equity, including, without limitation, concepts of materiality, reasonableness, good faith and fair dealing, regardless of whether considered in a proceeding in equity or at law).  In expressing the opinion set forth in this paragraph 1, we have assumed, with your consent, that the form of the Exchange Notes will conform to that included in the Indenture.

2.    Assuming the due authorization, execution and delivery of the respective guarantees by each Subsidiary Guarantor, each such guarantee will constitute the legal, valid and binding obligation of the applicable Subsidiary Guarantor, enforceable against such Subsidiary Guarantor in accordance with its terms (subject to applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and other similar laws affecting creditors’ rights generally from time to time in effect and to general principles of equity, including, without limitation, concepts of materiality, reasonableness, good faith and fair dealing, regardless of whether considered in a proceeding in equity or at law).

3.    Assuming the due authorization, execution and delivery of the Indenture by each Subsidiary Guarantor, the Indenture constitutes a legal, valid and binding obligation of the Company and the Subsidiary Guarantors enforceable against the Company and the Subsidiary Guarantors in accordance with its terms (subject to applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and other similar laws affecting creditors’ rights generally from time to time in effect and to general principles of equity, including, without limitation, concepts of materiality, reasonableness, good faith and fair dealing, regardless of whether considered in a proceeding in equity or at law).

With respect to the opinions set forth herein, we express no opinion as to any provision of the Indenture, the Exchange Notes or the related guarantees that relates to the waiver of rights to jury trial.  We also express no opinion as to (i) the enforceability of the provisions of the Indenture, the Exchange Notes or the related guarantees to the extent such provisions constitute a waiver of illegality as a defense to performance of contract obligations or any other defense to performance which cannot, as a matter of law, be effectively waived, or (ii) whether a state court outside the State of New York or a Federal court of the United States would give effect to the choice of New York law as provided for in the Indenture, the Exchange Notes or the related guarantees.  We also note that insofar as any provision in the Indenture, the Exchange Notes or the related

2

guarantees provides for indemnification, the enforceability thereof may be limited by public policy considerations.

We are admitted to practice in the State of New York, and we express no opinion as to any matters governed by any law other than the law of the State of New York, the General Corporation Law of the State of Delaware and the Federal law of the United States of America.  In particular, we do not purport to pass on any matter governed by the laws of Iowa, Washington or Wisconsin.

We hereby consent to the filing of this opinion with the Commission as Exhibit 5.1 to the Registration Statement.  We also consent to the reference to our firm under the caption “Validity of the Exchange Notes” in the prospectus constituting a part of the Registration Statement.  In giving such consent, we do not admit that we are included in the category of persons whose consent is required under Section 7 of the Securities Act or the rules and regulations of the Commission.

We are furnishing this opinion to you, solely for your benefit.  This opinion may not be relied upon by any other person or for any other purpose or used, circulated, quoted or otherwise referred to for any other purpose.

Very truly yours,

/s/ CRAVATH, SWAINE & MOORE LLP

The Reader’s Digest Association, Inc.

Reader’s Digest Road

Pleasantville, New York 10570-7000

3

EX-10.1

Exhibit 10.1

EXECUTION COPY

CREDIT AGREEMENT

Dated as of March 2, 2007

among

DOCTOR ACQUISITION CO.,

RDA HOLDING CO.,

THE READER’S DIGEST ASSOCIATION, INC.,

THE OVERSEAS BORROWERS PARTY HERETO,

The Lenders Party Hereto

JPMORGAN CHASE BANK, N.A.,
as Administrative Agent

CITICORP NORTH AMERICA, INC. and
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED,
as Co-Syndication Agents,

and

THE ROYAL BANK OF SCOTLAND PLC,
as Documentation Agent

J.P. MORGAN SECURITIES INC.,
CITIGROUP GLOBAL MARKETS INC.,
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
and RBS SECURITIES CORPORATION,
as Co-Lead Arrangers and Joint Bookrunners

TABLE OF CONTENTS

		Page
ARTICLE I DEFINITIONS AND ACCOUNTING TERMS		2
SECTION 1.01.	Defined Terms	2
SECTION 1.02.	Other Interpretive Provisions	48
SECTION 1.03.	Accounting Terms	48
SECTION 1.04.	Rounding	48
SECTION 1.05.	References to Agreements, Laws, Etc	49
SECTION 1.06.	Times of Day	49
SECTION 1.07.	Timing of Payment of Performance	49
SECTION 1.08.	Currency Equivalents Generally	49
SECTION 1.09.	Change of Currency	50
ARTICLE II THE COMMITMENTS AND CREDIT EXTENSIONS		50
SECTION 2.01.	The Loans	50
SECTION 2.02.	Borrowings, Conversions and Continuations of Loans	51
SECTION 2.03.	Letters of Credit	52
SECTION 2.04.	Swing Line Loans	59
SECTION 2.05.	Prepayments	61
SECTION 2.06.	Termination or Reduction of Commitments	64
SECTION 2.07.	Repayment of Loans	65
SECTION 2.08.	Interest	65
SECTION 2.09.	Fees	66
SECTION 2.10.	Computation of Interest and Fees	66
SECTION 2.11.	Evidence of Indebtedness	66
SECTION 2.12.	Payments Generally	67
SECTION 2.13.	Sharing of Payments	69
SECTION 2.14.	Incremental Credit Extensions	70
SECTION 2.15.	Overseas Borrower Costs	73
ARTICLE III TAXES, INCREASED COSTS PROTECTION AND ILLEGALITY		73
SECTION 3.01.	Taxes	73
SECTION 3.02.	Illegality	76
SECTION 3.03.	Inability to Determine Rates	76
SECTION 3.04.	Increased Cost and Reduced Return; Capital Adequacy; Reserves on Eurocurrency Rate Loans	76
SECTION 3.05.	Funding Losses	78
SECTION 3.06.	Matters Applicable to All Requests for Compensation	78
SECTION 3.07.	Replacement of Lenders under Certain Circumstances	79
SECTION 3.08.	Survival	80
ARTICLE IV CONDITIONS PRECEDENT TO CREDIT EXTENSIONS		80
SECTION 4.01.	Conditions of Initial Credit Extension	80
SECTION 4.02.	Conditions to All Credit Extensions	83
SECTION 4.03.	Conditions of Initial Credit Extension to Overseas Borrower	84

i

ARTICLE V REPRESENTATIONS AND WARRANTIES		85
SECTION 5.01.	Existence, Qualification and Power; Compliance with Laws	85
SECTION 5.02.	Authorization; No Contravention	85
SECTION 5.03.	Governmental Authorization; Other Consents	85
SECTION 5.04.	Binding Effect	86
SECTION 5.05.	Financial Statements; No Material Adverse Effect	86
SECTION 5.06.	Litigation	87
SECTION 5.07.	No Default	87
SECTION 5.08.	Ownership of Property; Liens	87
SECTION 5.09.	Environmental Compliance	87
SECTION 5.10.	Taxes	88
SECTION 5.11.	ERISA Compliance	88
SECTION 5.12.	Subsidiaries; Equity Interests	89
SECTION 5.13.	Margin Regulations; Investment Company Act	89
SECTION 5.14.	Disclosure	89
SECTION 5.15.	Intellectual Property; Licenses, Etc	89
SECTION 5.16.	Solvency	90
SECTION 5.17.	Labor Matters	90
SECTION 5.18.	Collateral	90
ARTICLE VI AFFIRMATIVE COVENANTS		91
SECTION 6.01.	Financial Statements	91
SECTION 6.02.	Certificates; Other Information	92
SECTION 6.03.	Notices	94
SECTION 6.04.	Payment of Obligations	94
SECTION 6.05.	Preservation of Existence, Etc	94
SECTION 6.06.	Maintenance of Properties	94
SECTION 6.07.	Maintenance of Insurance	95
SECTION 6.08.	Compliance with Laws	95
SECTION 6.09.	Inspection Rights	95
SECTION 6.10.	Covenant to Guarantee Obligations and Give Security	95
SECTION 6.11.	Compliance with Environmental Laws	97
SECTION 6.12.	Further Assurances	98
SECTION 6.13.	Use of Proceeds	99
SECTION 6.14.	Interest Rate Protection	99
SECTION 6.15.	Designation of Subsidiaries	99
SECTION 6.16.	Ownership of Overseas Borrowers	99
SECTION 6.17.	Post-Closing Covenants	99
ARTICLE VII NEGATIVE COVENANTS		100
SECTION 7.01.	Liens	100
SECTION 7.02.	Investments	103
SECTION 7.03.	Indebtedness	107
SECTION 7.04.	Fundamental Changes	110
SECTION 7.05.	Dispositions	112
SECTION 7.06.	Restricted Payments	113
SECTION 7.07.	Change in Nature of Business	115
SECTION 7.08.	Transactions with Affiliates	115

ii

SECTION 7.09.	Burdensome Agreements	116
SECTION 7.10.	Financial Covenant	116
SECTION 7.11.	Accounting Changes	117
SECTION 7.12.	Prepayments, Etc. of Indebtedness	117
SECTION 7.13.	Holding Company	117
SECTION 7.14.	Capital Expenditures	118
ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES		119
SECTION 8.01.	Events of Default	119
SECTION 8.02.	Remedies Upon Event of Default	121
SECTION 8.03.	Exclusion of Immaterial Subsidiaries	121
SECTION 8.04.	Application of Funds	122
SECTION 8.05.	Company’s Right to Cure	123
SECTION 8.06.	CAM Exchange	123
ARTICLE IX ADMINISTRATIVE AGENT AND OTHER AGENTS		124
SECTION 9.01.	Appointment and Authorization of Agents	124
SECTION 9.02.	Delegation of Duties	125
SECTION 9.03.	Liability of Agents	125
SECTION 9.04.	Reliance by Agents	126
SECTION 9.05.	Notice of Default	126
SECTION 9.06.	Credit Decision; Disclosure of Information by Agents	126
SECTION 9.07.	Indemnification of Agents	127
SECTION 9.08.	Agents in their Individual Capacities	127
SECTION 9.09.	Successor Agents	128
SECTION 9.10.	Administrative Agent May File Proofs of Claim	128
SECTION 9.11.	Collateral and Guarantee Matters	129
SECTION 9.12.	Other Agents; Arrangers and Managers	130
SECTION 9.13.	Appointment of Supplemental Administrative Agents	130
ARTICLE X MISCELLANEOUS		131
SECTION 10.01.	Amendments, Etc	131
SECTION 10.02.	Notices and Other Communications; Facsimile Copies	133
SECTION 10.03.	No Waiver; Cumulative Remedies	135
SECTION 10.04.	Attorney Costs, Expenses and Taxes	135
SECTION 10.05.	Indemnification by the Company	135
SECTION 10.06.	Payments Set Aside	136
SECTION 10.07.	Successors and Assigns	137
SECTION 10.08.	Confidentiality	140
SECTION 10.09.	Setoff	142
SECTION 10.10.	Interest Rate Limitation	142
SECTION 10.11.	Counterparts	142
SECTION 10.12.	Integration	143
SECTION 10.13.	Survival of Representations and Warranties	143
SECTION 10.14.	Severability	143
SECTION 10.15.	Tax Forms	143
SECTION 10.16.	GOVERNING LAW	145
SECTION 10.17.	WAIVER OF RIGHT TO TRIAL BY JURY	146

iii

SECTION 10.18.	Binding Effect	146
SECTION 10.19.	Lender Action	146
SECTION 10.20.	USA PATRIOT Act	146
SECTION 10.21.	Agent for Service of Process	146
SECTION 10.22.	Effectiveness of the Merger; Assignment and Delegation to and Assumption by Reader’s Digest	147
SECTION 10.23.	Judgment Currency	147
SECTION 10.24.	German Tax Confirmation	147

iv

SCHEDULES
	1.01A	Certain Security Interests and Guarantees
	1.01B	Mortgaged Properties
	1.01C	Management Adjustments
	1.01D	Excluded Subsidiaries
	1.01E	Foreign Subsidiaries
	1.01F	Holdings Contractual Obligations
	1.01G	Unrestricted Subsidiaries
	1.01H	Mandatory Cost Formulae
	1.01I	Existing Letters of Credit
	2.01	Commitments
	5.05	Certain Liabilities
	5.09	Environmental Matters
	5.10	Taxes
	5.11	ERISA Compliance
	5.12	Subsidiaries and Other Equity Investments
	5.18	Collateral Matters
	7.01(b)	Existing Liens
	7.02(f)	Existing Investments
	7.03(b)	Existing Indebtedness
	7.05(k)	Dispositions
	7.08	Transactions with Affiliates
	7.09	Existing Restrictions
	10.02	Administrative Agent’s Office, Certain Addresses for Notices

EXHIBITS

            Form of

A	Committed Loan Notice
B	Swing Line Loan Notice
C-1	U.S. Term Note
C-2	Revolving Credit Note
C-3	Euro Term Note
D	Compliance Certificate
E	Assignment and Assumption
F	Guarantee and Security Agreement
G	Mortgage
H-1	Opinion of Cravath, Swaine & Moore LLP
H-2	Opinion of Richards, Layton & Finger
H-3	Opinion of General Counsel (Company)
H-4	Opinion of General Counsel (WRC Media)
H-5	Opinion of General Counsel (Direct Holdings)
I	Letter of Credit Application (commercial)
J	Letter of Credit Application (standby)
K	Continuing Agreement
L	German Tax Confirmation

v

CREDIT AGREEMENT

This CREDIT AGREEMENT (“Agreement”) is entered into as of March 2, 2007, among DOCTOR ACQUISITION CO., a Delaware corporation (“Acquisition Co”) (to be merged with and into Reader’s Digest (as defined herein), the “Company”), RDA HOLDING CO., a Delaware corporation (“Holdings”), THE READER’S DIGEST ASSOCIATION, INC., a Delaware corporation (“Reader’s Digest”), the Overseas Borrowers from time to time party hereto, JPMORGAN CHASE BANK, N.A., as Administrative Agent, each lender from time to time party hereto (collectively, the “Lenders” and individually, a “Lender”), CITICORP NORTH AMERICA, INC. and MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED, as Co-Syndication Agents, and THE ROYAL BANK OF SCOTLAND PLC, as Documentation Agent.

PRELIMINARY STATEMENTS

Pursuant to the Purchase Agreement (as this and other capitalized terms used in these preliminary statements are defined in Section 1.01 below), Holdings agreed to acquire Reader’s Digest (the “Acquisition”) through the merger of Acquisition Co with and into Reader’s Digest (the “Merger”), with Reader’s Digest being the surviving corporation.  Immediately following and as a result of the Merger, Reader’s Digest will assume all rights and obligations of Acquisition Co as the Company hereunder.

Pursuant to the WRC Acquisition Agreement, Holdings agreed to acquire WRC Media, Inc., a Delaware corporation (“WRC Media” and such acquisition, the “WRC Acquisition”).  Substantially concurrently with the Acquisition, Holdings will contribute all of the capital stock of WRC Media to the Company.  In addition, pursuant to the DH Acquisition Agreement, Holdings agreed to acquire Direct Holdings U.S. Corp., a Delaware corporation (“Direct Holdings” and, such acquisition, the “DH Acquisition” together with the Acquisition and the WRC Acquisition, the “Acquisitions”).  Substantially concurrently with the Acquisition, Holdings will contribute all of the capital stock of Direct Holdings to the Company.

Acquisition Co has requested that concurrently with the consummation of the Acquisitions, the Lenders extend credit to Acquisition Co and the German Borrower in the form of Term Loans in an initial aggregate Dollar Amount of $1,310,000,000 and in the form a Revolving Credit Facility in an initial aggregate amount of $300,000,000.  The Revolving Credit Facility may include one or more Swing Line Loans and one or more Letters of Credit from time to time.

The proceeds of the Term Loans and any Revolving Credit Loans made on the Closing Date, together with the proceeds of (i) the issuance of the Senior Subordinated Notes, (ii) the issuance of the Holdings Senior PIK Preferred, (iii) the issuance of the Holdings Common Equity, (iv) the Sponsor Equity Contributions, and (v) cash on hand at Reader’s Digest of up to $70,000,000 will be used to pay the cash portion of the Purchase Price and the Transaction Expenses and to refinance certain outstanding Indebtedness of Reader’s Digest, WRC Media and Direct Holdings.  The proceeds of Revolving Credit Loans and Swing Line Loans and the Letters of Credit made on or after the Closing Date will be used for working capital and other general corporate purposes of Holdings and its Subsidiaries, including the financing of Permitted Acquisitions.

1

The applicable Lenders have indicated their willingness to lend, and the L/C Issuers have indicated their willingness to issue Letters of Credit, in each case, on the terms and subject to the conditions set forth herein.

In consideration of the mutual covenants and agreements herein contained, the parties hereto covenant and agree as follows:

ARTICLE I

DEFINITIONS AND ACCOUNTING TERMS

SECTION 1.01.  Defined Terms .  As used in this Agreement, the following terms shall have the meanings set forth below:

“Acquired EBITDA” means, with respect to any Acquired Entity or Business for any period, the amount for such period of Consolidated EBITDA of such Acquired Entity or Business (determined as if references to the Company and the Restricted Subsidiaries in the definition of Consolidated EBITDA were references to such Acquired Entity or Business and its Subsidiaries), all as determined on a consolidated basis for such Acquired Entity or Business.

“Acquired Entity or Business” has the meaning set forth in the definition of the term “Consolidated EBITDA”.

“Acquisition” has the meaning set forth in the preliminary statements to this Agreement.

“Acquisition Co” has the meaning specified in the introductory paragraph to this Agreement.

“Acquisitions” has the meaning set forth in the preliminary statements to this Agreement.

“Additional Lender” has the meaning set forth in Section 2.14(a).

“Additional Overseas Lender” has the meaning set forth in Section 2.14(b).

“Administrative Agent” means JPMorgan Chase Bank, in its capacity as administrative agent under any of the Loan Documents, or any permitted successor administrative agent.

“Administrative Agent’s Office” means, with respect to any currency, the Administrative Agent’s address and, as appropriate, account as set forth on Schedule 10.02 with respect to such currency, or such other address or account with respect to such currency as the Administrative Agent may from time to time notify the Company and the Lenders in writing (including by electronic mail or by posting to Intralinks or other similar information transmission systems).

“Administrative Questionnaire” means an Administrative Questionnaire in a form supplied by the Administrative Agent.

2

“Affiliate” means, with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified.  “Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise.  “Controlling” and “Controlled” have meanings correlative thereto.

“Agent-Related Persons” means the Agents, together with their respective Affiliates, and the officers, directors, employees, agents and attorneys-in-fact of such Persons and Affiliates.

“Agents” means, collectively, the Administrative Agent, the Co-Syndication Agents, the Documentation Agent and the Supplemental Administrative Agents (if any).

“Aggregate Commitments” means the Commitments of all the Lenders.

“Aggregate Credit Exposures” means, at any time, the sum of (a) the unused portion of each Revolving Credit Commitment then in effect, (b) the unused portion of each U.S. Term Commitment then in effect, (c) the unused portion of each Euro Term Commitment then in effect and (c) the Total Outstandings at such time.

“Agreement” means this Credit Agreement.

“Agreement Currency” has the meaning specified in Section 10.23.

“Alternative Currency” means Sterling, Euros, Canadian Dollars or Australian Dollars.

“Alternative Currency Loan” means a Loan that is a Eurocurrency Rate Loan and that is made in an Alternative Currency pursuant to the applicable Committed Loan Notice.

“Applicable Rate” means a percentage per annum equal to:

(a) with respect to Term Loans, (i) for Eurocurrency Rate Loans, 2.00% and (ii) for Base Rate Loans, 1.00%; and

(b)  with respect to Revolving Credit Loans, unused Revolving Credit Commitments and Letter of Credit fees, until delivery of financial statements for the first full fiscal quarter commencing on or after the Closing Date pursuant to Section 6.01, (A) for Eurocurrency Rate Loans, 2.25%, (B) for Base Rate Loans, 1.25%, (C) for Letter of Credit fees, 2.25% and (D) for commitment fees, 0.375% and (ii) thereafter, the following percentages per annum, based upon the Total Leverage Ratio as set forth in the most recent Compliance Certificate received by the Administrative Agent pursuant to Section 6.02(b):

Applicable Rate
Pricing Level	Total Leverage Ratio	Eurocurrency Rate and Letter of Credit Fees	Base Rate	Commitment Fee Rate
1	>6.0:1	2.25%	1.25%	0.375%
2	<6.0:1 but >5.0:1	2.00%	1.00%	0.375%

3

Applicable Rate
Pricing Level	Total Leverage Ratio	Eurocurrency Rate and Letter of Credit Fees	Base Rate	Commitment Fee Rate
3	<5.0:1 but >4.0:1	1.75%	0.75%	0.375%
4	<4.0:1	1.50%	0.50%	0.250%

Any increase or decrease in the Applicable Rate resulting from a change in the Total Leverage Ratio shall become effective as of the first Business Day immediately following the date a Compliance Certificate (together with the related financial statements) is delivered pursuant to Section 6.02(b); provided that, at the option of the Administrative Agent or the Required Lenders, (x) the highest Pricing Level shall apply as of the third Business Day after the date on which a Compliance Certificate (together with the related financial statements) was required to have been delivered but was not delivered, and shall continue to so apply to and including the date on which such Compliance Certificate (together with the related financial statements) is so delivered (and thereafter the Pricing Level otherwise determined in accordance with this definition shall apply) and (y) the next-higher Pricing Level to the Pricing Level then in effect shall apply as of the first Business Day after an Event of Default under Section 8.01(a) shall have occurred and be continuing, and shall continue to so apply to but excluding the date on which such Event of Default is cured or waived (and thereafter the Pricing Level otherwise determined in accordance with this definition shall apply).

“Appropriate Lender” means, at any time, (a) with respect to Loans of any Class, the Lenders of such Class, (b) with respect to Letters of Credit, the relevant L/C Issuers and the Revolving Credit Lenders and (c) with respect to the Swing Line Facility, the Swing Line Lender and the Revolving Credit Lenders.

“Approved Bank” has the meaning specified in clause (c) of the definition of “Cash Equivalents”.

“Approved Fund” means any Fund that is administered, advised or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers, advises or manages a Lender.

“Arrangers” means J.P. Morgan Securities Inc., Citigroup Global Markets Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated and RBS Securities Corporation, each in its capacity as a Joint Bookrunner and a Co-Lead Arranger under this Agreement.

“Assignees” has the meaning specified in Section 10.07(b).

“Assignment and Assumption” means an Assignment and Assumption substantially in the form of Exhibit E.

“Attorney Costs” means and includes all reasonable fees, expenses and disbursements of any law firm or other external legal counsel.

“Attributable Indebtedness” means, on any date, in respect of any Capitalized Lease of any Person, the capitalized amount thereof that would appear on a balance sheet of such Person prepared as of such date in accordance with GAAP.

4

“Audited Financial Statements” means (a) the audited consolidated balance sheets of Reader’s Digest and its Subsidiaries as of each of June 30, 2004, June 30, 2005 and June 30, 2006, and the related audited consolidated statements of income, stockholders’ equity and cash flows for Reader’s Digest and its Subsidiaries for the periods ended on such dates, (b) the audited consolidated balance sheets of WRC Media and its Subsidiaries as of each of December 31, 2004, December 31, 2005 and December 31, 2006, and the related audited consolidated statements of income, stockholders’ equity and cash flows for WRC Media and its Subsidiaries for the periods ended on such dates, and (c) the audited consolidated balance sheets of Direct Holdings and its Subsidiaries as of each of June 26, 2004, June 25, 2005 and June 24, 2006, and the related audited consolidated statements of income, stockholders’ equity and cash flows for Direct Holdings and its Subsidiaries for the periods ended on such dates.

“Australian Dollars” means the lawful currency of Australia.

“Auto-Renewal Letter of Credit” has the meaning specified in Section 2.03(b)(iii).

“Base Rate” means for any day a fluctuating rate per annum equal to the higher of (a) the Federal Funds Rate plus 1/2 of 1% and (b) the rate of interest in effect for such day as publicly announced from time to time by JPMorgan Chase Bank as its “prime rate.”  The “prime rate” is a rate set by JPMorgan Chase Bank based upon various factors including JPMorgan Chase Bank costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such announced rate.  Any change in such rate announced by JPMorgan Chase Bank shall take effect at the opening of business on the day specified in the public announcement of such change.

“Base Rate Loan” means a Loan that bears interest based on the Base Rate.

“Board” means the Board of Governors of the Federal Reserve System of the United States (or any successor).

“Borrowers” means the Company, the German Borrower and the other Overseas Borrowers.

“Borrowing” means a Revolving Credit Borrowing, a Swing Line Borrowing, or a Term Borrowing, as the context may require.

“Business Day” means any day other than a Saturday, Sunday or other day on which commercial banks are authorized to close under the Laws of, or are in fact closed in, the state where the Administrative Agent’s Office is located or in The City of New York; provided, that (a) when used in connection with a Eurocurrency Rate Loan denominated in a currency other than Euro, the term “Business Day” shall also exclude any day on which banks are not open for dealings in deposits in the applicable currency in the London interbank market, (b) when used in connection with a Eurocurrency Rate Loan denominated in Euro, the term “Business Day” shall also exclude any day which is not a TARGET Day, (c) when used in connection with any Loan denominated in Canadian Dollars, the term “Business Day” shall also exclude any day on which banks are not open for dealings in deposits in Toronto but shall include any day on which banks are open for dealings in deposits in Toronto, (d) when used in connection with any Loan denominated in Sterling, the term “Business Day” shall also exclude any day on which banks are not open for dealings in deposits in Sterling in London but shall include any day on which banks are open for dealings in deposits in Sterling in London, and (e) when used in connection with any

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Loan denominated in Australian Dollars, the term “Business Day” shall also exclude any day on which banks are not open for dealings in deposits in Sydney but shall include any day on which banks are open for dealings in deposits in Sydney.

“CAM” means the mechanism for the allocation and exchange of interests in Loans and other Credit Extensions under this Agreement and collections thereunder established in Section 8.06.

“CAM Exchange” means the exchange of the Lenders’ interests provided for in Section 8.06.

“CAM Exchange Date” means the date on which any Event of Default referred to in Section 8.01(f) shall occur or the date on which the Company receives written notice from the Administrative Agent that any Event of Default referred to in Section 8.01(g) has occurred.

“CAM Percentage” means, as to each Lender, a fraction, expressed as a decimal, of which (a) the numerator shall be the aggregate Dollar Amount of the Designated Obligations owed to such Lender (whether or not at the time due and payable) immediately prior to the CAM Exchange Date and (b) the denominator shall be the aggregate Dollar Amount of the Designated Obligations owed to all the Lenders (whether or not at the time due and payable) immediately prior to the CAM Exchange Date.

“Canadian Dollars” means the lawful currency of Canada.

“Capital Expenditures” means, for any period, the additions to property, plant and equipment and other capital expenditures of the Company and its consolidated Subsidiaries that are (or are required to be) set forth in a consolidated statement of cash flows of the Company for such period prepared in accordance with GAAP; provided that the term “Capital Expenditures” shall not include, without duplication, (i) subject to the terms of Section 2.05(b)(ii)(B), expenditures of Net Cash Proceeds arising from any Casualty Event or any Disposition of any property or asset of the Company or any Restricted Subsidiary (other than any Disposition permitted by Section 7.05(b) (to the extent constituting a Disposition of inventory in the ordinary course of business), (d), (e), (f), (g) or (h)), (ii) the purchase price of equipment that is purchased during such period to the extent the consideration therefore consists of (x) existing equipment traded in at the time of such purchase or (y) the proceeds of a concurrent sale of existing equipment, in each case in the ordinary course of business, (iii) expenditures that are accounted for as capital expenditures by the Company or any Restricted Subsidiary and that actually are paid for by a Person other than the Company or any Restricted Subsidiary and for which neither the Company nor any Restricted Subsidiary has provided or is required to provide or incur, directly or indirectly, any consideration or obligation to such Person or any other Person (whether before, during or after such period), (iv) interest capitalized during such period, (v) additions resulting from Permitted Acquisitions, (vi) the book value of any asset owned by the Company or any Restricted Subsidiary prior to or during such period to the extent that such book value is included as a capital expenditure during such period as a result of such Person reusing or beginning to reuse such asset during such period without a corresponding expenditure actually having been made in such period; provided that (x) any expenditure necessary in order to permit such asset to be reused shall be included as a Capital Expenditure during the period that such expenditure actually is made and (y) such book value shall have been included in Capital Expenditures when such asset was originally acquired, or (vii) expenditures required to comply with special legal requirements, including, but not limited to, changes in Environmental Laws.

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“Capitalized Leases” means all leases that are required to be, in accordance with GAAP, recorded as capitalized leases; provided that for all purposes hereunder the amount of obligations under any Capitalized Lease shall be the Attributable Indebtedness in respect thereof.

“Cash Collateral” has the meaning specified in Section 2.03(g).

“Cash Collateral Account” means a blocked account at JPMorgan Chase Bank (or another commercial bank selected in compliance with Section 9.09) in the name of the Administrative Agent and under the sole dominion and control of the Administrative Agent, and otherwise established in a manner satisfactory to the Administrative Agent.

“Cash Collateralize” has the meaning specified in Section 2.03(g).

“Cash Equivalents” means any of the following types of Investments, to the extent owned by the Company or any Restricted Subsidiary:

(a)  Dollars, Euros or other Alternative Currency or, in the case of any Foreign Subsidiary, such local currencies held by it from time to time in the ordinary course of business;

(b)  marketable obligations issued or directly and fully guaranteed or insured by the government or any agency or instrumentality of (i) the United States or (ii) any member nation of the European Union, having average maturities of not more than 12 months from the date of acquisition thereof; provided that the full faith and credit of the United States or a member nation of the European Union is pledged in support thereof;

(c)  time deposits with, or certificates of deposit, overnight bank deposits or bankers’ acceptances issued or guaranteed by, or money market deposit accounts issued or offered by, any commercial bank that (i) is a Lender or (ii) (A) is organized under the Laws of the United States, any state thereof, the District of Columbia or any member nation of the Organization for Economic Cooperation and Development or is the principal banking Subsidiary of a bank holding company organized under the Laws of the United States, any state thereof, the District of Columbia or any member nation of the Organization for Economic Cooperation and Development, and is a member of the Federal Reserve System, and (B) has combined capital and surplus of at least $250,000,000 (any such bank in the foregoing clauses (i) or (ii) being an “Approved Bank”), in each case with average maturities of not more than 12 months from the date of acquisition thereof;

(d)  commercial paper and variable or fixed rate notes issued by an Approved Bank (or by the parent company thereof) or any commercial paper or any variable or fixed rate note issued by, or guaranteed by, a corporation rated A-2 (or the equivalent thereof) or better by S&P or P-2 (or the equivalent thereof) or better by Moody’s, in each case with average maturities of not more than 12 months from the date of acquisition thereof;

(e)  fully collateralized repurchase agreements entered into by any Person with a bank or trust company (including any of the Lenders) or recognized securities dealer, in each case, having capital and surplus in excess of $250,000,000 for direct obligations issued by or fully guaranteed or insured by the government or any agency or instrumentality of (i) the United States or (ii) any member nation of the European Union;

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(f)  securities with average maturities of 12 months or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States, by any political subdivision or taxing authority of any such state, commonwealth or territory or by any foreign government having an investment grade rating from either S&P or Moody’s (or the equivalent thereof);

(g)  Investments with average maturities of 12 months or less from the date of acquisition in money market funds rated AAA- (or the equivalent thereof) or better by S&P or Aaa3 (or the equivalent thereof) or better by Moody’s;

(h)  instruments equivalent to those referred to in clauses (a) through (g) above denominated in Euros or other Alternative Currency or any other foreign currency comparable in credit quality and tenor to those referred to above and customarily used by corporations for cash management purposes in any jurisdiction outside the United States to the extent reasonably required in connection with any business conducted by any Restricted Subsidiary organized in such jurisdiction; and

(i)  Investments in money market investment or similar programs which are registered under the Investment Company Act of 1940 or which are administered by financial institutions having capital of at least $250,000,000, and, in either case, the portfolios of which are limited such that substantially all of such investments are of the character, quality and maturity described in clauses (a) through (h) of this definition.

“Cash Management Obligations” means obligations owed by Holdings, the Company or any Restricted Subsidiary to any Lender or any Affiliate of a Lender in respect of any overdraft and related liabilities arising from treasury, depository and cash management services or any automated clearing house transfers of funds.

“Casualty Event” means any event that gives rise to the receipt by Holdings, the Company or any Restricted Subsidiary of any insurance proceeds or condemnation awards in respect of any equipment, fixed assets or real property (including any improvements thereon) to replace or repair such equipment, fixed assets or real property.

“CERCLA” means the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as subsequently amended.

“CERCLIS” means the Comprehensive Environmental Response, Compensation, and Liability Information System maintained by the U.S. Environmental Protection Agency.

“Change of Control” means the earliest to occur of (a) the Permitted Holders ceasing to have the power, directly or indirectly, to vote or direct the voting of securities having a majority of the ordinary voting power for the election of directors of Holdings; provided that the occurrence of the foregoing event shall not be deemed a Change of Control if,

(i)  at any time prior to the consummation of a Qualifying IPO, and for any reason whatsoever, (A) the Permitted Holders otherwise have the right, directly or indirectly, to designate (and do so designate) a majority of the board of directors of Holdings or (B) the Permitted Holders own, directly or indirectly, of record and beneficially an amount of common stock of Holdings equal to an amount more than fifty percent (50%) of the amount of common stock of

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Holdings owned, directly or indirectly, by the Permitted Holders of record and beneficially as of the Closing Date and such ownership by the Permitted Holders represents the largest single block of voting securities of Holdings held by any Person or related group for purposes of Section 13(d) of the Exchange Act; or

(ii)  at any time after the consummation of a Qualifying IPO, and for any reason whatsoever, (A) no “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act, but excluding any employee benefit plan of such person and its Subsidiaries, and any person or entity acting in its capacity as trustee, agent or other fiduciary or administrator of any such plan), excluding the Permitted Holders, shall become the “beneficial owner” (as defined in Rules 13(d)-3 and 13(d)-5 under such Act), directly or indirectly, of more than the greater of (x) thirty-five percent (35%) of the then outstanding voting stock of Holdings (or voting power related thereto) and (y) the percentage of the then outstanding voting stock of Holdings owned, directly or indirectly, beneficially by the Permitted Holders, and (B) during each period of twelve (12) consecutive months, the board of directors of Holdings shall consist of a majority of the Continuing Directors; or

(b)  any “Change of Control” (or any comparable term) in the Senior Subordinated Note Indenture or in any document pertaining to the Holdings PIK Preferred; or

(c)  Holdings ceasing to own, directly or indirectly, all of the outstanding Equity Interests in the Company other than the Company Preferred Stock.

“Charges” has the meaning specified in Section 10.10.

“Class” (a) when used with respect to Lenders, refers to whether such Lenders are Revolving Credit Lenders, U.S. Term Lenders or Euro Term Lenders, (b) when used with respect to Commitments, refers to whether such Commitments are Revolving Credit Commitments, U.S. Term Commitments or Euro Term Commitments and (c) when used with respect to Loans or a Borrowing, refers to whether such Loans, or the Loans comprising such Borrowing, are Revolving Credit Loans, U.S. Term Loans or Euro Term Loans.

“Closing Date” means the first date all the conditions precedent in Section 4.01 are satisfied or waived in accordance with Section 4.01.

“Code” means the U.S. Internal Revenue Code of 1986 and rules and regulations related thereto.

“Collateral” means all the “Collateral” as defined in any Collateral Document and shall include the Mortgaged Properties.

“Collateral and Guarantee Requirement” means, at any time, the requirement that:

(a)  the Administrative Agent shall have received each Collateral Document required to be delivered on the Closing Date pursuant to Section 4.01(a)(iii) or pursuant to Section 6.10 at such time, duly executed by each Loan Party thereto;

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(b)  all Obligations shall have been unconditionally guaranteed (the “U.S. Guarantees”) by Holdings, the Company (in the case of Obligations of the Overseas Borrowers) and each Restricted Subsidiary that is a Domestic Subsidiary and not an Excluded Subsidiary and each other Restricted Subsidiary that executes a Security Agreement Supplement (each, a “U.S. Guarantor”);

(c)  except as set forth in Section 6.17, all Obligations, if any, of each Overseas Borrower (the “Overseas Obligations”) shall have been unconditionally guaranteed (the “Overseas Guarantees” and, together with the U.S. Guarantees, the “Guarantees”) by each Restricted Subsidiary of such Overseas Borrower, in each case that is not an Excluded Subsidiary (other than pursuant to clause (d) of the definition thereof) (each, an “Overseas Guarantor” and, together with the U.S. Guarantors, the “Guarantors”) prior to, or concurrently with, the funding of any Loans to any Overseas Borrower, except in each case to the extent such Overseas Guarantee (A) is prohibited or limited by applicable Law, including financial assistance rules, (B) would result in material adverse tax consequences to Holdings and its Subsidiaries, (C) would conflict with the fiduciary duties of directors of any Subsidiary or (D) could reasonably be expected to result in personal or criminal liability of any director of any Subsidiary;

(d)  except as set forth in Section 6.17, the Obligations and the U.S. Guarantees shall have been secured by a security interest in (i) all the Equity Interests of the Company (other than the Company Preferred Stock) and (ii) all Equity Interests (other than Equity Interests of Unrestricted Subsidiaries, any Equity Interest of any Restricted Subsidiary pledged to secure Indebtedness permitted under Section 7.03(g) and any Equity Interest constituting Excluded Property (as defined in the Guarantee and Security Agreement)) of each Subsidiary of the Company directly owned by the Company or any U.S. Guarantor, in each case having the priority required by the Collateral Documents; provided that pledges of voting Equity Interests of each Foreign Subsidiary, and of each Domestic Subsidiary substantially all of whose assets consist of voting Equity Interests of one or more Foreign Subsidiaries, shall be limited to 65% of the issued and outstanding voting Equity Interests of such Subsidiary at any time;

(e)  except as set forth in Section 6.17, all Overseas Obligations and the related Overseas Guarantees shall have been secured by a security interest in all Equity Interests of the relevant Overseas Borrower and each applicable Overseas Guarantor (to the extent not so pledged pursuant to the preceding clause (d)) in each case having the priority required by the Collateral Documents;

(f)  except to the extent otherwise permitted hereunder or under any Collateral Document, (i) to the extent governed by the Uniform Commercial Code, the execution of the Collateral Documents shall be effective to create a security interest in all Collateral described therein and proceeds thereof, in each case, to the extent constituting Collateral and with the priority required by the Collateral Documents, (ii) except as set forth in Section 6.17, all Overseas Obligations and the related Overseas Guarantees shall have been secured by a security interest, and mortgages on, substantially all material owned tangible and intangible assets of the relevant Overseas Borrower and each applicable Overseas Guarantor, in each case (x) with the priority required by the Collateral Documents, (y) except to the extent the granting of such security interests or mortgages (A) is prohibited or limited by applicable Law, including financial assistance rules, (B) would result in material adverse tax consequences to Holdings and its Subsidiaries, (C) would conflict with the fiduciary duties of directors of any Subsidiary or (D) could

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reasonably be expected to result in personal or criminal liability of any director of any Subsidiary, and (z) subject to exceptions and limitations consistent with those set forth in the Collateral Documents as in effect on the Closing Date (to the extent appropriate in the applicable jurisdiction), and (iii) except as set forth in Section 6.17, all documents and instruments, including Uniform Commercial Code financing statements and filings made in respect of Intellectual Property constituting Collateral in the United States Patent and Trademark Office and the United States Copyright Office, reasonably requested by the Administrative Agent to be filed, registered or recorded to create the Liens intended to be created by the Collateral Documents and to perfect such Liens to the extent required by, and with the priority required by, the Collateral Documents, shall have been filed, registered or recorded or delivered to the Administrative Agent for filing, registration or recording;

(g)  none of the Collateral shall be subject to any Liens other than Liens permitted by Section 7.01; and

(h)  the Administrative Agent shall have received (i) counterparts of a Mortgage with respect to any Material Real Property described on Schedule 1.01B hereto or required to be delivered pursuant to Section 6.10 or 6.12 (the “Mortgaged Properties”) duly executed and delivered by the record owner of such property, (ii) a policy or policies of title insurance issued by a nationally recognized title insurance company insuring the Lien of each such Mortgage as a valid Lien on the property described therein, free of any other Liens except as expressly permitted by Section 7.01, together with such endorsements, coinsurance and reinsurance as the Administrative Agent may reasonably request, and (iii) such surveys, abstracts, appraisals, legal opinions and other documents (which, in the case of surveys, abstracts and appraisals, shall be limited to those existing as of the Closing Date or the date of the relevant acquisition) as the Administrative Agent may reasonably request with respect to any such Mortgaged Property.

The foregoing definition shall not require the creation or perfection of pledges of or security interests in, or the obtaining of title insurance or surveys with respect to, particular assets if and for so long as, in the reasonable judgment of the Administrative Agent and the Company, the economic detriment to the Loan Parties of granting or perfecting such pledges or security interests or the cost of creating or perfecting such pledges or security interests in such assets or obtaining title insurance or surveys in respect of such assets shall be excessive in view of the benefits to be obtained by the Lenders therefrom.  The Administrative Agent may grant extensions of time for the perfection of security interests in or the obtaining of title insurance with respect to particular assets (including extensions beyond the Closing Date for the perfection of security interests in the assets of the Loan Parties on such date) where it reasonably determines, in consultation with the Company, that perfection cannot be accomplished without undue effort or expense by the time or times at which it would otherwise be required by this Agreement or the Collateral Documents.

Notwithstanding the foregoing provisions of this definition or anything in this Agreement or any other Loan Document to the contrary, Liens required to be granted from time to time pursuant to the Collateral and Guarantee Requirement shall be subject to exceptions and limitations set forth in the Collateral Documents as in effect on the Closing Date and, to the extent appropriate in the applicable jurisdiction, as agreed between the Administrative Agent and the Company.

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“Collateral Documents” means, collectively, the Guarantee and Security Agreement, the Mortgages, Security Agreement Supplements, security agreements, pledge agreements or other similar agreements delivered to the Administrative Agent and the Lenders pursuant to Section 6.10 or Section 6.12 and each of the other agreements, instruments or documents that creates or purports to create a Lien or Guarantee in favor of the Administrative Agent for the benefit of the Secured Parties.

“Commitment” means a U.S. Term Commitment, a Euro Term Commitment or a Revolving Credit Commitment, as the context may require.

“Committed Loan Notice” means a notice of (a) a Term Borrowing, (b) a Revolving Credit Borrowing, (c) a conversion of Loans from one Type to the other, or (d) a continuation of Eurocurrency Rate Loans, pursuant to Section 2.02(a), which, if in writing, shall be substantially in the form of Exhibit A.

“Company” has the meaning specified in the introductory paragraph to this Agreement and includes the surviving company of the merger between Acquisition Co and Reader’s Digest to be consummated on the Closing Date.

“Company Preferred Stock” means the existing series of Preferred Stock, Second Preferred Stock and Third Subordinated Preferred Stock of Reader’s Digest; provided that the aggregate liquidation preference thereof shall not exceed $29,000,000.

“Compensation Period” has the meaning specified in Section 2.12(c)(ii).

“Compliance Certificate” means a certificate substantially in the form of Exhibit D.

“Confidential Information Memorandum” means the Confidential Information Memorandum dated February 2007, as modified or supplemented prior to the Closing Date.

“Consent Solicitation” means a consent solicitation with respect to the Existing Notes.

“Consolidated EBITDA” means, for any period, the Consolidated Net Income for such period, plus:

(a)  without duplication and to the extent already deducted (and not added back) in arriving at such Consolidated Net Income, the sum of the following amounts for such period:

(i)  total interest expense and, to the extent not reflected in such total interest expense, any losses on hedging obligations or other derivative instruments entered into for the purpose of hedging interest rate risk, net of interest income and gains on such hedging obligations, and costs of surety bonds in connection with financing activities,

(ii)  taxes and provision for taxes, including taxes based on income, profits or capital of the Company and the Restricted Subsidiaries and state, franchise and similar taxes and foreign withholding taxes paid or accrued during such period,

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(iii)  depreciation and amortization,

(iv)  Non-Cash Charges,

(v)  extraordinary losses and unusual or non-recurring charges,

(vi)  the amount of any restructuring, transition and management charges accrued during such period, including any charges to establish accruals and reserves or to make payments associated with the reassessment or realignment of the business and operations of the Company and its Subsidiaries, including, without limitation, the sale or closing of facilities, severance, stay bonuses and curtailments or modifications to pension and post-retirement employee benefit plans, asset writedowns or asset disposals (including leased facilities), writedowns for purchase and lease commitments, start up costs for new facilities, writedowns of excess, obsolete or unbalanced inventories, relocation costs, including costs of moving and relocating personnel, equipment, facilities, personal property and inventory, which are not otherwise capitalized and any related promotional costs of exiting products or product lines,

(vii) any deductions consisting of subsidiary income attributable to minority interests in a Subsidiary, except to the extent actually paid to a holder of Equity Interests in such Subsidiary (or any designee of such Person) other than the Company and its Subsidiaries (with such payments to be deducted in the period made),

(viii)  the amount of management, consulting and advisory fees and related expenses paid by Holdings, the Company or any Restricted Subsidiary to the Sponsors to the extent permitted hereunder,

(ix)  any costs or expenses incurred by the Company or a Restricted Subsidiary pursuant to any management equity plan or stock option plan or any other management or employee benefit plan or agreement or any stock subscription or shareholder agreement, to the extent that such costs or expenses are funded with cash proceeds contributed to the capital of Holdings or net cash proceeds of an issuance of Equity Interests of Holdings (other than Disqualified Equity Interests) Not Otherwise Applied,

(x)  to the extent actually reimbursed, expenses incurred to the extent covered by indemnification provisions in any agreement in connection with a Permitted Acquisition,

(xi)  expenses resulting from liability or casualty events,

(xii)  the amount of net cost savings projected by the Company in good faith to be realized as a result of specified actions taken during such period (calculated on a pro forma basis as though such cost savings had been realized on the first day of such period), net of the amount of actual benefits realized during such period from such actions; provided that (A) such cost savings are reasonably identifiable and factually supportable (in the reasonable good faith determination of the Company), (B) such actions are taken within 36 months after the Closing Date or within 24 months after the closing date of a Permitted Acquisition, as the

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case may be, (C) no cost savings shall be added pursuant to this clause (xii) to the extent duplicative of any expenses or charges relating to such cost savings that are included in clause (vi) above with respect to such period and (D) the aggregate amount of cost savings added pursuant to this clause (xii) shall not exceed $105,000,000 (for any such cost savings related to the Acquisitions in the aggregate) or $75,000,000 (for any such cost savings related to other specified actions in the aggregate) for any period consisting of four consecutive quarters,

(xiii)  Permitted Holdings Distributions not to exceed $12,500,000 in any fiscal year plus any reasonable indemnification claims made by directors or officers of Holdings (or any parent thereof) attributable to the ownership or operations of the Company and its Subsidiaries,

(xiv)  with regard to any period ending prior to July 1, 2008, the nonrecurring management adjustments during the four-quarter period ending on the last day of such period described in Schedule 1.01C to the extent occurring during such period, and

(xv)  non-cash charges pursuant to SFAS 158, less

(b)  without duplication and to the extent included in arriving at such Consolidated Net Income, the sum of the following amounts for such period:

(i)  extraordinary gains and unusual or non-recurring gains,

(ii)  non-cash gains (excluding any non-cash gain to the extent it represents the reversal of an accrual or reserve for a potential cash item that reduced Consolidated EBITDA in any prior period),

(iii)  gains on asset sales (other than asset sales in the ordinary course of business),

(iv)  any net after-tax income from the early extinguishment of Indebtedness or hedging obligations or other derivative instruments, and

(v)  all gains from sales of investments recorded using the equity method,

in each case, as determined on a consolidated basis for the Company and the Restricted Subsidiaries in accordance with GAAP; provided that, to the extent included in Consolidated Net Income,

(i)  there shall be excluded in determining Consolidated EBITDA currency translation gains and losses related to currency remeasurements of Indebtedness (including the net loss or gain resulting from Swap Contracts for currency exchange risk),

(ii)  there shall be excluded in determining Consolidated EBITDA for any period any adjustments resulting from the application of Statement of Financial Accounting Standards No. 133, and

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(iii)  for purposes of determining the Total Leverage Ratio only, (A) there shall be included in determining Consolidated EBITDA for any period, without duplication, the Acquired EBITDA of any Person, property, business or asset acquired by the Company or any Restricted Subsidiary during such period (but not the Acquired EBITDA of any related Person, property, business or assets to the extent not so acquired), to the extent not subsequently sold, transferred or otherwise disposed by the Company or such Restricted Subsidiary (each such Person, property, business or asset acquired and not subsequently so disposed of, an “Acquired Entity or Business”), based on the actual Acquired EBITDA of such Acquired Entity or Business for such period (including the portion thereof occurring prior to such acquisition), (B) there shall be included in determining Consolidated EBITDA for any period, without duplication, an adjustment in respect of each Acquired Entity or Business equal to the amount of the Pro Forma Adjustment with respect to such Acquired Entity or Business for such period (including the portion thereof occurring prior to such acquisition) as reasonably determined by the Company in good faith and specified in a certificate executed by a Responsible Officer and delivered to the Administrative Agent, and (C) there shall be excluded in determining Consolidated EBITDA for any period the Disposed EBITDA of any Person, property, business or asset sold, transferred or otherwise disposed of, closed or classified as discontinued operations by the Company or any Restricted Subsidiary during such period (each such Person, property, business or asset so sold or disposed of, a “Sold Entity or Business”), based on the actual Disposed EBITDA of such Sold Entity or Business for such period (including the portion thereof occurring prior to such sale, transfer or disposition).

For the purpose of the definition of Consolidated EBITDA, “Non-Cash Charges” means (a) non-cash losses on asset sales, disposals or abandonments (other than of current assets), (b) any impairment charge or asset write-off related to intangible assets, long-lived assets, and investments in debt and equity securities pursuant to GAAP, (c) all losses from investments recorded using the equity method, (d) stock-based awards compensation expense, and (e) other non-cash charges (provided that if any non-cash charges referred to in this clause (e) represent an accrual or reserve for potential cash items in any future period, the cash payment in respect thereof in such future period shall be subtracted from Consolidated EBITDA in such future period to such extent, and excluding non-cash charges consisting of amortization of a prepaid cash item that was paid in a prior period).  Notwithstanding the foregoing, Consolidated EBITDA for the fiscal quarters ending March 31, 2006, June 30, 2006, September 30, 2006, December 31, 2006 and March 31, 2007 shall be deemed to be $38,000,000, $78,000,000, $0, $154,000,000 and $50,000,000, respectively.

“Consolidated Net Income” means, for any period, the net income (loss) of the Company and the Restricted Subsidiaries for such period determined on a consolidated basis in accordance with GAAP, excluding, without duplication, (a) extraordinary items for such period, (b) the cumulative effect of a change in accounting principles during such period to the extent included in Consolidated Net Income, (c) any Transaction Expenses, (d) any fees and expenses incurred during such period, or any amortization thereof for such period, in connection with the consummation of any Permitted Acquisition, investment, asset disposition, issuance or repayment of debt, issuance of equity securities, refinancing transaction or amendment or other modification of any debt instrument (in each case, including any such transaction consummated prior to the Closing Date and any such transaction undertaken but not completed) and any charges or non-recurring merger costs incurred during such period as a result of any such transaction, (e) any

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income (loss) for such period attributable to the early extinguishment of Indebtedness, (f) accruals and reserves that are established within twelve months after the Closing Date that are so required to be established as a result of the Transaction in accordance with GAAP, (g) the income (loss) of any Unrestricted Subsidiary, provided that Consolidated Net Income shall be increased by the amount of dividends or other distributions actually paid or made to the Company or one of the Restricted Subsidiaries by such Unrestricted Subsidiary during such period in respect of the income earned by such Unrestricted Subsidiary in such period or in any prior period (to the extent not previously included in Consolidated Net Income), (h) the income (or deficit) of any Person accrued prior to the date it becomes a Subsidiary of Holdings or is merged into or consolidated with Holdings or any of its Subsidiaries and (i) the income (or deficit) of any Person (other than a Subsidiary of the Company) in which the Company or any of its Subsidiaries has an ownership interest, except to the extent that any such income is actually received by (or such deficit is actually distributed to) the Company or such Subsidiary in the form of dividends or similar distributions.  There shall be excluded from Consolidated Net Income (i) for any period, at the option of the Company or the Required Lenders (without prejudice to the application of the proviso set forth in the definition of “GAAP”), the effects of any change by the Company in its accounting policies, accounting treatment for any matter or application of GAAP, (ii) for any period, the purchase accounting effects of adjustments to property, inventory and equipment, pension and post-retirement employee benefit plan (including health plan) assets and liabilities, software and other intangible assets and deferred revenue and deferred expenses in component amounts required or permitted by GAAP and related authoritativepronouncements (including the effects of such adjustments pushed down to Holdings, the Company and the Restricted Subsidiaries), as a result of the Transaction, any acquisition consummated prior to the Closing Date, any Permitted Acquisitions, or the amortization or write-off of any amounts thereof, (iii) for any period, any gains or losses resulting from any reappraisal, revaluation or write-up or write-down of assets acquired pursuant to the Acquisitions to the extent such reappraisal, revaluation, write-up or write-down is made during the period beginning on the Closing Date and ending on the date 18 months after the Closing Date, and (iv) for any period, any gains or losses resulting from any reappraisal, revaluation or write-up or write-down of assets acquired pursuant to a Permitted Acquisition to the extent such reappraisal, revaluation, write-up or write-down is made during the period beginning on the date that such Permitted Acquisition is consummated and ending on the date six months after such date.

“Consolidated Total Debt” means, as of any date of determination, the aggregate principal amount of Indebtedness of the Company and the Restricted Subsidiaries outstanding on such date, determined on a consolidated basis in accordance with GAAP (but excluding the effects of any discounting of Indebtedness resulting from the application of purchase accounting in connection with the Transaction or any Permitted Acquisition), required to be reflected as “indebtedness” (or the equivalent thereof) on a consolidated balance sheet of the Company in accordance with GAAP (other than Indebtedness described in clause (b) (other than in respect of drawings thereunder to the extent not reimbursed within two Business Days after the date of such drawing) or (c) of the definition of Indebtedness).

“Consolidated Working Capital” means, at any date, the excess of (a) the sum of all amounts (other than cash and Cash Equivalents) that would, in conformity with GAAP, be set forth opposite the caption “total current assets” (or any like caption) on a consolidated balance sheet of the Company and the Restricted Subsidiaries at such date, but excluding the current portion of current and deferred income tax assets, over (b) the sum of all amounts that would, in conformity with GAAP, be set forth opposite the caption “total current liabilities” (or any like caption) on a consolidated balance sheet of the Company and the Restricted Subsidiaries on such date, excluding, without duplication, (i) the current portion of any Funded Debt, (ii) all

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Indebtedness consisting of Loans and L/C Obligations to the extent otherwise included therein, (iii) the current portion of interest, (iv) the current portion of current and deferred income taxes and (v) the current portion of deferred revenue.  There shall also be excluded from Consolidated Working Capital to the extent otherwise included therein (i) at the option of the Company or the Required Lenders (without prejudice to the application of the proviso set forth in the definition of “GAAP”), the effects of any change by the Company in its accounting policies, accounting treatment for any matter or application of GAAP, (ii) the purchase accounting effects of adjustments to property, inventory and equipment, pension and post-retirement employee benefit plan (including health plan) assets and liabilities, software and other intangible assets and deferred revenue and deferred expenses in component amounts required or permitted by GAAP and related authoritative pronouncements (including the effects of such adjustments pushed down to Holdings, the Company and the Restricted Subsidiaries), as a result of the Transaction, any acquisition consummated prior to the Closing Date, any Permitted Acquisitions, or the amortization or write-off of any amounts thereof, (iii) for any period, any gains or losses resulting from any reappraisal, revaluation or write-up or write-down of assets acquired pursuant to the Acquisitions to the extent such reappraisal, revaluation, write-up or write-down is made during the period beginning on the Closing Date and ending on the date 18 months after the Closing Date, and (iv) for any period, any gains or losses resulting from any reappraisal, revaluation or write-up or write-down of assets acquired pursuant to a Permitted Acquisition to the extent such reappraisal, revaluation, write-up or write-down is made during the period beginning on the date that such Permitted Acquisition is consummated and ending on the date six months after such date.

“Continuing Agreement” means the Continuing Agreement substantially in the form of Exhibit K.

“Continuing Directors” means the directors of Holdings on the Closing Date, as elected or appointed after giving effect to the Acquisitions and the other transactions contemplated hereby, and each other director, if, in each case, such other directors’ nomination for election to the board of directors of Holdings is recommended by a majority of the then Continuing Directors or such other director receives the vote of the Permitted Holders in his or her election by the stockholders of Holdings.

“Contract Consideration” has the meaning set forth in the definition of “Excess Cash Flow”.

“Contractual Obligation” means, as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound.

“Control” has the meaning specified in the definition of “Affiliate.”

“Co-Syndication Agents” means Citicorp North America, Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as Co-Syndication Agents under this Agreement.

“Credit Extension” means each of the following:  (a) a Borrowing and (b) an L/C Credit Extension.

“Cumulative Excess Cash Flow” means the sum of Excess Cash Flow (but not less than zero in any period) for the fiscal year ending on June 30, 2008 and Excess Cash Flow for each succeeding and completed fiscal year.

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“Cure Amount” has the meaning specified in Section 8.05.

“Cure Period” has the meaning specified in Section 8.05.

“Debt Issuance” means the issuance by any Person and its Subsidiaries of any Indebtedness for borrowed money.

“Debtor Relief Laws” means the Bankruptcy Code of the United States, and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief Laws of the United States or other applicable jurisdictions from time to time in effect and affecting the rights of creditors generally (including, in the case of Loan Parties incorporated or organized in England or Wales, administration, administrative receivership, voluntary arrangement and schemes of arrangement).

“Decrees” has the meaning specified in Section 10.24.

“Default” means any event or condition that constitutes an Event of Default or that, with the giving of any notice, the passage of time, or both, would be an Event of Default.

“Default Rate” means an interest rate equal to (a) the Base Rate plus (b) the Applicable Rate applicable to Base Rate Loans plus (c) 2.0% per annum; provided that with respect to the principal amount of any Eurocurrency Rate Loan, the Default Rate shall be an interest rate equal to the interest rate (including the Applicable Rate and any Mandatory Cost) otherwise applicable to such Loan plus 2.0% per annum, in each case, to the fullest extent permitted by applicable Laws.

“Defaulting Lender” means any Lender that (a) has failed to fund any portion of the U.S. Term Loans, Euro Term Loans, Revolving Credit Loans, participations in L/C Obligations or participations in Swing Line Loans required to be funded by it hereunder within one (1) Business Day of the date required to be funded by it hereunder, unless subsequently cured, (b) has otherwise failed to pay over to the Administrative Agent or any other Lender any other amount required to be paid by it hereunder within one (1) Business Day of the date when due, unless subsequently cured, or (c) has been deemed insolvent or become the subject of a bankruptcy or insolvency proceeding.

“Defeasance” means a covenant defeasance in respect of the Existing Notes pursuant to Article VIII of the Existing Note Indenture, including the placement of sufficient funds in escrow with the trustee under the Existing Note Indenture and consummation of all other actions necessary to satisfy the provisions of such Article.

“Designated Obligations” means all obligations of the Borrowers with respect to (a) principal of and interest on the Loans, (b) Unreimbursed Amounts and interest thereon and (c) accrued and unpaid fees under the Loan Documents.

“DH Acquisition” has the meaning set forth in the preliminary statements to this Agreement.

“DH Acquisition Agreement” means the Stock Acquisition Agreement, dated as of January 23, 2007, among Direct Holdings U.S. Corp., RDA Holding Co. and each of the members of Direct Holdings Worldwide L.L.C.

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“Direct Holdings” has the meaning set forth in the preliminary statements to this Agreement.

“Disposed EBITDA” means, with respect to any Sold Entity or Business for any period, the amount for such period of Consolidated EBITDA of such Sold Entity or Business (determined as if references to the Company and the Restricted Subsidiaries in the definition of Consolidated EBITDA were references to such Sold Entity or Business and its Subsidiaries), all as determined on a consolidated basis for such Sold Entity or Business.

“Disposition” or “Dispose” means the sale, transfer, license, lease or other disposition (including any sale and leaseback transaction and any sale of Equity Interests held in another Person) of any property by any Person, including any sale, assignment, transfer or other disposal, with or without recourse, of any notes or accounts receivable or any rights and claims associated therewith; provided that “Disposition” and “Dispose” shall not be deemed to include any issuance by a Person of any of its Equity Interests to another Person.

“Disqualified Equity Interests” means any Equity Interest (other than the Company Preferred Stock) which, by its terms (or by the terms of any security or other Equity Interests into which it is convertible or for which it is exchangeable), or upon the happening of any event or condition (a) matures or is mandatorily redeemable (other than solely for Qualified Equity Interests), pursuant to a sinking fund obligation or otherwise (except as a result of a change of control, public equity offering or asset sale so long as any rights of the holders thereof upon the occurrence of a change of control, public equity offering or asset sale event shall be subject to the prior repayment in full of the Loans and all other Obligations that are accrued and payable and the termination of the Commitments and the expiration, cancellation, termination or cash collateralization of any Letters of Credit in accordance with the terms hereof), (b) is redeemable at the option of the holder thereof (other than solely for Qualified Equity Interests), in whole or in part, (c) requires the scheduled payments of dividends in cash, or (d) is or becomes convertible into or exchangeable for Indebtedness or any other Equity Interests that would constitute Disqualified Equity Interests, in each case, prior to the date that is 91 days after the Maturity Date of the Term Loans.

“Documentation Agent” means The Royal Bank of Scotland plc, as Documentation Agent under this Agreement.

“Dollar” and “$” mean lawful money of the United States.

“Dollar Amount” means, at any time:

(a)  with respect to any Loan denominated in Dollars (including, with respect to any Swing Line Loan, any funded participation therein), the principal amount thereof then outstanding (or in which such participation is held);

(b)  with respect to any Alternative Currency Loan, the principal amount thereof then outstanding in the relevant Alternative Currency, converted to Dollars in accordance with Section 1.08.

“Domestic Subsidiary” means any Subsidiary that is organized under the Laws of the United States, any state thereof or the District of Columbia.

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“ECF Percentage” means 50%; provided that with respect to each fiscal year of the Company, the ECF Percentage shall be 25% in respect of such fiscal year if the Total Leverage Ratio as of the last day of such fiscal year is less than or equal to 6.00:1.00 but greater than 5.00:1.00; and provided further that the ECF Percentage shall be 0% in respect of such fiscal year if the Total Leverage Ratio as of the last day of such fiscal year is less than or equal to 5.00:1.00.

“Eligible Assignee” means any Assignee permitted by and consented to in accordance with Section 10.07(b).

“EMU” means the economic and monetary union in accordance with the Treaty of Rome 1957, as amended by the Single European Act 1986, the Maastricht Treaty of 1992 and the Amsterdam Treaty of 1998.

“EMU Legislation” means the legislative measures of the European Council for the introduction of, changeover to or operation of a single or unified European currency.

“Environmental Laws” means any and all Laws relating to pollution, the protection of the environment, natural resources, or, to the extent relating to exposure to Hazardous Materials, human health or to the release of any Hazardous Materials into the environment, including those related to air emissions and discharges to public water or waste treatment systems.

“Environmental Liability” means any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of the Company, any other Loan Party or any of their respective Subsidiaries directly or indirectly resulting from or based upon (a) violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or threatened release of any Hazardous Materials into the environment or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.

“Environmental Permit” means any permit, approval, identification number, license or other authorization required under any Environmental Law.

“Equity Contribution” shall mean the sum of (a) the Sponsor Equity Contributions, (b) the gross proceeds of the issuance on or prior to the Closing Date of the Holdings Senior PIK Preferred and (c) the gross proceeds of the issuance on or prior to the Closing Date of the Holdings Common Equity.

“Equity Interests” means, with respect to any Person, all of the shares, interests, rights, participations or other equivalents (however designated) of capital stock of (or other ownership or profit interests or units in) such Person and all of the warrants, options or other rights for the purchase, acquisition or exchange from such Person of any of the foregoing (including through convertible securities).

“Equity Investors” means the Sponsors, J. Rothschild Group Ltd., Goldentree Asset Management, LP, GSO Capital Partners LP, Merrill Lynch Capital Corporation, Magnetar Financial LLC and the Management Stockholders.

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“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time.

“ERISA Affiliate” means any trade or business (whether or not incorporated) that is under common control with any Loan Party within the meaning of Section 414 of the Code or Section 4001 of ERISA.

“ERISA Event” means (a) a Reportable Event with respect to a Pension Plan; (b) a withdrawal by any Loan Party or any ERISA Affiliate from a Pension Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation of operations that is treated as such a withdrawal under Section 4062(e) of ERISA; (c) a complete or partial withdrawal by any Loan Party or any ERISA Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is in reorganization or is in endangered or critical status; (d) the filing of a notice of intent to terminate, the treatment of a Plan amendment as a termination under Sections 4041 or 4041A of ERISA, or the commencement of proceedings by the PBGC to terminate a Pension Plan or Multiemployer Plan; (e) an event or condition which constitutes grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan or Multiemployer Plan; (f) the imposition of any liability under Title IV of ERISA, other than for PBGC premiums due but not delinquent under Section 4007 of ERISA, upon any Loan Party or any ERISA Affiliate; (g) on and after the effectiveness of the Pension Act, a determination that any Pension Plan is, or is expected to be, in “at risk” status (within the meaning of Title IV of ERISA); or (h) the existence with respect to any Pension Plan of an “accumulated funding deficiency” (as defined in Section 412 of the Code or Section 302 of ERISA), and, on and after the effectiveness of the Pension Act, any failure by any Pension Plan to satisfy the minimum funding standards (within the meaning of Section 412 of the Code or Section 302 of ERISA) applicable to such Pension Plan, whether or not waived.

“Euro” and “€”means the lawful currency of the Participating Member States introduced in accordance with EMU Legislation.

“Eurocurrency Rate” means, for any Interest Period with respect to any Eurocurrency Rate Loan:

(a)  the rate per annum equal to the rate determined by the Administrative Agent to be the offered rate that appears on the page of the Dow Jones Market screen (or any successor thereto) that displays an average British Bankers Association Interest Settlement Rate for deposits in Dollars or the relevant Alternative Currency (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period, determined as of approximately 11:00 a.m. (London time) two (2) Business Days prior to the first day of such Interest Period, or, if different, the date on which quotations would customarily be provided by leading banks in the London Interbank Market for deposits of amounts in the relevant currency for delivery on the first day of such Interest Period, or

(b)  if the rate referenced in the preceding clause (a) does not appear on such page or service or such page or service shall not be available, the rate per annum equal to the rate determined by the Administrative Agent to be the offered rate on such other page or other service that displays an average British Bankers Association Interest Settlement Rate for deposits in Dollars or the relevant Alternative Currency (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period, determined as of approximately 11:00 a.m. (London time) two (2) Business Days prior to the first day

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of such Interest Period, or, if different, the date on which quotations would customarily be provided by leading banks in the London Interbank Market for deposits of amounts in the relevant currency for delivery on the first day of such Interest Period, or

(c)  if the rates referenced in the preceding clauses (a) and (b) are not available, the rate per annum determined by the Administrative Agent as the rate of interest at which deposits in Dollars or the relevant Alternative Currency for delivery on the first day of such Interest Period in Same Day Funds in the approximate amount of the Eurocurrency Rate Loan being made, continued or converted by JPMorgan Chase Bank and with a term equivalent to such Interest Period would be offered by JPMorgan Chase Bank’s London Branch to major banks in the London interbank eurodollar market at their request at approximately 11:00 a.m. (London time) two (2) Business Days prior to the first day of such Interest Period or, if different, the date on which quotations would customarily be provided by leading banks in the London Interbank Market for deposits of amounts in the relevant currency for delivery on the first day of such Interest Period.

“Eurocurrency Rate Loan” means a Loan, whether denominated in Dollars or in an Alternative Currency, that bears interest at a rate based on the Eurocurrency Rate.

“Euro Refinanced Term Loans” has the meaning specified in Section 10.01.

“Euro Replacement Term Loans” has the meaning specified in Section 10.01.

“Euro Term Commitment” means, as to each Euro Term Lender, its obligation to make a Euro Term Loan to the German Borrower pursuant to Section 2.01(c) in an aggregate Dollar Amount not to exceed the amount set forth opposite such Lender’s name on Schedule 2.01 under the caption “Euro Term Commitment” or in the Assignment and Assumption pursuant to which such Euro Term Lender becomes a party hereto, as applicable, as such amount may be adjusted from time to time in accordance with this Agreement.  The initial aggregate amount of the Euro Term Commitments is $100,000,000.

“Euro Term Lender” means, at any time, any Lender that has a Euro Term Commitment or a Euro Term Loan at such time.

“Euro Term Loan” means a Loan made pursuant to Section 2.01(c).

“Euro Term Note” means a promissory note of the German Borrower payable to any Euro Term Lender, in substantially the form of Exhibit C-3 hereto, evidencing the aggregate Indebtedness of the German Borrower to such Euro Term Lender resulting from the Euro Term Loans made by such Euro Term Lender.

“Event of Default” has the meaning specified in Section 8.01.

“Excess Cash Flow” means, for any period, an amount equal to:

(a) the sum, without duplication, of:

(i) Consolidated Net Income for such period,

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(ii) an amount equal to the amount of all non-cash charges (including depreciation and amortization) to the extent deducted in arriving at such Consolidated Net Income,

(iii) an amount equal to the aggregate net non-cash loss on Dispositions by the Company and the Restricted Subsidiaries during such period to the extent deducted in arriving at such Consolidated Net Income, and

(iv) decreases in Consolidated Working Capital for such period, and; minus

(b) the sum, without duplication among the clauses below and without duplication of any amounts otherwise deducted in arriving at Consolidated Net Income for such period, of:

(i) an amount equal to the amount of all non-cash credits included in arriving at such Consolidated Net Income and cash charges included in clauses (a) through (e) of the definition of Consolidated Net Income,

(ii) an amount equal to the aggregate net non-cash gain on Dispositions by the Company and the Restricted Subsidiaries during such period to the extent included in arriving at such Consolidated Net Income,

(iii) without duplication of amounts deducted pursuant to clause (xi) below in prior fiscal years, the amount of Capital Expenditures made in cash or accrued during such period pursuant to Section 7.14, except to the extent that such Capital Expenditures were financed with the proceeds of any issuance or sale of Equity Interests of Holdings, with the proceeds of any Indebtedness (other than Revolving Credit Loans) of Holdings, the Company or the Restricted Subsidiaries, or, to the extent not otherwise included in Consolidated Net Income, with the proceeds of any Disposition of property of or any Casualty Event with respect to property of Holdings, the Company or the Restricted Subsidiaries,

(iv) the aggregate amount of all principal payments or prepayments of Indebtedness of the Company and the Restricted Subsidiaries (including (A) the principal component of payments in respect of Capitalized Leases, (B) the amount of any mandatory prepayment of Term Loans pursuant to Section 2.05(b)(ii) to the extent required due to a Disposition that resulted in an increase to Consolidated Net Income and not in excess of the amount of such increase and (C) the amount of any repayment of Term Loans pursuant to Section 2.07(a), but excluding (X) all other prepayments of Term Loans and (Y) all prepayments of Revolving Credit Loans and Swing Line Loans) made during such period (other than in respect of any revolving credit facility to the extent there is not an equivalent permanent reduction in commitments thereunder), except to the extent that such payments or prepayments were financed with the proceeds of any issuance or sale of Equity Interests of Holdings, with the proceeds of any other Indebtedness of Holdings, the Company or the Restricted Subsidiaries, or, to the extent not otherwise included in Consolidated Net Income, with the proceeds of any Disposition of property of or any Casualty Event with respect to property of Holdings, the Company or the Restricted Subsidiaries,

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(v) increases in Consolidated Working Capital for such period,

(vi) cash payments by the Company and the Restricted Subsidiaries during such period in respect of long-term liabilities of the Company and the Restricted Subsidiaries other than Indebtedness,

(vii) without duplication of amounts deducted pursuant to clause (xi) below in prior fiscal years, the amount of Investments and Permitted Acquisitions made during such period pursuant to Section 7.02 (other than Section 7.02(a)), except to the extent that such Investments and Permitted Acquisitions were financed with the proceeds of any issuance or sale of Equity Interests of Holdings, with the proceeds of any Indebtedness of Holdings, the Company or the Restricted Subsidiaries, or, to the extent not otherwise included in Consolidated Net Income, with the proceeds of any Disposition of property of or any Casualty Event with respect to property of Holdings, the Company or the Restricted Subsidiaries,

(viii) the amount (without duplication) of Restricted Payments paid by Holdings during such period pursuant to Section 7.06(g), (h)(i) or (i), except to the extent such Restricted Payments were financed with the proceeds of any issuance or sale of Equity Interests of Holdings, with the proceeds of any Indebtedness of Holdings, the Company or the Restricted Subsidiaries, or, to the extent not otherwise included in Consolidated Net Income, with the proceeds of any Disposition of property of or any Casualty Event with respect to property of Holdings, the Company or the Restricted Subsidiaries,

(ix) the aggregate amount of expenditures actually made by the Company and the Restricted Subsidiaries in cash during such period (including expenditures for the payment of financing fees) to the extent that such expenditures are not expensed during such period,

(x) the aggregate amount of any premium, make-whole or penalty payments actually paid in cash by the Company and the Restricted Subsidiaries during such period that are required to be made in connection with any prepayment of Indebtedness, and

(xi) without duplication of amounts deducted from Excess Cash Flow in prior periods, the aggregate consideration required to be paid in cash by the Company or any of the Restricted Subsidiaries pursuant to binding contracts (the “Contract Consideration”) entered into prior to or during such period relating to Permitted Acquisitions or Capital Expenditures to be consummated or made during the fiscal year of the Company following the end of such period, provided that to the extent the aggregate cash consideration paid for such Permitted Acquisitions or Capital Expenditures during such fiscal year (other than amounts financed with the proceeds of any issuance or sale of Equity Interests of Holdings, with the proceeds of any Indebtedness of Holdings, the Company or the Restricted Subsidiaries, or, to the extent not otherwise included in Consolidated Net Income, with the proceeds of any Disposition of property of or any Casualty Event with respect to property of Holdings, the Company or the Restricted Subsidiaries) is less than the Contract Consideration, the amount of

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such shortfall shall be added to the calculation of Excess Cash Flow at the end of such period of four consecutive fiscal quarters.

“Exchange Act” means the Securities Exchange Act of 1934.

“Exchange Rate” means on any day with respect to any currency other than Dollars, the rate at which such currency may be exchanged into Dollars, as set forth at approximately 11:00 a.m. (London time) on such day on the Reuters World Currency Page for such currency; in the event that such rate does not appear on any Reuters World Currency Page, the Exchange Rate shall be determined by reference to such other publicly available service for displaying exchange rates as may be agreed upon by the Administrative Agent and the Company, or, in the absence of such agreement, such Exchange Rate shall instead be the arithmetic average of the spot rates of exchange of the Administrative Agent in the market where its foreign currency exchange operations in respect of such currency are then being conducted, at or about 10:00 a.m. (New York City time) on such date for the purchase of Dollars for delivery two Business Days later.

“Excluded Subsidiary” means (a) any Subsidiary that is not a wholly-owned Subsidiary unless such Subsidiary executes a Security Agreement Supplement, (b) each Subsidiary listed on Schedule 1.01D hereto, (c) any Foreign Subsidiary, or any other Subsidiary created or acquired after the date hereof, that is prohibited by applicable Law from guaranteeing the Obligations (in each case unless such Subsidiary subsequently executes a Security Agreement Supplement), (d) other than with respect to the Overseas Obligations to the extent required by the definition of “Collateral and Guarantee Requirement”, any Foreign Subsidiary, any Domestic Subsidiary that is a Subsidiary of a Foreign Subsidiary and any Domestic Subsidiary substantially all of whose assets consist of voting Equity Interests of one or more Foreign Subsidiaries (in each case unless such Subsidiary executes a Security Agreement Supplement), (e) any Restricted Subsidiary acquired pursuant to a Permitted Acquisition financed with secured Indebtedness incurred pursuant to Section 7.03(g) and each Restricted Subsidiary thereof that guarantees such Indebtedness; provided that each such Restricted Subsidiary shall cease to be an Excluded Subsidiary under this clause (e) if such secured Indebtedness is repaid or becomes unsecured or if such Restricted Subsidiary ceases to guarantee such secured Indebtedness, as applicable, (f) any Immaterial Subsidiary and (g) any other Subsidiary with respect to which, in the reasonable judgment of the Administrative Agent (confirmed in writing by notice to the Company), the cost or other consequences (including any adverse tax consequences) of providing a Guarantee shall be excessive in view of the benefits to be obtained by the Lenders therefrom.

“Existing Credit Agreement” means the Five-Year Revolving Credit Agreement, dated as of April 14, 2005, among Reader’s Digest, Books Are Fun, Ltd., QSP, Inc., Reiman Media Group, Inc., the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent.

“Existing DH/WRC Debt Agreements” means (a) the Credit and Guaranty Agreement dated as of July 22, 2005, among Weekly Reader Corporation, CompassLearning, Inc., WRC Media, Inc., the subsidiary guarantors party thereto, Goldman Sachs Specialty Lending Group, L.P., as administrative agent and collateral agent, and the lenders from time to time party thereto, (b) the Term Loan and Guaranty Agreement dated as of July 22, 2005, among Weekly Reader Corporation, CompassLearning, Inc., WRC Media, Inc., the subsidiary guarantors party thereto, The Bank of New York, as collateral agent, and the lenders from time to time party thereto, (c) the Amended and Restated Financing Agreement dated as of May 31, 2005, by and among Direct Holdings Americas Inc., Direct Holdings Custom Publishing Inc., Direct Holdings

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Education Inc., Alex Inc., Direct Holdings.com, Inc., Direct Holdings Customer Service, Inc., Direct Holdings Libraries, Inc., Direct Holdings U.S. Corp., Direct Holdings Worldwide L.L.C. and The CIT Group/Business Credit, Inc. and (d) the Term Loan B Financing Agreement dated as of May 31, 2005, by and among Direct Holdings Americas Inc., Direct Holdings Custom Publishing Inc., Direct Holdings Education Inc., Alex Inc., Direct Holdings.com, Inc., Direct Holdings Customer Service, Inc., Direct Holdings Libraries, Inc., Direct Holdings U.S. Corp., Direct Holdings Worldwide L.L.C. and The CIT Group/Business Credit, Inc.

“Existing Letters of Credit” means the letters of credit set forth on Schedule 1.01I.

“Existing Notes” means Reader’s Digest’s existing 6½% senior unsecured notes due 2011.

“Existing Note Indenture” means the Indenture entered into by Reader’s Digest in connection with the issuance of the Existing Notes, together with all instruments and other agreements entered into by Reader’s Digest in connection therewith.

“Facility” means the U.S. Term Loans, the Euro Term Loans, the Revolving Credit Facility, the Swing Line Sublimit or the Letter of Credit Sublimit, as the context may require.

“Federal Funds Rate” means, for any day, the rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank on the Business Day next succeeding such day; provided that (a) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (b) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate (rounded upward, if necessary, to a whole multiple of 1/100 of 1%) charged to JPMorgan Chase Bank on such day on such transactions as determined by the Administrative Agent.

“Foreign Immaterial Subsidiary” means any Foreign Subsidiary that is an Immaterial Subsidiary.  For the avoidance of doubt, as of the Closing Date, none of Caribe Condor S.A. de C.V., Reader’s Digest Deutschland Holding GmbH, The Reader’s Digest Assoc. Pty. Limited or 1302791 Alberta ULC shall constitute a Foreign Immaterial Subsidiary.

“Foreign Jurisdiction Deposit” means a deposit or Guarantee incurred in the ordinary course of business and required by any Governmental Authority in a foreign jurisdiction as a condition of doing business in such jurisdiction.

“Foreign Lender” has the meaning specified in Section 10.15(a)(i).

“Foreign Subsidiary” means any direct or indirect Restricted Subsidiary of the Company which (a) is not a Domestic Subsidiary or (b) is set forth on Schedule 1.01E.

“Fund” means any Person (other than a natural person) that is engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course.

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“Funded Debt” means all Indebtedness of the Company and the Restricted Subsidiaries for borrowed money that matures more than one year from the date of its creation or matures within one year from such date that is renewable or extendable, at the option of such Person, to a date more than one year from such date or arises under a revolving credit or similar agreement that obligates the lender or lenders to extend credit during a period of more than one year from such date, including Indebtedness in respect of the Loans.

“GAAP” means generally accepted accounting principles in the United States of America, as in effect from time to time; provided, however, that if the Company notifies the Administrative Agent that the Company requests an amendment to any provision hereof to eliminate the effect of any change occurring after the Closing Date in GAAP or in the application thereof on the operation of such provision (or if the Administrative Agent notifies the Company that the Required Lenders request an amendment to any provision hereof for such purpose), regardless of whether any such notice is given before or after such change in GAAP or in the application thereof, then such provision shall be interpreted on the basis of GAAP as in effect and applied immediately before such change shall have become effective until such notice shall have been withdrawn or such provision amended in accordance herewith.

“German Borrower” means RD German Holdings GmbH.

“Governmental Authority” means any nation or government, any state or other political subdivision thereof, any agency, authority, instrumentality, regulatory body, court, administrative tribunal, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.

“Granting Lender” has the meaning specified in Section 10.07(h).

“Group Member” means Holdings, the Company and the Restricted Subsidiaries.

“Guarantee” means, as to any Person, without duplication, (a) any obligation, contingent or otherwise, of such Person guaranteeing or having the economic effect of guaranteeing any Indebtedness or other monetary obligation payable or performable by another Person (the “primary obligor”) in any manner, whether directly or indirectly, and including any obligation of such Person, direct or indirect, (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other monetary obligation, (ii) to purchase or lease property, securities or services for the purpose of assuring the obligee in respect of such Indebtedness or monetary other obligation of the payment or performance of such Indebtedness or other monetary obligation, (iii) to maintain working capital, equity capital or any other financial statement condition or liquidity or level of income or cash flow of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other monetary obligation, or (iv) entered into for the purpose of assuring in any other manner the obligee in respect of such Indebtedness or other monetary obligation of the payment or performance thereof or to protect such obligee against loss in respect thereof (in whole or in part), or (b) any Lien on any assets of such Person securing any Indebtedness or other monetary obligation of any other Person, whether or not such Indebtedness or monetary other obligation is assumed by such Person (or any right, contingent or otherwise, of any holder of such Indebtedness to obtain any such Lien); provided that the term “Guarantee” shall not include endorsements for collection or deposit, in either case in the ordinary course of business.  The amount of any Guarantee shall be deemed to be an amount equal to the stated or determinable amount of the related primary obligation, or portion thereof, in respect of which such Guarantee is made or, if not stated or determinable, the

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maximum reasonably anticipated liability in respect thereof as determined by the guaranteeing Person in good faith.  The term “Guarantee” as a verb has a corresponding meaning.

“Guarantee and Security Agreement” means, collectively, the Guarantee and Collateral Agreement executed by the Loan Parties, substantially in the form of Exhibit F, together with each other security agreement supplement executed and delivered pursuant to Section 6.10.

“Guarantors” has the meaning set forth in the definition of “Collateral and Guarantee Requirement”.

“Hazardous Materials” means all explosive or radioactive substances or wastes and all hazardous or toxic substances, wastes or pollutants, including petroleum or petroleum distillates, asbestos or asbestos-containing materials, polychlorinated biphenyls, radon gas, infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to any Environmental Law.

“Hedge Bank” means any Person that is a Lender or an Affiliate of a Lender at the time it enters into a Secured Hedge Agreement, in its capacity as a party thereto.

“Holdings” has the meaning set forth in the introductory paragraph to this Agreement.

“Holdings Common Equity” means common stock of Holdings to be issued on or prior to the Closing Date to the holders of the Holdings Senior PIK Preferred.

“Holdings Junior PIK Preferred” means the Junior PIK Preferred Stock of Holdings issued on the Closing Date (and any additional Junior PIK Preferred Stock issued in connection with (i) the surrender of any such Junior PIK Preferred Stock pursuant to a transfer or exchange thereof or (ii) the issuance of any replacement certificate).

“Holdings Operating Expenses” means operating costs and expenses incurred by Holdings, which will include, in any event, without limitation, costs and expenses incurred in connection with (in each case to the extent not prohibited by the Loan Documents and in each case other than interest or dividend payments or expenses related to activities not permitted to be undertaken by Holdings pursuant to Section 7.13) (i) the maintenance of its existence and the ownership of an investment in the Company or the Subsidiaries of the Company, and the exercise of rights and performance of obligations in connection therewith, (ii) the entry into, and exercise of rights and performance of obligations in respect of (A) contracts and agreements with or for the benefit of officers, directors and employees of Holdings, the Company or any Subsidiary relating to their employment or directorships, (B) insurance policies and related contracts and agreements, (C) any equity subscription agreements, registration rights agreements, voting and other stockholder agreements, engagement letters, underwriting agreements and other agreements in respect of Equity Interests of Holdings or any offering, issuance or sale thereof, (D) the Loan Documents and (E) the Senior Subordinated Note Indenture, the Holdings PIK Preferred and related agreements, (iii) the offering, issuance and sale of Equity Interests of Holdings, (iv) the filing of registration statements, and compliance with applicable reporting and other obligations, under federal, state or other securities laws, (v) the performance of obligations under and compliance by Holdings with its certificate of incorporation and by-laws or any applicable law, ordinance, regulation rule, order, judgment, decree or permit, including, without limitation, as a result of or in connection with the activities of the Company or the Subsidiaries of the Company,

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(vi) the performance of contractual obligations in existence on the date hereof and set forth on Schedule 1.01F, (vii) payment of taxes for the benefit of or relating to Holdings, the Company and its Subsidiaries and (viii) other activities incidental or related to the foregoing.

“Holdings PIK Preferred” means (a) the Holdings Senior PIK Preferred and (b) the Holdings Junior PIK Preferred.

“Holdings Senior PIK Preferred” means the Series A PIK Preferred Stock of Holdings issued on the Closing Date (and any additional Series A PIK Preferred Stock issued in connection with (i) the surrender of any such Series A PIK Preferred Stock pursuant to a transfer or exchange thereof or (ii) the issuance of any replacement certificate).

“Honor Date” has the meaning specified in Section 2.03(c)(i).

“Immaterial Subsidiary” means any Subsidiary that, together with its consolidated Subsidiaries, does not, as of the day of the most recent completed fiscal quarter of the Company, have assets with a value in excess of 1% of the consolidated total assets of the Company and the Subsidiaries and did not, as of the four quarter period ending on the last day of such fiscal quarter, have revenues exceeding 1% of the total revenues of the Company and the Subsidiaries; provided that if (i) the aggregate assets then owned by all Subsidiaries of the Company that would otherwise constitute Immaterial Subsidiaries shall have a value in excess of 5% of the consolidated total assets of the Company and the Subsidiaries or (ii) the combined revenues of all Subsidiaries of the Company that would otherwise constitute Immaterial Subsidiaries shall exceed 5% of the total revenues of the Company and the Subsidiaries, only those such Subsidiaries as shall then have aggregate assets of less than 5% of the consolidated total assets of the Company and the Subsidiaries and combined revenues of less than 5% of the total revenues of the Company and the Subsidiaries and as shall be designated in writing by the Company to the Administrative Agent as Immaterial Subsidiaries shall be deemed to constitute Immaterial Subsidiaries.

“Incremental Amendment” has the meaning set forth in Section 2.14(a).

“Incremental Facility Closing Date” has the meaning set forth in Section 2.14(a).

“Incremental Overseas Amendment” has the meaning set forth in Section 2.14(b).

“Incremental Overseas Facility Closing Date” has the meaning set forth in Section 2.14(b).

“Incremental Overseas Term Loans” has the meaning set forth in Section 2.14(b).

“Incremental U.S. Term Loans” has the meaning set forth in Section 2.14(a).

“Indebtedness” means, as to any Person at a particular time, without duplication, all of the following, whether or not included as indebtedness or liabilities in accordance with GAAP:

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(a)  all obligations of such Person for borrowed money and all obligations of such Person evidenced by bonds, debentures, notes, loan agreements or other similar instruments;

(b)  the maximum amount (after giving effect to any prior drawings or reductions which may have been reimbursed) of all letters of credit (including standby and commercial), bankers’ acceptances, bank guaranties, surety bonds, performance bonds and similar instruments issued or created by or for the account of such Person;

(c)  net obligations of such Person under any Swap Contract;

(d)  all obligations of such Person to pay the deferred purchase price of property or services (other than (i) trade accounts payable in the ordinary course of business, (ii) any earn-out obligation until such obligation becomes a liability on the balance sheet of such Person in accordance with GAAP, (iii) deferred or equity compensation arrangements payable to directors, officers or employees and (iv) any such obligation to pay royalties or commissions to authors);

(e)  indebtedness (excluding prepaid interest thereon) secured by a Lien on property owned or being purchased by such Person (including indebtedness arising under conditional sales or other title retention agreements and mortgage, industrial revenue bond, industrial development bond and similar financings), whether or not such indebtedness shall have been assumed by such Person or is limited in recourse;

(f)  all Attributable Indebtedness;

(g)  all obligations of such Person to purchase, redeem, retire or otherwise acquire for value any Disqualified Equity Interests; and

(h)  all Guarantees of such Person in respect of any of the foregoing.

For all purposes hereof, the Indebtedness of any Person shall (A) include the Indebtedness of any partnership or joint venture (other than a joint venture that is itself a corporation or limited liability company) in which such Person is a general partner or a joint venturer, except to the extent such Person’s liability for such Indebtedness is otherwise limited and only to the extent such Indebtedness would be included in the calculation of Consolidated Total Debt and (B) in the case of Holdings and its Subsidiaries, exclude (i) all intercompany Indebtedness having a term not exceeding 364 days (inclusive of any roll over or extensions of terms) and made in the ordinary of business consistent with past practice in connection with the cash management activities of Holdings and its Subsidiaries, (ii) customer deposits and advances and interest payable thereon in the ordinary course of business in accordance with customary trade terms and other obligations incurred in the ordinary course of business through credit on an open account basis customarily extended to such Person, (iii) statutory or other legal requirements to make deposits in connection with sweepstakes or similar contests, or surety bonds or letters of credit posted pursuant to such requirements and (iv) obligations under overdraft arrangements with banks outside the United States incurred in the ordinary course of business to cover working capital needs.  The amount of any net obligation under any Swap Contract on any date shall be deemed to be the Swap Termination Value thereof as of such date.  The amount of Indebtedness of any Person for purposes of clause (e) shall be deemed to be equal to the lesser of (i) the aggregate unpaid amount of such Indebtedness and (ii) the fair market value of the property encumbered thereby as determined by such Person in good faith.

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“Indemnified Liabilities” has the meaning set forth in Section 10.05.

“Indemnitees” has the meaning set forth in Section 10.05.

“Information” has the meaning specified in Section 10.08.

“Intellectual Property” has the meaning set forth in the Guarantee and Security Agreement.

“Interest Payment Date” means, (a) as to any Eurocurrency Rate Loan, the last day of each Interest Period applicable to such Loan and the Maturity Date of the Facility under which such Loan was made; provided that if any Interest Period for a Eurocurrency Rate Loan exceeds three months, the respective dates that fall every three months after the beginning of such Interest Period shall also be Interest Payment Dates; and (b) as to any Base Rate Loan (including a Swing Line Loan), the last Business Day of each March, June, September and December and the Maturity Date of the Facility under which such Loan was made.

“Interest Period” means, as to each Eurocurrency Rate Loan, the period commencing on the date such Eurocurrency Rate Loan is disbursed or converted to or continued as a Eurocurrency Rate Loan and ending on the date one or two weeks (with respect to the initial Interest Period applicable to the Euro Term Loans) or one, two, three or six months thereafter, or to the extent available to each Lender of such Eurocurrency Rate Loan (as reasonably determined by each such Lender in good faith), nine or twelve months, as selected by the relevant Borrower in its Committed Loan Notice; provided that:

(a)  any Interest Period that would otherwise end on a day that is not a Business Day shall be extended to the next succeeding Business Day unless such Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Business Day;

(b)  any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the calendar month at the end of such Interest Period; and

(c)  no Interest Period shall extend beyond the Maturity Date of the Facility under which such Loan was made.

“Investment” means, as to any Person, any direct or indirect acquisition or investment by such Person, whether by means of (a) the purchase or other acquisition of Equity Interests or debt or other securities of another Person or (b) a loan, advance or capital contribution to, Guarantee or assumption of Indebtedness of, or purchase or other acquisition of any other debt or equity participation or interest in, another Person, including any partnership or joint venture interest in such other Person (excluding, in the case of Holdings and its Subsidiaries, intercompany loans, advances, or Indebtedness having a term not exceeding 364 days (inclusive of any roll over or extensions of terms) and made in the ordinary course of business consistent with past practice in connection with the cash management activities of Holdings and its Subsidiaries) or (c) the purchase or other acquisition (in one transaction or a series of transactions) of all or substantially all of the property and assets or business of another Person or assets constituting a business unit, line of business or division of such Person.  For purposes of

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covenant compliance, the amount of any Investment shall be the amount actually invested, without adjustment for subsequent increases or decreases in the value of such Investment.

“IP Rights” has the meaning set forth in Section 5.15.

“IRS” means the United States Internal Revenue Service.

“JPMorgan Chase Bank” means JPMorgan Chase Bank, N.A. and its successors.

“Judgment Currency” has the meaning specified in Section 10.23.

“Junior Financing” has the meaning specified in Section 7.12.

“Junior Financing Documentation” means any documentation governing any Junior Financing.

“Laws” means, collectively, all international, foreign, Federal, state and local statutes, treaties, rules, guidelines, regulations, ordinances, codes and administrative or judicial precedents or authorities.

“L/C Advance” means, with respect to each Revolving Credit Lender, such Lender’s funding of its participation in any L/C Borrowing in accordance with its Pro Rata Share.

“L/C Borrowing” means an extension of credit resulting from a drawing under any Letter of Credit which has not been reimbursed or refinanced as a Refunding Loan in accordance with Section 2.03(c).

“L/C Credit Extension” means, with respect to any Letter of Credit, the issuance thereof or extension of the expiry date thereof, or the renewal or increase of the amount thereof.

“L/C Issuer” means JPMorgan Chase Bank and any other Lender that becomes an L/C Issuer in accordance with Section 2.03(k) or 10.07(j), in each case, in its capacity as an issuer of Letters of Credit hereunder, or any successor issuer of Letters of Credit permitted hereunder.

“L/C Obligations” means, as at any date of determination, the aggregate undrawn amount of all outstanding Letters of Credit plus the aggregate of all Unreimbursed Amounts, including all L/C Borrowings.

“Lender” has the meaning specified in the introductory paragraph to this Agreement and, as the context requires, includes an L/C Issuer and the Swing Line Lender, and their respective successors and assigns as permitted hereunder, each of which is referred to herein as a “Lender,” together with, in each case, any Affiliate of any such financial institution through which such financial institution elects, by notice to the Administrative Agent and the Company, to make any Loans available to any Overseas Borrower; provided that, for all purposes of voting or consenting with respect to (a) any amendment, supplementation or modification of any Loan Document, (b) any waiver of any requirements of any Loan Document or any Default or Event of Default and its consequences, or (c) any other matter as to which a Lender may vote or consent pursuant to Section 10.01 of this Agreement, the financial institution making such election shall

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be deemed the “Lender” rather than such Affiliate, which shall not be entitled to vote or consent (it being agreed that failure of any such Affiliate to fund an obligation under this Agreement shall not relieve its affiliated financial institution from funding).

“Lending Office” means, as to any Lender, the office or offices of such Lender described as such in such Lender’s Administrative Questionnaire, or such other office or offices as a Lender may from time to time notify the Company and the Administrative Agent.

“Letter of Credit” means any letter of credit issued hereunder.  A Letter of Credit may be a commercial letter of credit or a standby letter of credit.

“Letter of Credit Application” means an application and agreement for the issuance or amendment of a Letter of Credit in the form from time to time in use by the relevant L/C Issuer, provided that any such application or agreement shall not be inconsistent with the terms hereof or impose any additional obligations or liabilities on any Loan Party.  Any Letter of Credit Application delivered to JPMorgan Chase Bank as L/C Issuer for a commercial letter of credit shall be substantially in the form of Exhibit I or such other form as may be reasonably acceptable to JPMorgan Chase Bank.  Any Letter of Credit Application delivered to JPMorgan Chase Bank as L/C Issuer for a standby letter of credit shall be substantially in the form of Exhibit J or such other form as may be reasonably acceptable to JPMorgan Chase Bank.

“Letter of Credit Expiration Date” means the day that is five (5) Business Days prior to the scheduled Maturity Date then in effect for the Revolving Credit Facility (or, if such day is not a Business Day, the next preceding Business Day).

“Letter of Credit Sublimit” means an amount equal to the lesser of (a) $50,000,000 and (b) the aggregate amount of the Revolving Credit Commitments.  The Letter of Credit Sublimit is part of, and not in addition to, the Revolving Credit Facility.

“Lien” means any mortgage, pledge, hypothecation, collateral assignment, deposit arrangement, encumbrance, lien (statutory or other), charge or other security interest or preferential arrangement intended to create a security interest of any kind or nature whatsoever (including any conditional sale or other title retention agreement, any easement, right of way or other encumbrance on title to real property, and any Capitalized Lease having substantially the same economic effect as any of the foregoing).

“Loan” means an extension of credit by a Lender to a Borrower under Article II in the form of a U.S. Term Loan, a Euro Term Loan, a Revolving Credit Loan or a Swing Line Loan.

“Loan Documents” means, collectively, (i) this Agreement, (ii) the Notes, (iii) the Collateral Documents, (iv) each Letter of Credit Application and (v) the Continuing Agreement (if applicable).

“Loan Parties” means, collectively, each Borrower and each Guarantor; provided that for purposes of Article VII, unless such Person is or becomes a U.S. Guarantor, each Overseas Borrower and each Overseas Guarantor shall not be treated as a Loan Party and shall be treated as a Subsidiary that is not a Loan Party.

“Management Stockholders” means the members of management of Holdings or its Subsidiaries who are investors in Holdings or any direct or indirect parent thereof.

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“Mandatory Cost” means, with respect to any period, the percentage rate per annum determined in accordance with Schedule 1.01H.

“Master Agreement” has the meaning specified in the definition of “Swap Contract.”

“Material Adverse Change” means a material adverse effect on (a) the business, financial condition or results of operations of Reader’s Digest and its subsidiaries, taken as a whole, (b) the ability of Reader’s Digest to perform its obligations under the Purchase Agreement or (c) the ability of Reader’s Digest to consummate the Acquisition and the other Transactions (as defined in the Purchase Agreement) to be performed or consummated by Reader’s Digest, other than any event, change, effect, development, condition or occurrence to the extent arising out of or relating to:  (i) general economic conditions, (ii) conditions generally affecting industries in which any of Reader’s Digest or its subsidiaries operate (except, in the case of clauses (i) and (ii) above, if the event, change, effect, development, condition or occurrence disproportionately impacts the business, financial condition or results of operations of Reader’s Digest and its subsidiaries, taken as a whole, relative to companies operating in the industries in which Reader’s Digest or its subsidiaries operate), (iii) the public announcement of the Purchase Agreement and the Acquisition, (iv) any changes in law or interpretation thereof or (v) any changes in GAAP or interpretation thereof.

“Material Adverse Effect” means an event, change or occurrence that, individually or in the aggregate, has had or could reasonably be expected to have a material adverse effect on (a) the business, assets, results of operation or financial condition of the Company and its Subsidiaries, taken as a whole, or (b) the rights and remedies of the Administrative Agent and the Lenders under any Loan Document.

“Material Real Property” means, on any date, any real property owned by any Loan Party with a fair market value as of such date in excess of $2,500,000.

“Maturity Date” means (a) with respect to the Revolving Credit Facility, March 2, 2013 and (b) with respect to the Term Loans, March 2, 2014.

“Maximum Rate” has the meaning specified in Section 10.10.

“Merger” has the meaning set forth in the preliminary statements to this Agreement.

“Moody’s” means Moody’s Investors Service, Inc. and any successor thereto.

“Mortgage” means, collectively, the deeds of trust, trust deeds, hypothecs and mortgages made by the Loan Parties in favor or for the benefit of the Administrative Agent on behalf of the Lenders substantially in the form of Exhibit G (with such changes as may be customary to account for local Law matters or as otherwise may be reasonably satisfactory to the Administrative Agent), and any other mortgages executed and delivered pursuant to Section 6.10.

“Mortgage Policies” has the meaning specified in Section 6.12(b)(ii).

“Mortgaged Properties” has the meaning specified in paragraph (g) of the definition of Collateral and Guarantee Requirement.

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“Multiemployer Plan” means any employee benefit plan of the type described in Section 4001(a)(3) of ERISA, to which any Loan Party or any ERISA Affiliate makes or is obligated to make contributions, or during the preceding five plan years, has made or been obligated to make contributions.

“Net Cash Proceeds” means:

(a)  with respect to the Disposition of any asset by Holdings, the Company or any Restricted Subsidiary or any Casualty Event, an amount equal to (i) the sum of cash and Cash Equivalents received in connection with such Disposition or Casualty Event (including any cash or Cash Equivalents received by way of deferred payment pursuant to, or by monetization of, a note receivable or otherwise, but only as and when so received and, with respect to any Casualty Event, any insurance proceeds or condemnation awards in respect of such Casualty Event actually received by or paid to or for the account of Holdings, the Company or any Restricted Subsidiary) less (ii) the sum of (A) the principal amount, premium or penalty, if any, interest and other amounts on any Indebtedness that is secured by the asset subject to such Disposition or Casualty Event and that is required to be repaid (and is repaid) in connection with such Disposition or Casualty Event (other than Indebtedness under the Loan Documents), (B) the out-of-pocket expenses (including attorneys’ fees, investment banking fees, accounting fees and other professional and transactional fees, survey costs, title insurance premiums, and related search and recording charges, transfer taxes, deed or mortgage recording taxes, other customary expenses and brokerage, consultant and other customary commissions and fees) actually incurred by Holdings, the Company or such Restricted Subsidiary in connection with such Disposition or Casualty Event, (C) taxes paid or reasonably estimated to be actually payable in connection therewith, (D) any reserve for adjustment in accordance with GAAP in respect of (x) the sale price of such asset or assets and (y) any liabilities associated with such asset or assets and retained by Holdings, the Company or any Restricted Subsidiary after such sale or other disposition thereof, including pension and other post-employment benefit liabilities and liabilities related to environmental matters or against any indemnification obligations associated with such transaction and (E) the Company’s reasonable estimate of payments required to be made with respect to unassumed liabilities relating to the assets involved within one year of such Disposition or Casualty Event, and it being understood that “Net Cash Proceeds” shall include (i) any cash or Cash Equivalents received upon the Disposition of any non-cash consideration received by Holdings, the Company or any Restricted Subsidiary in any such Disposition, (ii) an amount equal to any reversal (without the satisfaction of any applicable liabilities in cash in a corresponding amount) of any reserve described in clause (C) or (D) above at the time of such reversal and (iii) an amount equal to any estimated liabilities described in clause (E) above that have not been satisfied in cash within three hundred and sixty-five (365) days after such Disposition or Casualty Event; provided that (x) no net cash proceeds calculated in accordance with the foregoing realized in a single transaction or series of related transactions shall constitute Net Cash Proceeds unless such net cash proceeds shall exceed $5,000,000 and (y) no such net cash proceeds shall constitute Net Cash Proceeds under this clause (a) in any fiscal year until the aggregate amount of all such net cash proceeds in such fiscal year shall exceed $10,000,000 (and thereafter only net cash proceeds in excess of such amount shall constitute Net Cash Proceeds under this clause (a)); and

(b)  with respect to the incurrence or issuance of any Indebtedness or Equity Interests by Holdings, the Company or any Restricted Subsidiary, an amount equal to (i)

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the sum of the cash received in connection with such incurrence or issuance less (ii) the attorneys’ fees, investment banking fees, accountants’ fees, underwriting or other discounts, commissions, costs and other out-of-pocket fees, transfer and similar taxes and other customary out-of-pocket expenses actually incurred by Holdings, the Company or such Restricted Subsidiary in connection with such incurrence or issuance.

“Non-Cash Charges” has the meaning set forth in the definition of the term “Consolidated EBITDA”.

“Non-Consenting Lenders” has the meaning specified in Section 3.07(d).

“Nonrenewal Notice Date” has the meaning specified in Section 2.03(b)(iii).

“Note” means a U.S. Term Note, a Euro Term Note or a Revolving Credit Note, as the context may require.

“Notice of Intent to Cure” has the meaning specified in Section 6.02(b).

“Not Otherwise Applied” means, with reference to any amount of Net Cash Proceeds of any transaction or event or of Excess Cash Flow, that such amount (a) was not required to be applied to prepay the Loans pursuant to Section 2.05(b), and (b) was not previously applied as a Cure Amount or in determining the permissibility of a transaction under the Loan Documents where such permissibility was contingent on receipt of such amount or utilization of such amount for a specified purpose.  The Company shall promptly notify the Administrative Agent of any application of such amount as contemplated by (b) above.

“NPL” means the National Priorities List under CERCLA.

“Obligations” means all (a) monetary obligations of any Loan Party and its Subsidiaries arising under any Loan Document, whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising and including interest and fees that accrue after the commencement by or against any Loan Party or Subsidiary of any proceeding under any Debtor Relief Laws naming such Person as the debtor in such proceeding, regardless of whether such interest and fees are allowed claims in such proceeding, (b) monetary obligations of any Loan Party and its Subsidiaries arising under any Secured Hedge Agreement and (c) monetary Cash Management Obligations.  Without limiting the generality of the foregoing, the Obligations of the Loan Parties under the Loan Documents (and of their Subsidiaries to the extent they have obligations under the Loan Documents) include (x) the obligation (including guarantee obligations) to pay principal, interest, Letter of Credit commissions, reimbursement obligations, charges, expenses, fees, Attorney Costs, indemnities, and other amounts payable by any Loan Party or its Subsidiaries under any Loan Document and (y) the obligation of any Loan Party or any of its Subsidiaries to reimburse any amount in respect of any of the foregoing that any Lender, in its sole discretion, may elect to pay or advance on behalf of such Loan Party or such Subsidiary.

“Organization Documents” means, (a) with respect to any corporation, the certificate or articles of incorporation and the bylaws (or equivalent or comparable constitutive documents with respect to any non-U.S. jurisdiction); (b) with respect to any limited liability company, the certificate or articles of formation or organization and operating agreement; and (c) with respect to any partnership, joint venture, trust or other form of business entity, the partnership, joint venture or other applicable agreement of formation or organization and any

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agreement, instrument, filing or notice with respect thereto filed in connection with its formation or organization with the applicable Governmental Authority in the jurisdiction of its formation or organization and, if applicable, any certificate or articles of formation or organization of such entity.

“Other Taxes” has the meaning specified in Section 3.01(b).

“Outstanding Amount” means (a) with respect to the U.S. Term Loans, Euro Term Loans, Revolving Credit Loans and Swing Line Loans on any date, the Dollar Amount thereof after giving effect to any borrowings and prepayments or repayments of U.S. Term Loans, Euro Term Loans, Revolving Credit Loans (including any refinancing of outstanding unpaid drawings under Letters of Credit or L/C Credit Extensions as a Revolving Credit Borrowing) and Swing Line Loans, as the case may be, occurring on such date; and (b) with respect to any L/C Obligations on any date, the amount thereof on such date after giving effect to any L/C Credit Extension occurring on such date and any other changes thereto as of such date, including as a result of any reimbursements of outstanding unpaid drawings under any Letters of Credit (including any refinancing of outstanding unpaid drawings under Letters of Credit or L/C Credit Extensions as a Revolving Credit Borrowing) or any reductions in the maximum amount available for drawing under Letters of Credit taking effect on such date.

“Overnight Rate” means, for any day, (a) with respect to any amount denominated in Dollars, the Federal Funds Rate, and (b) with respect to any amount denominated in an Alternative Currency, the rate of interest per annum at which overnight deposits in the applicable Alternative Currency, in an amount approximately equal to the amount with respect to which such rate is being determined, would be offered for such day by a branch or Affiliate of JPMorgan Chase Bank in the applicable offshore interbank market for such currency to major banks in such interbank market.

“Overseas Borrowers” means, collectively, (a) the German Borrower and (b) any other Foreign Subsidiary which has borrowed Incremental Overseas Term Loans in accordance with Section 2.14(b).

“Overseas Guarantees” has the meaning set forth in the definition of “Collateral and Guarantee Requirement”.

“Overseas Guarantors” has the meaning set forth in the definition of “Collateral and Guarantee Requirement”.

“Overseas Obligations” has the meaning set forth in the definition of “Collateral and Guarantee Requirement”.

“Participant” has the meaning specified in Section 10.07(e).

“Participating Member State” means each state so described in any EMU Legislation.

“Patriot Act” means the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)).

“PBGC” means the Pension Benefit Guaranty Corporation.

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“Pension Act” shall mean the Pension Protection Act of 2006, as it presently exists or as it may be amended from time to time.

“Pension Plan” means any “employee pension benefit plan” (as such term is defined in Section 3(2) of ERISA), other than a Multiemployer Plan, that is subject to Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA and is sponsored or maintained by any Loan Party or any ERISA Affiliate or to which any Loan Party or any ERISA Affiliate contributes or has an obligation to contribute, or in the case of a multiple employer or other plan described in Section 4064(a) of ERISA, has made contributions at any time during the immediately preceding five (5) plan years.

“Perfection Certificate” means a certificate in the form of Annex 2 to the Guarantee and Security Agreement or any other form approved by the Administrative Agent.

“Permitted Acquisition” has the meaning specified in Section 7.02(i).

“Permitted Equity Issuance” means any sale or issuance of any Qualified Equity Interests of Holdings to the extent permitted hereunder or any capital contribution made to Holdings in respect of its Qualified Equity Interests.

“Permitted Holders” means the Equity Investors other than (i) the Management Stockholders to the extent that the amount of the outstanding voting stock of Holdings owned beneficially or of record by such Management Stockholders in the aggregate at any time exceeds ten percent (10%) of the total amount of the outstanding voting stock of Holdings at such time and (ii) Goldentree Asset Management, LP, GSO Capital Partners LP and Magnetar Financial LLC.

“Permitted Holdings Distributions” means payments, dividends or distributions by the Company to Holdings in order to pay Holdings Operating Expenses.

“Permitted Refinancing” means, with respect to any Person, any modification, refinancing, refunding, renewal or extension of any Indebtedness of such Person; provided that (a) the principal amount (or accreted value, if applicable) thereof does not exceed the principal amount (or accreted value, if applicable) of the Indebtedness so modified, refinanced, refunded, renewed or extended except by an amount equal to unpaid accrued interest and premium thereon plus other reasonable amount paid, and fees and expenses reasonably incurred, in connection with such modification, refinancing, refunding, renewal or extension and by an amount equal to any existing commitments unutilized thereunder, (b) other than with respect to a Permitted Refinancing in respect of Indebtedness permitted pursuant to Section 7.03(e), such modification, refinancing, refunding, renewal or extension has a final maturity date equal to or later than the earlier of (x) the final maturity date of the Indebtedness so modified, refinanced, refunded, renewed or extended and (y) the date which is 91 days after the Maturity Date with respect to the Term Loans, (c) other than with respect to a Permitted Refinancing in respect of Indebtedness permitted pursuant to Section 7.03(e), such modification, refinancing, refunding, renewal or extension has a Weighted Average Life to Maturity equal to or greater than the remaining Weighted Average Life to Maturity of, the Indebtedness being modified, refinanced, refunded, renewed or extended, (d) to the extent such Indebtedness being modified, refinanced, refunded, renewed or extended is subordinated in right of payment to the Obligations, such modification, refinancing, refunding, renewal or extension is subordinated in right of payment to the Obligations on terms at least as favorable to the Lenders (in the reasonable good faith determination of the Company) as those contained in the documentation governing the

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Indebtedness being modified, refinanced, refunded, renewed or extended, and (e) the terms and conditions (including, if applicable, as to collateral but excluding as to subordination, interest rate or other pricing terms and redemption or prepayment premium) of any such modified, refinanced, refunded, renewed or extended Indebtedness, taken as a whole, are not materially less favorable to the Lenders (in the reasonable good faith determination of the Company) than the terms and conditions of the Indebtedness being modified, refinanced, refunded, renewed or extended.

“Person” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.

“Plan” means any “employee benefit plan” (as such term is defined in Section 3(3) of ERISA) established by any Loan Party or, with respect to any such plan that is subject to Section 412 of the Code or Section 302 or Title IV of ERISA, any ERISA Affiliate.

“Pledged Debt” has the meaning specified in the Guarantee and Security Agreement.

“Pledged Equity” has the meaning specified in the Guarantee and Security Agreement.

“Post-Acquisition Period” means, with respect to any Permitted Acquisition, the period beginning on the date such Permitted Acquisition is consummated and ending on the last day of the sixth full consecutive fiscal quarter immediately following the date on which such Permitted Acquisition is consummated.

“Pro Forma Adjustment” means, for any Test Period that includes all or any part of a fiscal quarter included in any Post-Acquisition Period, with respect to the Acquired EBITDA of the applicable Acquired Entity or Business or the Consolidated EBITDA of the Company, the pro forma increase or decrease in such Acquired EBITDA or such Consolidated EBITDA, as the case may be, projected by the Company in good faith as a result of (a) actions taken during such Post-Acquisition Period for the purposes of realizing reasonably identifiable and factually supportable cost savings or (b) any additional costs incurred during such Post-Acquisition Period, in each case in connection with the combination of the operations of such Acquired Entity or Business with the operations of the Company and the Restricted Subsidiaries; provided that, so long as such actions are taken during such Post-Acquisition Period or such costs are incurred during such Post-Acquisition Period, as applicable, with respect to the cost savings related to such actions or such additional costs, as applicable, it may be reasonably assumed, for purposes of projecting such pro forma increase or decrease to such Acquired EBITDA or such Consolidated EBITDA, as the case may be, that such cost savings will be realizable during the entirety of such Test Period, or such additional costs, as applicable, will be incurred during the entirety of such Test Period; provided further that any such pro forma increase or decrease to such Acquired EBITDA or such Consolidated EBITDA, as the case may be, shall be without duplication for cost savings or additional costs already included in such Acquired EBITDA or such Consolidated EBITDA, as the case may be, for such Test Period.

“Pro Forma Balance Sheet” has the meaning set forth in Section 5.05(a)(ii).

“Pro Forma Basis”, “Pro Forma Compliance” and “Pro Forma Effect” mean, with respect to compliance with any test or covenant hereunder, that (A) to the extent applicable, the Pro Forma Adjustment shall have been made and (B) all Specified Transactions and the following transactions in connection therewith shall be deemed to have occurred as of the first

39

day of the applicable period of measurement in such test or covenant:  (a) income statement items (whether positive or negative) attributable to the property or Person subject to such Specified Transaction, (i) in the case of a Disposition of all or substantially all Equity Interests in any Subsidiary of the Company owned by the Company or any of its Subsidiaries or any division, product line, or facility used for operations of the Company or any of its Subsidiaries, shall be excluded, and (ii) in the case of a Permitted Acquisition or Investment described in the definition of “Specified Transaction”, shall be included, (b) any retirement of Indebtedness and (c) any Indebtedness incurred or assumed by the Company or any of the Restricted Subsidiaries in connection therewith and if such Indebtedness has a floating or formula rate, shall have an implied rate of interest for the applicable period for purposes of this definition determined by utilizing the rate which is or would be in effect with respect to such Indebtedness as at the relevant date of determination; provided that, without limiting the application of the Pro Forma Adjustment pursuant to clause (A) above (but without duplication thereof), the foregoing pro forma adjustments may be applied to any such test or covenant solely to the extent that such adjustments are consistent with the definition of Consolidated EBITDA and give effect to events (including operating expense reductions) that are (i) in the reasonable good faith determination of the Company (x) directly attributable to such transaction and (y) factually supportable or (ii) otherwise consistent with the definition of Pro Forma Adjustment.

“Pro Rata Share” means, with respect to each Lender at any time a fraction (expressed as a percentage, carried out to the ninth decimal place), the numerator of which is the amount of the Commitments (or, in the case of the Term Facility, outstanding Term Loans) of such Lender under the applicable Facility or Facilities at such time and the denominator of which is the amount of the Aggregate Commitments (or, in the case of the Term Facility, aggregate outstanding Term Loans) under the applicable Facility or Facilities at such time; provided that (if applicable) if such Commitments have been terminated, then the Pro Rata Share of each Lender shall be determined based on the Pro Rata Share of such Lender immediately prior to such termination and after giving effect to any subsequent assignments made pursuant to the terms hereof.

“Projections” shall have the meaning set forth in Section 6.01(c).

“Purchase Agreement” means the Agreement and Plan of Merger, dated as of November 16, 2006, among Holdings, Acquisition Co and Reader’s Digest.

“Purchase Price” means the total funds required to consummate the Acquisitions.

“Qualified Equity Interests” means any Equity Interests that are not Disqualified Equity Interests.

“Qualifying IPO” means the issuance by Holdings or any direct or indirect parent of Holdings of its common Equity Interests in an underwritten primary public offering for cash (other than a public offering pursuant to a registration statement on Form S-8) pursuant to an effective registration statement filed with the SEC in accordance with the Securities Act (whether alone or in connection with a secondary public offering).

“Reader’s Digest” has the meaning specified in the introductory paragraph to this Agreement.

“Refunding Loans” has the meaning set forth in Section 2.03(c)(i).

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“Register” has the meaning set forth in Section 10.07(d).

“Reportable Event” means any of the events set forth in Section 4043(c) of ERISA or the regulations issued thereunder, other than events for which the thirty (30) day notice period has been waived.

“Request for Credit Extension” means (a) with respect to a Borrowing, conversion or continuation of U.S. Term Loans, Euro Term Loans or Revolving Credit Loans, a Committed Loan Notice, (b) with respect to an L/C Credit Extension, a Letter of Credit Application, and (c) with respect to a Swing Line Loan, a Swing Line Loan Notice.

“Required Lenders” means, as of any date of determination, Lenders having more than 50% of the sum of the (a) Total Outstandings (with the aggregate Dollar Amount of each Lender’s risk participation and funded participation in L/C Obligations and Swing Line Loans being deemed “held” by such Lender for purposes of this definition), (b) aggregate unused U.S. Term Commitments, (c) aggregate unused Euro Term Commitments and (d) aggregate unused Revolving Credit Commitments.

“Responsible Officer” means the chief executive officer, president, chief financial officer, treasurer or controller or other similar officer of a Loan Party and, as to any document delivered on the Closing Date, any secretary or assistant secretary of a Loan Party.  Any document delivered hereunder that is signed by a Responsible Officer of a Loan Party shall be conclusively presumed to have been authorized by all necessary corporate, partnership and/or other action on the part of such Loan Party and such Responsible Officer shall be conclusively presumed to have acted on behalf of such Loan Party.

“Restricted Payment” means any dividend or other distribution (whether in cash, securities or other property) with respect to any Equity Interest of Holdings, the Company or any Restricted Subsidiary, or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, defeasance, acquisition, cancellation or termination of any such Equity Interest, or on account of any return of capital to Holdings or the Company’s stockholders, partners or members (or the equivalent Persons thereof).

“Restricted Subsidiary” means any Subsidiary of the Company other than an Unrestricted Subsidiary.

“Revolving Commitment Increase” has the meaning set forth in Section 2.14(a).

“Revolving Commitment Increase Lender” has the meaning set forth in Section 2.14(a).

“Revolving Credit Borrowing” means a borrowing consisting of simultaneous Revolving Credit Loans of the same Type and, in the case of Eurocurrency Rate Loans, having the same Interest Period made by each of the Revolving Credit Lenders pursuant to Section 2.01(b).

“Revolving Credit Commitments” means, as to each Revolving Credit Lender, its obligation to (a) make Revolving Credit Loans to the Company pursuant to Section 2.01(b), (b) purchase participations in L/C Obligations and (c) purchase participations in Swing Line

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Loans, in an aggregate principal amount at any one time outstanding not to exceed the amount set forth, opposite such Lender’s name on Schedule 2.01 under the caption “Revolving Credit Commitment” or in the Assignment and Assumption pursuant to which such Lender becomes a party hereto, as applicable, as such amount may be adjusted from time to time in accordance with this Agreement.  The aggregate Revolving Credit Commitments of all Revolving Credit Lenders shall be $300,000,000 on the Closing Date, as such amount may be adjusted from time to time in accordance with this Agreement.

“Revolving Credit Exposure” means, as to each Revolving Credit Lender, the sum of the outstanding principal amount of such Revolving Credit Lender’s Revolving Credit Loans and its Pro Rata Share of the L/C Obligations and outstanding Swing Line Loans at such time.

“Revolving Credit Facility” means, at any time, the aggregate amount of the Revolving Credit Lenders’ Revolving Credit Commitments at such time.

“Revolving Credit Lenders” means, at any time, any Lender that has a Revolving Credit Commitment at such time.

“Revolving Credit Loans” has the meaning specified in Section 2.01(b).

“Revolving Credit Note” means a promissory note of the Company payable to any Revolving Credit Lender, in substantially the form of Exhibit C-2 hereto, evidencing the aggregate Indebtedness of the Company to such Revolving Credit Lender resulting from the Revolving Credit Loans made by such Revolving Credit Lender.

“Rollover Amount” has the meaning set forth in Section 7.14(b).

“S&P” means Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc., and any successor thereto.

“Same Day Funds” means (a) with respect to disbursements and payments in Dollars, immediately available funds, and (b) with respect to disbursements and payments in an Alternative Currency, same day or other funds as may be determined by the Administrative Agent to be customary in the place of disbursement or payment for the settlement of international banking transactions in the relevant Alternative Currency.

“SEC” means the Securities and Exchange Commission, or any Governmental Authority succeeding to any of its principal functions.

“Secured Hedge Agreement” means any Swap Contract permitted under Article VII that is entered into by and between any Loan Party or any Restricted Subsidiary and any Hedge Bank.

“Secured Obligations” has the meaning specified in the Guarantee and Security Agreement.

“Secured Parties” means, collectively, the Administrative Agent, the other Agents, the Lenders, the Hedge Banks, any Affiliate of a Lender to which Obligations are owed, the Supplemental Administrative Agent and each co-agent or sub-agent appointed by the Administrative Agent from time to time pursuant to Section 9.01(c).

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“Securities Act” means the Securities Act of 1933.

“Security Agreement Supplement” has the meaning specified in the Guarantee and Security Agreement.

“Senior Subordinated Note Indenture” means the Indenture entered into by the Company and certain of its Subsidiaries in connection with the issuance of the Senior Subordinated Notes, together with all instruments and other agreements entered into by the Company or such Subsidiaries in connection therewith.

“Senior Subordinated Notes” means the $600,000,000 aggregate principal amount of senior subordinated notes of the Company issued on the Closing Date pursuant to the Senior Subordinated Note Indenture.

“Sold Entity or Business” has the meaning set forth in the definition of the term “Consolidated EBITDA”.

“Solvent” and “Solvency” mean, with respect to any Person on any date of determination, that on such date (a) the fair value of the property of such Person is greater than the total amount of liabilities, including contingent liabilities, of such Person, (b) the present fair salable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured, (c) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person’s ability to pay such debts and liabilities as they become absolute and matured and (d) such Person is not engaged in any business, as conducted on such date and as proposed to be conducted following such date, for which such Person’s property would constitute an unreasonably small capital.  The amount of contingent liabilities at any time shall be computed as the amount that, in the light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.

“SPC” has the meaning specified in Section 10.07(h).

“Specified Transaction” means, with respect to any period, any Investment, Disposition, incurrence or repayment of Indebtedness, Restricted Payment, Subsidiary designation, Incremental U.S. Term Loan, Incremental Overseas Term Loan or Revolving Commitment Increase that by the terms of this Agreement requires “Pro Forma Compliance” with a test or covenant hereunder or requires such test or covenant to be calculated on a “Pro Forma Basis”.

“Sponsors” means Ripplewood Holdings L.L.C. and its Affiliates, but not including, however, any portfolio companies of any of the foregoing.

“Sponsor Equity Contributions” means, collectively, (a) the contribution by the Equity Investors of an aggregate amount of cash of not less than $374,992,909.09 to Holdings, and (b) the further contribution by Holdings to the Company of any portion of such cash contribution proceeds not used by Holdings to pay Transaction Expenses.

“Statutory Reserve Rate” means a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of which is the number one minus the aggregate of the maximum reserve percentages (including any marginal, special, emergency or supplemental reserves) expressed as a decimal established by the Board to which the relevant

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Lender is subject for eurocurrency funding (currently referred to as “Eurocurrency Liabilities” in Regulation D of the Board).  Such reserve percentages shall include those imposed pursuant to such Regulation D.  Eurocurrency Rate Loans shall be deemed to constitute eurocurrency funding and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to any Lender under such Regulation D or any comparable regulation.  The Statutory Reserve Rate shall be adjusted automatically on and as of the effective date of any change in any reserve percentage.

“Sterling” means the lawful currency of the United Kingdom.

“Subsidiary” of a Person means a corporation, partnership, joint venture, limited liability company or other business entity of which a majority of the shares of securities or other interests having ordinary voting power for the election of directors or other governing body (other than securities or interests having such power only by reason of the happening of a contingency) are at the time beneficially owned directly, or indirectly through one or more intermediaries, or both, by such Person.  Unless otherwise specified, all references herein to a “Subsidiary” or to “Subsidiaries” shall refer to a Subsidiary or Subsidiaries of the Company, as well as any other entity that, following the consummation of the Acquisitions, will become a Subsidiary of the Company.

“Successful Consent Solicitation” means a Consent Solicitation that results in the receipt of consents in respect of an aggregate amount of Existing Notes necessary to modify the Existing Note Indenture to remove any provisions thereof that would restrict or prohibit the Transactions or the entering into of the Loan Documents or the Senior Subordinated Note Indenture.

“Supplemental Administrative Agent” has the meaning specified in Section 9.13 and “Supplemental Administrative Agents” shall have the corresponding meaning.

“Swap Contract” means (a) any and all rate swap transactions, basis swaps, credit derivative transactions, forward rate transactions, commodity swaps, commodity options, forward commodity contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or options or forward bond or forward bond price or forward bond index transactions, interest rate options, forward foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency swap transactions, cross-currency rate swap transactions, currency options, spot contracts, or any other similar transactions or any combination of any of the foregoing (including any options to enter into any of the foregoing), whether or not any such transaction is governed by or subject to any master agreement, and (b) any and all transactions of any kind, and the related confirmations, which are subject to the terms and conditions of, or governed by, any form of master agreement published by the International Swaps and Derivatives Association, Inc., any International Foreign Exchange Master Agreement, or any other master agreement (any such master agreement, together with any related schedules, a “Master Agreement”), including any such obligations or liabilities under any Master Agreement.

“Swap Termination Value” means, in respect of any one or more Swap Contracts, after taking into account the effect of any legally enforceable netting agreement relating to such Swap Contracts, (a) for any date on or after the date such Swap Contracts have been closed out and termination value(s) determined in accordance therewith, such termination value(s), and (b) for any date prior to the date referenced in clause (a), the amount(s) determined as the mark-to-market value(s) for such Swap Contracts, as determined based upon one or more

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mid-market or other readily available quotations provided by any recognized dealer in such Swap Contracts (which may include a Lender or any Affiliate of a Lender).

“Swing Line Borrowing” means a borrowing of a Swing Line Loan pursuant to Section 2.04.

“Swing Line Facility” means the revolving credit facility made available by the Swing Line Lender pursuant to Section 2.04.

“Swing Line Lender” means JPMorgan Chase Bank, in its capacity as provider of Swing Line Loans, or any successor swing line lender hereunder.

“Swing Line Loan” has the meaning specified in Section 2.04(a).

“Swing Line Loan Notice” means a notice of a Swing Line Borrowing pursuant to Section 2.04(b), which, if in writing, shall be substantially in the form of Exhibit B.

“Swing Line Obligations” means, as at any date of determination, the aggregate principal amount of all Swing Line Loans outstanding.

“Swing Line Sublimit” means an amount equal to the lesser of (a) $30,000,000 and (b) the aggregate amount of the Revolving Credit Commitments.  The Swing Line Sublimit is part of, and not in addition to, the Revolving Credit Commitments.

“TARGET Day” means any day on which the Trans-European Automated Real-time Gross Settlement Express Transfer (TARGET) payment system (or, if such payment system ceases to be operative, such other payment system (if any) determined by the Administrative Agent to be a suitable replacement) is open for the settlement of payments in Euro.

“Tax Confirmation” has the meaning specified in Section 10.24.

“Taxes” has the meaning specified in Section 3.01(a).

“Term Borrowing” means a borrowing consisting of simultaneous Term Loans of the same Type and currency and, in the case of Eurocurrency Rate Loans, having the same Interest Period made by each of the Term Lenders pursuant to Section 2.01.

“Term Commitment” means a U.S. Term Commitment or a Euro Term Commitment, as the context may require.

“Term Lender” means a U.S. Term Lender or a Euro Term Lender, as the context may require.

“Term Loan” means a U.S. Term Loan or a Euro Term Loan, as the context may require.

“Term Note” means a U.S. Term Note or Euro Term Note, as the context may require.

“Test Period” means, for any determination under this Agreement, the four consecutive fiscal quarters of the Company then last ended.

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“Threshold Amount” means $20,000,000.

“Total Leverage Ratio” means, with respect to any Test Period, the ratio as of the last day of such Test Period of (a) Consolidated Total Debt as of the last day of such Test Period to (b) Consolidated EBITDA for such Test Period.

“Total Outstandings” means the aggregate Outstanding Amount of all Loans and all L/C Obligations.

“Tranche” means a category of Commitments or Credit Extensions thereunder.  For purposes hereof, each of the following comprises a separate Tranche:  (a) the unused Revolving Commitments, (b) the outstanding Revolving Credit Loans and L/C Obligations in respect of Letters of Credit, (c) the outstanding U.S. Term Loans and (d) the outstanding Euro Term Loans.

“Transaction” means, collectively, (a) the Sponsor Equity Contributions, (b) the Acquisition, (c) the Merger, (d) the DH Acquisition, (e) the WRC Acquisition, (f) the issuance of the Senior Subordinated Notes, (g) the issuance of the Holdings PIK Preferred, (h) the issuance of the Holdings Common Equity, (i) the funding of the Term Loans, (j) the consummation of a Successful Consent Solicitation or a Defeasance, (k) the repayment, repurchase or redemption of certain outstanding Indebtedness of Reader’s Digest, WRC Media and Direct Holdings, (l) the consummation of any other transactions in connection with the foregoing and (m) the payment of fees and expenses incurred in connection with any of the foregoing.

“Transaction Expenses” means any fees or expenses incurred or paid by Holdings, the Company or any Restricted Subsidiary in connection with the Transaction, this Agreement and the other Loan Documents and the transactions contemplated hereby and thereby.

“Type” means, with respect to a Loan denominated in Dollars, its character as a Base Rate Loan or a Eurocurrency Rate Loan.

“Unaudited Financial Statements” means (i) the unaudited consolidated balance sheets and related statements of income, stockholders’ equity and cash flows of Reader’s Digest and Direct Holdings and their respective Subsidiaries for each subsequent fiscal quarter ended after the fiscal year ended June 30, 2006 and June 24, 2006, respectively, for which such financial statements are available (and which are publicly available, in the case of Reader’s Digest) prior to the Closing Date, and (ii) the unaudited consolidated balance sheets and related statements of income, stockholders’ equity and cash flows of WRC Media and its Subsidiaries for each subsequent fiscal quarter ended after the fiscal year ended December 31, 2006, for which such financial statements are available prior to the Closing Date.

“Uniform Commercial Code” means the Uniform Commercial Code as the same may from time to time be in effect in the State of New York or the Uniform Commercial Code (or similar code or statute) of another jurisdiction, to the extent it may be required to apply to any item or items of Collateral.

“United States” and “U.S.” mean the United States of America.

“Unreimbursed Amount” has the meaning set forth in Section 2.03(c)(i).

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“Unrestricted Subsidiary” means (i) each Subsidiary of the Company listed on Schedule 1.01G and (ii) any Subsidiary of the Company designated by the board of directors of Holdings as an Unrestricted Subsidiary pursuant to Section 6.15 subsequent to the date hereof.

“U.S. Guarantees” has the meaning set forth in the definition of “Collateral and Guarantee Requirement”.

“U.S. Guarantor” has the meaning set forth in the definition of “Collateral and Guarantee Requirement”.

“U.S. Lender” has the meaning set forth in Section 10.15(b).

“U.S. Refinanced Term Loans” has the meaning specified in Section 10.01.

“U.S. Replacement Term Loans” has the meaning specified in Section 10.01.

“U.S. Term Commitment” means, as to each U.S. Term Lender, its obligation to make a U.S. Term Loan to the Company pursuant to Section 2.01(a) in an aggregate Dollar Amount not to exceed the amount set forth opposite such Lender’s name on Schedule 2.01 under the caption “U.S. Term Commitment” or in the Assignment and Assumption pursuant to which such U.S. Term Lender becomes a party hereto, as applicable, as such amount may be adjusted from time to time in accordance with this Agreement.  The initial aggregate amount of the Term Commitments is $1,210,000,000.

“U.S. Term Lender” means, at any time, any Lender that has a U.S. Term Commitment or a U.S. Term Loan at such time.

“U.S. Term Loan” means a Loan made pursuant to Section 2.01(a).

“U.S. Term Note” means a promissory note of the Company payable to any U.S. Term Lender, in substantially the form of Exhibit C-1 hereto, evidencing the aggregate Indebtedness of the Company to such U.S. Term Lender resulting from the U.S. Term Loans made by such U.S. Term Lender.

“Weighted Average Life to Maturity” means, when applied to any Indebtedness at any date, the number of years obtained by dividing:  (i) the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by (b) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment; by (ii) the then outstanding principal amount of such Indebtedness.

“wholly owned” means, with respect to a Subsidiary of a Person, a Subsidiary of such Person all of the outstanding Equity Interests of which (other than (x) director’s qualifying shares and (y) shares issued to foreign nationals to the extent required by applicable Law) are owned by such Person and/or by one or more wholly owned Subsidiaries of such Person.

“WRC Acquisition” has the meaning set forth in the preliminary statements to this Agreement.

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“WRC Acquisition Agreement” means the Agreement and Plan of Merger, dated as of January 23, 2007, among RDA Holding Co., WRC Acquisition Co. and WRC Media Inc.

“WRC Media” has the meaning set forth in the preliminary statements to this Agreement.

SECTION 1.02.  Other Interpretive Provisions.  With reference to this Agreement and each other Loan Document, unless otherwise specified herein or in such other Loan Document:

(a)  The meanings of defined terms are equally applicable to the singular and plural forms of the defined terms.

(b)  (i)  The words “herein,” “hereto,” “hereof” and “hereunder” and words of similar import when used in any Loan Document shall refer to such Loan Document as a whole and not to any particular provision thereof.

(ii)  Article, Section, Exhibit and Schedule references are to the Loan Document in which such reference appears.

(iii)  The term “including” is by way of example and not limitation.

(iv)  The term “documents” includes any and all instruments, documents, agreements, certificates, notices, reports, financial statements and other writings, however evidenced, whether in physical or electronic form.

(c)  In the computation of periods of time from a specified date to a later specified date, the word “from” means “from and including;” the words “to” and “until” each mean “to but excluding;” and the word “through” means “to and including.”

(d)  Section headings herein and in the other Loan Documents are included for convenience of reference only and shall not affect the interpretation of this Agreement or any other Loan Document.

SECTION 1.03.  Accounting Terms.  (a)  All accounting terms not specifically or completely defined herein shall be construed in conformity with, and all financial data (including financial ratios and other financial calculations) required to be submitted pursuant to this Agreement shall be prepared in conformity with, GAAP, applied in a manner consistent with that used in preparing the Audited Financial Statements, except as otherwise specifically prescribed herein.

(b)  Notwithstanding anything to the contrary herein, for purposes of determining compliance with any test or covenant contained in this Agreement with respect to any period during which any Specified Transaction occurs, the Total Leverage Ratio shall be calculated with respect to such period and such Specified Transaction on a Pro Forma Basis.  To the extent that any provision of any Loan Document requires or tests for Pro Forma Compliance with Section 7.10 prior to the first test date set forth in Section 7.10, such provision shall be deemed to refer to the first covenant level set forth therein.

SECTION 1.04.  Rounding.  Any financial ratios required to be maintained by the Company pursuant to this Agreement (or required to be satisfied in order for a specific action to

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be permitted under this Agreement) shall be calculated by dividing the appropriate component by the other component, carrying the result to one place more than the number of places by which such ratio is expressed herein and rounding the result up or down to the nearest number (with a rounding-up if there is no nearest number).

SECTION 1.05.  References to Agreements, Laws, Etc.  Unless otherwise expressly provided herein, (a) references to Organization Documents, agreements (including the Loan Documents) and other contractual instruments shall be deemed to include all subsequent amendments, restatements, extensions, supplements and other modifications thereto, but only to the extent that such amendments, restatements, extensions, supplements and other modifications are permitted by any Loan Document; and (b) references to any Law shall include all statutory and regulatory provisions consolidating, amending, replacing, supplementing or interpreting such Law.

SECTION 1.06.  Times of Day.  Unless otherwise specified, all references herein to times of day shall be references to Eastern time (daylight or standard, as applicable).

SECTION 1.07.  Timing of Payment of Performance.  When the payment of any obligation or the performance of any covenant, duty or obligation is stated to be due or performance required on a day which is not a Business Day, the date of such payment (other than as described in the definition of Interest Period) or performance shall extend to the immediately succeeding Business Day.

SECTION 1.08.  Currency Equivalents Generally.  (a)  Any amount specified in this Agreement (other than in Articles II, IX and X or as set forth in paragraph (b) of this Section) or any of the other Loan Documents to be in Dollars shall also include the equivalent of such amount in any currency other than Dollars, such equivalent amount to be determined at the rate of exchange quoted by the Reuters World Currency Page for the applicable currency at 11:00 a.m. (London time) on such day (or, in the event such rate does not appear on any Reuters World Currency Page, by reference to such other publicly available service for displaying exchange rates as may be agreed upon by the Administrative Agent and the Company, or, in the absence of such agreement, such rate shall instead be the arithmetic average of the spot rates of exchange of the Administrative Agent in the market where its foreign currency exchange operations in respect of such currency are then being conducted, at or about 10:00 a.m. (New York City time) on such date for the purchase of Dollars for delivery two Business Days later).  Notwithstanding the foregoing, for purposes of determining compliance with Sections 7.01, 7.02 and 7.03 with respect to any amount of Indebtedness or Investment in a currency other than Dollars, no Default shall be deemed to have occurred solely as a result of changes in rates of exchange occurring after the time such Indebtedness or Investment is incurred; provided that, for the avoidance of doubt, the foregoing provisions of this Section 1.08 shall otherwise apply to such Sections, including with respect to determining whether any Indebtedness or Investment may be incurred at any time under such Sections.

(b)  For purposes of determining compliance under Sections 7.02, 7.05, 7.06, 7.10 and 7.14, any amount in a currency other than Dollars will be converted to Dollars based on the average Exchange Rate for such currency for the most recent twelve-month period immediately prior to the date of determination determined in a manner consistent with that used in calculating EBITDA for the applicable period, provided, however, that the foregoing shall not be deemed to apply to the determination of any amount of Indebtedness.  For purposes of determining compliance with Section 7.10, (i) the Dollar Amount of the Euro Term Loans will be determined based on the Exchange Rate in effect on the Closing Date, (ii) the Dollar Amount of any

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Incremental Overseas Term Loans will be determined based on the Exchange Rate in effect on the applicable Incremental Overseas Facility Closing Date and (iii) the equivalent in Dollars of any other Indebtedness denominated in a currency other than Dollars will reflect the currency translation effects, determined in accordance with GAAP, of Swap Contracts for currency exchange risks with respect to the applicable currency in effect on the date of determination of the Dollar equivalent of such other Indebtedness.

(c)  For all purposes under this Agreement, the Administrative Agent shall determine the Dollar Amount of each Alternative Currency Loan as of the Closing Date, in the case of any Euro Term Loan, and as of the relevant Incremental Overseas Closing Date, in the case of any other Alternative Currency Loan.  Each such determination shall be based on the Exchange Rate on or about the date of the related initial Committed Loan Notice.  Notwithstanding the foregoing, the Exchange Rate applicable to the Euro Term Loans on the Closing Date shall be deemed to be 1.3206.

SECTION 1.09.  Change of Currency.  Each provision of this Agreement shall be subject to such reasonable changes of construction as the Administrative Agent may from time to time specify with the Company’s consent to appropriately reflect a change in currency of any country and any relevant market conventions or practices relating to such change in currency.

ARTICLE II

THE COMMITMENTS AND CREDIT EXTENSIONS

SECTION 2.01.  The Loans.  (a)  The U.S. Term Borrowings.  Subject to the terms and conditions set forth herein, each U.S. Term Lender severally agrees to make to the Company a single loan denominated in Dollars in a Dollar Amount equal to such U.S. Term Lender’s U.S. Term Commitment on the Closing Date.  Amounts borrowed under this Section 2.01(a) and repaid or prepaid may not be reborrowed.  U.S. Term Loans may be Base Rate Loans or Eurocurrency Rate Loans, as further provided herein.

(b)  The Revolving Credit Borrowings.  Subject to the terms and conditions set forth herein, each Revolving Credit Lender severally agrees to make loans denominated in Dollars to the Company as elected by the Company pursuant to Section 2.02 (each such loan, a “Revolving Credit Loan”) from time to time, on any Business Day until the Maturity Date, in an aggregate principal amount not to exceed at any time outstanding the amount of such Lender’s Revolving Credit Commitment; provided that (i) after giving effect to any Revolving Credit Borrowing, the amount of the Revolving Credit Exposure of any Lender shall not exceed such Lender’s Revolving Credit Commitment, and (ii) the aggregate principal amount of Revolving Credit Loans made on the Closing Date shall not exceed $10,000,000.  Within the limits of each Lender’s Revolving Credit Commitment, and subject to the other terms and conditions hereof, the Company may borrow under this Section 2.01(b), prepay under Section 2.05, and reborrow under this Section 2.01(b).  Revolving Credit Loans may be Base Rate Loans or Eurocurrency Rate Loans, as further provided herein.

(c)  The Euro Term Borrowings.  Subject to the terms and conditions set forth herein, each Euro Term Lender severally agrees to make to the German Borrower a single loan denominated in Euros in a Dollar Amount equal to such Euro Term Lender’s Euro Term Commitment on the Closing Date.  Amounts borrowed under this Section 2.01(c) and repaid or prepaid may not be reborrowed.  Euro Term Loans must be Eurocurrency Rate Loans, as further provided herein.

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SECTION 2.02.  Borrowings, Conversions and Continuations of Loans.  (a)  Each Term Borrowing, each Revolving Credit Borrowing, each conversion of Term Loans or Revolving Credit Loans from one Type to the other, and each continuation of Eurocurrency Rate Loans shall be made upon the relevant Borrower’s notice to the Administrative Agent, which may be given by telephone.  Each such notice must be received by the Administrative Agent not later than (i) 12:30 p.m. (New York time or London time in the case of any Borrowing denominated in an Alternative Currency) three (3) Business Days prior to the requested date of any Borrowing or continuation of Eurocurrency Rate Loans or any conversion of Base Rate Loans to Eurocurrency Rate Loans, and (ii) 11:00 a.m. (New York time) on the requested date of any Borrowing of Base Rate Loans.  Each telephonic notice by the relevant Borrower pursuant to this Section 2.02(a) must be confirmed promptly by delivery to the Administrative Agent of a written Committed Loan Notice, appropriately completed and signed by a Responsible Officer of such Borrower.  Each Borrowing of, conversion to or continuation of Eurocurrency Rate Loans shall be in a principal amount of $5,000,000 or a whole multiple of $1,000,000 in excess thereof (or comparable amounts determined by the Administrative Agent in the case of Alternative Currency Loans).  Except as provided in Sections 2.03(c) and 2.04(c), each Borrowing of or conversion to Base Rate Loans shall be in a principal amount of $1,000,000 or a whole multiple of $500,000 in excess thereof.  Each Committed Loan Notice (whether telephonic or written) shall specify (i) whether the relevant Borrower is requesting a Term Borrowing, a Revolving Credit Borrowing, a conversion of U.S. Term Loans or Revolving Credit Loans from one Type to the other, or a continuation of Eurocurrency Rate Loans, (ii) the requested date of the Borrowing, conversion or continuation, as the case may be (which shall be a Business Day), (iii) the principal amount of Loans to be borrowed, converted or continued, (iv) the currency in which the Loans to be borrowed are to be denominated, (v) the Type of Loans to be borrowed or to which existing Term Loans or Revolving Credit Loans are to be converted, and (vi) if applicable, the duration of the Interest Period with respect thereto.  If with respect to Loans denominated in Dollars the Company fails to specify a Type of Loan in a Committed Loan Notice or fails to give a timely notice requesting a conversion or continuation, then the applicable Term Loans or Revolving Credit Loans shall be made as, or converted to, Base Rate Loans.  Any such automatic conversion to Base Rate Loans shall be effective as of the last day of the Interest Period then in effect with respect to the applicable Eurocurrency Rate Loans.  If the relevant Borrower requests a Borrowing of, conversion to, or continuation of Eurocurrency Rate Loans in any such Committed Loan Notice, but fails to specify an Interest Period (or fails to give a timely notice requesting a continuation of Eurocurrency Rate Loans denominated in an Alternative Currency), it will be deemed to have specified an Interest Period of one (1) month.

(b)  Following receipt of a Committed Loan Notice, the Administrative Agent shall promptly notify each Lender of the amount of its Pro Rata Share of the applicable Class of Loans, and if no timely notice of a conversion or continuation is provided by the Company, the Administrative Agent shall notify each Lender of the details of any automatic conversion to Base Rate Loans or continuation described in Section 2.02(a).  In the case of each Borrowing, each Appropriate Lender shall make the amount of its Loan available to the Administrative Agent in Same Day Funds at the Administrative Agent’s Office for the applicable currency not later than 1:00 p.m. (New York time) on the Business Day specified in the applicable Committed Loan Notice.  Upon satisfaction of the applicable conditions set forth in Section 4.02 (and, if such Borrowing is the initial Credit Extension, Section 4.01, and, if such Borrowing is made by an Overseas Borrower, Section 4.03), the Administrative Agent shall make all funds so received available to the relevant Borrower in like funds as received by the Administrative Agent either by (i) crediting the account of such Borrower on the books of JPMorgan Chase Bank with the amount of such funds or (ii) wire transfer of such funds, in each case in accordance with instructions provided to (and reasonably acceptable to) the Administrative Agent by such

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Borrower; provided that if, on the date the Committed Loan Notice with respect to such Borrowing is given by the relevant Borrower, there are Swing Line Loans or L/C Borrowings outstanding, then the proceeds of such Borrowing shall be applied, first, to the payment in full of any such L/C Borrowings, second, to the payment in full of any such Swing Line Loans, and third, to the relevant Borrower as provided above.

(c)  Except as otherwise provided herein, a Eurocurrency Rate Loan may be continued or converted only on the last day of an Interest Period for such Eurocurrency Rate Loan unless the Company pays the amount due, if any, under Section 3.05 in connection therewith.

(d)  The Administrative Agent shall promptly notify the Company and the Lenders of the interest rate applicable to any Interest Period for Eurocurrency Rate Loans upon determination of such interest rate.  The determination of the Eurocurrency Rate by the Administrative Agent shall be conclusive in the absence of manifest error.  At any time that Base Rate Loans are outstanding, the Administrative Agent shall notify the Company and the Lenders of any change in JPMorgan Chase Bank prime rate used in determining the Base Rate promptly following the public announcement of such change.

(e)  After giving effect to all Term Borrowings, all Revolving Credit Borrowings, all conversions of Term Loans or Revolving Credit Loans from one Type to the other, and all continuations of Term Loans or Revolving Credit Loans as the same Type, there shall not be more than twenty (20) Interest Periods in effect.

(f)  The failure of any Lender to make the Loan to be made by it as part of any Borrowing shall not relieve any other Lender of its obligation, if any, hereunder to make its Loan on the date of such Borrowing, but no Lender shall be responsible for the failure of any other Lender to make the Loan to be made by such other Lender on the date of any Borrowing.

SECTION 2.03.  Letters of Credit.  (a)  The Letter of Credit Commitment.  (i)    On and after the Closing Date, each Existing Letter of Credit will constitute a Letter of Credit under this Agreement and for purposes hereof will be deemed to have been issued on the Closing Date.  Subject to the terms and conditions set forth herein, (A) each L/C Issuer agrees, in reliance upon the agreements of the other Revolving Credit Lenders set forth in this Section 2.03, (1) from time to time on any Business Day during the period from the Closing Date until the Letter of Credit Expiration Date, to issue Letters of Credit denominated in Dollars for the account of the Company (provided that any Letter of Credit may be for the benefit of Holdings or any Subsidiary of the Company) and to amend or renew Letters of Credit previously issued by it, in accordance with Section 2.03(b), and (2) to honor drafts under the Letters of Credit and (B) the Revolving Credit Lenders severally agree to participate in Letters of Credit issued pursuant to this Section 2.03; provided that no L/C Issuer shall be obligated to make any L/C Credit Extension with respect to any Letter of Credit, and no Lender shall be obligated to participate in any Letter of Credit to the extent that, as of the date of such L/C Credit Extension, (x) the amount of the Revolving Credit Exposure of any Lender would exceed such Lender’s Revolving Credit Commitment or (y) the Outstanding Amount of the L/C Obligations would exceed the Letter of Credit Sublimit.  Within the foregoing limits, and subject to the terms and conditions hereof, the Company’s ability to obtain Letters of Credit shall be fully revolving, and accordingly the Company may, during the foregoing period, obtain Letters of Credit to replace Letters of Credit that have expired or that have been drawn upon and reimbursed.

(ii)  An L/C Issuer shall be under no obligation to issue any Letter of Credit if:

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(A)  any order, judgment or decree of any Governmental Authority or arbitrator shall by its terms purport to enjoin or restrain such L/C Issuer from issuing such Letter of Credit, or any Law applicable to such L/C Issuer or any directive (whether or not having the force of law) from any Governmental Authority with jurisdiction over such L/C Issuer shall prohibit, or direct that such L/C Issuer refrain from, the issuance of letters of credit generally or such Letter of Credit in particular; or

(B)  the issuance of such Letter of Credit would violate any Laws binding upon such L/C Issuer.

(iii)  Each Letter of Credit shall, unless otherwise agreed by the applicable L/C Issuer and subject to Section 2.03(b)(iii), expire no later than the earlier of (x) twelve months after the date of issuance or last renewal and (y) unless Cash Collateralized prior to the Letter of Credit Expiration Date, the Letter of Credit Expiration Date.  An L/C Issuer shall be under no obligation to amend any Letter of Credit if (A) such L/C Issuer would have no obligation at such time to issue such Letter of Credit in its amended form under the terms hereof, or (B) the beneficiary of such Letter of Credit does not accept the proposed amendment to such Letter of Credit.

(b)  Procedures for Issuance and Amendment of Letters of Credit; Auto-Renewal Letters of Credit.  (i)  Each Letter of Credit shall be issued or amended, as the case may be, upon the request of the Company delivered to an L/C Issuer (with a copy to the Administrative Agent) in the form of a Letter of Credit Application, appropriately completed and signed by a Responsible Officer of the Company.  Such Letter of Credit Application must be received by the relevant L/C Issuer and the Administrative Agent not later than 12:30 p.m. at least three (3) Business Days prior to the proposed issuance date or date of amendment, as the case may be; or, in each case, such later date and time as the relevant L/C Issuer may agree in a particular instance in its sole discretion.  In the case of a request for an initial issuance of a Letter of Credit, such Letter of Credit Application shall specify in form and detail reasonably satisfactory to the relevant L/C Issuer:  (a) the proposed issuance date of the requested Letter of Credit (which shall be a Business Day); (b) the amount thereof; (c) the expiry date thereof; (d) the name and address of the beneficiary thereof; (e) the documents to be presented by such beneficiary in case of any drawing thereunder; (f) the full text of any certificate to be presented by such beneficiary in case of any drawing thereunder; and (g) such other matters as the relevant L/C Issuer may reasonably request.  In the case of a request for an amendment of any outstanding Letter of Credit, such Letter of Credit Application shall specify in form and detail reasonably satisfactory to the relevant L/C Issuer (1) the Letter of Credit to be amended; (2) the proposed date of amendment thereof (which shall be a Business Day); (3) the nature of the proposed amendment; and (4) such other matters as the relevant L/C Issuer may reasonably request.

(ii)  Promptly after receipt of any Letter of Credit Application, the relevant L/C Issuer will confirm with the Administrative Agent (by telephone or in writing) that the Administrative Agent has received a copy of such Letter of Credit Application from the Company and, if not, such L/C Issuer will provide the Administrative Agent with a copy thereof.  Upon receipt by the relevant L/C Issuer of confirmation from the Administrative Agent that the requested issuance or amendment is permitted in accordance with the terms hereof, then, subject to the terms and conditions hereof, such L/C Issuer shall, on the requested date, issue a Letter of Credit for the account of the Company or enter into the applicable amendment, as the case may be.  Immediately upon the issuance of each Letter of Credit, each Revolving Credit Lender shall be deemed to, and hereby irrevocably and unconditionally agrees to, purchase from the relevant L/C Issuer a risk participation in such Letter of Credit in an amount equal to the product of such Lender’s Pro Rata Share times the amount of such Letter of Credit.

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(iii)  If the Company so requests in any applicable Letter of Credit Application, the relevant L/C Issuer shall agree to issue a Letter of Credit that has automatic renewal provisions (each, an “Auto-Renewal Letter of Credit”); provided that any such Auto-Renewal Letter of Credit must permit the relevant L/C Issuer to prevent any such renewal at least once in each twelve month period (commencing with the date of issuance of such Letter of Credit) by giving prior notice to the beneficiary thereof not later than a day (the “Nonrenewal Notice Date”) in each such twelve month period to be agreed upon at the time such Letter of Credit is issued.  Unless otherwise directed by the relevant L/C Issuer, the Company shall not be required to make a specific request to the relevant L/C Issuer for any such renewal.  Once an Auto-Renewal Letter of Credit has been issued, the Lenders shall be deemed to have authorized (but may not require) the relevant L/C Issuer to permit the renewal of such Letter of Credit at any time to an expiry date not later than the Letter of Credit Expiration Date; provided that the relevant L/C Issuer shall not permit any such renewal if (A) the relevant L/C Issuer has determined that it would have no obligation at such time to issue such Letter of Credit in its renewed form under the terms hereof (by reason of the provisions of Section 2.03(a)(ii) or Section 2.03(a)(iii) or otherwise), or (B) it has received notice (which may be by telephone or in writing) on or before the day that is five (5) Business Days before the Nonrenewal Notice Date from the Administrative Agent, any Revolving Credit Lender or the Company that one or more of the applicable conditions specified in Section 4.02 is not then satisfied.

(iv)  Promptly after its delivery of any Letter of Credit or any amendment to a Letter of Credit to an advising bank with respect thereto or to the beneficiary thereof, the relevant L/C Issuer will also deliver to the Company and the Administrative Agent a true and complete copy of such Letter of Credit or amendment.

(c)  Drawings and Reimbursements; Funding of Participations.  (i)  Upon receipt from the beneficiary of any Letter of Credit of any notice of a drawing under such Letter of Credit, the relevant L/C Issuer shall notify promptly the Company and the Administrative Agent thereof.  Not later than 1:00 p.m. on (x) if notice that a payment is made on any date by an L/C Issuer under a Letter of Credit is received by the Company on or before 11:00 a.m. (New York time), the Business Day immediately following such date or (y) if notice that a payment is made on any date by an L/C Issuer under a Letter of Credit is received by the Company later than 11:00 a.m. (New York time), the second Business Day immediately following such date (each such date, an “Honor Date”), the Company shall reimburse such L/C Issuer through the Administrative Agent in an amount equal to the amount of such drawing.  In order to reimburse any such drawing, the Company shall have the option to request in accordance with Section 2.02 a Revolving Credit Borrowing of Base Rate Loans (“Refunding Loans”), without regard to the minimum and multiples specified in Section 2.02 for the principal amount of Base Rate Loans but subject to the amount of the unutilized portion of the Revolving Credit Commitments of the Revolving Credit Lenders and the conditions set forth in Section 4.02.  If the Company fails to so reimburse such L/C Issuer by such time, the Administrative Agent shall promptly notify each Revolving Credit Lender of the Honor Date, the amount of the unreimbursed drawing (the “Unreimbursed Amount”), and the amount of such Revolving Credit Lender’s Pro Rata Share thereof.  Any notice given by an L/C Issuer or the Administrative Agent pursuant to this Section 2.03(c)(i) may be given by telephone if immediately confirmed in writing; provided that the lack of such an immediate confirmation shall not affect the conclusiveness or binding effect of such notice.

(ii)  Each Revolving Credit Lender (including any Lender acting as an L/C Issuer) shall, upon any notice pursuant to Section 2.03(c)(i) to make a Refunding Loan to the Company, make such funds available to the Administrative Agent for the account of the relevant L/C Issuer, in Dollars, at the Administrative Agent’s Office for payments not later than 1:00 p.m. on the

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Business Day specified in such notice by the Company.  The Administrative Agent shall remit the funds so received to the relevant L/C Issuer.

(iii)  With respect to any Unreimbursed Amount, the Company shall be deemed to have incurred from the relevant L/C Issuer an L/C Borrowing in the amount of the Unreimbursed Amount that is not so refinanced, which L/C Borrowing shall be due and payable on demand (together with interest) and shall bear interest at the Default Rate.  In such event, upon demand by the relevant L/C Issuer (through the Administrative Agent), each Revolving Credit Lender shall make funds available to the Administrative Agent for the account of the relevant L/C Issuer, in Dollars, at the Administrative Agent’s Office for payments in an amount equal to its Pro Rata Share of the Unreimbursed Amount not later than 1:00 p.m. on the Business Day following the date of such demand, and such payment to the Administrative Agent for the account of the relevant L/C Issuer shall be deemed payment in respect of its participation in such L/C Borrowing and shall constitute an L/C Advance from such Lender in satisfaction of its participation obligation under this Section 2.03.

(iv)  Until each Revolving Credit Lender funds its L/C Advance pursuant to this Section 2.03(c) to reimburse the relevant L/C Issuer for any amount drawn under any Letter of Credit, interest in respect of such Lender’s Pro Rata Share of such amount shall be solely for the account of the relevant L/C Issuer.

(v)  Each Revolving Credit Lender’s obligation to make Refunding Loans or L/C Advances to reimburse an L/C Issuer for amounts drawn under Letters of Credit, as contemplated by this Section 2.03(c), shall be absolute and unconditional and shall not be affected by any circumstance, including (A) any setoff, counterclaim, recoupment, defense or other right which such Lender may have against the relevant L/C Issuer, the Company or any other Person for any reason whatsoever; (B) the occurrence or continuance of a Default, or (C) any other occurrence, event or condition, whether or not similar to any of the foregoing; provided that each Revolving Credit Lender’s obligation to make Refunding Loans pursuant to this Section 2.03(c) is subject to the conditions set forth in Section 4.02.  No such making of an L/C Advance shall relieve or otherwise impair the obligation of the Company to reimburse the relevant L/C Issuer for the amount of any payment made by such L/C Issuer under any Letter of Credit, together with interest as provided herein.

(vi)  If any Revolving Credit Lender fails to make available to the Administrative Agent for the account of the relevant L/C Issuer any amount required to be paid by such Lender pursuant to the foregoing provisions of this Section 2.03(c) by the time specified in Section 2.03(c)(iii), such L/C Issuer shall be entitled to recover from such Lender (acting through the Administrative Agent), on demand, such amount with interest thereon for the period from the date such payment is required to the date on which such payment is immediately available to such L/C Issuer at a rate per annum equal to the Federal Funds Rate from time to time in effect.  A certificate of the relevant L/C Issuer submitted to any Revolving Credit Lender (through the Administrative Agent) with respect to any amounts owing under this Section 2.03(c)(vi) shall be conclusive absent manifest error.

(d)  Repayment of Participations.  (i)  If at any time after an L/C Issuer has made a payment under any Letter of Credit and has received from any Revolving Credit Lender such Lender’s L/C Advance in respect of such payment in accordance with Section 2.03(c), the Administrative Agent receives for the account of such L/C Issuer any payment in respect of the related Unreimbursed Amount or interest thereon (whether directly from the Company or otherwise, including proceeds of Cash Collateral applied thereto by the Administrative Agent),

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the Administrative Agent will distribute to such Lender its Pro Rata Share thereof (appropriately adjusted, in the case of interest payments, to reflect the period of time during which such Lender’s L/C Advance was outstanding) in the same funds as those received by the Administrative Agent.

(ii)  If any payment received by the Administrative Agent for the account of an L/C Issuer pursuant to Section 2.03(c) is required to be returned under any of the circumstances described in Section 10.06 (including pursuant to any settlement entered into by such L/C Issuer in its discretion), each Revolving Credit Lender shall pay to the Administrative Agent for the account of such L/C Issuer its Pro Rata Share thereof on demand of the Administrative Agent, plus interest thereon from the date of such demand to the date such amount is returned by such Lender, at a rate per annum equal to the Federal Funds Rate from time to time in effect.

(e)  Obligations Absolute.  The obligation of the Company to reimburse the relevant L/C Issuer for each drawing under each Letter of Credit issued by it and to repay each L/C Borrowing shall be absolute, unconditional and irrevocable, and shall be paid strictly in accordance with the terms of this Agreement under all circumstances, including the following:

(i)  any lack of validity or enforceability of such Letter of Credit, this Agreement, or any other agreement or instrument relating thereto;

(ii)  the existence of any claim, counterclaim, setoff, defense or other right that any Loan Party may have at any time against any beneficiary or any transferee of such Letter of Credit (or any Person for whom any such beneficiary or any such transferee may be acting), the relevant L/C Issuer or any other Person, whether in connection with this Agreement, the transactions contemplated hereby or by such Letter of Credit or any agreement or instrument relating thereto, or any unrelated transaction;

(iii)  any draft, demand, certificate or other document presented under such Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; or any loss or delay in the transmission or otherwise of any document required in order to make a drawing under such Letter of Credit;

(iv)  any payment by the relevant L/C Issuer under such Letter of Credit against presentation of a draft or certificate that does not strictly comply with the terms of such Letter of Credit; or any payment made by the relevant L/C Issuer under such Letter of Credit to any Person purporting to be a trustee in bankruptcy, debtor-in-possession, assignee for the benefit of creditors, liquidator, receiver or other representative of or successor to any beneficiary or any transferee of such Letter of Credit, including any arising in connection with any proceeding under any Debtor Relief Law;

(v)  any exchange, release or nonperfection of any Collateral, or any release or amendment or waiver of or consent to departure from the Guarantee under the Guarantee and Security Agreement or any other guarantee, for all or any of the Obligations any Loan Party in respect of such Letter of Credit; or

(vi)  any other circumstance or happening whatsoever, whether or not similar to any of the foregoing, including any other circumstance that might otherwise constitute a defense available to, or a discharge of, any Loan Party;

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provided that the foregoing shall not excuse any L/C Issuer from liability to the Company to the extent of any direct damages (as opposed to consequential damages, claims in respect of which are waived by the Company to the extent permitted by applicable Law) suffered by the Company that are caused by such L/C Issuer’s gross negligence or willful misconduct when determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof.

(f)  Role of L/C Issuers.  Each Lender and the Company agree that, in paying any drawing under a Letter of Credit, the relevant L/C Issuer shall not have any responsibility to obtain any document (other than any sight draft, certificates and documents expressly required by the Letter of Credit) or to ascertain or inquire as to the validity or accuracy of any such document or the authority of the Person executing or delivering any such document.  None of the L/C Issuers, any Agent-Related Person nor any of the respective correspondents, participants or assignees of any L/C Issuer shall be liable to any Lender for (i) any action taken or omitted in connection herewith at the request or with the approval of the Lenders or the Required Lenders, as applicable; (ii) any action taken or omitted in the absence of gross negligence or willful misconduct; or (iii) the due execution, effectiveness, validity or enforceability of any document or instrument related to any Letter of Credit or Letter of Credit Application.  The Company hereby assumes all risks of the acts or omissions of any beneficiary or transferee with respect to its use of any Letter of Credit; provided that this assumption is not intended to, and shall not, preclude the Company’s pursuing such rights and remedies as it may have against the beneficiary or transferee at law or under any other agreement.  None of the L/C Issuers, any Agent-Related Person, nor any of the respective correspondents, participants or assignees of any L/C Issuer, shall be liable or responsible for any of the matters described in clauses (i) through (vi) of Section 2.03(e); provided that anything in such clauses to the contrary notwithstanding, the Company may have a claim against an L/C Issuer, and such L/C Issuer may be liable to the Company, to the extent, but only to the extent, of any direct, as opposed to consequential or exemplary, damages suffered by the Company which the Company proves were caused by such L/C Issuer’s willful misconduct or gross negligence or such L/C Issuer’s willful or grossly negligent failure to pay under any Letter of Credit after the presentation to it by the beneficiary of a sight draft and certificate(s) strictly complying with the terms and conditions of a Letter of Credit.  In furtherance and not in limitation of the foregoing, each L/C Issuer may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary, and no L/C Issuer shall be responsible for the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign a Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason.

(g)  Cash Collateral.  (i) If as of the Letter of Credit Expiration Date, any Letter of Credit may for any reason remain outstanding and partially or wholly undrawn, (ii) if any Event of Default occurs and is continuing and the Administrative Agent or the Required Lenders, as applicable, require the Company to Cash Collateralize the L/C Obligations pursuant to Section 8.02(c) or (iii) an Event of Default set forth under Section 8.01(f) occurs and is continuing, then the Company shall Cash Collateralize the then Outstanding Amount of such Letter of Credit (in the case of clause (i) above) or of all L/C Obligations (in the case of clauses (ii) and (iii) above) (in each case, in an amount equal to 102% of such Outstanding Amount), and shall do so not later than 2:00 p.m., New York City time, on (x) in the case of the immediately preceding clauses (i) and (ii), (1) the Business Day that the Company receives notice thereof, if such notice is received on such day prior to 12:00 Noon, New York City time (which notice, in the case of clause (i) above, shall not be given prior to the Letter of Credit Expiration Date), or (2) if clause (1) above does not apply, the Business Day immediately following the day that the Company receives such

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notice and (y) in the case of the immediately preceding clause (iii), the Business Day on which an Event of Default set forth under Section 8.01(f) occurs or, if such day is not a Business Day, the Business Day immediately succeeding such day.  For purposes hereof, “Cash Collateralize” means to pledge and deposit with or deliver to the Administrative Agent, for the benefit of the relevant L/C Issuer and the Lenders, as collateral for the L/C Obligations, cash or deposit account balances (“Cash Collateral”) pursuant to documentation in form and substance reasonably satisfactory to the Administrative Agent and the relevant L/C Issuer (which documents are hereby consented to by the Lenders).  Derivatives of such term have corresponding meanings.  The Company hereby grants to the Administrative Agent, for the benefit of the L/C Issuers and the Lenders, a security interest in all such cash, deposit accounts and all balances therein and all proceeds of the foregoing.  Cash Collateral shall be maintained in blocked accounts at JPMorgan Chase Bank and may be invested in readily available Cash Equivalents.  If at any time the Administrative Agent determines that any funds held as Cash Collateral are subject to any right or claim of any Person other than the Administrative Agent (on behalf of the Secured Parties) or that the total amount of such funds is less than 102% of the aggregate Outstanding Amount of all L/C Obligations, the Company will, forthwith upon demand by the Administrative Agent, pay to the Administrative Agent, as additional funds to be deposited and held in the deposit accounts at JPMorgan Chase Bank as aforesaid, an amount equal to the excess of (a) 102% of such aggregate Outstanding Amount over (b) the total amount of funds, if any, then held as Cash Collateral that the Administrative Agent reasonably determines to be free and clear of any such right and claim.  Upon the drawing of any Letter of Credit for which funds are on deposit as Cash Collateral, such funds shall be applied, to the extent permitted under applicable Law, to reimburse the relevant L/C Issuer.  To the extent the amount of any Cash Collateral exceeds 102% of the then Outstanding Amount of such L/C Obligations and so long as no Event of Default has occurred and is continuing, the excess shall be refunded to the Company.  If the Company is required to provide an amount of Cash Collateral hereunder as a result of the occurrence of an Event of Default, such amount plus any accrued interest or realized profits with respect to such amount (to the extent not applied as aforesaid) shall be returned to the Company within two Business Days after all Events of Default have been cured or waived.  Notwithstanding the occurrence of the Letter of Credit Expiration Date, any full or partial failure by the Company to Cash Collateralize the Outstanding Amount of any Letter of Credit in the case of clause (i) above shall operate to continue the several obligations of the Revolving Credit Lenders to participate in such Letter of Credit (x) to the extent so not Cash Collateralized and (y) to the extent any such Cash Collateral is required to be returned to the Company under any of the circumstances described in Section 10.06 (including pursuant to any settlement entered into by such L/C Issuer in its discretion), and upon any drawing under such Letter of Credit, such participations by the Revolving Credit Lenders in any Unreimbursed Amount shall be deemed to be L/C Borrowings and L/C Advances pursuant to this Section 2.03.

(h)  Letter of Credit Fees.  The Company shall pay to the Administrative Agent for the account of each Revolving Credit Lender in accordance with its Pro Rata Share a Letter of Credit fee for each Letter of Credit issued pursuant to this Agreement equal to the Applicable Rate times the daily maximum amount then available to be drawn under such Letter of Credit (whether or not such maximum amount is then in effect under such Letter of Credit if such maximum amount increases periodically pursuant to the terms of such Letter of Credit).  Such letter of credit fees shall be computed on a quarterly basis in arrears.  Such letter of credit fees shall be due and payable in Dollars on the first Business Day after the end of each March, June, September and December, commencing with the first such date to occur after the issuance of such Letter of Credit, on the Letter of Credit Expiration Date and thereafter on demand.  If there is any change in the Applicable Rate during any quarter, the daily maximum amount of each Letter of Credit

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shall be computed and multiplied by the Applicable Rate separately for each period during such quarter that such Applicable Rate was in effect.

(i)  Fronting Fee and Documentary and Processing Charges Payable to L/C Issuers.  The Company shall pay directly to each L/C Issuer for its own account a fronting fee with respect to each Letter of Credit issued by it equal to 0.125% per annum of the daily maximum amount then available to be drawn under such Letter of Credit (whether or not such maximum amount is then in effect under such Letter of Credit if such maximum amount increases periodically pursuant to the terms of such Letter of Credit).  Such fronting fees shall be computed on a quarterly basis in arrears.  Such fronting fees shall be due and payable on the first Business Day after the end of each March, June, September and December, commencing with the first such date to occur after the issuance of such Letter of Credit, on the Letter of Credit Expiration Date and thereafter on demand.  In addition, the Company shall pay directly to each L/C Issuer for its own account the customary issuance, presentation, amendment and other processing fees, and other standard costs and charges, of such L/C Issuer relating to letters of credit as from time to time in effect.  Such customary fees and standard costs and charges are due and payable within ten (10) Business Days of demand and are nonrefundable.

(j)  Conflict with Letter of Credit Application.  Notwithstanding anything else to the contrary in this Agreement, in the event of any conflict between the terms hereof and the terms of any Letter of Credit Application, the terms hereof shall control.

(k)  Addition of an L/C Issuer.  A Revolving Credit Lender may become an additional L/C Issuer hereunder pursuant to a written agreement among the Company, the Administrative Agent and such Revolving Credit Lender.  The Administrative Agent shall notify the Revolving Credit Lenders of any such additional L/C Issuer.

(l)  Continuing Agreement.  Prior to the issuance or renewal of any Letter of Credit for which JPMorgan Chase Bank will act as L/C Issuer, the Company shall have executed and delivered to JPMorgan Chase Bank the Continuing Agreement.

SECTION 2.04.  Swing Line Loans.  (a)  The Swing Line.  Subject to the terms and conditions set forth herein, the Swing Line Lender agrees to make loans (each such loan, a “Swing Line Loan”) to the Company from time to time on any Business Day (other than the Closing Date) until the Maturity Date in an aggregate amount not to exceed at any time outstanding the amount of the Swing Line Sublimit, notwithstanding the fact that such Swing Line Loans, when aggregated with the Pro Rata Share of the Outstanding Amount of Revolving Credit Loans and L/C Obligations of the Lender acting as Swing Line Lender, may exceed the amount of such Lender’s Revolving Credit Commitment; provided that, after giving effect to any Swing Line Loan, the aggregate Outstanding Amount of the Revolving Credit Loans of any Lender, plus such Lender’s Pro Rata Share of the Outstanding Amount of all L/C Obligations, plus such Lender’s Pro Rata Share of the Outstanding Amount of all Swing Line Loans shall not exceed such Lender’s Revolving Credit Commitment then in effect; provided further that, the Company shall not use the proceeds of any Swing Line Loan to refinance any outstanding Swing Line Loan.  Within the foregoing limits, and subject to the other terms and conditions hereof, the Company may borrow under this Section 2.04, prepay under Section 2.05, and reborrow under this Section 2.04.  Each Swing Line Loan shall be a Base Rate Loan.  Immediately upon the making of a Swing Line Loan, each Revolving Credit Lender shall be deemed to, and hereby irrevocably and unconditionally agrees to, purchase from the Swing Line Lender a risk participation in such Swing Line Loan in an amount equal to the product of such Lender’s Pro Rata Share times the amount of such Swing Line Loan.

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(b)  Borrowing Procedures.  Each Swing Line Borrowing shall be made upon the Company’s notice to the Swing Line Lender and the Administrative Agent, which may be given by telephone.  Each such notice must be received by the Swing Line Lender and the Administrative Agent not later than 2:00 p.m. on the requested borrowing date, and shall specify (i) the amount to be borrowed, which shall be a minimum of $250,000, and (ii) the requested borrowing date, which shall be a Business Day.  Each such telephonic notice must be confirmed promptly by delivery to the Swing Line Lender and the Administrative Agent of a written Swing Line Loan Notice, appropriately completed and signed by a Responsible Officer of the Company.  Promptly after receipt by the Swing Line Lender of any telephonic Swing Line Loan Notice, the Swing Line Lender will confirm with the Administrative Agent (by telephone or in writing) that the Administrative Agent has also received such Swing Line Loan Notice and, if not, the Swing Line Lender will notify the Administrative Agent (by telephone or in writing) of the contents thereof.  Unless (A) the making of such Swing Line Loan would not be permitted pursuant to the proviso to the first sentence of Section 2.04(a) or (B) one or more of the applicable conditions specified in Section 4.02 is not then satisfied, then, subject to the terms and conditions hereof, the Swing Line Lender will, not later than 4:00 p.m. on the borrowing date specified in such Swing Line Loan Notice, make the amount of its Swing Line Loan available to the Company.

(c)  Refinancing of Swing Line Loans.  (i)  In order to reimburse any such Swing Line Loans, the Company at any time may request that each Revolving Credit Lender make a Revolving Credit Loan (which shall be a Base Rate Loan) in an amount equal to such Lender’s Pro Rata Share of the amount of Swing Line Loans then outstanding.  Such request shall be made in accordance with the requirements of Section 2.02, without regard to the minimum and multiples specified therein for the principal amount of Base Rate Loans, but subject to the unutilized portion of the aggregate Revolving Credit Commitments and the conditions set forth in Section 4.02.  Each Revolving Credit Lender shall make an amount equal to its Pro Rata Share of the amount specified in such Committed Loan Notice available to the Administrative Agent in immediately available funds for the account of the Swing Line Lender at the Administrative Agent’s Office not later than 1:00 p.m. on the day specified in such Committed Loan Notice.  The Administrative Agent shall remit the funds so received to the Swing Line Lender.

(ii)  If an Event of Default has occurred and is continuing, or if for any reason any Swing Line Loan cannot be refinanced by such a Revolving Credit Borrowing in accordance with Section 2.04(c)(i), then upon notice by the Administrative Agent to the Revolving Credit Lenders each of the Revolving Credit Lenders shall fund its risk participation in the relevant Swing Line Loan by making an amount equal to its Pro Rata Share of the amount of such Swing Line Loan available to the Administrative Agent in immediately available funds for the account of the Swing Line Lender at the Administrative Agent’s Office not later than 1:00 p.m. on the day such Event of Default occurs or the day specified in such Committed Loan Notice, as the case may be.  The Administrative Agent shall remit the funds so received to the Swing Line Lender.

(iii)  If any Revolving Credit Lender fails to make available to the Administrative Agent for the account of the Swing Line Lender any amount required to be paid by such Lender pursuant to the foregoing provisions of this Section 2.04(c) by the time specified in Section 2.04(c)(i), the Swing Line Lender shall be entitled to recover from such Lender (acting through the Administrative Agent), on demand, such amount with interest thereon for the period from the date such payment is required to the date on which such payment is immediately available to the Swing Line Lender at a rate per annum equal to the Federal Funds Rate from time to time in effect.  A certificate of the Swing Line Lender submitted to any Lender (through the Administrative Agent) with respect to any amounts owing under this clause (iii) shall be conclusive absent manifest error.

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(iv)  Each Revolving Credit Lender’s obligation to make Revolving Credit Loans or to purchase and fund risk participations in Swing Line Loans pursuant to this Section 2.04(c) shall be absolute and unconditional and shall not be affected by any circumstance, including (A) any setoff, counterclaim, recoupment, defense or other right which such Lender may have against the Swing Line Lender, the Company or any other Person for any reason whatsoever, (B) the occurrence or continuance of a Default, or (C) any other occurrence, event or condition, whether or not similar to any of the foregoing; provided that each Revolving Credit Lender’s obligation to make Revolving Credit Loans pursuant to this Section 2.04(c) is subject to the conditions set forth in Section 4.02.  No such funding of risk participations shall relieve or otherwise impair the obligation of the Company to repay Swing Line Loans, together with interest as provided herein.

(d)  Repayment of Participations.  (i)  At any time after any Revolving Credit Lender has purchased and funded a risk participation in a Swing Line Loan, if the Swing Line Lender receives any payment on account of such Swing Line Loan, the Swing Line Lender will distribute to such Lender its Pro Rata Share of such payment (appropriately adjusted, in the case of interest payments, to reflect the period of time during which such Lender’s risk participation was funded) in the same funds as those received by the Swing Line Lender.

(ii)  If any payment received by the Swing Line Lender in respect of principal or interest on any Swing Line Loan is required to be returned by the Swing Line Lender under any of the circumstances described in Section 10.06 (including pursuant to any settlement entered into by the Swing Line Lender in its discretion), each Revolving Credit Lender shall pay to the Swing Line Lender its Pro Rata Share thereof on demand of the Administrative Agent, plus interest thereon from the date of such demand to the date such amount is returned, at a rate per annum equal to the Federal Funds Rate.  The Administrative Agent will make such demand upon the request of the Swing Line Lender.

(e)  Interest for Account of Swing Line Lender.  The Swing Line Lender shall be responsible for invoicing the Company for interest on the Swing Line Loans.  Until each Revolving Credit Lender funds its Base Rate Loan or risk participation pursuant to this Section 2.04 to refinance such Lender’s Pro Rata Share of any Swing Line Loan, interest in respect of such Pro Rata Share shall be solely for the account of the Swing Line Lender.

(f)  Payments Directly to Swing Line Lender.  The Company shall make all payments of principal and interest in respect of the Swing Line Loans directly to the Swing Line Lender.

SECTION 2.05.  Prepayments.  (a)  Optional.  (i)  Any Borrower may, upon notice to the Administrative Agent, at any time or from time to time voluntarily prepay Term Loans and Revolving Credit Loans in whole or in part without premium or penalty; provided that (1) such notice must be received by the Administrative Agent not later than 12:30 p.m. (New York time or London time in the case of Loans denominated in an Alternative Currency) (A) three (3) Business Days prior to any date of prepayment of Eurocurrency Rate Loans and (B) on the date of prepayment of Base Rate Loans; (2) any prepayment of Eurocurrency Rate Loans shall be in a principal amount of $5,000,000 or a whole multiple of $1,000,000 in excess thereof (or comparable amounts determined by the Administrative Agent in the case of Alternative Currency Loans); and (3) any prepayment of Base Rate Loans shall be in a principal amount of $1,000,000 or a whole multiple of $500,000 in excess thereof or, in each case, if less, the entire principal amount thereof then outstanding.  Each such notice shall specify the date and amount of such prepayment and the Class(es) and Type(s) of Loans to be prepaid.  The Administrative Agent will promptly notify each Appropriate Lender of its receipt of each such notice, and of the amount of such Lender’s Pro Rata Share of such prepayment.  If such notice is given by a Borrower, such

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Borrower shall make such prepayment and the payment amount specified in such notice shall be due and payable on the date specified therein.  Any prepayment of a Eurocurrency Rate Loan shall be accompanied by all accrued interest thereon, together with any additional amounts required pursuant to Section 3.05.  Each prepayment of principal of, and interest on, Alternative Currency Loans shall be made in the relevant Alternative Currency.  Each prepayment of the Loans pursuant to this Section 2.05(a) shall be paid to the Appropriate Lenders in accordance with their respective Pro Rata Shares.  Each prepayment of Term Loans pursuant to this Section 2.05(a) shall be applied to repayments thereof required pursuant to Section 2.07(a) in the order selected by the Company.

(ii)  The Company may, upon notice to the Swing Line Lender (with a copy to the Administrative Agent), at any time or from time to time, voluntarily prepay Swing Line Loans in whole or in part without premium or penalty; provided that (1) such notice must be received by the Swing Line Lender and the Administrative Agent not later than 1:00 p.m. on the date of the prepayment, and (2) any such prepayment shall be in a minimum principal amount of $250,000 or a whole multiple of $25,000 in excess thereof or, if less, the entire principal amount thereof then outstanding.  Each such notice shall specify the date and amount of such prepayment.  If such notice is given by the Company, the Company shall make such prepayment and the payment amount specified in such notice shall be due and payable on the date specified therein.

(iii)  Notwithstanding anything to the contrary contained in this Agreement, the Company may rescind any notice of prepayment under Section 2.05(a)(i) or 2.05(a)(ii) if such prepayment would have resulted from a refinancing of all or any portion of the Facilities, which refinancing shall not be consummated or shall otherwise be delayed.

(b)  Mandatory.  (i)  Within twenty (20) days after financial statements are required to be delivered pursuant to Section 6.01(a), the Company shall cause to be prepaid an aggregate Dollar Amount of Term Loans in an amount equal to (A) the ECF Percentage of Excess Cash Flow, if any, for the fiscal year covered by such financial statements (commencing with the fiscal year ended June 30, 2008) minus (B) the sum of (i) all voluntary prepayments of Term Loans during such fiscal year and (ii) all voluntary prepayments of Revolving Credit Loans during such fiscal year to the extent the Revolving Credit Commitments are permanently reduced by the amount of such payments.

(ii)   (A)  If (x) Holdings, the Company or any Restricted Subsidiary Disposes of any property or assets (other than any Disposition of any property or assets permitted by Section 7.05(a), (b), (c), (d), (e), (f), (g), (h), (i) or (m)) or (y) any Casualty Event occurs, which in the aggregate results in the realization or receipt by Holdings, the Company or such Restricted Subsidiary of Net Cash Proceeds, the Company shall cause to be prepaid on or prior to the date which is ten (10) Business Days after the date of the realization or receipt of such Net Cash Proceeds an aggregate Dollar Amount of Term Loans in an amount equal to 100% of all Net Cash Proceeds received; provided that no such prepayment shall be required pursuant to this Section 2.05(b)(ii)(A) with respect to such portion of such Net Cash Proceeds that the Company shall have, on or prior to such date, given written notice to the Administrative Agent of its intent to reinvest in accordance with Section 2.05(b)(ii)(B);

(B)  With respect to any Net Cash Proceeds realized or received with respect to any Disposition (other than any Disposition specifically excluded from the application of Section 2.05(b)(ii)(A)) or any Casualty Event, at the option of the Company the Company may reinvest all or any portion of such Net Cash Proceeds in assets useful for the Company’s or a Restricted Subsidiary’s business (provided that such reinvestment is

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permitted by Section 7.02) within (x) twelve (12) months following receipt of such Net Cash Proceeds or (y) if the Company or a Restricted Subsidiary enters into a legally binding commitment to reinvest such Net Cash Proceeds within twelve (12) months following receipt thereof, within twelve (12) months following the date of such commitment; provided that an amount equal to any such Net Cash Proceeds shall be applied within five (5) Business Days after such Net Cash Proceeds cannot be so reinvested or the Company reasonably determines that such Net Cash Proceeds are no longer intended to be so reinvested to the prepayment of the Term Loans as set forth in this Section 2.05.

(iii)  If Holdings, the Company or any Restricted Subsidiary incurs or issues any Indebtedness not expressly permitted to be incurred or issued pursuant to Section 7.03 (without prejudice to the restrictions therein), the Company shall cause to be prepaid an aggregate Dollar Amount of Term Loans in an amount equal to 100% of all Net Cash Proceeds received therefrom on or prior to the date which is five (5) Business Days after the receipt of such Net Cash Proceeds.  If any Overseas Borrower incurs or issues any Indebtedness pursuant to Section 2.14(b), the Company or such Overseas Borrower shall cause to be prepaid an aggregate Dollar Amount of U.S. Term Loans in an amount equal to 100% of the Net Cash Proceeds received therefrom on the date of the receipt of such Net Cash Proceeds.

(iv)  If for any reason the aggregate Revolving Credit Exposures at any time exceeds the aggregate Revolving Credit Commitments then in effect, the Company shall promptly prepay or cause to be promptly prepaid Revolving Credit Loans and Swing Line Loans and/or Cash Collateralize the L/C Obligations in an aggregate amount equal to such excess; provided that the Company shall not be required to Cash Collateralize the L/C Obligations pursuant to this Section 2.05(b)(iv) unless after the prepayment in full of the Revolving Credit Loans and Swing Line Loans such aggregate Outstanding Amount exceeds the aggregate Revolving Credit Commitments then in effect.  If the Company is required to provide an amount of Cash Collateral in respect of L/C Obligations pursuant to this clause (iv), such amount plus any accrued interest or realized profits with respect to such amount shall be returned to the Company as and to the extent that, after giving effect to such return, the Company would remain in compliance with this clause (iv) and no Event of Default shall have occurred and be continuing.

(v)  Each prepayment of Term Loans (x) pursuant to clause (i) of this Section 2.05(b) shall be applied to repayments thereof required pursuant to Section 2.07 in the order selected by the Company and (y) pursuant to clauses (ii) and (iii) of this Section 2.05(b) shall be applied first in direct order of maturity to repayments thereof required pursuant to Section 2.07 in the 24-month period following the date such prepayment becomes payable and second ratably to the remaining repayments of Term Loans required pursuant to Section 2.07; and each such prepayment shall be paid to the Lenders in accordance with their respective Pro Rata Shares.

(vi)  The Company shall notify the Administrative Agent in writing of any mandatory prepayment of Term Loans required to be made pursuant to clauses (i) through (iii) of this Section 2.05(b) at least three (3) Business Days prior to the date of such prepayment.  Each such notice shall specify the date of such prepayment and provide a reasonably detailed calculation of the amount of such prepayment.  The Administrative Agent will promptly notify each Appropriate Lender of the contents of the Company’s prepayment notice and of such Appropriate Lender’s Pro Rata Share of the prepayment.

(c)  All prepayments under this Section 2.05 shall be made together with, in the case of any such prepayment of a Eurocurrency Rate Loan on a date other than the last day of an Interest

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Period therefor, any amounts owing in respect of such Eurocurrency Rate Loan pursuant to Section 3.05.  Notwithstanding any of the provisions of Section 2.05(b), so long as no Event of Default shall have occurred and be continuing, if any prepayment of Eurocurrency Rate Loans is required to be made under Section 2.05(b), other than on the last day of the Interest Period therefor, the relevant Borrower may, in its sole discretion, deposit the amount of any such prepayment otherwise required to be made thereunder into a Cash Collateral Account until the last day of such Interest Period, at which time the Administrative Agent shall be authorized (without any further action by or notice to or from any Borrower or any other Loan Party) to apply such amount to the prepayment of such Loans in accordance with Section 2.05(b).  Upon the occurrence and during the continuance of any Event of Default, the Administrative Agent shall also be authorized (without any further action by or notice to or from any Borrower or any other Loan Party) to apply such amount to the prepayment of the outstanding Loans in accordance with Section 2.05(b).

SECTION 2.06.  Termination or Reduction of Commitments.  (a)  Optional.  The Company may, upon written notice to the Administrative Agent, terminate the unused Commitments of any Class, or from time to time permanently reduce the unused Commitments of any Class; provided that (i) any such notice shall be received by the Administrative Agent three (3) Business Days prior to the date of termination or reduction, (ii) any such partial reduction shall be in an aggregate amount of $1,000,000 or any whole multiple of $500,000 in excess thereof (or, if less, the remaining amount of such Commitments) and (iii) if, after giving effect to any reduction of the Commitments, the Letter of Credit Sublimit or the Swing Line Sublimit exceeds the amount of the Revolving Credit Facility, such sublimit shall be automatically reduced by the amount of such excess.  The amount of any such Commitment reduction shall not be applied to the Letter of Credit Sublimit or the Swing Line Sublimit unless otherwise specified by the Company.  Notwithstanding the foregoing, the Company may rescind or postpone any notice of termination or reduction of the Commitments if such termination or reduction would have resulted from a refinancing of all or any portion of the Facilities, which refinancing shall not be consummated or otherwise shall be delayed.

(b)  Mandatory.  The U.S. Term Commitment of each U.S. Term Lender shall be automatically and permanently reduced to $0 upon the making of such U.S. Term Lender’s U.S. Term Loans pursuant to Section 2.01(a).  The Euro Term Commitment of each Euro Term Lender shall be automatically and permanently reduced to $0 upon the making of such Euro Term Lender’s Euro Term Loans pursuant to Section 2.01(c).  In addition, if any Existing Notes remain outstanding on the Closing Date (in respect of which a Defeasance has not been consummated, or in respect of which funds have not been placed in escrow for the redemption or repayment thereof in a manner reasonably satisfactory to the Administrative Agent, as of the Closing Date), the Term Commitment of each Term Lender shall be automatically and permanently reduced (effective prior to the borrowing of Term Loans on the Closing Date) by the amount of such Term Lender’s Pro Rata Share of the amount that would have been used to purchase such Existing Notes if they had been tendered and purchased on the Closing Date pursuant to the Existing Note Indenture.

(c)  Application of Commitment Reductions; Payment of Fees.  The Administrative Agent will promptly notify the Lenders of any termination or reduction of unused portions of the Letter of Credit Sublimit, or the Swing Line Sublimit or the unused Commitments of any Class under this Section 2.06.  Upon any reduction of unused Commitments of any Class, the Commitment of each Lender of such Class shall be reduced by such Lender’s Pro Rata Share of the amount by which such Commitments are reduced (other than the termination of the Commitment of any Lender as provided in Section 3.07).  All commitment fees accrued until the effective date of any

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termination of the Aggregate Commitments shall be paid on the effective date of such termination.

SECTION 2.07.  Repayment of Loans.  (a)  U.S. Term Loans.  The Company shall repay to the Administrative Agent for the ratable account of the U.S. Term Lenders (i) on the last Business Day of each March, June, September and December, commencing with the second such date to occur after the Closing Date, an aggregate Dollar Amount equal to 0.25% of the aggregate amount of all U.S. Term Loans outstanding on the Closing Date (which payments shall be reduced as a result of the application of prepayments in accordance with the order of priority set forth in Section 2.05) and (ii) on the Maturity Date for the Term Loans, the aggregate principal amount of all U.S. Term Loans outstanding on such date.

(b)  Euro Term Loans.  The German Borrower shall repay to the Administrative Agent for the ratable account of the Euro Term Lenders (i) on the last Business Day of each March, June, September and December, commencing with the second such date to occur after the Closing Date, an aggregate Dollar Amount equal to 0.25% of the aggregate Dollar Amount of all Euro Term Loans outstanding on the Closing Date (which payments shall be reduced as a result of the application of prepayments in accordance with the order of priority set forth in Section 2.05) and (ii) on the Maturity Date for the Term Loans, the aggregate principal amount of all Euro Term Loans outstanding on such date.

(c)  Revolving Credit Loans.  The Company shall repay to the Administrative Agent for the ratable account of the Revolving Credit Lenders on the Maturity Date for the Revolving Credit Facility the aggregate principal amount of all of its Revolving Credit Loans outstanding on such date.

(d)  Swing Line Loans.  The Company shall repay its Swing Line Loans on the Maturity Date for the Revolving Credit Facility; provided that on each date that a Revolving Credit Loan is borrowed, the Company shall repay all Swing Line Loans then outstanding.

SECTION 2.08.  Interest.  (a)  Subject to the provisions of Section 2.08(b), (i) each Eurocurrency Rate Loan shall bear interest on the outstanding principal amount thereof for each Interest Period at a rate per annum equal to the Eurocurrency Rate for such Interest Period plus the Applicable Rate plus (in the case of a Eurocurrency Rate Loan denominated in an Alternative Currency of any Lender which is lent from a Lending Office in the United Kingdom or a Participating Member State) the Mandatory Cost; (ii) each Base Rate Loan shall bear interest on the outstanding principal amount thereof from the applicable borrowing date at a rate per annum equal to the Base Rate plus the Applicable Rate and (iii) each Swing Line Loan shall bear interest on the outstanding principal amount thereof from the applicable borrowing date at a rate per annum equal to the Base Rate plus the Applicable Rate for Revolving Credit Loans.

(b)  Each Borrower shall pay interest on past due amounts owed by it hereunder at a fluctuating interest rate per annum at all times equal to the Default Rate to the fullest extent permitted by applicable Laws.  Accrued and unpaid interest on past due amounts (including interest on past due interest) shall be due and payable upon demand.

(c)  Interest on each Loan shall be due and payable in arrears on each Interest Payment Date applicable thereto and at such other times as may be specified herein.  Interest hereunder shall be due and payable in accordance with the terms hereof before and after judgment, and before and after the commencement of any proceeding under any Debtor Relief Law.

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SECTION 2.09.  Fees.  In addition to certain fees described in Sections 2.03(h) and (i):

(a)  Commitment Fee.  The Company shall pay to the Administrative Agent for the account of each Revolving Credit Lender in accordance with its Pro Rata Share, a commitment fee equal to the Applicable Rate with respect to commitment fees times the average daily amount by which the aggregate Revolving Credit Commitment exceeds the sum of (A) the Outstanding Amount of Revolving Credit Loans (excluding any Swing Line Loans) and (B) the Outstanding Amount of L/C Obligations; provided that any commitment fee accrued with respect to any of the Commitments of a Defaulting Lender during the period prior to the time such Lender became a Defaulting Lender and unpaid at such time shall not be payable by the Company so long as such Lender shall be a Defaulting Lender except to the extent that such commitment fee shall otherwise have been due and payable by the Company prior to such time; and provided further that no commitment fee shall accrue on any of the Commitments of a Defaulting Lender so long as such Lender shall be a Defaulting Lender.  The commitment fee shall accrue at all times from the Closing Date until the Maturity Date for the Revolving Credit Facility or such earlier date as the Revolving Credit Commitments shall be terminated hereunder, including at any time during which one or more of the conditions in Article IV is not met, and shall be due and payable quarterly in arrears on the last Business Day of each March, June, September and December, commencing with the first such date to occur after the Closing Date, and on the Maturity Date for the Revolving Credit Facility.  The commitment fee shall be calculated quarterly in arrears, and if there is any change in the Applicable Rate during any quarter, the average daily amount shall be computed and multiplied by the Applicable Rate separately for each period during such quarter that such Applicable Rate was in effect.

(b)  Other Fees.  The Company shall pay to the Agents such fees as shall have been separately agreed upon in writing in the amounts and at the times so specified.  Such fees shall be fully earned when paid and shall not be refundable for any reason whatsoever (except as expressly agreed between the Company and the applicable Agent).

SECTION 2.10.  Computation of Interest and Fees.  All computations of interest for Base Rate Loans when the Base Rate is determined by JPMorgan Chase Bank’s “prime rate” and for Alternative Currency Loans denominated in Sterling shall be made on the basis of a year of three hundred and sixty-five (365) or three hundred and sixty-six (366) days, as the case may be, and actual days elapsed.  All other computations of fees and interest shall be made on the basis of a three hundred and sixty (360) day year and actual days elapsed.  Interest shall accrue on each Loan for the day on which the Loan is made, and shall not accrue on a Loan, or any portion thereof, for the day on which the Loan or such portion is paid; provided that any Loan that is repaid on the same day on which it is made shall, subject to Section 2.12(a), bear interest for one (1) day.  Each determination by the Administrative Agent of an interest rate or fee hereunder shall be conclusive and binding for all purposes, absent manifest error.  The Administrative Agent shall, upon the reasonable request of the Company, deliver to the Company a statement showing the quotations used by the Administrative Agent in determining any interest rate pursuant to Section 2.08(a).

SECTION 2.11.  Evidence of Indebtedness.  (a)  The Credit Extensions made by each Lender shall be evidenced by one or more accounts or records maintained by such Lender and evidenced by one or more entries in the Register maintained by the Administrative Agent, acting solely for purposes of Treasury Regulation Section 5f.103-1(c), as agent for the Borrowers, in each case in the ordinary course of business.  The accounts or records maintained by the Administrative Agent and each Lender shall be prima facie evidence absent manifest error of the amount of the Credit Extensions made by the Lenders to the Borrowers and the interest and

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payments thereon.  Any failure to so record or any error in doing so shall not, however, limit or otherwise affect the obligation of the Borrowers hereunder to pay any amount owing with respect to the Obligations.  In the event of any conflict between the accounts and records maintained by any Lender and the accounts and records of the Administrative Agent in respect of such matters, the accounts and records of the Administrative Agent shall control in the absence of manifest error.  Upon the request of any Lender made through the Administrative Agent, the Borrowers shall execute and deliver to such Lender (through the Administrative Agent) a Note payable to such Lender, which shall evidence such Lender’s Loans in addition to such accounts or records.  Each Lender may attach schedules to its Note and endorse thereon the date, Type (if applicable), amount and maturity of its Loans and payments with respect thereto.

(b)  In addition to the accounts and records referred to in Section 2.11(a), each Lender and the Administrative Agent shall maintain in accordance with its usual practice accounts or records and, in the case of the Administrative Agent, entries in the Register, evidencing the purchases and sales by such Lender of participations in Letters of Credit and Swing Line Loans.  In the event of any conflict between the accounts and records maintained by the Administrative Agent and the accounts and records of any Lender in respect of such matters, the accounts and records of the Administrative Agent shall control in the absence of manifest error.

(c)  Entries made in good faith by the Administrative Agent in the Register pursuant to Sections 2.11(a) and (b), and by each Lender in its account or accounts pursuant to Sections 2.11(a) and (b), shall be prima facie evidence of the amount of principal and interest due and payable or to become due and payable from the Borrowers to, in the case of the Register, each Lender and, in the case of such account or accounts, such Lender, under this Agreement and the other Loan Documents, absent manifest error; provided that the failure of the Administrative Agent or such Lender to make an entry, or any finding that an entry is incorrect, in the Register or such account or accounts shall not limit or otherwise affect the obligations of the Borrowers under this Agreement and the other Loan Documents.

SECTION 2.12.  Payments Generally.  (a)  All payments to be made by the Borrowers shall be made without condition or deduction for any counterclaim, defense, recoupment or setoff.  Except as otherwise expressly provided herein, all payments by the Company hereunder shall be made to the Administrative Agent, for the account of the respective Lenders to which such payment is owed, at the applicable Administrative Agent’s Office in Dollars and in Same Day Funds not later than 2:00 p.m. on the date specified herein.  Except as otherwise expressly provided herein, all payments by the Borrowers hereunder with respect to principal and interest on Loans denominated in an Alternative Currency shall be made to the Administrative Agent, for the account of the respective Lenders to which such payment is owed, at the applicable Administrative Agent’s Office in such Alternative Currency and in Same Day Funds not later than 2:00 p.m. (London time) on the dates specified herein.  If, for any reason, any Borrower is prohibited by any Law from making any required payment hereunder in an Alternative Currency, such Borrower shall make such payment in Dollars in the Dollar Amount of the Alternative Currency payment amount.  The Administrative Agent will promptly distribute to each Lender its Pro Rata Share (or other applicable share as provided herein) of such payment in like funds as received by wire transfer to such Lender’s Lending Office.  All payments received by the Administrative Agent (i) after 2:00 p.m., in the case of payments in Dollars, or (ii) after 2:00 p.m. (London time) in the case of payments in an Alternative Currency, shall in each case be deemed received on the next succeeding Business Day and any applicable interest or fee shall continue to accrue.

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(b)  If any payment to be made by any Borrower shall come due on a day other than a Business Day, payment shall be made on the next following Business Day, and such extension of time shall be reflected in computing interest or fees, as the case may be; provided that, if such extension would cause payment of interest on or principal of Eurocurrency Rate Loans to be made in the next succeeding calendar month, such payment shall be made on the immediately preceding Business Day.

(c)  Unless any Borrower or any Lender has notified the Administrative Agent, prior to the time any payment is required to be made by it to the Administrative Agent hereunder, that such Borrower or such Lender, as the case may be, will not make such payment, the Administrative Agent may assume that such Borrower or such Lender, as the case may be, has timely made such payment and may (but shall not be so required to), in reliance thereon, make available a corresponding amount to the Person entitled thereto.  If and to the extent that such payment was not in fact made to the Administrative Agent in Same Day Funds, then:

(i)  if any Borrower failed to make such payment, each Lender shall forthwith on demand repay to the Administrative Agent the portion of such assumed payment that was made available to such Lender in Same Day Funds, together with interest thereon in respect of each day from and including the date such amount was made available by the Administrative Agent to such Lender to the date such amount is repaid to the Administrative Agent in Same Day Funds at the applicable Overnight Rate from time to time in effect; and

(ii)  if any Lender failed to make such payment, such Lender shall forthwith on demand pay to the Administrative Agent the amount thereof in Same Day Funds, together with interest thereon for the period from the date such amount was made available by the Administrative Agent to the relevant Borrower to the date such amount is recovered by the Administrative Agent (the “Compensation Period”) at a rate per annum equal to the applicable Overnight Rate from time to time in effect.  When such Lender makes payment to the Administrative Agent (together with all accrued interest thereon), then such payment amount (excluding the amount of any interest which may have accrued and been paid in respect of such late payment) shall constitute such Lender’s Loan included in the applicable Borrowing.  If such Lender does not pay such amount forthwith upon the Administrative Agent’s demand therefor, the Administrative Agent may make a demand therefor upon the relevant Borrower, and the relevant Borrower shall pay such amount to the Administrative Agent, together with interest thereon for the Compensation Period at a rate per annum equal to the rate of interest applicable to the applicable Borrowing.  Nothing herein shall be deemed to relieve any Lender from its obligation to fulfill its Commitment or to prejudice any rights which the Administrative Agent or any Borrower may have against any Lender as a result of any default by such Lender hereunder.

A notice of the Administrative Agent to any Lender or the relevant Borrower with respect to any amount owing under this Section 2.12(c) shall be conclusive, absent manifest error.

(d)  If any Lender makes available to the Administrative Agent funds for any Loan to be made by such Lender as provided in the foregoing provisions of this Article II, and such funds are not made available to the relevant Borrower by the Administrative Agent because the conditions to the applicable Credit Extension set forth in Article IV are not satisfied or waived in accordance with the terms hereof, the Administrative Agent shall return such funds (in like funds as received from such Lender) to such Lender, without interest.

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(e)  The obligations of the Lenders hereunder to make Loans and to fund participations in Letters of Credit and Swing Line Loans are several and not joint.  The failure of any Lender to make any Loan or to fund any such participation on any date required hereunder shall not relieve any other Lender of its corresponding obligation to do so on such date, and no Lender shall be responsible for the failure of any other Lender to so make its Loan or purchase its participation.

(f)  Nothing herein shall be deemed to obligate any Lender to obtain the funds for any Loan in any particular place or manner or to constitute a representation by any Lender that it has obtained or will obtain the funds for any Loan in any particular place or manner.

(g)  Whenever any payment received by the Administrative Agent under this Agreement or any of the other Loan Documents is insufficient to pay in full all amounts due and payable to the Administrative Agent and the Lenders under or in respect of this Agreement and the other Loan Documents on any date, such payment shall be distributed by the Administrative Agent and applied by the Administrative Agent and the Lenders in the order of priority set forth in Section 8.04.  If the Administrative Agent receives funds for application to the Obligations of the Loan Parties under or in respect of the Loan Documents under circumstances for which the Loan Documents do not specify the manner in which such funds are to be applied, the Administrative Agent may, but at the direction of Required Lenders shall, elect to distribute such funds to each of the Lenders in accordance with such Lender’s Pro Rata Share of the sum of (a) the Outstanding Amount of all Loans outstanding at such time and (b) the Outstanding Amount of all L/C Obligations outstanding at such time, in repayment or prepayment of such of the outstanding Loans or other Obligations then owing to such Lender.

SECTION 2.13.  Sharing of Payments.  If, other than as expressly provided elsewhere herein, any Lender shall obtain on account of the Loans made by it, or the participations in L/C Obligations and Swing Line Loans held by it, any payment (whether voluntary, involuntary, through the exercise of any right of setoff, or otherwise) in excess of its ratable share (or other share contemplated hereunder) thereof, such Lender shall immediately (a) notify the Administrative Agent of such fact, and (b) purchase from the other Lenders such participations in the Loans made by them and/or such subparticipations in the participations in L/C Obligations or Swing Line Loans held by them, as the case may be, as shall be necessary to cause such purchasing Lender to share the excess payment in respect of such Loans or such participations, as the case may be, pro rata with each of them; provided that if all or any portion of such excess payment is thereafter recovered from the purchasing Lender under any of the circumstances described in Section 10.06 (including pursuant to any settlement entered into by the purchasing Lender in its discretion), such purchase shall to that extent be rescinded and each other Lender shall repay to the purchasing Lender the purchase price paid therefor, together with an amount equal to such paying Lender’s ratable share (according to the proportion of (i) the amount of such paying Lender’s required repayment to (ii) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered, without further interest thereon.  Each Borrower agrees that any Lender so purchasing a participation from another Lender may, to the fullest extent permitted by applicable Law, exercise all its rights of payment (including the right of setoff, but subject to Section 10.09) with respect to such participation as fully as if such Lender were the direct creditor of such Borrower in the amount of such participation.  The Administrative Agent will keep records (which shall be conclusive and binding in the absence of manifest error) of participations purchased under this Section 2.13 and will in each case notify the Lenders following any such purchases or repayments.  Each Lender that purchases a participation pursuant to this Section 2.13 shall from and after such purchase have the right to give all notices, requests, demands, directions and other communications under this Agreement with respect to the portion

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of the Obligations purchased to the same extent as though the purchasing Lender were the original owner of the Obligations purchased.

SECTION 2.14.  Incremental Credit Extensions.  (a)  The Company may at any time or from time to time after the Closing Date, by notice to the Administrative Agent (whereupon the Administrative Agent shall promptly deliver a copy to each of the Lenders), request (a) one or more additional tranches of term loans denominated in Dollars (the “Incremental U.S. Term Loans”) or (b) one or more increases in the amount of the Revolving Credit Commitments on the same terms and conditions as are then applicable to the Revolving Credit Commitments (each such increase, a “Revolving Commitment Increase”); provided that (i) both at the time of any such request and upon the effectiveness of any Incremental U.S. Amendment referred to below, no Default or Event of Default shall exist and at the time that any such Incremental U.S. Term Loan is made or any such Revolving Commitment Increase becomes effective (and after giving effect thereto) no Default or Event of Default shall exist and (ii) the Company shall be in compliance with the covenant set forth in Section 7.10 determined on a Pro Forma Basis as of the date of such Incremental U.S. Term Loan or Revolving Commitment Increase and the last day of the most recent Test Period, in each case, as if such Incremental U.S. Term Loans or Revolving Commitment Increases, as applicable, had been outstanding on the last day of such fiscal quarter of the Company for testing compliance therewith.  Each tranche of Incremental U.S. Term Loans and each Revolving Commitment Increase shall be in an aggregate Dollar Amount that is not less than $50,000,000 (provided that such amount may be less than $50,000,000 if such amount represents all remaining availability under the limit set forth in the next sentence).  Notwithstanding anything to the contrary herein, the aggregate Dollar Amount of the Incremental U.S. Term Loans and the Revolving Commitment Increases shall not exceed $200,000,000.  The Incremental U.S. Term Loans and any Revolving Credit Exposure under any such Revolving Commitment Increase (a) shall rank pari passu in right of payment and of security with the other Revolving Credit Exposure and the U.S. Term Loans, (b) in the case of Incremental U.S. Term Loans, shall not mature earlier than the Maturity Date with respect to the U.S. Term Loans, (c) in the case of Incremental U.S. Term Loans, shall not have a Weighted Average Life to Maturity that is shorter than the Weighted Average Life to Maturity with respect to the U.S. Term Loans, (d) in the case of Incremental U.S. Term Loans, will accrue interest at rates determined by the Company and the lenders providing such Incremental U.S. Term Loans, which rates may be higher or lower than the rates applicable to the U.S. Term Loans, and (e) in the case of Incremental U.S. Term Loans, except as set forth above, shall be treated substantially the same as, or less favorably to the lenders thereof than, the U.S. Term Loans (in each case, including with respect to mandatory and voluntary prepayments), provided that (i) the terms and conditions applicable to Incremental U.S. Term Loans may be materially different from those of the U.S. Term Loans to the extent such differences are reasonably acceptable to the Administrative Agent and (ii) subject to clauses (b), (c) and (d) above, the interest rates, maturity and amortization schedule applicable to the Incremental U.S. Term Loans shall be determined by the Company and the lenders thereof.  Each notice from the Company pursuant to this Section shall set forth the requested amount and proposed terms of the relevant Incremental U.S. Term Loans or Revolving Commitment Increases.  Incremental U.S. Term Loans may be made, and Revolving Commitment Increases may be provided, by any existing Lender or by any other bank or other financial institution (any such other bank or other financial institution being called an “Additional Lender”), in each case as designated by the Company, provided that the Administrative Agent, each L/C Issuer and the Swing Line Lender shall have consented (not to be unreasonably withheld) to such Lender’s or Additional Lender’s making such Incremental U.S. Term Loans or providing such Revolving Commitment Increases if such consent would be required under Section 10.07(b) for an assignment of Loans or Revolving Credit Commitments, as applicable, to such Lender or Additional Lender.  Commitments in respect of Incremental U.S.

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Term Loans and Revolving Commitment Increases shall become Commitments (or in the case of a Revolving Commitment Increase to be provided by an existing Revolving Credit Lender, an increase in such Lender’s applicable Revolving Credit Commitment) under this Agreement pursuant to an amendment (an “Incremental Amendment”) to this Agreement and, as appropriate, the other Loan Documents, executed by Holdings, the Company, each Lender agreeing to provide such Commitment, if any, each Additional Lender, if any, and the Administrative Agent.  The Incremental Amendment may, without the consent of any other Lenders, effect such amendments to this Agreement and the other Loan Documents as may be necessary or appropriate, in the reasonable opinion of the Administrative Agent and the Company, to effect the provisions of this Section.  The effectiveness of any Incremental Amendment shall be subject to the satisfaction on the date thereof (each, an “Incremental Facility Closing Date”) of each of the conditions set forth in Section 4.02 (it being understood that all references to “the date of such Credit Extension” or similar language in such Section 4.02 shall be deemed to refer to the effective date of such Incremental Amendment) and such other conditions as the parties thereto shall agree.  The Company will use the proceeds of the Incremental U.S. Term Loans and Revolving Commitment Increases for any purpose not prohibited by this Agreement.  No Lender shall be obligated to provide any Incremental U.S. Term Loans or Revolving Commitment Increases unless it so agrees.  Upon each increase in the Revolving Credit Commitments pursuant to this Section, each Revolving Credit Lender immediately prior to such increase will automatically and without further act be deemed to have assigned to each Lender providing a portion of the Revolving Commitment Increase (each a “Revolving Commitment Increase Lender”) in respect of such increase, and each such Revolving Commitment Increase Lender will automatically and without further act be deemed to have assumed, a portion of such Revolving Credit Lender’s participations hereunder in outstanding Letters of Credit and Swing Line Loans such that, after giving effect to each such deemed assignment and assumption of participations, the percentage of the aggregate outstanding (i) participations hereunder in Letters of Credit and (ii) participations hereunder in Swing Line Loans held by each Revolving Credit Lender (including each such Revolving Commitment Increase Lender) will equal the percentage of the aggregate Revolving Credit Commitments of all Revolving Credit Lenders represented by such Revolving Credit Lender’s Revolving Credit Commitment and (b) if, on the date of such increase, there are any Revolving Credit Loans outstanding, such Revolving Credit Loans shall on or prior to the effectiveness of such Revolving Commitment Increase be prepaid from the proceeds of additional Revolving Credit Loans made hereunder (reflecting such increase in Revolving Credit Commitments), which prepayment shall be accompanied by accrued interest on the Revolving Credit Loans being prepaid and any costs incurred by any Lender in accordance with Section 3.05.  The Administrative Agent and the Lenders hereby agree that the minimum borrowing, pro rata borrowing and pro rata payment requirements contained elsewhere in this Agreement shall not apply to the transactions effected pursuant to the immediately preceding sentence.

(b)  The Company may from time to time designate any Foreign Subsidiary organized under the Laws of Australia, Canada or the United Kingdom as an additional Overseas Borrower for purposes of this Agreement by delivering written notice thereof to the Administrative Agent duly executed on behalf of such Foreign Subsidiary and the Company.  Any such Overseas Borrower organized under the laws of Australia may, on any one date after the Closing Date, by notice to the Administrative Agent (whereupon the Administrative Agent shall promptly deliver a copy to each of the Lenders), request a tranche of term loans denominated in Australian Dollars, any such Overseas Borrower organized under the laws of Canada may, on any one date after the Closing Date, by notice to the Administrative Agent (whereupon the Administrative Agent shall promptly deliver a copy to each of the Lenders), request a tranche of term loans denominated in Canadian Dollars, and any such Overseas Borrower organized under the laws of the United

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Kingdom may, on any one date after the Closing Date, by notice to the Administrative Agent (whereupon the Administrative Agent shall promptly deliver a copy to each of the Lenders), request a tranche of term loans denominated in Sterling or Euros (any and all such term loans, the “Incremental Overseas Term Loans”); provided that both at the time of any such request and upon the effectiveness of any Incremental Overseas Amendment referred to below, no Default or Event of Default shall exist and at the time that any such Incremental Overseas Term Loan is made (and after giving effect thereto) no Default or Event of Default shall exist.  Each tranche of Incremental Overseas Term Loans shall be in an aggregate initial Dollar Amount of not more than $150,000,000 as of the relevant Incremental Overseas Facility Closing Date; provided that the aggregate initial Dollar Amount of the Incremental Overseas Term Loans shall not exceed $300,000,000.  The Incremental Overseas Term Loans (a) shall rank pari passu in right of payment and of security with the U.S. Term Loans, but may have additional security or Guarantees or limits on security or Guarantees to the extent required by the Collateral and Guarantee Requirement, (b) shall not mature earlier than the Maturity Date with respect to the U.S. Term Loans, (c) shall not have a Weighted Average Life to Maturity that is shorter than the Weighted Average Life to Maturity with respect to the U.S. Term Loans, (d) will accrue interest at rates determined by the applicable Overseas Borrower and the lenders providing such Incremental Overseas Term Loans, which rates may be higher or lower than the rates applicable to the U.S. Term Loans, and (e) except as set forth above, shall be treated substantially the same as, or less favorably to the lenders thereof than, the U.S. Term Loans (in each case, including with respect to mandatory and voluntary prepayments), provided that (i) the terms and conditions applicable to Incremental Overseas Term Loans may be materially different from those of the U.S. Term Loans to the extent such differences are reasonably acceptable to the Administrative Agent and (ii) subject to clauses (b), (c) and (d) above, the interest rates, maturity and amortization schedule applicable to the Incremental Overseas Term Loans shall be determined by the applicable Overseas Borrower and the lenders thereof.  Each notice from an Overseas Borrower pursuant to this Section shall set forth the requested amount and proposed terms of the relevant Incremental Overseas Term Loans.  Incremental Overseas Term Loans may be made by any existing Lender or by any other bank or other financial institution (any such other bank or other financial institution being called an “Additional Overseas Lender”), in each case as designated by the applicable Overseas Borrower, provided that the Administrative Agent shall have consented (not to be unreasonably withheld) to such Lender’s or Additional Overseas Lender’s making such Incremental Overseas Term Loans if such consent would be required under Section 10.07(b) for an assignment of Loans to such Lender or Additional Overseas Lender.  Commitments in respect of Incremental Overseas Term Loans shall become Commitments under this Agreement pursuant to an amendment (an “Incremental Overseas Amendment”) to this Agreement and, as appropriate, the other Loan Documents, executed by Holdings, the Company, the applicable Overseas Borrower, each Lender agreeing to provide such Commitment, if any, each Additional Overseas Lender, if any, and the Administrative Agent.  The Incremental Overseas Amendment may, without the consent of any other Lenders, effect such amendments to this Agreement and the other Loan Documents as may be necessary or appropriate, in the reasonable opinion of the Administrative Agent and the applicable Overseas Borrower, to effect the provisions of this Section.  The effectiveness of any Incremental Overseas Amendment shall be subject to the satisfaction on the date thereof (each, an “Incremental Overseas Facility Closing Date”) of each of the conditions set forth in Section 4.03 and such other conditions as the parties thereto shall agree.  The proceeds of the Incremental Overseas Term Loans shall be applied to the prepayment of the U.S. Term Loans pursuant to Section 2.05(b)(iii).  No Lender shall be obligated to provide any Incremental Overseas Term Loans unless it so agrees.  The Administrative Agent and the Lenders hereby agree that the minimum borrowing, pro rata borrowing and pro rata payment requirements contained elsewhere in this Agreement shall not apply to the transactions effected pursuant to this Section 2.14(b).

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(c)  This Section 2.14 shall supersede any provisions in Section 2.13 or 10.01 to the contrary.

SECTION 2.15.  Overseas Borrower Costs.  (a)  If as a result of the introduction of or any change in or in the interpretation of any Law, in each case after the date any Lender makes any Euro Term Loan or Incremental Overseas Term Loan to the applicable Overseas Borrower, or such Lender’s compliance therewith, the cost to such Lender of making or maintaining such Loan to such Overseas Borrower is increased (or the amount of any sum received or receivable by such Lender or its Lending Office is reduced) by an amount deemed by such Lender to be material, by reason of the fact that such Overseas Borrower is incorporated in, or conducts business in, a jurisdiction outside the United States, such Overseas Borrower shall indemnify such Lender for such increased cost or reduction within fifteen (15) days after demand by such Lender (with a copy to the Administrative Agent) (excluding for purposes of this Section 2.15 any such increased costs resulting from (i) Taxes or Other Taxes (as to which Section 3.01 and Section 10.15 shall govern), (ii) changes in the basis of taxation of overall net income or overall gross income (including branch profits), and franchise (and similar) taxes imposed in lieu of net income taxes, by the United States or any foreign jurisdiction or any political subdivision of either thereof under the Laws of which such Lender is organized or maintains a Lending Office, (iii) reserve requirements contemplated by Section 3.04(c) (as to which Section 3.04(c) shall govern) and (iv) the requirements of the Bank of England and the Financial Services Authority or the European Central Bank reflected in the Mandatory Cost (as to which Section 3.04(a) shall govern).  A certificate of such Lender claiming compensation under this Section 2.15 and setting forth the additional amount or amounts to be paid to it hereunder in reasonable detail shall be conclusive in the absence of manifest error.

(b)  Each Lender will promptly notify the Company, the relevant Overseas Borrower and the Administrative Agent of any event or circumstance of which it has knowledge that will entitle such Lender to compensation pursuant to this Section 2.15.  If any Lender requests compensation under this Section 2.15, then such Lender will, if requested by the Company, use commercially reasonable efforts to designate another Lending Office for any Loan affected by such event; provided that such efforts are made on terms that, in the reasonable judgment of such Lender, cause such Lender and its Lending Office(s) to suffer no material economic, legal or regulatory disadvantage.

ARTICLE III

TAXES, INCREASED COSTS PROTECTION AND ILLEGALITY

SECTION 3.01.  Taxes.  (a)  Except as provided in this Section 3.01 and Section 10.15, any and all payments by any Borrower (the term Borrower under Article III being deemed to include any Subsidiary for whose account a Letter of Credit is issued) to or for the account of any Agent or any Lender under any Loan Document shall be made free and clear of and without deduction for any and all present or future taxes, duties, levies, imposts, deductions, assessments, fees, withholdings or similar charges, and all liabilities (including additions to tax, penalties and interest) with respect thereto, excluding in the case of each Agent and each Lender, (x) taxes imposed on or measured by its net income or overall gross income (including branch profits), and franchise (and similar) taxes imposed on it in lieu of net income taxes, by the jurisdiction (or any political subdivision thereof) under the Laws of which such Agent or such Lender, as the case may be, is organized, managed or controlled or maintains a Lending Office or, in the case of Germany, a permanent establishment for tax purposes, and all liabilities (including additions to tax, penalties and interest) with respect thereto and (y) any limited German income tax liability

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pursuant to § 49 para. 1 no. 5 lit. c) aa) German Income Tax Act imposed on such Agent or such Lender (including any withholding obligation of the German Borrower on behalf of such Agent or such Lender pursuant to § 50a para. 7 German Income Tax Act) due to the fact that the Euro Term Loans are secured by German real property or by any rights treated as German real property under German Civil Law, and all liabilities (including additions to tax, penalties and interest) with respect thereto; provided that the exclusion set forth in clause (y) above shall be inapplicable for so long as the Euro Term Loans are secured by German real property or by any rights treated as German real property under German Civil Law the aggregate fair market value of which real property and rights exceeds 10% of the consolidated total assets of the German Borrower and its Subsidiaries.  All non-excluded taxes, duties, levies, imposts, deductions, assessments, fees, withholdings or similar charges, and liabilities described in the immediately preceding sentence are hereinafter referred to as “Taxes”.  If any Borrower shall be required by any Laws to deduct any Taxes or Other Taxes from or in respect of any sum payable under any Loan Document to any Agent or any Lender, (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 3.01), each of such Agent and such Lender receives an amount equal to the sum it would have received had no such deductions been made, (ii) such Borrower shall make such deductions, (iii) such Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable Laws, and (iv) within thirty (30) days after the date of such payment (or, if receipts or evidence are not available within thirty (30) days, as soon as possible thereafter), such Borrower shall furnish to such Agent or Lender (as the case may be) the original or a certified copy of a receipt evidencing payment thereof to the extent such a receipt is issued therefor, or other written proof of payment thereof that is reasonably satisfactory to the Administrative Agent.  If such Borrower fails to pay any Taxes or Other Taxes when due to the appropriate taxing authority or fails to remit to any Agent or any Lender the required receipts or other required documentary evidence, such Borrower shall indemnify such Agent and such Lender for any incremental taxes, interest or penalties that may become payable by such Agent or such Lender arising out of such failure.

(b)  In addition, each Borrower agrees to pay any and all present or future stamp, court or documentary taxes and any other excise, property, intangible or mortgage recording taxes or charges or similar levies which arise from any payment made under any Loan Document or from the execution, delivery, performance, enforcement or registration of, or otherwise with respect to, any Loan Document (hereinafter referred to as “Other Taxes”).

(c)  Each Borrower agrees to indemnify each Agent and each Lender for (i) the full amount of Taxes and Other Taxes (including any Taxes or Other Taxes imposed or asserted by any jurisdiction on amounts payable under this Section 3.01) paid by such Agent and such Lender and (ii) any liability (including additions to tax, penalties, interest and expenses) arising therefrom or with respect thereto, in each case whether or not such Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority; provided such Agent or Lender, as the case may be, provides such Borrower with a written statement thereof setting forth in reasonable detail the basis and calculation of such amounts.  Payment under this Section 3.01(c) shall be made within thirty (30) days after the date such Lender or such Agent makes a demand therefor.

(d)  No Borrower shall be required pursuant to this Section 3.01 to pay any additional amount to, or to indemnify, any Lender or Agent, as the case may be, to the extent that such Lender or such Agent becomes subject to Taxes subsequent to the Closing Date (or, if later, the date such Lender or Agent becomes a party to this Agreement) as a result of a change in the place of organization of such Lender or Agent or a change in the lending office of such Lender, except

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to the extent that any such change is requested or required in writing by any Borrower (and provided that nothing in this clause (d) shall be construed as relieving any Borrower from any obligation to make such payments or indemnification in the event of a change in lending office or place of organization that precedes a change in Law to the extent such Taxes result from a change in Law).

(e)  Notwithstanding anything else herein to the contrary, if a Lender or an Agent is subject to withholding tax imposed by any jurisdiction in which any Borrower is formed or organized at a rate in excess of zero percent at the time such Lender or such Agent, as the case may be, first becomes a party to this Agreement (or, if later, the date such Lender or Agent makes an Incremental Overseas Term Loan to any Borrower), withholding tax imposed by such jurisdiction at such rate shall be considered excluded from Taxes unless and until such Lender or Agent, as the case may be, provides the appropriate forms required or prescribed by applicable Law certifying that a lesser rate applies, whereupon withholding tax at such lesser rate only shall be considered excluded from Taxes for periods governed by such forms; provided that, if at the date of the Assignment and Assumption pursuant to which a Lender becomes a party to this Agreement, the Lender assignor was entitled to payments under clause (a) of this Section 3.01 in respect of withholding tax with respect to interest paid at such date, then, to such extent, the term Taxes shall include (in addition to withholding taxes that may be imposed in the future or other amounts otherwise includable in Taxes) withholding tax, if any, applicable with respect to the Lender assignee on such date.

(f)  If any Lender or Agent determines, in its reasonable discretion, that it has received a refund in respect of any Taxes or Other Taxes as to which indemnification or additional amounts have been paid to it by any Borrower pursuant to this Section 3.01, it shall promptly remit such refund (but only to the extent of indemnity payments made, or additional amounts paid, by any Borrower under this Section 3.01 with respect to the Taxes or Other Taxes giving rise to such refund plus any interest included in such refund by the relevant taxing authority attributable thereto) to such Borrower, net of all out-of-pocket expenses of the Lender or Agent, as the case may be and without interest (other than any interest paid by the relevant taxing authority with respect to such refund); provided that such Borrower, upon the request of the Lender or Agent, as the case may be, agrees promptly to return such refund to such party in the event such party is required to repay such refund to the relevant taxing authority.  Such Lender or Agent, as the case may be, shall, at such Borrower’s request, provide such Borrower with a copy of any notice of assessment or other evidence of the requirement to repay such refund received from the relevant taxing authority (provided that such Lender or Agent may delete any information therein that such Lender or Agent deems confidential).  Nothing herein contained shall interfere with the right of a Lender or Agent to arrange its tax affairs in whatever manner it thinks fit nor oblige any Lender or Agent to claim any tax refund or to make available its tax returns or disclose any information relating to its tax affairs or any computations in respect thereof or require any Lender or Agent to do anything that would prejudice its ability to benefit from any other refunds, credits, reliefs, remissions or repayments to which it may be entitled.

(g)  Each Lender agrees that, upon the occurrence of any event giving rise to the operation of Section 3.01(a) or (c) with respect to such Lender it will, if requested by the Company, use commercially reasonable efforts to designate another Lending Office for any Loan or Letter of Credit affected by such event; provided that such efforts are made on terms that, in the sole judgment exercised in good faith of such Lender, cause such Lender and its Lending Office(s) to suffer no economic, legal or regulatory disadvantage, and provided further that nothing in this Section 3.01(g) shall affect or postpone any of the Obligations of any Borrower or the rights of such Lender pursuant to Section 3.01(a) or (c).

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SECTION 3.02.  Illegality.  If any Lender determines that any Law has made it unlawful, or that any Governmental Authority has asserted that it is unlawful, for any Lender or its applicable Lending Office to make, maintain or fund Eurocurrency Rate Loans, or to determine or charge interest rates based upon the Eurocurrency Rate, then, on notice thereof by such Lender to the Borrowers through the Administrative Agent, any obligation of such Lender to make or continue Eurocurrency Rate Loans or to convert Base Rate Loans to Eurocurrency Rate Loans shall be suspended until such Lender notifies the Administrative Agent and the relevant Borrowers that the circumstances giving rise to such determination no longer exist.  Upon receipt of such notice, the relevant Borrowers shall upon demand from such Lender (with a copy to the Administrative Agent), prepay or, if applicable, convert all Eurocurrency Rate Loans of such Lender to Base Rate Loans, either on the last day of the Interest Period therefor, if such Lender may lawfully continue to maintain such Eurocurrency Rate Loans to such day, or promptly, if such Lender may not lawfully continue to maintain such Eurocurrency Rate Loans.  Upon any such prepayment or conversion, each relevant Borrower shall also pay accrued interest on the amount so prepaid or converted and all amounts due, if any, in connection with such prepayment or conversion under Section 3.05.  Each Lender agrees to designate a different Lending Office if such designation will avoid the need for such notice and will not, in the good faith judgment of such Lender, otherwise be materially disadvantageous to such Lender.

SECTION 3.03.  Inability to Determine Rates.  If the Required Lenders determine that for any reason adequate and reasonable means do not exist for determining the Eurocurrency Rate for any requested Interest Period with respect to a proposed Eurocurrency Rate Loan, or that the Eurocurrency Rate for any requested Interest Period with respect to a proposed Eurocurrency Rate Loan does not adequately and fairly reflect the cost to such Lenders of funding such Loan, or that Dollar deposits are not being offered to banks in the London interbank eurodollar market for the applicable amount and the Interest Period of such Eurocurrency Rate Loan, the Administrative Agent will promptly so notify each relevant Borrower and each Lender.  Thereafter, the obligation of the Lenders to make or maintain Eurocurrency Rate Loans shall be suspended until the Administrative Agent (upon the instruction of the Required Lenders, which instruction shall be given promptly upon such condition’s ceasing to exist) revokes such notice.  Upon receipt of such notice, each relevant Borrower may revoke any pending request for a Borrowing of, conversion to or continuation of Eurocurrency Rate Loans or, failing that, will be deemed to have converted such request into a request for a Borrowing of Base Rate Loans in the amount specified therein.

SECTION 3.04.  Increased Cost and Reduced Return; Capital Adequacy; Reserves on Eurocurrency Rate Loans.  (a)  If any Lender determines (in good faith) that as a result of the introduction of or any change in or in the interpretation of any Law, in each case after the date hereof, or such Lender’s compliance therewith, there shall be any increase in the cost to such Lender of agreeing to make or making, funding or maintaining Eurocurrency Rate Loans or (as the case may be) issuing or participating in Letters of Credit, or a reduction in the amount received or receivable by such Lender in connection with any of the foregoing (excluding for purposes of this Section 3.04(a) any such increased costs or reduction in amount covered by Section 2.15 or resulting from (i) Taxes or Other Taxes (as to which Section 3.01 shall govern), (ii) changes in the basis of taxation of overall net income or overall gross income (including branch profits), and franchise (and similar) taxes imposed in lieu of net income taxes, by the United States or any foreign jurisdiction or any political subdivision of either thereof under the Laws of which such Lender is organized or maintains a Lending Office, (iii) reserve requirements contemplated by Section 3.04(c) and (iv) in the case of Eurocurrency Rate Loans denominated in an Alternative Currency, the requirements of the Bank of England and the Financial Services Authority or the European Central Bank reflected in the Mandatory Cost, other than as set forth

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below) or the Mandatory Cost, as calculated hereunder, does not represent the cost to such Lender of complying with the requirements of the Bank of England and/or the Financial Services Authority or the European Central Bank in relation to its making, funding or maintaining of such Eurocurrency Rate Loans, then from time to time within fifteen (15) days after demand by such Lender setting forth in reasonable detail such increased costs (with a copy of such demand to the Administrative Agent given in accordance with Section 3.06), the Company shall pay to such Lender such additional amounts as will compensate such Lender for such increased cost or reduction or, if applicable, the portion of such cost that is not represented by the Mandatory Cost.

(b)  If any Lender determines (in good faith) that the introduction of any Law regarding capital adequacy or any change therein or in the interpretation thereof, in each case after the date hereof, or compliance by such Lender or such Lender’s holding company therewith, has the effect of reducing the rate of return on the capital of such Lender or such Lender’s holding company (or its Lending Office) as a consequence of its obligations hereunder to a level below that which such Lender or such Lender’s holding company could have achieved but for such introduction, change or compliance (taking into consideration its policies with respect to capital adequacy, by an amount deemed by such Lender to be material, then from time to time upon demand of such Lender setting forth in reasonable detail the charge and the calculation of such reduced rate of return (with a copy of such demand to the Administrative Agent given in accordance with Section 3.06), the Company shall pay to such Lender such additional amounts as will compensate such Lender or such Lender’s holding company for such reduction within fifteen (15) days after receipt of such demand.

(c)  The Company shall pay to each Lender, (i) as long as such Lender shall be required to maintain reserves with respect to liabilities or assets consisting of or including Eurocurrency funds or deposits, additional interest on the unpaid principal amount of each Eurocurrency Rate Loan equal to the actual costs of such reserves allocated to such Loan by such Lender (as determined by such Lender in good faith, which determination shall be conclusive in the absence of manifest error), and (ii) as long as such Lender shall be required to comply with any reserve ratio requirement or analogous requirement of any other central banking or financial regulatory authority imposed in respect of the maintenance of the Commitments or the funding of the Eurocurrency Rate Loans, such additional costs (expressed as a percentage per annum and rounded upwards, if necessary, to the nearest five decimal places) equal to the actual costs allocated to such Commitment or Loan by such Lender (as determined by such Lender in good faith, which determination shall be conclusive absent manifest error) which in each case shall be due and payable on each date on which interest is payable on such Loan, provided the Company shall have received at least fifteen (15) days’ prior notice (with a copy to the Administrative Agent, and which notice shall specify the Statutory Reserve Rate, if any, applicable to such Lender) of such additional interest or cost from such Lender.  If a Lender fails to give notice fifteen (15) days prior to the relevant Interest Payment Date, such additional interest or cost shall be due and payable fifteen (15) days from receipt of such notice.

(d)  Failure or delay on the part of any Lender to demand compensation pursuant to this Section 3.04 shall not constitute a waiver of such Lender’s right to demand such compensation, provided that the Company shall not be required to compensate a Lender pursuant to Section 3.04(a), (b) or (c) for any such increased cost or reduction incurred more than ninety (90) days prior to the date that such Lender demands, or notifies the Company of its intention to demand, compensation therefor, provided further that, if the circumstance giving rise to such increased cost or reduction is retroactive, then such 90-day period referred to above shall be extended to include the period of retroactive effect thereof.

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(e)  If any Lender requests compensation under this Section 3.04, then such Lender will, if requested by the Company, use commercially reasonable efforts to designate another Lending Office for any Loan or Letter of Credit affected by such event; provided that such efforts are made on terms that, in the reasonable judgment of such Lender, cause such Lender and its Lending Office(s) to suffer no material economic, legal or regulatory disadvantage, and provided further that nothing in this Section 3.04(e) shall affect or postpone any of the Obligations of any Borrower or the rights of such Lender pursuant to Section 3.04(a), (b), (c) or (d) or any rights of the Company pursuant to Section 3.07.

SECTION 3.05.  Funding Losses.  Upon demand of any Lender (with a copy to the Administrative Agent) from time to time, the Company shall promptly compensate such Lender for and hold such Lender harmless from any loss, cost or expense (excluding loss of profit) incurred by it as a result of:

(a)  (i) any continuation, conversion, payment or prepayment of any Eurocurrency Rate Loan on a day other than the last day of the Interest Period for such Loan or (ii) the CAM Exchange (in each case, whether voluntary, mandatory, automatic, by reason of acceleration, or otherwise); or

(b)  any failure by any Borrower (for a reason other than the failure of such Lender to make a Loan) to prepay, borrow, continue or convert any Eurocurrency Rate Loan on the date or in the amount notified by such Borrower;

including any loss or expense arising from the liquidation or reemployment of funds obtained by it to maintain such Loan or from fees payable to terminate the deposits from which such funds were obtained.

SECTION 3.06.  Matters Applicable to All Requests for Compensation.  (a)  Any Agent or any Lender claiming compensation under this Article III shall deliver a certificate to the Company setting forth the additional amount or amounts to be paid to it hereunder which shall be conclusive in the absence of manifest error.

(b)  With respect to any Lender’s claim for compensation under Section 2.15, 3.01, 3.02, 3.03 or 3.04, no Borrower shall be required to compensate such Lender for any amount incurred more than ninety (90) days prior to the date that such Lender notifies the relevant Borrowers of the event that gives rise to such claim; provided that, if the circumstance giving rise to such claim is retroactive, then such 90-day period referred to above shall be extended to include the period of retroactive effect thereof.  If any Lender requests compensation by the Company under Section 2.15 or 3.04, the Company may, by notice to such Lender (with a copy to the Administrative Agent), suspend the obligation of such Lender to make or continue from one Interest Period to another Eurocurrency Rate Loans, or to convert Base Rate Loans into Eurocurrency Rate Loans, until the event or condition giving rise to such request ceases to be in effect (in which case the provisions of Section 3.06(c) shall be applicable); provided that such suspension shall not affect the right of such Lender to receive the compensation so requested.

(c)  If the obligation of any Lender to make or continue from one Interest Period to another any Eurocurrency Rate Loan, or to convert Base Rate Loans into Eurocurrency Rate Loans shall be suspended pursuant to Section 3.06(b) hereof, such Lender’s Eurocurrency Rate Loans shall be automatically converted into Base Rate Loans on the last day(s) of the then current Interest Period(s) for such Eurocurrency Rate Loans (or, in the case of an immediate conversion required by Section 3.02, on such earlier date as required by Law) and, unless and until such

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Lender gives notice as provided below that the circumstances specified in Section 2.15, 3.01, 3.02, 3.03 or 3.04 hereof that gave rise to such conversion no longer exist:

(i)  to the extent that such Lender’s Eurocurrency Rate Loans have been so converted, all payments and prepayments of principal that would otherwise be applied to such Lender’s Eurocurrency Rate Loans shall be applied instead to its Base Rate Loans; and

(ii)  all Loans that would otherwise be made or continued from one Interest Period to another by such Lender as Eurocurrency Rate Loans shall be made or continued instead as Base Rate Loans, and all Base Rate Loans of such Lender that would otherwise be converted into Eurocurrency Rate Loans shall remain as Base Rate Loans.

(d)  If any Lender gives notice to the Company (with a copy to the Agent) that the circumstances specified in Section 2.15, 3.01, 3.02, 3.03 or 3.04 hereof that gave rise to the conversion of such Lender’s Eurocurrency Rate Loans pursuant to this Section 3.06 no longer exist (which such Lender agrees to do promptly upon such circumstances ceasing to exist) at a time when Eurocurrency Rate Loans made by other Lenders are outstanding, such Lender’s Base Rate Loans shall be automatically converted, on the first day(s) of the next succeeding Interest Period(s) for such outstanding Eurocurrency Rate Loans, to the extent necessary so that, after giving effect thereto, all Loans held by the Lenders holding Eurocurrency Rate Loans and by such Lender are held pro rata (as to principal amounts, interest rate basis, and Interest Periods) in accordance with their respective Commitments.

SECTION 3.07.  Replacement of Lenders under Certain Circumstances.  (a)  If at any time (i) any Borrower becomes obligated to pay additional amounts or indemnity payments described in Section 2.15, 3.01 or 3.04 as a result of any condition described in such Sections or any Lender ceases to make Eurocurrency Rate Loans as a result of any condition described in Section 3.02 or Section 3.04, (ii) any Lender becomes a Defaulting Lender or (iii) any Lender becomes a Non-Consenting Lender, then the Company may, upon prior written notice to the Administrative Agent and such Lender, replace such Lender by causing such Lender to (and such Lender shall be obligated to) assign pursuant to Section 10.07(b) (with the assignment fee to be paid by the Company in such instance) all of its rights and obligations under this Agreement to one or more Eligible Assignees; provided that neither the Administrative Agent nor any Lender shall have any obligation to the Company to find a replacement Lender or other such Person.

(b)  Any Lender being replaced pursuant to Section 3.07(a) above shall (i) execute and deliver an Assignment and Assumption with respect to such Lender’s Commitment and outstanding Loans and participations in L/C Obligations and Swing Line Loans, and (ii) deliver any Notes evidencing such Loans to the Company or Administrative Agent.  Pursuant to such Assignment and Assumption, (A) the assignee Lender shall acquire all or a portion, as the case may be, of the assigning Lender’s Commitment and outstanding Loans and participations in L/C Obligations and Swing Line Loans, (B) all obligations of the Borrowers owing to the assigning Lender relating to the Loans and participations so assigned shall be paid in full by the assignee Lender to such assigning Lender concurrently with such assignment and assumption and (C) upon such payment and, if so requested by the assignee Lender, delivery to the assignee Lender of the appropriate Note or Notes executed by the relevant Borrowers, the assignee Lender shall become a Lender hereunder and the assigning Lender shall cease to constitute a Lender hereunder with respect to such assigned Loans, Commitments and participations, except with respect to indemnification provisions under this Agreement, which shall survive as to such assigning Lender.

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(c)  Notwithstanding anything to the contrary contained above, any Lender that acts as an L/C Issuer may not be replaced hereunder at any time that it has any Letter of Credit outstanding hereunder unless arrangements reasonably satisfactory to such L/C Issuer (including the furnishing of a back-up standby letter of credit in form and substance, and issued by an issuer reasonably satisfactory to such L/C Issuer or the depositing of cash collateral into a cash collateral account in amounts and pursuant to arrangements reasonably satisfactory to such L/C Issuer) have been made with respect to each such outstanding Letter of Credit and the Lender that acts as the Administrative Agent may not be replaced hereunder except in accordance with the terms of Section 9.09.

(d)  In the event that (i) the Company or the Administrative Agent has requested that the Lenders consent to a departure or waiver of any provisions of the Loan Documents or agree to any amendment thereto, (ii) the consent, waiver or amendment in question requires the agreement of all affected Lenders in accordance with the terms of Section 10.01 or all the Lenders with respect to a certain Class of the Loans and (iii) the Required Lenders have agreed to such consent, waiver or amendment, then any Lender who does not agree to such consent, waiver or amendment shall be deemed a “Non-Consenting Lender.”

SECTION 3.08.  Survival.  All of the Borrowers’ obligations under this Article III shall survive termination of the Aggregate Commitments and repayment of all other Obligations hereunder.

ARTICLE IV

CONDITIONS PRECEDENT TO CREDIT EXTENSIONS

SECTION 4.01.  Conditions of Initial Credit Extension.  The obligation of each Lender to make its initial Credit Extension hereunder is subject to satisfaction or waiver of the following conditions on or prior to the Closing Date:

(a)  The Administrative Agent’s receipt of the following, each of which shall be originals or facsimiles (followed promptly by originals) unless otherwise specified, each properly executed by a Responsible Officer of the signing Loan Party, each in form and substance reasonably satisfactory to the Administrative Agent:

(i)  executed counterparts of this Agreement;

(ii)  a Note executed by the Company in favor of each Lender that has requested a Note at least two Business Days in advance of the Closing Date;

(iii)  each Collateral Document set forth on Schedule 1.01A, duly executed by each Loan Party thereto, together with:

(A)  certificates, if any, representing the Pledged Equity referred to therein accompanied by undated stock powers executed in blank and instruments evidencing the Pledged Debt indorsed in blank;

(B)  to the extent required under the Collateral and Guarantee Requirement, an opinion of local counsel for the Loan Parties in Iowa with respect to the enforceability and perfection of the Mortgage with respect to the Mortgaged Property in Iowa and any

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related fixture filings in form and substance reasonably satisfactory to the Administrative Agent;

(C)  evidence that all other actions, recordings and filings that the Administrative Agent may deem reasonably necessary to satisfy the Collateral and Guarantee Requirement shall have been taken, completed or otherwise provided for in a manner reasonably satisfactory to the Administrative Agent; and

(D)  a completed Perfection Certificate dated the Closing Date and signed by the associate general counsel or the chief legal officer of the Company, together with all attachments contemplated thereby;

(iv)  such certificates of resolutions or other action, incumbency certificates and/or other certificates of Responsible Officers of each Loan Party as the Administrative Agent may reasonably require evidencing the identity, authority and capacity of each Responsible Officer thereof authorized to act as a Responsible Officer in connection with this Agreement and the other Loan Documents to which such Loan Party is a party or is to be a party on the Closing Date;

(v)  opinion from (u) Cravath, Swaine & Moore LLP, special New York counsel to Holdings substantially in the form of Exhibit H-1, (v) local counsel in each of Iowa and Washington as may be reasonably required by the Administrative Agent, (w) Richards, Layton & Finger, special Delaware counsel to the Loan Parties substantially in the form of Exhibit H-2, and (x) Clifford H.R. DuPree, associate general counsel to the Company substantially in the form of Exhibit H-3, (y) Karen E. Andrews, general counsel to WRC Media substantially in the form of Exhibit H-4, and (z) Randolph H. Elkins, general counsel to Direct Holdings substantially in the form of Exhibit H-5;

(vi)  a certificate signed by a Responsible Officer of Holdings certifying that (A) except as set forth (x) in the Company Disclosure Letter (as defined in the Purchase Agreement) or (y) in Reader’s Digest’s Annual Report on Form 10-K for the fiscal year ended June 30, 2006, filed with the SEC on August 21, 2006, Reader’s Digest’s Current Reports on Forms 8-K filed with the SEC on October 4, 2006 and October 5, 2006, Reader’s Digest’s proxy statement on Schedule 14A filed with the SEC on September 29, 2006, Reader’s Digest’s Registration Statement on Form S-8 filed with the SEC on August 21, 2006, and post-effective amendment thereto dated August 22, 2006, but excluding in each case under this clause (y) any risk factor disclosures or other cautionary, predictive and forward looking disclosures contained in any such document under the heading “Risk Factors” or “Forward Looking Statements” or under any other heading, from June 30, 2006 to November 16, 2006, there has been no state of facts, event, change, effect, development, condition or occurrence that, individually or in the aggregate, has had or could reasonably be expected to result in a Material Adverse Change, and (B) except as set forth in the Company Disclosure Letter, since November 16, 2006, there has been no event, change, effect, development, condition or occurrence that, individually or in the aggregate, has had or could reasonably be expected to result in a Material Adverse Change;

(vii)  a certificate signed by a Responsible Officer of Holdings certifying that since June 30, 2006 there has been no event, change, effect, development, condition or occurrence with respect to WRC Media, Direct Holdings or any of their respective subsidiaries that, individually or in the aggregate, has had, or would reasonably be expected to have a material adverse effect on the business, operations, property or financial condition of Reader’s Digest, WRC Media, Direct Holdings and their respective subsidiaries, taken as a whole.

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(viii)  a certificate (which shall be reasonably satisfactory to the Administrative Agent) attesting to the Solvency of the Loan Parties (taken as a whole) after giving effect to the Transaction, from the Treasurer of Holdings;

(ix)  except as set forth in Section 6.17, evidence that all insurance (including title insurance) required to be maintained pursuant to the Loan Documents has been obtained and is in effect and that the Administrative Agent has been named as loss payee or additional insured, as appropriate, under each insurance policy with respect to such liability and property insurance as to which the Administrative Agent shall have reasonably requested to be so named;

(x)  a Committed Loan Notice or Letter of Credit Application, as applicable, relating to the initial Credit Extension; and

(xi)  a certificate signed by a Responsible Officer of the Company certifying compliance with the conditions set forth in paragraphs (a) and (b) of Section 4.02.

(b)  All fees and expenses required to be paid hereunder and invoiced before the Closing Date shall have been paid in full in cash.

(c)  Prior to or substantially contemporaneously with the initial Credit Extension, (i) the Sponsor Equity Contributions shall have been funded in full in cash; and (ii) Acquisition Co shall have received (as a common equity capital contribution or, if otherwise, on terms and conditions reasonably satisfactory in all material respects to the Administrative Agent) cash proceeds from the Equity Contribution in an aggregate amount, when combined with (x) the aggregate value of the Company Preferred Stock that is rolled over in connection with the Transactions and (y) the value (which shall be calculated net of the fees and expenses of the Company in connection with the WRC Acquisition and the DH Acquisition in excess of $15,000,000) of the Equity Interests issued by Holdings to the shareholders of WRC Media and Direct Holdings as consideration for the WRC Acquisition and the DH Acquisition, respectively) is equal to at least 29% of the total capitalization of the Company.

(d)  The Acquisition and the Merger shall be consummated in accordance with the terms of the Purchase Agreement without waiver or amendment of any material provisions thereof (other than any such waivers or amendments as are not, taken as a whole, materially adverse to the Lenders) unless consented to by the Administrative Agent, which consent shall not be unreasonably withheld, conditioned or delayed.

(e)  The DH Acquisition shall be consummated in accordance with the terms of the DH Acquisition Agreement without waiver or amendment of any material provisions thereof (other than any such waivers or amendments as are not, taken as a whole, materially adverse to the Lenders) unless consented to by the Administrative Agent, which consent shall not be unreasonably withheld, conditioned or delayed.  Holdings shall have contributed all of the Equity Interests of Direct Holdings to the Company.

(f)  The WRC Acquisition shall be consummated in accordance with the terms of the WRC Acquisition Agreement without waiver or amendment of any material provisions thereof (other than any such waivers or amendments as are not, taken as a whole, materially adverse to the Lenders) unless consented to by the Administrative Agent, which consent shall not be unreasonably withheld, conditioned or delayed.  Holdings shall have contributed all of the Equity Interests of WRC Media to the Company.

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(g)  Prior to or substantially contemporaneously with the initial Credit Extensions, the Company shall have received at least $600,000,000 in gross cash proceeds from the issuance of the Senior Subordinated Notes.

(h)  Prior to or substantially contemporaneously with the initial Credit Extensions, Holdings shall have received at least $274,000,000 in gross cash proceeds from the issuance of the Holdings Senior PIK Preferred.

(i)  Prior to or substantially contemporaneously with the initial Credit Extensions, Holdings shall have received at least $91,333,333.33 in gross cash proceeds from the issuance of the Holdings Common Equity.

(j)  The Administrative Agent shall have received evidence reasonably satisfactory to it that all loans outstanding under the Existing Credit Agreement and the Existing DH/WRC Debt Agreements and all accrued and unpaid interest, fees and other amounts owing thereunder shall have been paid in full, all commitments to extend credit thereunder shall have terminated, and all Liens securing obligations thereunder shall have been released.  A Successful Consent Solicitation or a Defeasance shall have been consummated.  Except for (A) any Existing Notes not repurchased or redeemed on or prior to the Closing Date, (B) Indebtedness listed on Schedule 7.03(b), (C) the Company Preferred Stock, (D) the Loans and L/C Obligations, (E) the Senior Subordinated Notes and (F) the Holdings PIK Preferred, Holdings, the Company and its Subsidiaries shall have no Indebtedness or preferred Equity Interests outstanding after giving effect to the Transaction.

(k)  The Arrangers and the Lenders shall have received (i) the Audited Financial Statements, (ii) the Unaudited Financial Statements and (iii) to the extent made available by each of Reader’s Digest, Direct Holdings and WRC Media, monthly financial data generated by each of Reader’s Digest’s, Direct Holdings’, and WRC Media’s internal accounting systems for use by senior management for each month ended after the latest fiscal quarter for which Unaudited Financial Statements are delivered pursuant to clause (ii) above and at least 30 days before the Closing Date.

(l)  The Arrangers and the Lenders shall have received the Pro Forma Balance Sheet.

Notwithstanding anything in this Agreement or any other Loan Document to the contrary, (I) the only representations and warranties (and related defaults) made by the Loan Parties relating to Reader’s Digest, its subsidiaries and their businesses the making of which shall be a condition to availability of the Facilities on the Closing Date shall be such of the representations made by Reader’s Digest in the Purchase Agreement as are material to the interests of the Lenders, but only to the extent that Holdings and Acquisition Co have the right to terminate their obligations under the Purchase Agreement as a result of a breach of such representations in the Purchase Agreement (determined without regard to whether any notice is required to be delivered by Holdings or Acquisition Co), and (II) the only other representations and warranties (and related defaults) made by the Loan Parties the making of which shall be a condition to availability of the Facilities on the Closing Date shall be the Specified Representations (as defined below).  For purposes hereof, “Specified Representations” means the representations and warranties set forth in Sections 5.01(a), 5.01(b), 5.02, 5.04, 5.13, 5.16 and 5.18.

SECTION 4.02.  Conditions to All Credit Extensions.  Subject to the last paragraph of Section 4.01, the obligation of each Lender to honor any Request for Credit Extension (other than

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a Committed Loan Notice requesting only a conversion or a continuation of Loans) is subject to the following conditions precedent:

(a)  The representations and warranties of the Company and each other Loan Party contained in Article V or any other Loan Document shall be true and correct in all material respects on and as of the date of such Credit Extension; provided that, to the extent that such representations and warranties specifically refer to an earlier date, they shall be true and correct in all material respects as of such earlier date; provided, further that, any representation and warranty that is qualified as to “materiality,” “Material Adverse Effect” or similar language shall be true and correct in all respects on such respective dates.

(b)  No Default shall have occurred and be continuing at the time of or immediately after giving effect to such proposed Credit Extension.

(c)  The Administrative Agent and, if applicable, the relevant L/C Issuer or the Swing Line Lender shall have received a Request for Credit Extension in accordance with the requirements hereof.

Each Request for Credit Extension (other than a Committed Loan Notice requesting only a conversion or a continuation of Loans) submitted by the Company shall be deemed to be a representation and warranty that the conditions specified in Sections 4.02(a) and (b) have been satisfied on and as of the date of the applicable Credit Extension.

SECTION 4.03.  Conditions of Initial Credit Extension to Overseas Borrower.  Subject to the last paragraph of Section 4.01, the obligation of each Lender to make any Euro Term Loan or Incremental Overseas Term Loan to any Overseas Borrower is subject to satisfaction or waiver of the following further conditions:

(a)  receipt by the Administrative Agent of an opinion of counsel for such Overseas Borrower reasonably acceptable to the Administrative Agent, covering such customary matters relating to the transactions contemplated hereby as the Administrative Agent may reasonably request;

(b)  receipt by the Administrative Agent of all documents with respect to such Overseas Borrower satisfying the requirements set forth in Section 4.01(a)(iv) with respect thereto;

(c)  to the extent required by the Collateral and Guarantee Requirement, all Overseas Obligations shall have been (i) unconditionally guaranteed by each required Guarantor and (ii) secured by a security interest in the required Collateral with the priority required by the Collateral Documents, and the Administrative Agent shall have received evidence that all other actions, recordings and filings that the Administrative Agent may deem reasonably necessary to satisfy the Collateral and Guarantee Requirement shall have been taken, completed or otherwise provided for in a manner reasonably satisfactory to the Administrative Agent;

(d)  receipt by the Administrative Agent of a Note executed by such Overseas Borrower in favor of each Lender that has requested a Note at least two Business Days in advance of date of the relevant Credit Extension;

(e)  receipt by the Administrative Agent of a certificate signed by a Responsible Officer of the Company certifying compliance with the conditions set forth in paragraphs (a) and (b) of Section 4.02; and

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(f)  receipt by the Administrative Agent of a certificate signed by a Responsible Officer of such Overseas Borrower certifying that the representations and warranties set forth in Sections 5.01, 5.02, 5.03 and 5.04 are true and correct in all material respects as to such Overseas Borrower and any Loan Document to which such Overseas Borrower is a party on and as of the date of such Credit Extension; provided that any representation and warranty that is qualified as to “materiality,” “Material Adverse Effect” or similar language shall be true and correct in all respects on such date.

ARTICLE V

REPRESENTATIONS AND WARRANTIES

The Company represents and warrants (provided that, on the Closing Date, only the Specified Representations shall be made as to the Company and its Subsidiaries, and the Specified Representations shall be made by Acquisition Co only) to the Agents and the Lenders that:

SECTION 5.01.  Existence, Qualification and Power; Compliance with Laws.  Each Loan Party and each of its Subsidiaries (a) is a Person duly organized or formed, validly existing and in good standing (to the extent such concept is applicable in the applicable jurisdiction) under the Laws of the jurisdiction of its incorporation or organization, (b) has all requisite power and authority to (i) own or lease its assets and carry on its business and (ii) execute, deliver and perform its obligations under the Loan Documents to which it is a party, (c) is duly qualified and in good standing (to the extent such concept is applicable in the applicable jurisdiction) under the Laws of each jurisdiction where its ownership, lease or operation of properties or the conduct of its business requires such qualification, (d) is in compliance with all Laws, orders, writs, injunctions and orders and (e) has all requisite governmental licenses, authorizations, consents and approvals to operate its business as currently conducted; except in each case referred to in clause (c), (d) or (e), to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect.

SECTION 5.02.  Authorization; No Contravention.  The execution, delivery and performance by each Loan Party of each Loan Document to which such Person is a party, and the consummation of the Transaction, are within such Loan Party’s corporate or other powers, have been duly authorized by all necessary corporate or other organizational action, and do not and will not (a) violate the terms of any of such Person’s Organization Documents, (b) violate or result in any breach of, or the creation of any Lien under (other than Liens created by the Loan Documents and other Liens permitted by Section 7.01), or require any payment to be made under (i) any Contractual Obligation to which such Person is a party or which is binding upon such Person or the properties of such Person or any of its Subsidiaries or (ii) any order, injunction, writ or decree of any Governmental Authority or any arbitral award to which such Person or its property is subject; or (c) violate any Law; except with respect to any violation or breach (but not creation of Liens) referred to in clause (b) and (c) above, to the extent that such violation or breach could not reasonably be expected to have a Material Adverse Effect.

SECTION 5.03.  Governmental Authorization; Other Consents.  No approval, consent, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority is necessary or required in connection with (a) the execution, delivery or performance by any Loan Party of this Agreement or any other Loan Document, or for the consummation of the Transaction, (b) the grant by any Loan Party of the Liens granted by it pursuant to the Collateral Documents or (c) the perfection or maintenance of the Liens created under the

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Collateral Documents (including the priority thereof), except for (i) filings necessary to perfect or maintain the perfection of the Liens on the Collateral granted by the Loan Parties in favor of the Secured Parties, (ii) the approvals, consents, exemptions, authorizations, actions, notices and filings which have been duly obtained, taken, given or made and are in full force and effect and (iii) those approvals, consents, exemptions, authorizations or other actions, notices or filings, the failure of which to obtain or make could not reasonably be expected to have a Material Adverse Effect.

SECTION 5.04.  Binding Effect.  This Agreement and each other Loan Document has been duly executed and delivered by each Loan Party that is party thereto.  This Agreement and each other Loan Document constitutes a legal, valid and binding obligation of each Loan Party that is party thereto, enforceable against such Loan Party in accordance with its terms, except as such enforceability may be limited by Debtor Relief Laws and by general principles of equity, regardless of whether considered in a proceeding in equity or at law.

SECTION 5.05.  Financial Statements; No Material Adverse Effect.  (a)  (i)  The Audited Financial Statements and the Unaudited Financial Statements fairly present in all material respects the consolidated financial condition of Reader’s Digest, WRC Media, Direct Holdings and their respective Subsidiaries as of the dates thereof and their results of operations for the period covered thereby in accordance with GAAP consistently applied throughout the periods covered thereby, except as otherwise expressly noted therein and, in the case of the Unaudited Financial Statements, subject to normal year-end audit adjustments and the absence of footnotes.

(ii)  The unaudited pro forma consolidated balance sheet of the Company and its Subsidiaries as at December 31, 2006 (including the notes thereto) (the “Pro Forma Balance Sheet”) has been prepared giving effect (as if such events had occurred on such date) to the Transaction, each material acquisition by Reader’s Digest, WRC Media, Direct Holdings or any of their respective Subsidiaries consummated after June 30, 2006 (and, with respect to WRC Media, after December 31, 2005) and prior to the Closing Date and all other transactions that would be required to be given pro forma effect by Regulation S-X promulgated under the Exchange Act.  The Pro Forma Balance Sheet has been prepared in good faith, based on assumptions believed by the Company to be reasonable as of the date of delivery thereof, and presents fairly in all material respects in accordance with GAAP the pro forma financial position of the Company and its Subsidiaries as at December 31, 2006 and their pro forma results of operations for the periods covered thereby, assuming that the events specified in the preceding sentence had actually occurred at such date.

(b)  Since June 30, 2006, there has been no event or circumstance, either individually or in the aggregate, that has had or could reasonably be expected to have a Material Adverse Effect.

(c)  The forecasts of consolidated balance sheets, income statements and cash flow statements of the Company and its Subsidiaries for each fiscal year through 2013, copies of which have been furnished to the Administrative Agent prior to the Closing Date, have been prepared in good faith on the basis of assumptions believed to be reasonable at the time made, it being understood that forecasts are, by their nature, inherently uncertain and actual results may vary from such forecasts and that such variations may be material.

(d)  As of the Closing Date, except as disclosed in any schedule to this Agreement, neither the Company nor any Subsidiary has any Indebtedness or other obligations or liabilities, direct or contingent (other than (i) the Indebtedness, obligations and liabilities reflected on Schedule 5.05, (ii) obligations arising under this Agreement, the Senior Subordinated Note

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Indenture, the Company Preferred Stock and the Holdings PIK Preferred, (iii) liabilities arising as a result of the Transaction and (iv) liabilities incurred in the ordinary course of business) that, either individually or in the aggregate, have had or could reasonably be expected to have a Material Adverse Effect.

SECTION 5.06.  Litigation.  As of the Closing Date, there are no actions, suits, proceedings, claims, investigations or disputes pending or, to the knowledge of the Company, threatened in writing or contemplated, at law, in equity, in arbitration or before any Governmental Authority, by or against the Company or any of its Subsidiaries or against any of their properties or revenues that, either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.

SECTION 5.07.  No Default.  Neither the Company nor any Subsidiary is in default under or with respect to any Contractual Obligation (other than any Contractual Obligation pursuant to which the Company or such Subsidiary has issued or incurred Indebtedness) that, either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.

SECTION 5.08.  Ownership of Property; Liens.  Each Loan Party (other than any Immaterial Subsidiary) and each of its Subsidiaries (other than any Immaterial Subsidiary) has good title to, or valid leasehold interests in, or easements or other limited property interests in, all its properties and assets material to the ordinary conduct of its business (including all Material Real Property), free and clear of all Liens except for minor defects in title that do not materially interfere with its ability to conduct its business or to utilize such assets for their intended purposes and Liens permitted by Section 7.01.  Each Immaterial Subsidiary has good title to, or valid leasehold interests in, or easements or other limited property interests in, all its properties and assets material to the ordinary conduct of the business of the Company and the Subsidiaries taken as a whole (including all Material Real Property), free and clear of all Liens except for minor defects in title that do not materially interfere with its ability to conduct its business or to utilize such assets for their intended purposes and Liens permitted by Section 7.01.

SECTION 5.09.  Environmental Compliance.  (a)  There are no claims, actions, suits, or proceedings alleging potential liability or responsibility for violation of, or otherwise relating to, any Environmental Law that could, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

(b)  Except as specifically disclosed in Schedule 5.09 or except as could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, (i) none of the properties currently or, to the knowledge of the Company, formerly owned, leased or operated by any Loan Party or any of its Subsidiaries is listed or proposed for listing on the NPL or on the CERCLIS or any analogous foreign, state or local list or, to the knowledge of the Company, is adjacent to any such property; and (ii) Hazardous Materials have not been released, discharged or disposed of by any Person on any property currently or, to the knowledge of the Company, formerly owned, leased or operated by any Loan Party or any of its Subsidiaries and Hazardous Materials have not otherwise been released, discharged or disposed of by any of the Loan Parties and their Subsidiaries at any other location, in each case in a manner that could reasonably be expected to result in Environmental Liability.

(c)  The properties owned, leased or operated by the Company and the Subsidiaries do not contain any Hazardous Materials in amounts or concentrations which (i) constitute a violation of, (ii) require remedial action under, or (iii) could give rise to liability under, Environmental

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Laws, which violations, remedial actions and liabilities, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect.

(d)  Except as specifically disclosed in Schedule 5.09, neither the Company nor any of its Subsidiaries is undertaking, either individually or together with other potentially responsible parties, any investigation or assessment or remedial or response action relating to any actual or threatened release, discharge or disposal of Hazardous Materials at any site, location or operation, either voluntarily or pursuant to the order of any Governmental Authority or the requirements of any Environmental Law, except for such investigation or assessment or remedial or response action that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.

(e)  All Hazardous Materials generated, used, treated, handled or stored at, or transported to or from, by any Loan Party or any of its Subsidiaries, any property currently or formerly owned or operated by any Loan Party or any of its Subsidiaries have been disposed of in a manner not reasonably expected to result, individually or in the aggregate, in a Material Adverse Effect.

(f)  Except as would not reasonably be expected to result, individually or in the aggregate, in a Material Adverse Effect, none of the Loan Parties and their Subsidiaries has contractually assumed any liability or obligation under or relating to any Environmental Law.

SECTION 5.10.  Taxes.  The Company and its Subsidiaries have filed all Federal and state and other tax returns and reports required to be filed, and have paid all Federal and state and other taxes, assessments, fees and other governmental charges levied or imposed upon them or their properties, income or assets otherwise due and payable, except those (a) which are not overdue by more than thirty (30) days, (b) which are being contested in good faith by appropriate proceedings diligently conducted and for which reserves have been provided to the extent required by GAAP or (c) set forth in Schedule 5.10 and except as the failure to do any of the foregoing could not, either individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.

SECTION 5.11.  ERISA Compliance.  (a)  Except as set forth in Schedule 5.11 or as could not, either individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect, each Plan is in compliance with the applicable provisions of ERISA, the Code and other Federal or state Laws.

(b)  (i) No ERISA Event has occurred during the five year period prior to the date on which this representation is made or deemed made with respect to any Pension Plan; (ii) neither any Loan Party nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability under Title IV of ERISA with respect to any Pension Plan (other than premiums due and not delinquent under Section 4007 of ERISA); (iii) neither any Loan Party nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability (and no event has occurred which, with the giving of notice under Section 4219 of ERISA, would result in such liability) under Sections 4201 or 4243 of ERISA with respect to a Multiemployer Plan; (iv) neither any Loan Party nor any ERISA Affiliate has engaged in a transaction that could be subject to Sections 4069 or 4212(c) of ERISA; and (v) the present value of all benefit liabilities under each Pension Plan does not exceed the aggregate current value of the assets of such Pension Plan (based on those assumptions used to fund the Pension Plans); except, with respect to each of the foregoing clauses of this Section 5.11(b), as could not reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect.

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SECTION 5.12.  Subsidiaries; Equity Interests.  As of the Closing Date, neither Holdings nor any Loan Party has any Subsidiaries other than those specifically disclosed in Schedule 5.12, and all of the outstanding Equity Interests in material Subsidiaries have been validly issued, are fully paid and nonassessable and all Equity Interests owned by Holdings or a Loan Party that are required to be pledged on the Closing Date pursuant to the Collateral and Guarantee Requirement are owned free and clear of all Liens except (i) those created under the Collateral Documents and (ii) any nonconsensual Lien that is permitted under Section 7.01.  As of the Closing Date, Schedule 5.12 (a) sets forth the name and jurisdiction of each Subsidiary, (b) sets forth the ownership interest of Holdings, the Company and any other Subsidiary in each Subsidiary, including the percentage of such ownership and (c) identifies each Subsidiary that is a Subsidiary the Equity Interests of which are required to be pledged on the Closing Date pursuant to the Collateral and Guarantee Requirement.

SECTION 5.13.  Margin Regulations; Investment Company Act.  (a)  The Company is not engaged nor will it engage, principally or as one of its important activities, in the business of purchasing or carrying margin stock (within the meaning of Regulation U issued by the Board), or extending credit for the purpose of purchasing or carrying margin stock, and no proceeds of any Borrowings or drawings under any Letter of Credit will be used for any purpose that violates Regulation U.

(b)  None of the Company, any Person Controlling the Company, or any Subsidiary is required to be registered as an “investment company” under the Investment Company Act of 1940.

SECTION 5.14.  Disclosure.  No report, financial statement, certificate or other written information furnished by or on behalf of any Loan Party to any Agent or any Lender in connection with the transactions contemplated hereby and the negotiation of this Agreement or delivered hereunder or any other Loan Document (as modified or supplemented by other information so furnished) when taken as a whole contains any material misstatement of fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not materially misleading; provided that, with respect to projected financial information and pro forma financial information, the Company represents only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time made; it being understood that projections are, by their nature, inherently uncertain and such projections may vary from actual results and that such variances may be material.

SECTION 5.15.  Intellectual Property; Licenses, Etc.  Each of the Loan Parties and their Subsidiaries owns, licenses or possesses the right to use, all of the United States and foreign trademarks, service marks, logos, trade names, domain names, copyrights, patents, patent rights, licenses, trade secrets, proprietary information, technology, software, know-how database rights, design rights and other intellectual property rights (collectively, “IP Rights”) that are material to the operation of the business of the Company and its Subsidiaries, taken as a whole, as currently conducted, and, without conflict with the rights of any Person, except to the extent such conflicts, either individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.  To the knowledge of the Company, the business of the Company and its Subsidiaries, taken as a whole, as currently conducted, does not infringe upon any IP Rights held by any Person and no Person infringes upon any IP Rights of the Company and its Subsidiaries, except in each case as could not reasonably be expected to have a Material Adverse Effect.  No claim or litigation regarding any of the IP Rights is pending or, to the knowledge of any

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Borrower, threatened against any Loan Party or Subsidiary, which, either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.

SECTION 5.16.  Solvency.  On the Closing Date after giving effect to the Transaction, the Company and its Subsidiaries, on a consolidated basis, are Solvent.

SECTION 5.17.  Labor Matters.  Except as, in the aggregate, could not reasonably be expected to have a Material Adverse Effect, (a) there are no strikes or other labor disputes against any of Holdings, the Company or any Subsidiary pending or, to the knowledge of Holdings or the Company, threatened; (b) hours worked by and payment made to employees of each of Holdings, the Company or any Subsidiary have not been in violation of the Fair Labor Standards Act or any other applicable Laws dealing with such matters; and (c) all payments due from any of Holdings, the Company or any Subsidiary on account of employee health and welfare insurance have been paid or accrued as a liability on the books of the relevant party.  The consummation of the Transaction will not give rise to any right of termination or right of renegotiation on the part of any union under any collective bargaining agreement to which Holdings, the Company or any Subsidiary is bound, except as could not reasonably be expected to have a Material Adverse Effect.

SECTION 5.18.  Collateral.  (a)   The Guarantee and Security Agreement is effective to create in favor of the Administrative Agent, for the benefit of the Lenders, legal, valid and enforceable (subject to the effect of Debtor Relief Laws and subject to general principles of equity) security interests in the Collateral described therein and proceeds thereof to the extent governed by the Uniform Commercial Code.  In the case of the Pledged Equity or Pledged Debt described in any of the Collateral Documents, when stock certificates representing such Pledged Equity or promissory notes representing such Pledged Debt are delivered to the Administrative Agent together with the necessary endorsements (provided that stock certificates representing the Pledged Equity of any Foreign Immaterial Subsidiary need not be delivered to the Administrative Agent for so long as such Foreign Immaterial Subsidiary remains a Foreign Immaterial Subsidiary), and in the case of the other Collateral described in any of the Collateral Documents, when financing statements and other filings specified on Schedule 5.18 in appropriate form are filed in the offices specified on Schedule 5.18, the Guarantee and Security Agreement shall constitute a fully perfected Lien on, and security interest in, all right, title and interest of the Loan Parties in such Collateral and the proceeds thereof, as security for their respective Obligations to the extent a Lien on such Collateral can be perfected by the filing of a financing statement, by filings to be made in respect of Intellectual Property in the United States Patent and Trademark Office and the United States Copyright Office or, in the case of the Pledged Equity and Pledged Debt, by possession or control, in each case prior and superior in right to any other Person (except (x) in the case of Collateral constituting Pledged Equity and Pledged Debt, nonconsensual Liens permitted by Section 7.01 and (y) in the case of Collateral other than Pledged Equity and Pledged Debt, Liens permitted by Section 7.01).

(b)  Each of the Mortgages is effective to create in favor of the Administrative Agent, for the benefit of the Lenders, a legal, valid and enforceable (subject to the effect of Debtor Relief Laws and subject to general principles of equity) Lien on the Mortgaged Properties described therein and proceeds thereof, and when the Mortgages are filed in the appropriate recording offices, each such Mortgage shall constitute a fully perfected Lien on, and security interest in, all right, title and interest of the Loan Parties in the Mortgaged Properties and the proceeds thereof, as security for the Obligations (as defined in the relevant Mortgage), in each case prior and superior in right to any other Person (except that the security interest created in such real property and the Mortgaged Property may be subject to the Liens permitted by Section 7.01).

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ARTICLE VI

AFFIRMATIVE COVENANTS

So long as any Lender shall have any Commitment hereunder, any Loan or other Obligation hereunder which is accrued and payable shall remain unpaid or unsatisfied, or any Letter of Credit shall remain outstanding, each of Holdings and the Company shall, and shall (except in the case of the covenants set forth in Sections 6.01, 6.02 and 6.03) cause each Restricted Subsidiary to:

SECTION 6.01.  Financial Statements.  Deliver to the Administrative Agent for prompt further distribution to each Lender:

(a)  as soon as available, but in any event within ninety (90) days (or, in the case of the fiscal year ending June 30, 2007, one hundred twenty (120) days) after the end of each fiscal year of the Company beginning with the fiscal year ending June 30, 2007, a consolidated balance sheet of the Company and its consolidated Subsidiaries as at the end of such fiscal year, and the related consolidated statements of income or operations, stockholders’ equity and cash flows for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, all prepared in accordance with GAAP, audited and accompanied by a report and opinion of an independent registered public accounting firm of nationally recognized standing, which report and opinion shall be prepared in accordance with generally accepted auditing standards and shall not be subject to any “going concern” or like qualification or exception or any qualification or exception as to the scope of such audit;

(b)  as soon as available, but in any event within forty-five (45) days (or, in the case of the fiscal quarter ending March 31, 2007, ninety (90) days) after the end of each of the first three (3) fiscal quarters of each fiscal year of the Company, an unaudited consolidated balance sheet of the Company and its consolidated Subsidiaries (or, at the Company’s option, with respect to the fiscal quarter of the Company ending March 31, 2007, of each of Reader’s Digest and its consolidated Subsidiaries, WRC Media and its consolidated Subsidiaries and Direct Holdings and its consolidated Subsidiaries) as at the end of such fiscal quarter, and the related unaudited (i) consolidated statements of income or operations for such fiscal quarter and for the portion of the fiscal year then ended and (ii) consolidated statements of cash flows for the portion of the fiscal year then ended, setting forth in each case in comparative form the figures for the corresponding fiscal quarter of the previous fiscal year for the applicable entities and the corresponding portion of the previous fiscal year for the applicable entities, all certified by a Responsible Officer of the Company as fairly presenting in all material respects the consolidated financial condition, results of operations, stockholders’ equity and cash flows of the Company and its consolidated Subsidiaries (or, at the Company’s option, with respect to the fiscal quarter of the Company ending March 31, 2007 or the corresponding fiscal quarter ended March 31, 2006, of each of Reader’s Digest and its consolidated Subsidiaries, WRC Media and its consolidated Subsidiaries and Direct Holdings and its consolidated Subsidiaries) in accordance with GAAP (other than the comparative financial statements for the fiscal quarter ended March 31, 2006 and the fiscal year ended June 30, 2006), subject only to normal year-end audit adjustments and the absence of footnotes;

(c)  as soon as available, and in any event no later than ninety (90) days after the end of each fiscal year of the Company beginning with the fiscal year ending June 30, 2007, a reasonably detailed consolidated budget for the following fiscal year (including a projected consolidated balance sheet of the Company and its consolidated Subsidiaries as of the end of the

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following fiscal year, the related consolidated statements of projected cash flow and projected income and a summary of the material underlying assumptions applicable thereto) (collectively, the “Projections”); and

(d)  simultaneously with the delivery of each set of consolidated financial statements referred to in Sections 6.01(a) and 6.01(b) above, the related consolidating financial statements reflecting the adjustments necessary to eliminate the accounts of Unrestricted Subsidiaries (if any) from such consolidated financial statements.

Notwithstanding the foregoing, the obligations in paragraphs (a) and (b) of this Section 6.01 may be satisfied with respect to financial information of the Company and the Restricted Subsidiaries by furnishing (A) the applicable financial statements of Holdings (or any direct or indirect parent of Holdings) or (B) the Company’s or Holdings’ (or any direct or indirect parent thereof), as applicable, Form 10-K or 10-Q, as applicable, filed with the SEC; provided that, with respect to each of clauses (A) and (B), (i) to the extent such information relates to Holdings (or a parent thereof), such information is accompanied by consolidating information that explains in reasonable detail the differences between the information relating to Holdings (or such parent), on the one hand, and the information relating to the Company and the Restricted Subsidiaries on a standalone basis, on the other hand and (ii) to the extent such information is in lieu of information required to be provided under Section 6.01(a), such materials are accompanied by a report and opinion of an independent registered public accounting firm of nationally recognized standing, which report and opinion shall be prepared in accordance with generally accepted auditing standards and shall not be subject to any “going concern” or like qualification or exception or any qualification or exception as to the scope of such audit.

SECTION 6.02.  Certificates; Other Information.  Deliver to the Administrative Agent for prompt further distribution to each Lender:

(a)  simultaneously with the delivery of the financial statements referred to in Section 6.01(a), a certificate of its independent registered public accounting firm certifying such financial statements and stating that in making the examination necessary therefor no knowledge was obtained of any Event of Default under Section 7.10 or, if any such Event of Default shall exist, stating the nature and status of such event (which certificate may be limited to the extent required by such firm’s general accounting and auditing rules, policies or guidelines);

(b)  simultaneously with the delivery of the financial statements referred to in Section 6.01(a) and (b), a duly completed Compliance Certificate signed by a Responsible Officer of the Company and, if such Compliance Certificate demonstrates an Event of Default of any covenant under Section 7.10, any of the Equity Investors may deliver, together with such Compliance Certificate or at any time prior to the end of the applicable Cure Period, notice of their intent to cure (a “Notice of Intent to Cure”) such Event of Default pursuant to Section 8.05; provided that the delivery of a Notice of Intent to Cure shall in no way affect or alter the occurrence, existence or continuation of any such Event of Default or the rights, benefits, powers and remedies of the Administrative Agent and the Lenders under any Loan Document;

(c)  promptly after the same are publicly available, copies of all annual, quarterly and current reports and registration statements which the Company files with the SEC or with any Governmental Authority that may be substituted therefor (other than amendments to any registration statement (to the extent such registration statement, in the form it became effective, is delivered), exhibits to any registration statement and, if applicable, any registration statement on

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Form S-8) and in any case not otherwise required to be delivered to the Administrative Agent pursuant hereto;

(d)  promptly after the furnishing thereof, copies of any material requests or material notices received by any Loan Party (other than in the ordinary course of business) or material statements or material reports furnished to any holder of debt securities of any Loan Party or of any of its Subsidiaries pursuant to the terms of the Senior Subordinated Note Indenture or any other Junior Financing Documentation in a principal amount greater than the Threshold Amount or to any holder of preferred equity securities of any Loan Party and not otherwise required to be furnished to the Lenders pursuant to any other clause of this Section 6.02;

(e)  together with the delivery of each Compliance Certificate pursuant to Section 6.02(b) required to be delivered concurrently with the delivery of financial statements referred to in Section 6.01(a), (i) a certificate of a Responsible Officer of the Company (x) setting forth the information required pursuant to the Perfection Certificate or confirming that there has been no change in such information since the date of the Perfection Certificate delivered on the Closing Date or the date of the most recent certificate delivered pursuant to this Section and (y) identifying, based on Collateral owned, and Laws in effect, as of the date of such certificate, all Uniform Commercial Code financing statements (including fixture filings, as applicable) or other appropriate filings, recordings or registrations, including all refilings, rerecordings and reregistrations, containing a description of the Collateral that will be required to be filed of record within the 18 months following the date of such certificate, in each governmental, municipal or other appropriate office in each jurisdiction identified pursuant to clause (x) above to the extent necessary and required under the Collateral Documents to protect and perfect the security interests under the Collateral Documents for a period of not less than 18 months after the date of such certificate (except as noted therein with respect to any continuation statements to be filed within such period), (ii) a reasonably detailed calculation of Excess Cash Flow for such fiscal year, (iii) a description of any change in the status of a Subsidiary as a Restricted or an Unrestricted Subsidiary as of the date of delivery of such Compliance Certificate and (iv) a description of any change in the status of any Subsidiary as a Foreign Immaterial Subsidiary as of the date of delivery of such Compliance Certificate; and

(f)  promptly, such additional information regarding the business, legal, financial or corporate affairs of any Loan Party or any Subsidiary, or compliance with the terms of the Loan Documents, as the Administrative Agent or any Lender through the Administrative Agent may from time to time reasonably request.

Documents required to be delivered pursuant to Section 6.01(a) or (b) or Section 6.02(c) or (d) (to the extent any such documents are included in materials otherwise filed with the SEC) may be delivered electronically and if so delivered, shall be deemed to have been delivered on the date (i) on which the Company posts such documents, or provides a link thereto on the Company’s website on the Internet at the website address listed on Schedule 10.02; (ii) on which such documents are posted on the Company’s behalf on IntraLinks/IntraAgency or another relevant website, if any, to which each Lender and the Administrative Agent have access (whether a commercial, third-party website or whether sponsored by the Administrative Agent); or (iii) such documents are publicly available on the SEC’s website pursuant to the SEC’s EDGAR system; provided that:  (i) upon written request by the Administrative Agent, the Company shall deliver paper copies of such documents to the Administrative Agent for further distribution to each Lender until a written request to cease delivering paper copies is given by the Administrative Agent and (ii) the Company shall notify (which may be by facsimile or electronic mail) the Administrative Agent of the posting of any such documents and provide to the

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Administrative Agent by electronic mail electronic versions (i.e., soft copies) of such documents.  Notwithstanding anything contained herein, in every instance the Company shall be required to provide paper copies of the Compliance Certificates required by Section 6.02(b) to the Administrative Agent.  Each Lender shall be solely responsible for timely accessing posted documents or requesting delivery of paper copies of such documents from the Administrative Agent and maintaining its copies of such documents.

SECTION 6.03.  Notices.  Promptly (but in any event within five Business Days) after any Responsible Officer of the Company obtains knowledge thereof, notify the Administrative Agent (for prompt notification to each Lender):

(a)  of the occurrence of any continuing Default; and

(b)  of any dispute, litigation, investigation or proceeding between any Loan Party or any Subsidiary and any Governmental Authority or other Person that could reasonably be expected to have a Material Adverse Effect.

Each notice pursuant to this Section shall be accompanied by a written statement of a Responsible Officer of the Company (x) that such notice is being delivered pursuant to Section 6.03(a) or (b) (as applicable) and (y) setting forth details of the occurrence referred to therein and stating what action the Company has taken and proposes to take with respect thereto.

SECTION 6.04.  Payment of Obligations.  Pay, discharge or otherwise satisfy as the same shall become due and payable, all its obligations and liabilities (other than Indebtedness), including in respect of taxes, assessments and governmental charges or levies imposed upon it or upon its income or profits or in respect of its property before the same shall become delinquent or in default; provided, however, that such payment, discharge or satisfaction shall not be required hereunder with respect to any such obligation, liability, tax, assessment, charge or levy (i) so long as the validity or amount thereof shall be contested in good faith by appropriate proceedings and the applicable Company or Subsidiary shall have set aside on its books reserves with respect thereto to the extent required by and in accordance with GAAP and such contest operates to suspend collection of the contested obligation, tax, assessment or charge or (ii) to the extent the failure to pay or discharge the same could not reasonably be expected to have a Material Adverse Effect.

SECTION 6.05.  Preservation of Existence, Etc.  (a) Preserve, renew and maintain in full force and effect its legal existence under the Laws of the jurisdiction of its organization except (i) in the case of any Subsidiary of the Company, where the failure to perform such obligations, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect, or (ii) in a transaction permitted by Section 7.04 or 7.05, and (b) take all reasonable action to maintain all privileges (including its good standing), material rights, material permits, material licenses and material franchises necessary or desirable in the normal conduct of its business, except (i) to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect or (ii) pursuant to a transaction permitted by Section 7.04 or 7.05.

SECTION 6.06.  Maintenance of Properties.  Except if the failure to do so could not reasonably be expected to have a Material Adverse Effect, (a) maintain, preserve and protect all of its properties and equipment material to the operation of its business in good working order, repair and condition, ordinary wear and tear excepted and casualty or condemnation excepted, and (b) make all necessary renewals, replacements, modifications, improvements, upgrades, extensions and additions thereof or thereto in accordance with prudent industry practice.

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SECTION 6.07.  Maintenance of Insurance.  Maintain with financially sound and reputable insurance companies, insurance with respect to its properties and business against loss or damage of the kinds customarily insured against by Persons engaged in the same or similar business, of such types and in such amounts (after giving effect to any self-insurance reasonable and customary for similarly situated Persons engaged in the same or similar businesses as the Company and the Restricted Subsidiaries) and with deductible levels as are customarily carried under similar circumstances by such other Persons and ensure that the Administrative Agent is an additional insured and/or loss payee under such liability and property insurance as reasonably requested by the Administrative Agent.

SECTION 6.08.  Compliance with Laws.  Comply with the requirements of all Laws and all orders, writs, injunctions and decrees applicable to it or to its business or property, except if the failure to comply therewith could not reasonably be expected to have a Material Adverse Effect.

SECTION 6.09.  Inspection Rights.  Permit representatives and independent contractors of the Administrative Agent and each Lender to (a) visit and inspect any of its properties, (b) examine its corporate, financial and operating records, and make copies thereof or abstracts therefrom, and (c) discuss its affairs, finances and accounts with its directors, officers, and independent public accountants, all at the reasonable expense of the Company and at such reasonable times during normal business hours and as often as may be reasonably desired, upon reasonable advance notice to the Company, in all cases subject to applicable Law and the terms of any applicable confidentiality agreements not entered into for purposes of obstructing the operation of this Section 6.09; provided that, excluding any such visits and inspections during the continuation of an Event of Default, only the Administrative Agent on behalf of the Lenders may exercise rights of the Administrative Agent and the Lenders under this Section 6.09 and the Administrative Agent shall not exercise such rights more often than two (2) times during any calendar year absent the continuation of an Event of Default and only one (1) such time shall be at the Company’s expense; provided further that when an Event of Default shall have occurred and be continuing, the Administrative Agent or any Lender (or any of their respective representatives or independent contractors) may do any of the foregoing at the expense of the Company at any time during normal business hours and upon reasonable advance notice.  The Administrative Agent and the Lenders shall give the Company the opportunity to participate in any discussions with the Company’s independent public accountants.

SECTION 6.10.  Covenant to Guarantee Obligations and Give Security.  At the Company’s expense, take all action reasonably requested by the Administrative Agent to ensure that the Collateral and Guarantee Requirement continues to be satisfied, including:

(a)  upon the formation or acquisition of any new direct or indirect Restricted Subsidiary (in each case, other than an Excluded Subsidiary) by any Loan Party or the designation in accordance with Section 6.15 of any existing direct or indirect Subsidiary as a Restricted Subsidiary (other than an Excluded Subsidiary):

(i)  within (x) thirty (30) days after the formation, acquisition or designation of any such Domestic Subsidiary or such longer period as may be reasonably acceptable to the Administrative Agent and (y) ninety (90) days after the formation, acquisition or designation of any such Foreign Subsidiary or such longer period as may be reasonably acceptable to the Administrative Agent:

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(A)  cause each such Restricted Subsidiary that is required to become a Guarantor under the Collateral and Guarantee Requirement or becomes a Guarantor to furnish to the Administrative Agent a description of the Material Real Property owned by such Restricted Subsidiary, in detail reasonably satisfactory to the Administrative Agent;

(B)  cause (x) each such Restricted Subsidiary that is required to become a Guarantor pursuant to the Collateral and Guarantee Requirement or becomes a Guarantor to duly execute and deliver to the Administrative Agent Mortgages, Security Agreement Supplements and other security agreements and documents and to execute, deliver, file and record any such other documents, statements, assignments, instruments, agreements or other papers and take all other actions reasonably requested by the Administrative Agent in order to create a perfected security interest with the priority required by the Collateral Documents in all of its assets required to constitute Collateral under the Loan Documents (including, with respect to Mortgages, the documents listed in Section 6.12(b)), as reasonably requested by and in form and substance reasonably satisfactory to the Administrative Agent (consistent with the Mortgages, Guarantee and Security Agreement and other security agreements in effect on the Closing Date), and (y) each direct parent of each such Restricted Subsidiary (if such parent is a Borrower or is required to be a Guarantor pursuant to the Collateral and Guarantee Requirement or becomes a Guarantor) to duly execute and deliver to the Administrative Agent such Security Agreement Supplements and other security agreements and to execute, deliver, file and record any such other documents, statements, assignments, instruments, agreements or other papers and take all other actions reasonably requested by the Administrative Agent in order to create a perfected security interest with the priority required by the Collateral Documents in any uncertificated Equity Interests of such Restricted Subsidiary that are required to constitute Collateral under the Loan Documents, as reasonably requested by the Administrative Agent and in form and substance reasonably satisfactory to the Administrative Agent (consistent with the Guarantee and Security Agreement in effect on the Closing Date);

(C)  (x) cause each such Restricted Subsidiary that is required to become a Guarantor pursuant to the Collateral and Guarantee Requirement or becomes a Guarantor to deliver any and all certificates representing Equity Interests (to the extent certificated) that are required to be pledged pursuant to the Collateral and Guarantee Requirement, accompanied by undated stock powers or other appropriate instruments of transfer executed in blank and any instruments evidencing the intercompany Indebtedness held by such Restricted Subsidiary and required to be pledged pursuant to the Collateral Documents, indorsed in blank to the Administrative Agent and (y) cause each direct parent of such Restricted Subsidiary (if such parent is a Borrower or is required to be a Guarantor pursuant to the Collateral and Guarantee Requirement or becomes a Guarantor) to deliver any and all certificates representing the outstanding Equity Interests (to the extent certificated) of such Restricted Subsidiary that are required to be pledged pursuant to the Collateral and Guarantee Requirement, accompanied by undated stock powers or other appropriate instruments of transfer executed in blank and any instruments evidencing the intercompany Indebtedness issued by such Restricted Subsidiary and required to be pledged in

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accordance with the Collateral Documents, indorsed in blank to the Administrative Agent;

(D)  take and cause such Restricted Subsidiary and each direct or indirect parent of such Restricted Subsidiary to take whatever action (including the recording of Mortgages, the filing of Uniform Commercial Code financing statements, delivery of stock and membership interest certificates, delivery of promissory notes duly endorsed in favor of the Administrative Agent, and the execution, delivery, filing and recording of any such other documents, statements, assignments, instruments, agreements or other papers) may be reasonably requested by the Administrative Agent to vest in the Administrative Agent (or in any representative of the Administrative Agent designated by it) valid Liens required by the Collateral and Guarantee Requirement, enforceable against all third parties in accordance with their terms, except as such enforceability may be limited by Debtor Relief Laws and by general principles of equity;

(E)  cause each such Restricted Subsidiary that is required to become a Guarantor under the Collateral and Guarantee Requirement to Guarantee the Obligations; and

(F)  cause each such Restricted Subsidiary to deliver to the Administrative Agent copies of its Organization Documents,

(ii)  within thirty (30) days (with respect to any Domestic Subsidiary) or ninety (90) days (with respect to any Foreign Subsidiary) after the request therefor by the Administrative Agent (or such longer period as may be reasonably acceptable to the Administrative Agent), deliver to the Administrative Agent a signed copy of an opinion, addressed to the Administrative Agent, the other Agents and the Lenders, of counsel for the Loan Parties reasonably acceptable to the Administrative Agent as to such matters set forth in this Section 6.10(a) as the Administrative Agent may reasonably request, and

(iii)  as promptly as practicable after the request therefor by the Administrative Agent, deliver to the Administrative Agent, with respect to each parcel of Material Real Property that is owned by such Restricted Subsidiary, any existing title reports, existing surveys or existing environmental assessment reports; and

(b)  after the Closing Date, concurrently with the acquisition of any Material Real Property by any Loan Party and such Material Real Property shall not already be subject to a perfected Lien pursuant to the Collateral and Guarantee Requirement, the Company shall give notice thereof to the Administrative Agent and promptly thereafter shall cause such assets to be subjected to a Lien to the extent and at such times as shall be required by the Collateral and Guarantee Requirement and the Collateral Documents, as the case may be, and will take, or cause the relevant Loan Party to take, such actions and at such times as shall be reasonably requested by the Administrative Agent to grant and perfect or record such Lien, including, as applicable, the actions referred to in Section 6.12(b).

SECTION 6.11.  Compliance with Environmental Laws.  Except, in each case, to the extent that the failure to do so could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect:  (a) comply, and take all reasonable actions to cause all lessees and other Persons operating or occupying its properties to comply, with all applicable

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Environmental Laws and Environmental Permits; (b) obtain and renew all Environmental Permits necessary for its operations and properties; and (c) in each case to the extent required by Environmental Laws, conduct any investigation, study, sampling and testing, and undertake any cleanup, removal, remedial or other action necessary to remove and clean up all Hazardous Materials from any of its properties, in accordance with the requirements of all Environmental Laws.

SECTION 6.12.  Further Assurances.  (a)  Promptly upon reasonable request by the Administrative Agent (i) correct any material defect or error that may be discovered in the execution, acknowledgment, filing or recordation of any Collateral Document or other document or instrument relating to any Collateral, and (ii) do, execute, acknowledge, deliver, record, re-record, file, re-file, register and re-register any and all such further acts, deeds, certificates, assurances and other instruments as the Administrative Agent may reasonably request from time to time in order to carry out more effectively the purposes of the Collateral Documents.

(b)  In the case of any Material Real Property referred to in Section 6.10(b), provide the Administrative Agent with Mortgages with respect to such Material Real Property within sixty (60) days of the acquisition of such real property (or such longer period as may be reasonably acceptable to the Administrative Agent) together with:

(i)  evidence that counterparts of any such Mortgage has been duly executed, acknowledged and delivered and is in form suitable for filing or recording in all filing or recording offices that the Administrative Agent may deem reasonably necessary or desirable in order to create a valid and subsisting perfected Lien on the property and/or rights described therein in favor of the Administrative Agent for the benefit of the Secured Parties and that all filing and recording taxes and fees have been paid or otherwise provided for in a manner reasonably satisfactory to the Administrative Agent;

(ii)  fully paid American Land Title Association Lender’s Extended Coverage title insurance policies or the equivalent or other form available in each applicable jurisdiction (the “Mortgage Policies”) in form and substance, with endorsements and in amount, reasonably acceptable to the Administrative Agent (not to exceed the value of the real properties covered thereby), issued, coinsured and reinsured by title insurers reasonably acceptable to the Administrative Agent, insuring the Mortgages to be valid subsisting Liens on the property described therein, free and clear of all defects and encumbrances except for minor defects in title that do not materially interfere with the Loan Party’s ability to conduct business and subject to Liens permitted by Section 7.01, and providing for such other affirmative insurance (including endorsements for future advances under the Loan Documents) and such coinsurance and direct access reinsurance as the Administrative Agent may reasonably request;

(iii)  opinions of local counsel for the Loan Parties in states in which the real properties are located, with respect to the enforceability and perfection of any such Mortgage and any related fixture filings in form and substance reasonably satisfactory to the Administrative Agent; and

(iv)  such other evidence that all other actions that the Administrative Agent may reasonably deem necessary or desirable in order to create valid and subsisting Liens on the property described in each such Mortgage has been taken.

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SECTION 6.13.  Use of Proceeds.  Apply the proceeds of the Term Loans, Revolving Credit Loans and Swing Line Loans and the Letters of Credit solely to the uses described in the fourth paragraph of the preliminary statements to this Agreement and in the last sentence of Section 2.05(b)(iii).

SECTION 6.14.  Interest Rate Protection.  Within 180 days after the Closing Date (or such longer period as may be reasonably acceptable to the Administrative Agent), enter into, and thereafter maintain, Swap Contracts to the extent necessary to provide that at least 50% of the aggregate principal amount of the Funded Debt of the Company and the Restricted Subsidiaries is subject to either a fixed interest rate or interest rate protection for a minimum of three years, which Swap Contracts shall have terms and conditions reasonably satisfactory to the Administrative Agent.

SECTION 6.15.  Designation of Subsidiaries.  The board of directors of Holdings may at any time designate any Restricted Subsidiary as an Unrestricted Subsidiary or any Unrestricted Subsidiary as a Restricted Subsidiary; provided that (i) immediately before and after such designation, no Default shall have occurred and be continuing, (ii) immediately after giving effect to such designation, the Company and the Restricted Subsidiaries shall be in compliance, on a Pro Forma Basis, with the covenants set forth in Section 7.10 (and, as a condition precedent to the effectiveness of any such designation, the Company shall deliver to the Administrative Agent a certificate setting forth in reasonable detail the calculations demonstrating such compliance), (iii) no Subsidiary may be designated as an Unrestricted Subsidiary if it is a “Restricted Subsidiary” for the purpose of the Senior Subordinated Notes or any other Junior Financing, as applicable, (iv) no Restricted Subsidiary may be designated as an Unrestricted Subsidiary if it was previously designated an Unrestricted Subsidiary and (v) no Subsidiary may be designated as an Unrestricted Subsidiary if such Subsidiary is a Borrower.  The designation of any Subsidiary that is a Loan Party as an Unrestricted Subsidiary shall constitute an Investment by the Company therein at the date of designation in an amount equal to the net book value of the applicable Loan Party’s investment therein.  The designation of any Unrestricted Subsidiary as a Restricted Subsidiary shall constitute the incurrence at the time of designation of any Indebtedness or Liens of such Subsidiary existing at such time.

SECTION 6.16.  Ownership of Overseas Borrowers.  Each of the Overseas Borrowers shall, at all times, be a direct or indirect Subsidiary of the Company.

SECTION 6.17.  Post-Closing Covenants.  (a)  Within 90 days following the Closing Date (or such longer period as may be reasonably acceptable to the Administrative Agent), (i) the Company will enter into, and cause W.A. Publications, LLC to enter into, a pledge agreement under the laws of Australia in form and substance reasonably satisfactory to the Administrative Agent and provide legal opinions reasonably satisfactory to the Administrative Agent with respect to the pledge of the outstanding Equity Interests (limited, with respect to outstanding voting Equity Interests, to 65%) in The Reader’s Digest Assoc. Pty. Limited and (ii) the Company will enter into a pledge agreement under the laws of France in form and substance reasonably satisfactory to the Administrative Agent and provide legal opinions reasonably satisfactory to the Administrative Agent with respect to the pledge of the outstanding Equity Interests (limited, with respect to outstanding voting Equity Interests, to 65%) in Selection du Reader’s Digest S.A.

(b)  Within 90 days following the Closing Date (or such longer period as may be reasonably acceptable to the Administrative Agent), (i) the German Borrower will enter into, and cause each of its Overseas Guarantors to enter into (and the Company shall cause the direct parent entity of the German Borrower to enter into, if such direct parent entity is a Foreign Subsidiary),

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foreign law security agreements and pledge agreements and (in the case of such Overseas Guarantors and the direct parent entity of the German Borrower, if such Person is a Foreign Subsidiary) Overseas Guarantees, in each case in form and substance reasonably satisfactory to the Administrative Agent, and provide legal opinions reasonably satisfactory to the Administrative Agent with respect thereto, in each case to the extent required to satisfy the Collateral and Guarantee Requirement under clauses (c), (e) and (f) thereof, and (ii) each of the Company and any U.S. Guarantor that directly owns Equity Interests in a Subsidiary organized under the laws of Germany (other than the German Borrower) will enter into a foreign law pledge agreement with respect to such Equity Interests, in each case in form and substance reasonably satisfactory to the Administrative Agent, and provide legal opinions reasonably satisfactory to the Administrative Agent with respect thereto, in each case to the extent required to satisfy the Collateral and Guarantee Requirement under clauses (d) and (f) thereof.

(c)  Within 30 days following the Closing Date (or such longer period as may be reasonably acceptable to the Administrative Agent), the Company will enter into a pledge agreement under the laws of the United Kingdom in form and substance reasonably satisfactory to the Administrative Agent and provide legal opinions reasonably satisfactory to the Administrative Agent with respect to the pledge of the outstanding Equity Interests (limited, with respect to outstanding voting Equity Interests, to 65%) in The Reader’s Digest Association Limited.

(d)  Within 60 days following the Closing Date (or such longer period as may be reasonably acceptable to the Administrative Agent), deliver to the Administrative Agent any and all certificates representing Equity Interests of Das Beste aus Reader’s Digest AG, accompanied by undated stock powers or other appropriate instruments of transfer executed in blank, in each case to the extent required to satisfy the Collateral and Guarantee Requirement under clause (d) thereof.

ARTICLE VII

NEGATIVE COVENANTS

So long as any Lender shall have any Commitment hereunder, any Loan or other Obligation hereunder which is accrued and payable shall remain unpaid or unsatisfied, or any Letter of Credit shall remain outstanding, Holdings and the Company shall not, nor shall they permit any of their Restricted Subsidiaries to, directly or indirectly:

SECTION 7.01.  Liens.  Create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, other than the following:

(a)  Liens pursuant to any Loan Document;

(b)  Liens existing on the date hereof and listed on Schedule 7.01(b) and any modifications, replacements, renewals or extensions thereof; provided that (i) the Lien does not extend to any additional property other than (A) after-acquired property that is affixed or incorporated into the property covered by such Lien or financed by Indebtedness permitted under Section 7.03, and (B) proceeds and products thereof, and (ii) the renewal, extension or refinancing of the obligations secured or benefited by such Liens is permitted by Section 7.03;

(c)  Liens for taxes, assessments or governmental charges which are not overdue for a period of more than thirty (30) days or which are being contested in good faith and by appropriate

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proceedings diligently conducted, if reserves with respect thereto are maintained on the books of the applicable Person to the extent required by and in accordance with GAAP;

(d)  statutory Liens of landlords, carriers, warehousemen, mechanics, materialmen, repairmen, workmen, suppliers, construction contractors or other like Liens arising in the ordinary course of business which secure amounts not overdue for a period of more than thirty (30) days or if more than thirty (30) days overdue, are unfiled and no other action has been taken to enforce such Lien or which are being contested in good faith and by appropriate proceedings diligently conducted, if reserves with respect thereto are maintained on the books of the applicable Person to the extent required by and in accordance with GAAP;

(e)  (i) Liens, pledges or deposits in the ordinary course of business in connection with workers’ compensation, unemployment insurance and other social security legislation and (ii) Liens, pledges and deposits in the ordinary course of business securing liability for premiums or reimbursement or indemnification obligations of (including obligations in respect of letters of credit or bank guarantees for the benefit of) insurance carriers providing insurance to Holdings, the Company or any Restricted Subsidiary;

(f)  Liens or deposits (including deposits made to satisfy statutory or other legal obligations in connection with sweepstakes or similar contests) to secure the performance of bids, trade contracts, governmental contracts, tenders, statutory bonds and leases (other than Indebtedness for borrowed money and Capitalized Leases), statutory obligations, surety, stay, customs and appeal bonds, performance bonds and other obligations of a like nature (including those to secure health, safety and environmental obligations) incurred in the ordinary course of business;

(g)  easements, rights-of-way, restrictions (including zoning restrictions), covenants, licenses, encroachments, protrusions and other similar encumbrances and minor title defects affecting real property which, in the aggregate, do not in any case materially interfere with the ordinary conduct of the business of the Company or any Subsidiary;

(h)  Liens securing judgments, decrees, attachments or awards for the payment of money not constituting an Event of Default under Section 8.01(h);

(i)  Liens securing Indebtedness permitted under Section 7.03(e); provided that (i) such Liens attach concurrently with or within two hundred and seventy (270) days after the acquisition, repair, replacement, construction or improvement (as applicable) of the property subject to such Liens, (ii) such Liens do not at any time encumber any property except for accessions to such property other than the property financed by such Indebtedness and the proceeds and the products thereof and (iii) with respect to Capitalized Leases, such Liens do not at any time extend to or cover any assets (except for accessions to such assets) other than the assets subject to such Capitalized Leases; provided further that individual financings of equipment provided by one lender may be cross collateralized to other financings of equipment provided by such lender;

(j)  leases, licenses, subleases or sublicenses granted to others in the ordinary course of business which do not (i) interfere in any material respect with the business of the Company or any Subsidiary or (ii) secure any Indebtedness;

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(k)  Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods in the ordinary course of business;

(l)  Liens (i) of a collection bank arising under Section 4-210 of the Uniform Commercial Code on items in the course of collection, (ii) attaching to commodity trading accounts or other commodities brokerage accounts incurred in the ordinary course of business; and (iii) in favor of a banking institution arising as a matter of law encumbering deposits (including the right of set-off);

(m)  Liens (i) on cash advances in favor of the seller of any property to be acquired in an Investment permitted pursuant to Sections 7.02(f), (i) and (n) to be applied against the purchase price for such Investment, and (ii) consisting of an agreement to Dispose of any property in a Disposition permitted under Section 7.05, in each case, solely to the extent such Investment or Disposition, as the case may be, would have been permitted on the date of the creation of such Lien;

(n)  Liens on property or Equity Interests of any Foreign Subsidiary (other than a Borrower) (i) that is not a Loan Party and (ii) which property or Equity Interests do not constitute Collateral, which Liens secure Indebtedness of such Foreign Subsidiary permitted under Section 7.03;

(o)  Liens securing Indebtedness permitted under Section 7.03(d) (i) of the Company or a Restricted Subsidiary in favor of a Loan Party and (ii) of any Restricted Subsidiary that is not a Loan Party in favor of any other Restricted Subsidiary that is not a Loan Party;

(p)  Liens existing on property at the time of its acquisition or existing on the property of any Person at the time such Person becomes a Restricted Subsidiary (other than by designation as a Restricted Subsidiary pursuant to Section 6.15), in each case after the date hereof (other than Liens on the Equity Interests of any Person that becomes a Restricted Subsidiary); provided that (i) such Lien was not created in contemplation of such acquisition or such Person becoming a Restricted Subsidiary, (ii) such Lien does not extend to or cover any other assets or property (other than the proceeds or products thereof and other than improvements and after-acquired property subjected to a Lien securing Indebtedness and other obligations incurred prior to such time and which Indebtedness and other obligations are permitted hereunder that require, pursuant to their terms at such time, a pledge of after-acquired property, it being understood that such requirement shall not be permitted to apply to any property to which such requirement would not have applied but for such acquisition), and (iii) the Indebtedness secured thereby is permitted under Section 7.03(e), (g), (h) or (k);

(q)  any interest or title of a lessor under leases entered into by the Company or any of the Restricted Subsidiaries in the ordinary course of business;

(r)  Liens arising out of conditional sale, title retention, consignment or similar arrangements for sale of goods entered into by the Company or any of the Restricted Subsidiaries in the ordinary course of business permitted by this Agreement;

(s)  Liens deemed to exist in connection with Investments in repurchase agreements under Section 7.02;

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(t)  Liens encumbering reasonable customary initial deposits and margin deposits and similar Liens attaching to commodity trading accounts or other brokerage accounts incurred in the ordinary course of business and not for speculative purposes;

(u)  Liens that are contractual rights of set-off or, in the case of clause (i) or (ii) below, other bankers’ Liens (i) relating to Cash Management Obligations or to the establishment of depository relations with banks not given in connection with the issuance of Indebtedness, (ii) relating to pooled deposit or sweep accounts of Holdings, the Company or any Restricted Subsidiary to permit satisfaction of overdraft or similar obligations incurred in the ordinary course of business of Holdings, the Company and the Restricted Subsidiaries or (iii) relating to purchase orders and other agreements entered into with customers of the Company or any Restricted Subsidiary in the ordinary course of business;

(v)  Liens solely on any cash earnest money deposits made by the Company or any of the Restricted Subsidiaries in connection with any letter of intent or purchase agreement permitted hereunder;

(w)  (i) Liens placed upon the Equity Interests of any Restricted Subsidiary acquired pursuant to a Permitted Acquisition to secure Indebtedness incurred pursuant to Section 7.03(g) in connection with such Permitted Acquisition and (ii) Liens placed upon the assets of such Restricted Subsidiary and any of its Subsidiaries to secure a Guarantee by such Restricted Subsidiary and its Subsidiaries of any such Indebtedness incurred pursuant to Section 7.03(g);

(x)  ground leases in respect of real property on which facilities owned or leased by the Company or any of its Subsidiaries are located and other Liens affecting the interest of any landlord (and any underlying landlord) of any real property leased by the Company or any Restricted Subsidiary;

(y)  Liens on equipment (including printing presses and data-processing equipment) owned by the Company or any Restricted Subsidiary and located on the premises of any supplier and used in the ordinary course of business; and

(z)  other Liens securing obligations, including Indebtedness, outstanding in an aggregate principal amount not to exceed $100,000,000.

SECTION 7.02.  Investments.  Make or hold any Investments, except:

(a)  Investments by the Company or a Restricted Subsidiary in cash and assets that were Cash Equivalents when such Investment was made;

(b)  loans or advances to officers, directors and employees of Holdings, the Company and the Restricted Subsidiaries (i) for reasonable and customary business-related travel, entertainment, relocation and analogous ordinary business purposes, (ii) in connection with such Person’s purchase of Equity Interests of Holdings (or any direct or indirect parent thereof) (provided that the amount of such loans and advances shall be contributed to the Company in cash as common equity) and (iii) for purposes not described in the foregoing clauses (i) and (ii), in an aggregate principal amount outstanding not to exceed $5,000,000;

(c)  Investments (i) by Holdings, the Company or any Restricted Subsidiary in the Company or any Subsidiary that is a Loan Party, (ii) by any Restricted Subsidiary that is not a Loan Party in any other such Restricted Subsidiary that is also not a Loan Party, and (iii) by the

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Company or any Restricted Subsidiary (A) in any Restricted Subsidiary; provided that the aggregate amount of such Investments in Restricted Subsidiaries that are not Loan Parties (together with the aggregate consideration paid in respect of Permitted Acquisitions of Persons that do not become Loan Parties pursuant to Section 7.02(i)(B)) shall not exceed (x) $350,000,000 for the period from the Closing Date to the first anniversary of the Closing Date, (y) $400,000,000 for the period from the Closing Date to the second anniversary of the Closing Date and (z) $500,000,000 for the period from the Closing Date to the Maturity Date with respect to the Term Loans (in each case, net of any return representing a return of capital in respect of any such Investment), (B) in any Foreign Subsidiary that is a Loan Party, consisting of the contribution of Equity Interests of any other Foreign Subsidiary held directly by the Company or such Restricted Subsidiary in exchange for Indebtedness, Equity Interests or a combination thereof of the Foreign Subsidiary to which such contribution is made, (C) in any Foreign Subsidiary, constituting an exchange of Equity Interests of such Foreign Subsidiary for Indebtedness of such Foreign Subsidiary or (D) constituting Guarantees of Indebtedness or other monetary obligations of Foreign Subsidiaries owing to any Loan Party; provided that any Indebtedness incurred by a Loan Party pursuant to Section 7.03(h)(i)(B) to finance a Permitted Acquisition and loaned, advanced or contributed to a Restricted Subsidiary that is not a Loan Party to consummate such Permitted Acquisition (which, but for the operation of this proviso, would have been treated as an Investment by such Loan Party pursuant to this clause (c) and a subsequent Investment by such Restricted Subsidiary that is not a Loan Party pursuant to Section 7.02(i)) shall be treated as a single Investment by such Restricted Subsidiary that is not a Loan Party pursuant to Section 7.02(i);

(d)  Investments consisting of extensions of credit in the nature of accounts receivable or notes receivable arising from the grant of trade credit in the ordinary course of business, and Investments received in satisfaction or partial satisfaction thereof from financially troubled account debtors and other credits to suppliers in the ordinary course of business;

(e)  Investments (i) resulting from the creation of a Lien permitted under Section 7.01, (ii) resulting from the incurrence of Indebtedness permitted under Section 7.03, (iii) made to effect Dispositions permitted under Section 7.04 or Section 7.05 (other than Section 7.05(e)) or (iv) made to effect Restricted Payments permitted under Section 7.06;

(f)  (i) Investments existing or contemplated on the date hereof and set forth on Schedule 7.02(f) and any modification, replacement, renewal, reinvestment or extension thereof and (ii) Investments existing on the date hereof by the Company or any Restricted Subsidiary in the Company or any other Restricted Subsidiary and any modification, renewal or extension thereof; provided that the amount of the original Investment is not increased except by the terms of such Investment or as otherwise permitted by this Section 7.02;

(g)  Investments in Swap Contracts permitted under Section 7.03;

(h)  promissory notes and other non-cash consideration received in connection with Dispositions permitted by Section 7.05;

(i)  the purchase or other acquisition of property and assets or businesses of any Person or of assets constituting a business unit, a line of business or division of such Person, or Equity Interests in a Person that, upon the consummation thereof, will be a Subsidiary of the Company (including as a result of a merger or consolidation); provided that, with respect to each purchase or other acquisition made pursuant to this Section 7.02(i) (each, a “Permitted Acquisition”):

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(A)  subject to clause (B) below, each applicable Loan Party and any such newly created or acquired Subsidiary (and, to the extent required under the Collateral and Guarantee Requirement, the Subsidiaries of such created or acquired Subsidiary) shall be a Guarantor and shall have complied with the requirements of and granted the security interests required by Section 6.10 within the times specified therein;

(B)  the aggregate amount of consideration (cash and non-cash (other than Qualified Equity Interests of Holdings and the Net Cash Proceeds of Permitted Equity Issuances after the Closing Date Not Otherwise Applied), including (i) the fair market value (on the date of such Permitted Acquisition) of all Equity Interests issued or transferred to the sellers thereof and (ii) all indemnities, earnouts and other contingent payment obligations to, and the aggregate amounts paid or to be paid under noncompete, consulting and other affiliated agreements with, the sellers thereof, all write-downs of property and reserves for liabilities with respect thereto and all assumptions of debt, liabilities and other obligations in connection therewith; provided that any such liability or future payment pursuant to clause (ii) above that is subject to a contingency shall be considered consideration for a Permitted Acquisition for purposes of this clause (B) only to the extent of the amount of such liability or payment, if any, required under GAAP to be reflected on the face of a consolidated balance sheet of the Company or the reserve, if any, required under GAAP to be established in respect thereof by the Company or any of its Restricted Subsidiaries, in each case at the time such Permitted Acquisition is consummated) paid in respect of acquisitions of Persons that do not become Loan Parties (together with the aggregate amount of all Investments in Restricted Subsidiaries that are not Loan Parties pursuant to Section 7.02(c)(iii)) shall not exceed (x) $350,000,000 for the period from the Closing Date to the first anniversary of the Closing Date, (y) $400,000,000 for the period from the Closing Date to the second anniversary of the Closing Date and (z) $500,000,000 for the period from the Closing Date to the Maturity Date with respect to the Term Loans (in each case, net of any return representing a return of capital in respect of any such Investment);

(C)   (1) immediately before and immediately after giving Pro Forma Effect to any such purchase or other acquisition (including any Indebtedness incurred pursuant thereto as permitted under Sections 7.03(e), (g) and (h)), no Event of Default shall have occurred and be continuing and (2) immediately after giving effect to such purchase or other acquisition, the Company and the Restricted Subsidiaries shall be in Pro Forma Compliance with all of the covenants set forth in Section 7.10, such compliance to be determined on the basis of the financial information most recently delivered to the Administrative Agent and the Lenders pursuant to Section 6.01(a) or (b) as though such purchase or other acquisition had been consummated as of the first day of the fiscal period covered thereby and evidenced by a certificate from the Chief Financial Officer of the Company demonstrating such compliance calculation in reasonable detail; and

(D)  the Company shall have delivered to the Administrative Agent, on behalf of the Lenders, no later than five (5) Business Days after the date on which any such purchase or other acquisition is consummated, a certificate of a Responsible Officer, in form and substance reasonably satisfactory to the Administrative Agent, certifying that all of the requirements set forth in this clause (i) have been satisfied or will be satisfied on or prior to the consummation of such purchase or other acquisition;

(j)  the Transaction;

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(k)  Investments in the ordinary course of business consisting of Article 3 endorsements for collection or deposit and Article 4 customary trade arrangements with customers consistent with past practices;

(l)  Investments (including debt obligations and Equity Interests) received in connection with the bankruptcy or reorganization of suppliers and customers or in settlement of delinquent obligations of, or other disputes with, customers and suppliers arising in the ordinary course of business or upon the foreclosure with respect to any secured Investment or other transfer of title with respect to any secured Investment;

(m)  loans and advances to Holdings (or any direct or indirect parent thereof) in lieu of, and not in excess of the amount of (after giving effect to any other loans, advances or Restricted Payments in respect thereof), Restricted Payments to the extent permitted to be made to Holdings (or such parent) in accordance with Sections 7.06(f) or (g);

(n)  Investments that do not exceed the sum of (i) $200,000,000 plus (ii) the aggregate amount of the Net Cash Proceeds of Permitted Equity Issuances after the Closing Date (other than Permitted Equity Issuances made pursuant to Section 8.05) that have been contributed to the Company as common equity and Not Otherwise Applied plus (iii) if, as of the last day of the immediately preceding Test Period (after giving Pro Forma Effect to such Investments) the Total Leverage Ratio is less than 4.00:1.00, the amount of Cumulative Excess Cash Flow that is Not Otherwise Applied;

(o)  advances of payroll payments to employees and advances to authors in the ordinary course of business;

(p)  Investments to the extent that payment for such Investments is made solely with Qualified Equity Interests of Holdings;

(q)  existing Investments of a Restricted Subsidiary acquired after the Closing Date or of a corporation merged into the Company or merged or consolidated with a Restricted Subsidiary in accordance with Section 7.04 after the Closing Date to the extent that such Investments were not made in contemplation of or in connection with such acquisition, merger or consolidation and were in existence on the date of such acquisition, merger or consolidation;

(r)  Guarantees by Holdings, the Company or any Restricted Subsidiary of leases (other than Capitalized Leases) or of other obligations that do not constitute Indebtedness, in each case entered into in the ordinary course of business;

(s)  lease, utility and other similar deposits in the ordinary course of business; and

(t)  loans by any Restricted Subsidiary to any other Restricted Subsidiary of the proceeds of Incremental Overseas Term Loans provided that such proceeds are ultimately received by the Company and applied in accordance with Section 2.05(b)(iii);

provided that no Investment in an Unrestricted Subsidiary that would otherwise be permitted under this Section 7.02 shall be permitted hereunder to the extent that any portion of such Investment is used to make any prepayments, redemptions, purchases, defeasances and other payments in respect of Junior Financings that would not be permitted by this Agreement if made by the Company.

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SECTION 7.03.  Indebtedness.  Create, incur, assume or suffer to exist any Indebtedness, except:

(a)  Indebtedness of Holdings, the Company and any of its Subsidiaries under the Loan Documents;

(b)  (i)(x) Indebtedness outstanding on the date hereof and listed on Schedule 7.03(b) and (y) any Permitted Refinancing thereof (to the extent (A) such Permitted Refinancing is incurred by the Person who is the obligor of the Indebtedness subject to such Permitted Refinancing, (B) such Permitted Refinancing, if incurred by a Person who is not a Loan Party, is in respect of Indebtedness originally incurred by a Person who is not a Loan Party, or (C) such incurrence is otherwise permitted under this Section 7.03) and (ii) intercompany Indebtedness outstanding on the Closing Date;

(c)  Guarantees by Holdings, the Company and the Restricted Subsidiaries in respect of Indebtedness otherwise permitted hereunder of the Company or any Restricted Subsidiary to the extent constituting an Investment permitted under Section 7.02; provided that (A) no Guarantee by any Restricted Subsidiary of the Senior Subordinated Notes or any other Junior Financing shall be permitted unless such Restricted Subsidiary shall have also provided a Guarantee of the Obligations substantially on the terms set forth in the Guarantee and Security Agreement, (B) if the Indebtedness being Guaranteed is subordinated to the Obligations, such Guarantee shall be subordinated to the Guarantee of the Obligations on terms at least as favorable to the Lenders (in the reasonable good faith determination of the Company) as those contained in the subordination of such Indebtedness and (C) a Loan Party may not Guarantee Indebtedness of a Restricted Subsidiary that is not a Loan Party unless such Loan Party could have incurred such Indebtedness or such Guarantee is subordinated to the Obligations on the terms set forth in Section 5.1(b) of the Guarantee and Security Agreement;

(d)  Indebtedness of the Company or any Restricted Subsidiary owing to the Company or any other Restricted Subsidiary to the extent constituting an Investment permitted by Section 7.02; provided that, all such Indebtedness of any Loan Party owed to any Person that is not a Loan Party shall be subject to the subordination terms set forth in Section 5.1(b) of the Guarantee and Security Agreement;

(e)  (i) Attributable Indebtedness and other Indebtedness (including Capitalized Leases) financing the acquisition, construction, repair, replacement or improvement of fixed or capital assets; provided that such Indebtedness is incurred concurrently with or within two hundred and seventy (270) days after the applicable acquisition, construction, repair, replacement or improvement, and (ii) any Permitted Refinancing of any Indebtedness set forth in the immediately preceding clause (i); provided that the aggregate principal amount of all Indebtedness permitted under this Section 7.03(e) shall not exceed $50,000,000 at any time outstanding;

(f)  Indebtedness in respect of Swap Contracts incurred in the ordinary course of business and not for speculative purposes;

(g)  Indebtedness of the Company or any Restricted Subsidiary (i) assumed in connection with any Permitted Acquisition; provided that such Indebtedness is not incurred in contemplation of such Permitted Acquisition or (ii) incurred to finance a Permitted Acquisition, in each case, that is secured only by the assets or business (including any Equity Interests) acquired in the applicable Permitted Acquisition and so long as both immediately prior and after giving effect thereto, (A) no Event of Default shall exist or result therefrom, (B) the Company and the

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Restricted Subsidiaries will be in Pro Forma Compliance with the covenants set forth in Section 7.10, such compliance to be determined on the basis of the financial information most recently delivered to the Administrative Agent and the Lenders pursuant to Section 6.01(a) or (b) as though such Indebtedness had been assumed or incurred as of the first day of the fiscal period covered thereby and evidenced by a certificate from the Chief Financial Officer of the Company demonstrating such compliance calculation in reasonable detail, (C) the aggregate principal amount of such Indebtedness and all Indebtedness resulting from any Permitted Refinancing thereof at any time outstanding pursuant to this paragraph (g) (together with the aggregate principal amount of Indebtedness incurred pursuant to Section 7.03(h)(y)) does not exceed $150,000,000, and (D) the aggregate principal amount of Indebtedness pursuant to this clause (g) and clause (h) below assumed by Restricted Subsidiaries that are not Loan Parties in connection with or incurred by Restricted Subsidiaries that are not Loan Parties to finance Permitted Acquisitions of Persons that do not become Loan Parties and all Indebtedness resulting from any Permitted Refinancing thereof shall not exceed (I) with respect to any such Permitted Acquisition, 65% of the aggregate amount of consideration paid in respect thereof pursuant to Section 7.02(i)(B), and (II) with respect to all such Permitted Acquisitions, (a) $175,000,000 for the period from the Closing Date to the first anniversary of the Closing Date, (b) $200,000,000 for the period from the Closing Date to the second anniversary of the Closing Date and (c) $250,000,000 for the period from the Closing Date to the Maturity Date with respect to the Term Loans;

(h)  (i) Indebtedness of the Company and the Restricted Subsidiaries (A) assumed in connection with any Permitted Acquisition; provided that such Indebtedness is not incurred in contemplation of such Permitted Acquisition, or (B) incurred to finance a Permitted Acquisition and (ii) any Permitted Refinancing of the foregoing; provided, in each case that such Indebtedness and all Indebtedness resulting from any Permitted Refinancing thereof (t) is unsecured, (u) both immediately prior and after giving effect thereto, (1) no Event of Default shall exist or result therefrom and (2) the Company and the Restricted Subsidiaries will be in Pro Forma Compliance with the covenants set forth in Section 7.10, such compliance to be determined on the basis of the financial information most recently delivered to the Administrative Agent and the Lenders pursuant to Section 6.01(a) or (b) as though such Indebtedness had been assumed or incurred as of the first day of the fiscal period covered thereby and evidenced by a certificate from the Chief Financial Officer of the Company demonstrating such compliance calculation in reasonable detail, (v) subject to clause (y) below, matures after, and does not require any scheduled amortization or other scheduled payments of principal prior to, the Maturity Date of the Term Loans (it being understood that such Indebtedness may have mandatory prepayment, repurchase or redemptions provisions satisfying the requirement of clause (w) hereof), (w) subject to clause (y) below, has terms and conditions (other than interest rate and other pricing terms, redemption and prepayment premiums and subordination terms) which, when taken as a whole, are not materially less favorable to the Lenders (in the reasonable good faith determination of the Company) than the terms and conditions of the Senior Subordinated Note Indenture as of the Closing Date; provided that the Company shall deliver to the Administrative Agent, at least five Business Days prior to the incurrence of such Indebtedness, a certificate of a Responsible Officer, together with a reasonably detailed description of the material terms and conditions of such Indebtedness or drafts of the documentation relating thereto, stating that the Company has determined in good faith that such terms and conditions satisfy the foregoing requirement; (x) subject to clause (y) below, with respect to such Indebtedness described in the immediately preceding clause (B), is incurred by the Company or a Subsidiary that is a Loan Party; (y) the aggregate principal amount of such Indebtedness incurred pursuant to clause (B) and all Indebtedness resulting from any Permitted Refinancing thereof, in each case which Indebtedness or Refinancing Indebtedness would

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otherwise not be permitted by clauses (v), (w) or (x) above, at any time outstanding pursuant to this paragraph (h) (together with the aggregate principal amount of Indebtedness incurred pursuant to Section 7.03(g) and all Indebtedness resulting from any Permitted Refinancing thereof) does not exceed $150,000,000, and (z) the aggregate principal amount of Indebtedness pursuant to clause (g) above and this clause (h) assumed by Restricted Subsidiaries that are not Loan Parties in connection with or incurred by Restricted Subsidiaries that are not Loan Parties to finance Permitted Acquisitions of Persons that do not become Loan Parties and all Indebtedness resulting from any Permitted Refinancing thereof shall not exceed (I) with respect to any such Permitted Acquisition, 65% of the aggregate amount of consideration paid in respect thereof pursuant to Section 7.02(i)(B), and (II) with respect to all such Permitted Acquisitions, (a) $175,000,000 for the period from the Closing Date to the first anniversary of the Closing Date, (b) $200,000,000 for the period from the Closing Date to the second anniversary of the Closing Date and (c) $250,000,000 for the period from the Closing Date to the Maturity Date with respect to the Term Loans;

(i)  Indebtedness representing deferred compensation to employees of the Company and the Restricted Subsidiaries incurred in the ordinary course of business;

(j)  Indebtedness consisting of promissory notes issued by any Loan Party to current or former officers, directors and employees, their respective estates, spouses or former spouses to finance the purchase or redemption of Equity Interests of Holdings permitted by Section 7.06;

(k)  Indebtedness incurred by the Company or the Restricted Subsidiaries in a Permitted Acquisition, any other Investment expressly permitted hereunder or any Disposition, in each case constituting indemnification obligations or obligations in respect of purchase price or other similar adjustments;

(l)  Indebtedness consisting of (i) obligations of Holdings, the Company or the Restricted Subsidiaries under deferred compensation or other similar arrangements incurred by such Person in connection with the Transaction and Permitted Acquisitions or any other Investment expressly permitted hereunder or (ii) unsecured Indebtedness at any time outstanding that is owed to the seller of a business in a Permitted Acquisition to the extent constituting consideration for such Permitted Acquisition, provided that (x) such Indebtedness shall not mature or amortize any principal prior to the date that is 91 days after the Maturity Date with respect to the Term Loans, (y) unless, as of the last day of the immediately preceding Test Period (after giving Pro Forma Effect to the incurrence of such Indebtedness) the Total Leverage Ratio is less than 4.00:1.00, the aggregate amount of such Indebtedness shall not exceed $25,000,000 outstanding at any time and (z) such Indebtedness shall not be incurred in contemplation of the transfer by such seller to one or more financial institutions;

(m)  Cash Management Obligations and other Indebtedness in respect of netting services, overdraft protections and similar arrangements in each case in connection with deposit accounts incurred in the ordinary course of business in connection with cash management activities;

(n)  Indebtedness in an aggregate principal amount not to exceed $200,000,000 at any time outstanding;

(o)  Indebtedness consisting of (a) the financing of insurance premiums with the providers of such insurance or their affiliates or (b) take-or-pay obligations contained in supply arrangements, in each case, in the ordinary course of business;

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(p)  Indebtedness incurred by the Company or any of the Restricted Subsidiaries in respect of letters of credit, bank guarantees, bankers’ acceptances or similar instruments issued or created in the ordinary course of business, including in respect of workers compensation claims, health, disability or other employee benefits or property, casualty or liability insurance or self-insurance or other Indebtedness with respect to reimbursement-type obligations regarding workers compensation claims; provided that any reimbursement obligations in respect thereof are reimbursed within 30 days following the incurrence thereof;

(q)  obligations in respect of performance, bid, appeal and surety bonds and performance and completion guarantees and similar obligations provided by the Company or any of the Restricted Subsidiaries or obligations in respect of letters of credit, bank guarantees or similar instruments related thereto, in each case in the ordinary course of business or consistent with past practice;

(r)  Indebtedness supported by a Letter of Credit, in a principal amount not to exceed the face amount of such Letter of Credit;

(s)  any Existing Notes not tendered and purchased on the Closing Date pursuant to the Existing Note Indenture;

(t)  Indebtedness in respect of the Senior Subordinated Notes and any Permitted Refinancing thereof;

(u)  Foreign Jurisdiction Deposits;

(v)  Indebtedness of Holdings represented by the obligations of Holdings to make payments with respect to the cancellation or repurchase of its common stock or stock options or warrants in respect of its common stock granted to management investors; provided that any payments with respect to such obligations shall be subject to Section 7.06;

(w)  to the extent constituting Indebtedness, judgments, decrees, attachments or awards not constituting an Event of Default under Section 8.01(h);

(x)  to the extent constituting Indebtedness, Indebtedness in respect of the Holdings PIK Preferred;

(y)  Indebtedness resulting from an Investment permitted by clauses (e)(i), (m) or (p) of Section 7.02; and

(z)  all premiums (if any), interest (including post-petition interest), fees, expenses, charges and additional or contingent interest on obligations described in clauses (a) through (y) above.

SECTION 7.04.  Fundamental Changes.  Merge, dissolve, liquidate, consolidate with or into another Person, or Dispose of (whether in one transaction or in a series of transactions) all or substantially all of its assets (whether now owned or hereafter acquired) to or in favor of any Person, except that:

(a)  any Restricted Subsidiary may merge with (i) the Company; provided that the Company shall be the continuing or surviving Person, or (ii) any one or more other Restricted Subsidiaries; provided that when any Restricted Subsidiary that is a Borrower or a Loan Party is

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merging with another Restricted Subsidiary, a Borrower or a Loan Party shall be the continuing or surviving Person;

(b)  (i) any Subsidiary (other than a Borrower) that is not a Loan Party may merge or consolidate with or into any other Subsidiary (other than a Borrower) that is not a Loan Party, (ii) any Overseas Guarantor may merge or consolidate with or into the applicable Overseas Borrower, provided that the Overseas Borrower shall be the continuing or surviving Person, and (iii) any Subsidiary (other than a Borrower) may liquidate or dissolve or change its legal form if the Company determines in good faith that such action is in the best interests of the Company and its Subsidiaries and is not materially disadvantageous to the Lenders;

(c)  any Restricted Subsidiary may Dispose of all or substantially all of its assets (upon voluntary liquidation or otherwise) to the Company or to another Restricted Subsidiary; provided that if the transferor in such a transaction is a Guarantor or a Borrower, then either (i) the transferee must either be the Company or a U.S. Guarantor, (ii) in the case of a transfer by an Overseas Guarantor, the transferee must be the applicable Overseas Borrower or another Overseas Guarantor of such Overseas Borrower, or (iii) to the extent constituting an Investment, such Investment must be a permitted Investment in or Indebtedness of a Restricted Subsidiary which is not a Loan Party in accordance with Sections 7.02 and 7.03, respectively;

(d)  so long as no Event of Default exists or would result therefrom, the Company may merge with any other Person; provided that (i) the Company shall be the continuing or surviving corporation or (ii) if the Person formed by or surviving any such merger or consolidation is not the Company (any such Person, the “Successor Company”), (A) the Successor Company shall be an entity organized or existing under the laws of the United States, any state thereof, the District of Columbia or any territory thereof, (B) the Successor Company shall expressly assume all the obligations of the Company under this Agreement and the other Loan Documents to which the Company is a party pursuant to a supplement hereto or thereto in form reasonably satisfactory to the Administrative Agent, (C) each U.S. Guarantor, unless it is the other party to such merger or consolidation, shall have by a supplement to the Guarantee and Security Agreement confirmed that its obligations thereunder shall apply to the Successor Company’s obligations under this Agreement, (D) each mortgagor of a Mortgaged Property, unless it is the other party to such merger or consolidation, shall have by an amendment to or restatement of the applicable Mortgage confirmed that its obligations thereunder shall apply to the Successor Company’s obligations under this Agreement, and (E) the Company shall have delivered to the Administrative Agent an officer’s certificate and an opinion of counsel, each stating that such merger or consolidation and such supplement to this Agreement or any Collateral Document comply with this Agreement; provided, further, that if the foregoing are satisfied, the Successor Company will succeed to, and be substituted for, the Company under this Agreement;

(e)  any Restricted Subsidiary may merge with any other Person in order to effect an Investment permitted pursuant to Section 7.02; provided that the continuing or surviving Person shall be a Restricted Subsidiary, which together with each of its Restricted Subsidiaries, shall have complied with the requirements of Section 6.10;

(f)  the Company and the Restricted Subsidiaries may consummate the Acquisitions and Merger and any Permitted Acquisition; and

(g)  a merger, dissolution, liquidation, consolidation or Disposition, the purpose of which is to effect a Disposition permitted pursuant to Section 7.05.

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SECTION 7.05.  Dispositions.  Make any Disposition or enter into any agreement to make any Disposition, except:

(a)  Dispositions of obsolete or worn out property, whether now owned or hereafter acquired, in the ordinary course of business and Dispositions of property no longer used or useful in the conduct of the business of the Company and the Restricted Subsidiaries;

(b)  Dispositions of inventory and immaterial assets in the ordinary course of business;

(c)  Dispositions of property to the extent that (i) such property is exchanged for credit against the purchase price of similar replacement property or (ii) the proceeds of such Disposition are promptly applied to the purchase price of such replacement property;

(d)  Dispositions of property (i) to the Company or to a Restricted Subsidiary; provided that if the transferor of such property is a Guarantor or the Company, the transferee thereof must either be the Company or a Guarantor, or in the case of a transfer by an Overseas Guarantor, the applicable Overseas Borrower, (ii) to the extent such transaction constitutes an Investment permitted under Section 7.02, or (iii) consisting of Equity Interests of Foreign Subsidiaries to other Foreign Subsidiaries;

(e)  Dispositions permitted by Sections 7.04 and 7.06 and Liens permitted by Section 7.01;

(f)  Dispositions of cash and Cash Equivalents;

(g)  Dispositions of accounts receivable in connection with the collection or compromise thereof;

(h)   leases, subleases, licenses or sublicenses (including the provision of software under an open source license), in each case in the ordinary course of business and which do not materially interfere with the business of Holdings, the Company and the Restricted Subsidiaries;

(i)  transfers of property to the extent subject to Casualty Events;

(j)  Dispositions of property not otherwise permitted under this Section 7.05; provided that (i) at the time of such Disposition (other than any such Disposition made pursuant to a legally binding commitment entered into at a time when no Event of Default exists), no Event of Default shall exist or would result from such Disposition, (ii) the aggregate book value of all property Disposed of in reliance on this clause (j) shall not exceed $300,000,000 in the aggregate and (iii) with respect to any Disposition pursuant to this clause (j) for a purchase price in excess of $25,000,000, the Company or a Restricted Subsidiary shall receive not less than 75% of such consideration in the form of cash or Cash Equivalents (in each case, free and clear of all Liens at the time received, other than nonconsensual Liens permitted by Section 7.01 and Liens permitted by Section 7.01(s) and clauses (i) and (ii) of Section 7.01(u)); provided, however, that for the purposes of this clause (iii), each of the following shall be deemed to be cash:  (A) any liabilities (as shown on the Company’s or such Restricted Subsidiary’s most recent balance sheet provided hereunder or in the footnotes thereto) of the Company or such Restricted Subsidiary, other than liabilities that are by their terms subordinated to the payment in cash of the Obligations, that are assumed by the transferee with respect to the applicable Disposition and for which the Company and all of the Restricted Subsidiaries shall have been validly released by all applicable creditors in writing and (B) any securities received by the Company or such Restricted Subsidiary from

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such transferee that are converted by the Company or such Restricted Subsidiary into cash (to the extent of the cash received) within 180 days following the closing of the applicable Disposition;

(k)  Dispositions listed on Schedule 7.05(k);

(l)  Dispositions of Investments in joint ventures to the extent required by, or made pursuant to customary buy/sell arrangements between, the joint venture parties set forth in joint venture arrangements and similar binding arrangements; and

(m)  the Disposition for consideration not in excess of €15,000,000 of the building owned by Verlag Das Beste GmbH located at Augustenstrasse 1, Stuttgart 70178.

provided that any Disposition of any property pursuant to this Section 7.05(j), (k) and (m) shall be for no less than the fair market value of such property at the time of such Disposition.  To the extent any Collateral is Disposed of as expressly permitted by this Section 7.05 to any Person other than Holdings, the Company or any Restricted Subsidiary, such Collateral shall be sold free and clear of the Liens created by the Loan Documents without further action by the Administrative Agent, and the Administrative Agent shall be authorized to take any actions deemed appropriate in order to effect the foregoing.

SECTION 7.06.  Restricted Payments.  Declare or make, directly or indirectly, any Restricted Payment, except:

(a)  each Restricted Subsidiary may make Restricted Payments to the Company and to other Restricted Subsidiaries (and, in the case of a Restricted Payment by a non-wholly owned Restricted Subsidiary, to the Company and any other Restricted Subsidiary and to each other owner of Equity Interests of such Restricted Subsidiary based on their relative ownership interests of the relevant class of Equity Interests);

(b)  Holdings, the Company and each Restricted Subsidiary may declare and make dividend payments or other distributions to the extent payable in the Equity Interests (other than Disqualified Equity Interests not otherwise permitted by Section 7.03 or such dividend payments or distributions that would cause a Change of Control) of such Person;

(c)  Restricted Payments made to consummate the Transaction;

(d)  to the extent constituting Restricted Payments, Holdings, the Company and the Restricted Subsidiaries may enter into and consummate transactions expressly permitted by any provision of Section 7.04 or 7.08;

(e)  repurchases of Equity Interests in Holdings, the Company or any Restricted Subsidiary deemed to occur upon exercise of stock options or warrants if such Equity Interests represent a portion of the exercise price of such options or warrants;

(f)  Holdings may pay (or make Restricted Payments to allow any direct or indirect parent thereof to pay) for the repurchase, retirement or other acquisition or retirement for value of Equity Interests of Holdings (or of any such parent of Holdings) by any future, present or former employee or director of Holdings (or any direct or indirect parent of Holdings) or any of its Subsidiaries pursuant to any employee or director equity plan, employee or director stock option plan or any other employee or director benefit plan or any agreement (including any stock subscription or shareholder agreement) with any employee or director of Holdings or any of its

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Subsidiaries; provided that the aggregate amount of payments under this clause (f) shall not exceed $16,000,000 in any fiscal year of the Company;

(g)  the Company and its Restricted Subsidiaries may make Restricted Payments to Holdings:

(i)  the proceeds of which will be used to pay (or to make Restricted Payments to allow any direct or indirect parent of Holdings to pay) the tax liability to each relevant jurisdiction in respect of consolidated, combined, unitary or affiliated returns for the relevant jurisdiction of Holdings (or such parent) attributable to Holdings, the Company or its Subsidiaries;

(ii)  consisting of Permitted Holdings Distributions plus an additional amount of $500,000 per fiscal year (which amount shall be available only to pay Holdings Operating Expenses);

(iii)  the proceeds of which shall be used by Holdings to make Restricted Payments permitted by Section 7.06(c), (d) or (f);

(iv)  to finance any Investment permitted to be made pursuant to Section 7.02; provided that (A) such Restricted Payment shall be made substantially concurrently with the closing of such Investment and (B) Holdings shall, immediately following the closing thereof, cause (1) all property acquired (whether assets or Equity Interests) to be contributed to the Company or its Restricted Subsidiaries or (2) the merger (to the extent permitted in Section 7.04) of the Person formed or acquired into the Company or its Restricted Subsidiaries in order to consummate such Permitted Acquisition, in each case, in accordance with the requirements of Section 6.10;

(h)  so long as immediately before and after giving effect to any such Restricted Payment, no Default shall have occurred and be continuing or would result therefrom, the Company may make additional Restricted Payments to Holdings the proceeds of which may be utilized by Holdings to make additional Restricted Payments, in an aggregate amount not to exceed the sum of (i) $100,000,000 plus (ii) the aggregate amount of the Net Cash Proceeds of Permitted Equity Issuances after the Closing Date (other than Permitted Equity Issuances made pursuant to Section 8.05) that have been contributed to the Company as common equity and Not Otherwise Applied plus (iii) if, as of the last day of the immediately preceding Test Period (after giving Pro Forma Effect to such Restricted Payment) the Total Leverage Ratio is less than 4.00:1.00, the amount of Cumulative Excess Cash Flow that is Not Otherwise Applied;

(i)  so long as immediately before and after giving effect to any such Restricted Payment, no Default shall have occurred and be continuing or would result therefrom, the Company may make additional Restricted Payments in cash to Holdings the proceeds of which may be utilized by Holdings to make additional Restricted Payments in cash if, as of the last day of the immediately preceding Test Period (after giving Pro Forma Effect to such Restricted Payment) the Total Leverage Ratio is less than 4.00:1.00;

(j)  Holdings may declare and pay dividend payments or other distributions in respect of (i) Holdings Senior PIK Preferred to the extent payable in additional shares of Holdings Senior PIK Preferred or accrued and added to the liquidation preference thereof and (ii) Holdings Junior PIK Preferred to the extent payable in additional shares of Holdings Junior PIK Preferred or accrued and added to the liquidation preference thereof; and

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(k)  the Company may (i) declare and pay regular quarterly dividends required pursuant to the terms of the Company Preferred Stock and (ii) to the extent any holder of Company Preferred Stock exercises appraisal rights in respect of its shares of Company Preferred Stock as a result of the Transaction, pay amounts required to be paid with respect thereto.

SECTION 7.07.  Change in Nature of Business.  Engage to any material extent in a line of business substantially different from those lines of business conducted by the Company and the Restricted Subsidiaries on the date hereof or any business reasonably related, ancillary or complementary thereto.

SECTION 7.08.  Transactions with Affiliates.  Enter into any transaction of any kind with any Affiliate of the Company, whether or not in the ordinary course of business, other than (a) transactions among Loan Parties or any Restricted Subsidiary or any entity that becomes a Restricted Subsidiary as a result of such transaction, (b) on terms substantially as favorable to Holdings, the Company or such Restricted Subsidiary (in the reasonable good faith determination of the Company) as would be obtainable by Holdings, the Company or such Restricted Subsidiary at the time in a comparable arm’s-length transaction with a Person other than an Affiliate, (c) the Transaction and the payment of fees and expenses related to the Transaction, (d) the issuance of Qualified Equity Interests of Holdings and the granting of registration or other customary rights in connection therewith, (e) so long as immediately before and after giving effect thereto, no Event of Default shall have occurred and be continuing or would result therefrom, the payment of management fees to the Sponsors in an aggregate amount in any fiscal quarter not to exceed $1,875,000, (f) reimbursement of out-of-pocket costs and expenses to the Sponsors and their Affiliates, (g) loans, Investments, Restricted Payments and other transactions to the extent otherwise permitted under this Article VII, (h) employment, incentive, benefit and severance arrangements between Holdings, the Company and the Restricted Subsidiaries and their respective officers and employees in the ordinary course of business, (i) payments by Holdings (and any direct or indirect parent thereof), the Company and the Restricted Subsidiaries pursuant to the tax sharing agreements among Holdings (and any such parent thereof), the Company and the Restricted Subsidiaries on customary terms to the extent attributable to the ownership or operation of the Company and the Restricted Subsidiaries, (j) customary compensation and benefits and reimbursement of reasonable out-of-pocket costs to, and indemnities provided on behalf of, directors, officers and employees of Holdings, the Company and the Restricted Subsidiaries in the ordinary course of business to the extent attributable to the ownership or operation of Holdings, the Company and the Restricted Subsidiaries, (k) transactions pursuant to permitted agreements in existence on the Closing Date and set forth on Schedule 7.08 or any amendment thereto to the extent such an amendment is not adverse to the Lenders in any material respect, (l) dividends, redemptions and repurchases permitted under Section 7.06, (m) customary payments by Holdings, the Company and any Restricted Subsidiaries to the Sponsors or their Affiliates made for any financial advisory, financing, underwriting or placement services or in respect of other investment banking activities (including in connection with acquisitions or divestitures) up to 5.0% of the value of transactions with respect to which such services are provided, (n) the existence of, and the performance by Holdings, the Company or any Restricted Subsidiary of its obligations under the terms of, any limited liability company agreement, limited partnership or other organizational document or securityholders agreement (including any registration rights agreement or purchase agreement related thereto) to which it is a party on the Closing Date and which has been disclosed to the Lenders as in effect on the Closing Date, and similar organizational agreements (including any registration rights agreements or purchase agreements related thereto) it may enter into thereafter, provided that the existence of, or the performance by Holdings, the Company or any Restricted Subsidiary of obligations under, any amendment to any such existing agreement or any such similar agreement (including any

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registration rights agreements or purchase agreements related thereto) entered into after the Closing Date shall only be permitted by this Section 7.08(n) to the extent not more adverse to the interest of the Lenders in any material respect when taken as a whole (in the reasonable good faith determination of the Company) than any of such documents and agreements as in effect on the Closing Date, and (o) transactions with landlords, customers, clients, suppliers, authors, joint venture partners or purchasers or sellers of goods and services, in each case in the ordinary course of business and not otherwise prohibited by this Agreement.

SECTION 7.09.  Burdensome Agreements.  Enter into or permit to exist any Contractual Obligation (other than this Agreement or any other Loan Document) that limits the ability of any Restricted Subsidiary of the Company that is not a U.S. Guarantor to make Restricted Payments to the Company or any U.S. Guarantor; provided that the foregoing shall not apply to Contractual Obligations which (i)(x) exist on the date hereof and (to the extent not otherwise permitted by this Section 7.09) are listed on Schedule 7.09 hereto or (y) are set forth in any agreement evidencing any permitted amendment, renewal, extension or refinancing of any Contractual Obligation permitted by clause (x) so long as such amendment, renewal, extension or refinancing is not materially more restrictive (in the reasonable good faith determination of the Company) than such Contractual Obligation, (ii) are binding on a Restricted Subsidiary at the time such Restricted Subsidiary first becomes a Restricted Subsidiary of the Company, so long as such Contractual Obligations were not entered into solely in contemplation of such Person becoming a Restricted Subsidiary of the Company, or are imposed by any permitted amendment, renewal, extension or refinancing of any such Contractual Obligation so long as the terms of any such amendment, renewal, extension or refinancing, taken as a whole, are not materially more restrictive (in the reasonable good faith determination of the Company) than such Contractual Obligation; provided further that this clause (ii) shall not apply to Contractual Obligations that are binding on a Person that becomes a Restricted Subsidiary pursuant to Section 6.15, (iii) represent Indebtedness of a Restricted Subsidiary of the Company which is not a Loan Party which is permitted by Section 7.03, (iv) arise in connection with any Disposition permitted by Section 7.05, (v) are customary provisions in joint venture agreements and other similar agreements applicable to joint ventures permitted under Section 7.02 and applicable solely to such joint venture entered into in the ordinary course of business, (vi) are customary restrictions in leases, subleases, licenses or asset sale agreements otherwise permitted hereby so long as such restrictions relate to the assets subject thereto, (vii) comprise restrictions imposed by any agreement relating to secured Indebtedness permitted pursuant to 7.03(g) to the extent that such restrictions apply only to the Restricted Subsidiaries incurring or guaranteeing such Indebtedness, (viii) are customary provisions restricting subletting or assignment of any lease governing a leasehold interest of the Company or any Restricted Subsidiary, (ix) are customary provisions restricting assignment of any agreement entered into in the ordinary course of business, (x) are restrictions on cash or other deposits or net worth imposed by customers under contracts entered into in the ordinary course of business, and (xi) comprise restrictions imposed by a Lien permitted by Section 7.01 restricting the transfer of the property subject thereto.

SECTION 7.10.  Financial Covenant.  Permit the Total Leverage Ratio as of the last day of any Test Period (beginning with the Test Period ending on March 31, 2008) to be greater than the ratio set forth below opposite the last day of such Test Period:

Year	March 31	June 30	September 30	December 31
2008	8.75:1.00	8.75:1.00	8.75:1.00	8.75:1.00
2009	8.75:1.00	8.00:1.00	8.00:1.00	8.00:1.00
2010	8.00:1.00	6.50:1.00	6.50:1.00	6.50:1.00

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Year	March 31	June 30	September 30	December 31
2011	6.50:1.00	5.75:1.00	5.75:1.00	5.75:1.00
2012	5.75:1.00	5.00:1.00	5.00:1.00	5.00:1.00
2013	5.00:1.00	5.00:1.00	5.00:1.00	5.00:1.00

SECTION 7.11.  Accounting Changes.  Make any change in fiscal year; provided, however, that (i) each of WRC Media and its Subsidiaries may change its fiscal year to June 30 and (ii) each of the Company and its Subsidiaries may, upon written notice to the Administrative Agent, change its fiscal year to a calendar year or to any other fiscal year reasonably acceptable to the Administrative Agent, in which case, the Company and the Administrative Agent will, and are hereby authorized by the Lenders to, make any adjustments to this Agreement that are necessary to reflect such change in fiscal year.

SECTION 7.12.  Prepayments, Etc. of Indebtedness.  (a)  Prepay, redeem, purchase, defease or otherwise satisfy prior to the scheduled maturity thereof in any manner (it being understood that payments of regularly scheduled interest shall be permitted) the Senior Subordinated Notes, any other Indebtedness that is required to be subordinated to the Obligations pursuant to the terms of the Loan Documents (collectively, “Junior Financing”) or the Holdings PIK Preferred or make any payment in violation of any subordination terms of any Junior Financing Documentation, except (i) the refinancing thereof with the Net Cash Proceeds of any Indebtedness (to the extent such Indebtedness constitutes a Permitted Refinancing), to the extent not required to prepay any Loans or Facility pursuant to Section 2.05(b), (ii) the conversion of any Junior Financing to Equity Interests (other than Disqualified Equity Interests) of Holdings or any of its direct or indirect parents, (iii) the prepayment of Indebtedness of the Company or any Restricted Subsidiary to the Company or any Restricted Subsidiary to the extent permitted by the Collateral Documents, and (iv) so long as immediately before and after giving effect thereto, no Default shall have occurred and be continuing or would result therefrom, prepayments, redemptions, purchases, defeasances and other payments in respect of Junior Financings or the Holdings PIK Preferred prior to their scheduled maturity in an aggregate amount not to exceed the sum of (x) $100,000,000 plus (y) the aggregate amount of the Net Cash Proceeds of Permitted Equity Issuances after the Closing Date (other than Permitted Equity Issuances made pursuant to Section 8.05) that (other than with respect to any prepayment, redemption, purchase, defeasance or other payment of the Holdings PIK Preferred) have been contributed to the Company as common equity and Not Otherwise Applied plus (z) if, as of the last day of the immediately preceding Test Period (after giving Pro Forma Effect to such prepayment, redemption, purchase, defeasance or other payment) the Total Leverage Ratio is less than 4.00:1.00, the amount of Cumulative Excess Cash Flow that is Not Otherwise Applied.

(b)  Amend, modify or change in any manner materially adverse to the interests of the Lenders (i) any term or condition of any Junior Financing Documentation, (ii) any term or condition of the Company Preferred Stock or (iii) any Organization Document of Holdings, the Company or any Restricted Subsidiary, in any case without the consent of the Administrative Agent.

SECTION 7.13.  Holding Company.  In the case of Holdings, conduct, transact or otherwise engage in any business or operations other than those incidental to (i) its ownership of the Equity Interests in, and its management of, the Company, (ii) the maintenance of its legal existence and its compliance with applicable Laws, (iii) the performance of the Loan Documents, the documents in respect of the Holdings PIK Preferred, the Purchase Agreement, the DH

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Acquisition Agreement, the WRC Acquisition Agreement and the other agreements contemplated by the Purchase Agreement, the DH Acquisition Agreement or the WRC Acquisition Agreement, (iv) any public offering of its common stock or any other issuance of its Equity Interests not prohibited by Article VII, and (v) the issuance, acquisition or maintenance of any Indebtedness or Investments, or the making of any Restricted Payments, that Holdings is expressly permitted to enter into or consummate under this Article VII; provided that, notwithstanding the foregoing, Holdings shall not own, lease, manage, acquire or otherwise operate any properties or assets (other than the ownership of Equity Interests in, and its management of, the Company, cash and Cash Equivalents and de minimis amounts of other assets incidental to the conduct of its business) or incur any material consensual liabilities (other than liabilities related to its existence and permitted business and activities specified above).

SECTION 7.14.  Capital Expenditures.  (a)   Commencing with the fiscal year ending June 30, 2008, make any Capital Expenditure except for Capital Expenditures not exceeding, in the aggregate for the Company and the Restricted Subsidiaries during each fiscal year set forth below, the amount set forth opposite such fiscal year:

Fiscal Year	Amount
2008	$	40,000,000
2009	$	40,000,000
2010	$	40,000,000
2011	$	45,000,000
2012	$	45,000,000
2013	$	45,000,000
2014	$	45,000,000

; provided that the amount of Capital Expenditures permitted to be made in respect of any fiscal year shall be increased (i) after the consummation of any Permitted Acquisition in an amount equal to 10% of the pro forma aggregate consolidated revenues of the Acquired Entity or Business so acquired during the fiscal year of such Acquired Entity or Business beginning after such Permitted Acquisition and (ii) by an amount equal to the sum of (x) the aggregate amount of the Net Cash Proceeds of Permitted Equity Issuances after the Closing Date (other than Permitted Equity Issuances made pursuant to Section 8.05) that have been contributed to the Company as common equity and Not Otherwise Applied plus (y) if, as of the last day of the immediately preceding Test Period (after giving Pro Forma Effect to such Capital Expenditure) the Total Leverage Ratio is less than 4.00:1.00, the amount of Cumulative Excess Cash Flow that is Not Otherwise Applied.

(b)  Notwithstanding anything to the contrary contained in clause (a) above, to the extent that the aggregate amount of Capital Expenditures made by the Company and the Restricted Subsidiaries in any fiscal year pursuant to Section 7.14(a) is less than the maximum amount of Capital Expenditures permitted by Section 7.14(a) with respect to such fiscal year (without taking into consideration any amounts available pursuant to clause (ii) of the proviso thereto), the amount of such difference (the “Rollover Amount”) may be carried forward and used to make Capital Expenditures in the next succeeding fiscal year; provided that Capital Expenditures in any fiscal year shall be counted against the base amount set forth in Section 7.14(a) (without taking into consideration any amounts available pursuant to clause (ii) of the proviso thereto) with respect to such fiscal year prior to being counted against any Rollover Amount available with respect to such fiscal year.

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ARTICLE VIII

EVENTS OF DEFAULT AND REMEDIES

SECTION 8.01.  Events of Default.  Any of the following shall constitute an Event of Default:

(a)  Non-Payment.  Any Borrower or any other Loan Party fails to pay (i) when and as required to be paid herein, any amount of principal of any Loan, or (ii) within five (5) Business Days after the same becomes due, any interest or any other amount (including Cash Collateral) payable hereunder or with respect to any other Loan Document; or

(b)  Specific Covenants.  (i) Any Group Member fails to perform or observe (or to cause the performance or observance of) any term, covenant or agreement contained in any of Sections 6.03(a), 6.05(a) (solely with respect to the existence of Holdings and the Company), 6.17 or Article VII or (ii) Holdings fails to observe any term, covenant or agreement contained in Section 7.13; provided that any Event of Default under Section 7.10 is subject to cure as contemplated by Section 8.05; or

(c)  Other Defaults.  Any Group Member fails to perform or observe (or to cause the performance or observance of) any other covenant or agreement (not specified in Section 8.01(a) or (b) above) contained in any Loan Document on its part to be performed or observed and such failure continues for thirty (30) days after written notice thereof by the Administrative Agent to the Company; or

(d)  Representations and Warranties.  Any representation, warranty, certification or statement of fact made or deemed made by or on behalf of the Company or any other Loan Party herein, in any other Loan Document, or in any document required to be delivered in connection herewith or therewith shall be incorrect or misleading in any material respect when made or deemed made; or

(e)  Cross-Default.  Any Loan Party or any Restricted Subsidiary (A) fails to make any payment beyond the applicable grace period with respect thereto, if any (whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise) in respect of any Indebtedness (other than Indebtedness hereunder) having an aggregate principal amount of not less than the Threshold Amount, or (B) fails to observe or perform any other agreement or condition contained in any instrument or agreement evidencing or governing any such Indebtedness, or any other “default” (or like term) occurs, the effect of which failure or other “default” is to cause, or to permit the holder or holders of such Indebtedness (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause, with the giving of notice if required, such Indebtedness to become due (automatically or otherwise) prior to its stated maturity; provided that this clause (e)(B) shall not apply to secured Indebtedness that becomes due as a result of the voluntary sale or transfer of the property or assets securing such Indebtedness, if such sale or transfer is permitted hereunder and under the documents providing for such Indebtedness; or

(f)  Insolvency Proceedings, Etc.  Any Loan Party or any of the Restricted Subsidiaries institutes or consents to the institution of any proceeding under any Debtor Relief Law, or makes an assignment for the benefit of creditors; or applies for or consents to the appointment of any receiver, trustee, custodian, conservator, liquidator, rehabilitator, administrator, administrative receiver or similar officer for it or for all or any material part of its property; or any receiver,

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trustee, custodian, conservator, liquidator, rehabilitator, administrator, administrative receiver or similar officer is appointed without the application or consent of such Person and the appointment continues undischarged or unstayed for sixty (60) calendar days; or any proceeding under any Debtor Relief Law relating to any such Person or to all or any material part of its property is instituted without the consent of such Person and continues undismissed or unstayed for sixty (60) calendar days, or an order for relief approving or ordering any of the foregoing is entered in any such proceeding; or

(g)  Inability to Pay Debts; Attachment.  (i) Any Loan Party or any Restricted Subsidiary becomes generally unable or admits in writing its inability generally or fails generally to pay its debts in excess of the Threshold Amount as they become due, or (ii) any writ or warrant of attachment or execution or similar process is issued or levied against all or any material part of the property of the Loan Parties, taken as a whole, and is not released, vacated or fully bonded within sixty (60) days after its issue or levy; or

(h)  Judgments.  There is entered against any Loan Party or any Restricted Subsidiary a final judgment or order for the payment of money in an aggregate amount exceeding the Threshold Amount (to the extent due and payable and not covered by independent third-party insurance as to which the insurer has been notified of such judgment or order and has not disputed coverage) and such judgment or order shall not have been satisfied, vacated, discharged or stayed or bonded pending an appeal for a  period of sixty (60) consecutive days; or

(i)  ERISA.  (i) An ERISA Event occurs with respect to a Pension Plan or Multiemployer Plan which has resulted or could reasonably be expected to result in liability of any Loan Party under Title IV of ERISA in an aggregate amount which could reasonably be expected to result in a Material Adverse Effect, (ii) any Loan Party or any ERISA Affiliate fails to pay when due, after the expiration of any applicable grace period, any installment payment with respect to its withdrawal liability under Section 4201 of ERISA under a Multiemployer Plan in an aggregate amount which could reasonably be expected to result in a Material Adverse Effect, (iii) any Loan Party or any of its Subsidiaries or ERISA Affiliates shall engage in any “prohibited transaction” (as defined in Section 406 of ERISA or Section 4975 of the Code) involving any Pension Plan which could reasonably be expected to result in a Material Adverse Effect, or (iv) any other event or condition shall occur or exist with respect to a Pension Plan which has resulted or could reasonably be expected to result in a Material Adverse Effect; or

(j)  Invalidity of Collateral Documents.  Any material provision of any Collateral Document, at any time after its execution and delivery and for any reason other than as expressly permitted hereunder or thereunder (including as a result of a transaction permitted under Section 7.04 or 7.05) or as a result of acts or omissions by the Administrative Agent or any Lender or the satisfaction in full of all the Obligations, ceases to be in full force and effect; or any Loan Party contests in writing the validity or enforceability of any provision of any Collateral Document; or any Loan Party denies in writing that it has any or further liability or obligation under any Collateral Document (other than as a result of repayment in full of the Obligations and termination of the Aggregate Commitments), or purports in writing to revoke or rescind any Collateral Document; or

(k)  Change of Control.  There occurs any Change of Control; or

(l)  Liens on Collateral.  Any Collateral Document shall for any reason (other than pursuant to the terms thereof including as a result of a transaction permitted under Section 7.04 or 7.05) cease to create a valid and perfected lien, with the priority required by the Collateral

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Documents, (or other security purported to be created on the applicable Collateral) on and security interest in any material portion of the Collateral purported to be covered thereby, subject to Liens permitted under Section 7.01, or any Loan Party or Affiliate thereof shall so assert in writing, except to the extent that any such loss of perfection or priority results from the failure of the Administrative Agent to maintain possession of certificates actually delivered to it representing securities pledged under the Collateral Documents or to file Uniform Commercial Code continuation statements and except as to Collateral consisting of real property to the extent that such losses are covered by a lender’s title insurance policy and such insurer has not disputed coverage; or

(m)  Junior Financing Documentation.  Any of the Obligations of the Loan Parties under the Loan Documents for any reason shall cease to be “Senior Indebtedness” (or any comparable term) or “Senior Secured Financing” (or any comparable term) under, and as defined in the Senior Subordinated Note Indenture or in any other Junior Financing Documentation.

SECTION 8.02.  Remedies Upon Event of Default.  If any Event of Default occurs and is continuing, the Administrative Agent may and, at the request of the Required Lenders, shall take any or all of the following actions:

(a)  declare the commitment of each Lender to make Loans and any obligation of the L/C Issuers to make L/C Credit Extensions to be terminated, whereupon such commitments and obligation shall be terminated;

(b)  declare the unpaid principal amount of all outstanding Loans, all interest accrued and unpaid thereon, and all other amounts owing or payable hereunder or under any other Loan Document to be immediately due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by the Borrowers;

(c)  require that the Company Cash Collateralize the L/C Obligations (in an amount equal to the then Outstanding Amount thereof); and

(d)  exercise on behalf of itself and the Lenders all rights and remedies available to it and the Lenders under the Loan Documents or applicable Law;

provided that upon the occurrence of an actual or deemed entry of an order for relief with respect to the Company under the Bankruptcy Code of the United States, the obligation of each Lender to make Loans and any obligation of the L/C Issuers to make L/C Credit Extensions shall automatically terminate, the unpaid principal amount of all outstanding Loans and all interest and other amounts as aforesaid shall automatically become due and payable, and the obligation of the Company to Cash Collateralize the L/C Obligations as aforesaid shall automatically become effective, in each case without further act of the Administrative Agent or any Lender.

SECTION 8.03.  Exclusion of Immaterial Subsidiaries.  Solely for the purpose of determining whether a Default has occurred under clause (f) or (g) of Section 8.01, any reference in any such clause to any Restricted Subsidiary or Loan Party shall be deemed not to include any Restricted Subsidiary affected by any event or circumstances referred to in any such clause that did not, as of the last day of the most recent completed fiscal quarter of the Company, have assets with a value in excess of 5% of the consolidated total assets of the Company and the Restricted Subsidiaries and did not, as of the four quarter period ending on the last day of such fiscal quarter, have revenues exceeding 5% of the total revenues of the Company and the Restricted Subsidiaries (it being agreed that all Restricted Subsidiaries affected by any event or circumstance referred to

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in any such clause shall be considered together, as a single consolidated Restricted Subsidiary, for purposes of determining whether the condition specified above is satisfied).

SECTION 8.04.  Application of Funds.  After the exercise of remedies provided for in Section 8.02 (or after the Loans have automatically become immediately due and payable and the L/C Obligations have automatically been required to be Cash Collateralized as set forth in the proviso to Section 8.02), any amounts received on account of the Obligations shall be applied by the Administrative Agent in the following order:

First, to payment of that portion of the Obligations constituting fees, indemnities, expenses and other amounts (other than principal and interest, but including Attorney Costs payable under Section 10.04 and amounts payable under Article III) payable to the Administrative Agent in its capacity as such;

Second, to payment of that portion of the Obligations constituting fees, indemnities and other amounts (other than principal and interest) payable to the Lenders (including Attorney Costs payable under Section 10.04 and amounts payable under Article III), ratably among them in proportion to the amounts described in this clause Second payable to them;

Third, to payment of that portion of the Obligations constituting accrued and unpaid interest on the Loans and L/C Borrowings, ratably among the holders of such Obligations in proportion to the respective amounts described in this clause Third payable to them;

Fourth, to payment of that portion of the Obligations constituting unpaid principal of the Loans and L/C Borrowings, the termination value under Secured Hedge Obligations and Cash Management Obligations and to Cash Collateralize the portion of the L/C Obligations comprised of the aggregate undrawn amount of Letters of Credit, ratably among the holders of such Obligations in proportion to the respective amounts described in this clause Fourth held by them;

Fifth, to the payment of all other Obligations of the Loan Parties that are due and payable to the Administrative Agent and the other Secured Parties on such date, ratably based upon the respective aggregate amounts of all such Obligations owing to the Administrative Agent and the other Secured Parties on such date; and

Last, the balance, if any, after all of the Obligations have been paid in full, to the Company or as otherwise required by Law.

Subject to Section 2.03(c), amounts used to Cash Collateralize the aggregate undrawn amount of Letters of Credit pursuant to clause Fourth above shall be applied to satisfy drawings under such Letters of Credit as they occur.  If any amount remains on deposit as Cash Collateral after all Letters of Credit have either been fully drawn or expired, such remaining amount shall be applied to the other Obligations, if any, in the order set forth above and, if no Obligations remain outstanding, to the Company.

Notwithstanding anything to the contrary in this Agreement, amounts received from any Foreign Subsidiary on account of the Obligations of any Foreign Subsidiary shall be applied solely to the payment of Obligations of Foreign Subsidiaries.

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SECTION 8.05.  Company’s Right to Cure.  (a)   Notwithstanding anything to the contrary contained in Section 8.01, in the event that Holdings and the Company fail to comply with the requirements of Section 7.10 at the end of any fiscal quarter, at any time during the period beginning with the first day of such fiscal quarter and ending on the expiration of the twentieth (20^th) day after the date on which financial statements are required to be delivered with respect to the applicable fiscal quarter hereunder (the “Cure Period”), Holdings shall have the right to engage in a Permitted Equity Issuance for cash or otherwise receive cash contributions to the capital of Holdings (which, or the cash proceeds of which, shall be contributed to the Company prior to the end of the Cure Period), and upon receipt by the Company of such amount in cash (the “Cure Amount”) to the extent Not Otherwise Applied, (i) to the extent the Cure Amount is applied to prepay Term Loans on or prior to the last day of the Cure Period, such prepayment shall be deemed to have occurred prior to the end of such fiscal quarter and (ii) the Cure Amount shall be added to Consolidated EBITDA for purposes of determining compliance with Section 7.10 for the last fiscal quarter of the four fiscal quarter period for which such failure to comply would have otherwise occurred (and future four fiscal quarter periods which include such fiscal quarter).  If, after giving effect to the foregoing recalculation, the Company shall then be in compliance with the requirements of Section 7.10, the Company shall be deemed to have satisfied the requirements of Section 7.10 as of the relevant date of determination with the same effect as though there had been no failure to comply therewith at such date, and the applicable breach or default of Section 7.10 that would have otherwise occurred but for the prepayment of the Term Loans pursuant to clause (i) above and/or the receipt by the Company of the Cure Amount and the addition thereof to Consolidated EBITDA pursuant to clause (ii) above shall be deemed not to have occurred for the purposes of the Loan Documents.  The parties hereby acknowledge that, other than as set forth in clause (i) above, this Section 8.05(a) may not be relied on for purposes of calculating any financial ratios other than as applicable to Section 7.10 and shall not result in any adjustment to any amounts other than the amount of the Consolidated EBITDA as referred to in this Section 8.05(a).

(b)  Notwithstanding anything herein to the contrary, (i) in each period of four fiscal quarters, there shall be at least two (2) fiscal quarters in which no cure set forth in Section 8.05(a) is made and (ii) the Cure Amount shall be no greater than the amount required for purposes of complying with Section 7.10 for the most recently completed four fiscal quarter period.

SECTION 8.06.  CAM Exchange.  On the CAM Exchange Date, (i) the Commitments shall automatically and without further act be terminated in accordance with Section 8.02, (ii) the Lenders shall automatically and without further act be deemed to have exchanged interests in the Designated Obligations such that, in lieu of the interests of each Lender in the Designated Obligations under each Tranche in which it shall participate as of such date, such Lender shall own an interest equal to such Lender’s CAM Percentage in the Designated Obligations under each of the Tranches and (iii) simultaneously with the deemed exchange of interests pursuant to clause (ii) above, the interests in the Designated Obligations to be received in such deemed exchange shall, automatically and with no further action required, be converted into the Dollar Amount, determined using the Exchange Rate calculated as of such date, of such amount and on and after such date all amounts accruing and owed to the Lenders in respect of such Designated Obligations shall accrue and be payable in Dollars at the rate otherwise applicable hereunder.  Each Lender, each person acquiring a participation from any Lender as contemplated by Section 10.07 and each Borrower hereby consents and agrees to the CAM Exchange.  Each of the Borrowers and the Lenders agrees from time to time to execute and deliver to the Administrative Agent all such promissory notes and other instruments and documents as the Administrative Agent shall reasonably request to evidence and confirm the respective interests and obligations of the Lenders after giving effect to the CAM Exchange, and each Lender agrees to surrender any

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promissory notes originally received by it in connection with its Loans hereunder to the Administrative Agent against delivery of any promissory notes so executed and delivered; provided that the failure of any Borrower to execute or deliver or of any Lender to accept any such promissory note, instrument or document shall not affect the validity or effectiveness of the CAM Exchange.

As a result of the CAM Exchange, on and after the CAM Exchange Date, each payment received by the Administrative Agent pursuant to any Loan Document in respect of the Designated Obligations shall be distributed to the Lenders pro rata in accordance with their respective CAM Percentages (to be redetermined as of each such date of payment or distribution to the extent required by the next paragraph below).

In the event that, on or after the CAM Exchange Date, the aggregate amount of the Designated Obligations shall change as a result of the making of a disbursement under a Letter of Credit by an L/C Issuer that is not reimbursed by the Company, then (i) each Revolving Lender shall, in accordance with Section 2.03(c), promptly make its L/C Advance in respect of such Unreimbursed Amount (without giving effect to the CAM Exchange), (ii) the Administrative Agent shall redetermine the CAM Percentages after giving effect to such disbursement and the making of such L/C Advances and the Lenders shall automatically and without further act be deemed to have exchanged interests in the Designated Obligations such that each Lender shall own an interest equal to such Lender’s CAM Percentage in the Designated Obligations under each of the Tranches (and the interests in the Designated Obligations to be received in such deemed exchange shall, automatically and with no further action required, be converted into the Dollar Amount of such amount in accordance with the first sentence of this Section 8.06), and (iii) in the event distributions shall have been made in accordance with clause (i) of the preceding paragraph, the Lenders shall make such payments to one another as shall be necessary in order that the amounts received by them shall be equal to the amounts they would have received had each such disbursement and L/C Advance been outstanding on the CAM Exchange Date.  Each such redetermination shall be binding on each of the Lenders and their successors and assigns and shall be conclusive, absent manifest error.

ARTICLE IX

ADMINISTRATIVE AGENT AND OTHER AGENTS

Section 9.01.  Appointment and Authorization of Agents.  (a)  Each Lender hereby irrevocably appoints, designates and authorizes the Administrative Agent to take such action on its behalf under the provisions of this Agreement and each other Loan Document and to exercise such powers and perform such duties as are expressly delegated to it by the terms of this Agreement or any other Loan Document, together with such powers as are reasonably incidental thereto.  Notwithstanding any provision to the contrary contained elsewhere herein or in any other Loan Document, the Administrative Agent shall have no duties or responsibilities, except those expressly set forth herein, nor shall the Administrative Agent have or be deemed to have any fiduciary relationship with any Lender or participant, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against the Administrative Agent.  Without limiting the generality of the foregoing sentence, the use of the term “agent” herein and in the other Loan Documents with reference to any Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable Law.  Instead, such term is used merely as a matter of market custom, and is intended to create or reflect only an administrative relationship between independent contracting parties.

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(b)  Each L/C Issuer shall act on behalf of the Lenders with respect to any Letters of Credit issued by it and the documents associated therewith, and each such L/C Issuer shall have all of the benefits and immunities (i) provided to the Agents in this Article IX with respect to any acts taken or omissions suffered by such L/C Issuer in connection with Letters of Credit issued by it or proposed to be issued by it and the applications and agreements for letters of credit pertaining to such Letters of Credit as fully as if the term “Agent” as used in this Article IX and in the definition of “Agent-Related Person” included such L/C Issuer with respect to such acts or omissions, and (ii) as additionally provided herein with respect to such L/C Issuer.

(c)  The Administrative Agent shall also act as the “collateral agent” under the Loan Documents, and each of the Lenders (in its capacities as a Lender, Swing Line Lender (if applicable), L/C Issuer (if applicable) and a potential Hedge Bank) hereby irrevocably appoints and authorizes the Administrative Agent to act as the agent of (and to hold any security interest created by the Collateral Documents for and on behalf of or on trust for) such Lender for purposes of acquiring, holding and enforcing any and all Liens on Collateral granted by any of the Loan Parties to secure any of the Secured Obligations, together with such powers and discretion as are reasonably incidental thereto.  In this connection, the Administrative Agent, as “collateral agent” (and any co-agents, sub-agents and attorneys-in-fact appointed by the Administrative Agent pursuant to Section 9.02 for purposes of holding or enforcing any Lien on the Collateral (or any portion thereof) granted under the Collateral Documents, or for exercising any rights and remedies thereunder at the direction of the Administrative Agent), shall be entitled to the benefits of all provisions of this Article IX (including, Section 9.07, as though such co-agents, sub-agents and attorneys-in-fact were the “collateral agent” under the Loan Documents) as if set forth in full herein with respect thereto.

Section 9.02.  Delegation of Duties.  The Administrative Agent may execute any of its duties under this Agreement or any other Loan Document (including for purposes of holding or enforcing any Lien on the Collateral (or any portion thereof) granted under the Collateral Documents or of exercising any rights and remedies thereunder) by or through agents, employees or attorneys-in-fact including for the purpose of any Borrowings or payments in Alternative Currencies, such sub-agents as shall be deemed necessary by the Administrative Agent and shall be entitled to advice of counsel and other consultants or experts concerning all matters pertaining to such duties.  The Administrative Agent shall not be responsible for the negligence or misconduct of any agent or sub-agent or attorney-in-fact that it selects in the absence of gross negligence or willful misconduct (as determined in the final non-appealable judgment of a court of competent jurisdiction).

Section 9.03.  Liability of Agents.  No Agent-Related Person shall (a) be liable for any action taken or omitted to be taken by any of them under or in connection with this Agreement or any other Loan Document or the transactions contemplated hereby (except for its own gross negligence or willful misconduct, as determined by the final judgment of a court of competent jurisdiction, in connection with its duties expressly set forth herein), or (b) be responsible in any manner to any Lender or participant for any recital, statement, representation or warranty made by any Loan Party or any officer thereof, contained herein or in any other Loan Document, or in any certificate, report, statement or other document referred to or provided for in, or received by the Administrative Agent under or in connection with, this Agreement or any other Loan Document, or the validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document, or the perfection or priority of any Lien or security interest created or purported to be created under the Collateral Documents, or for any failure of any Loan Party or any other party to any Loan Document to perform its obligations hereunder or thereunder.  No Agent-Related Person shall be under any obligation to any Lender or participant

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to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the properties, books or records of any Loan Party or any Affiliate thereof.

Section 9.04.  Reliance by Agents.  (a)  Each Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, communication, signature, resolution, representation, notice, consent, certificate, affidavit, letter, telegram, facsimile, telex or telephone message, electronic mail message, statement or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons, and upon advice and statements of legal counsel (including counsel to any Loan Party), independent accountants and other experts selected by such Agent.  Each Agent shall be fully justified in failing or refusing to take any action under any Loan Document unless it shall first receive such advice or concurrence of the Required Lenders as it deems appropriate and, if it so requests, it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action.  Each Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement or any other Loan Document in accordance with a request or consent of the Required Lenders (or such greater number of Lenders as may be expressly required hereby in any instance) and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders.

(b)  For purposes of determining compliance with the conditions specified in Section 4.01, each Lender that has signed this Agreement shall be deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to a Lender unless the Administrative Agent shall have received notice from such Lender prior to the proposed Closing Date specifying its objection thereto.

Section 9.05.  Notice of Default.  The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of any Default, except with respect to defaults in the payment of principal, interest and fees required to be paid to the Administrative Agent for the account of the Lenders, unless the Administrative Agent shall have received written notice from a Lender or the Company referring to this Agreement, describing such Default and stating that such notice is a “notice of default.”  The Administrative Agent will notify the Lenders of its receipt of any such notice.  The Administrative Agent shall take such action with respect to any Event of Default as may be directed by the Required Lenders in accordance with Article VIII; provided that unless and until the Administrative Agent has received any such direction, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Event of Default as it shall deem advisable or in the best interest of the Lenders.

Section 9.06.  Credit Decision; Disclosure of Information by Agents.  Each Lender acknowledges that no Agent-Related Person has made any representation or warranty to it, and that no act by any Agent hereafter taken, including any consent to and acceptance of any assignment or review of the affairs of any Loan Party or any Affiliate thereof, shall be deemed to constitute any representation or warranty by any Agent-Related Person to any Lender as to any matter, including whether Agent-Related Persons have disclosed material information in their possession.  Each Lender represents to each Agent that it has, independently and without reliance upon any Agent-Related Person and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, prospects, operations, property, financial and other condition and creditworthiness of the Loan Parties and their

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respective Subsidiaries, and all applicable bank or other regulatory Laws relating to the transactions contemplated hereby, and made its own decision to enter into this Agreement and to extend credit to the Company and the other Loan Parties hereunder.  Each Lender also represents that it will, independently and without reliance upon any Agent-Related Person and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigations as it deems necessary to inform itself as to the business, prospects, operations, property, financial and other condition and creditworthiness of the Company and the other Loan Parties.  Except for notices, reports and other documents expressly required to be furnished to the Lenders by any Agent herein, such Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, prospects, operations, property, financial and other condition or creditworthiness of any of the Loan Parties or any of their respective Affiliates which may come into the possession of any Agent-Related Person.

Section 9.07.  Indemnification of Agents.  Whether or not the transactions contemplated hereby are consummated, the Lenders shall indemnify upon demand each Agent-Related Person (to the extent not reimbursed by or on behalf of any Loan Party and without limiting the obligation of any Loan Party to do so), pro rata, and hold harmless each Agent-Related Person from and against any and all Indemnified Liabilities incurred by it; provided that no Lender shall be liable for the payment to any Agent-Related Person of any portion of such Indemnified Liabilities resulting from such Agent-Related Person’s own gross negligence or willful misconduct, as determined by the final non-appealable judgment of a court of competent jurisdiction; provided that no action taken in accordance with the directions of the Required Lenders (or such other number or percentage of the Lenders as shall be required by the Loan Documents) shall be deemed to constitute gross negligence or willful misconduct for purposes of this Section 9.07; and provided, further, that to the extent the indemnification of the L/C Issuer is required hereunder, such obligation shall be limited solely to the Revolving Credit Lenders.  In the case of any investigation, litigation or proceeding giving rise to any Indemnified Liabilities, this Section 9.07 applies whether any such investigation, litigation or proceeding is brought by any Lender or any other Person.  Without limitation of the foregoing, each Lender shall reimburse the Administrative Agent upon demand for its ratable share of any costs or out-of-pocket expenses (including Attorney Costs) incurred by the Administrative Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, any other Loan Document, or any document contemplated by or referred to herein, to the extent that the Administrative Agent is not reimbursed for such expenses by or on behalf of the Company.  The undertaking in this Section 9.07 shall survive termination of the Aggregate Commitments, the payment of all other Obligations and the resignation of the Administrative Agent.

Section 9.08.  Agents in their Individual Capacities.  JPMorgan Chase Bank and its Affiliates may make loans to, issue letters of credit for the account of, accept deposits from, acquire Equity Interests in and generally engage in any kind of banking, trust, financial advisory, underwriting or other business with each of the Loan Parties and their respective Affiliates as though JPMorgan Chase Bank were not the Administrative Agent or an L/C Issuer hereunder and without notice to or consent of the Lenders.  The Lenders acknowledge that, pursuant to such activities, JPMorganChase Bank or its Affiliates may receive information regarding any Loan Party or its Affiliates (including information that may be subject to confidentiality obligations in favor of such Loan Party or such Affiliate) and acknowledge that the Administrative Agent shall be under no obligation to provide such information to them.  With respect to its Loans,JPMorgan

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Chase Bank shall have the same rights and powers under this Agreement as any other Lender and may exercise such rights and powers as though it were not the Administrative Agent or an L/C Issuer, and the terms “Lender” and “Lenders” include JPMorgan Chase Bank in its individual capacity.

SECTION 9.09.  Successor Agents.  The Administrative Agent may resign as the Administrative Agent upon thirty (30) days’ notice to the Lenders and the Company.  If the Administrative Agent resigns under this Agreement, the Required Lenders shall appoint from among the Lenders a successor agent for the Lenders, which successor agent shall be consented to by the Company at all times other than during the existence of an Event of Default under Section 8.01(f) or (g) (which consent of the Company shall not be unreasonably withheld or delayed).  If no successor agent is appointed prior to the effective date of the resignation of the Administrative Agent, the Administrative Agent may appoint, after consulting with the Lenders and the Company, a successor agent, which shall be a Lender or a bank with an office in New York, New York or an Affiliate of such Lender or bank, and which successor agent shall be consented to by the Company at all times other than during the existence of an Event of Default under Section 8.01(f) or (g) (which consent of the Company shall not be unreasonably withheld).  Upon the acceptance of its appointment as successor agent hereunder, the Person acting as such successor agent shall succeed to all the rights, powers and duties of the retiring Administrative Agent and the term “Administrative Agent,” shall mean such successor administrative agent and/or supplemental administrative agent, as the case may be, and the retiring Administrative Agent’s appointment, powers and duties as the Administrative Agent shall be terminated.  After the retiring Administrative Agent’s resignation hereunder as the Administrative Agent, the provisions of this Article IX and Sections 10.04 and 10.05 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was the Administrative Agent under this Agreement.  If no successor agent has accepted appointment as the Administrative Agent by the date which is thirty (30) days following the retiring Administrative Agent’s notice of resignation, the retiring Administrative Agent’s resignation shall nevertheless thereupon become effective and the Lenders shall perform all of the duties of the Administrative Agent hereunder until such time, if any, as the Required Lenders appoint a successor agent as provided for above.  Upon the acceptance of any appointment as the Administrative Agent hereunder by a successor and upon the execution and filing or recording of such financing statements, or amendments thereto, and such amendments or supplements to the Mortgages, and such other instruments or notices, as may be necessary or desirable, or as the Required Lenders may request, in order to (a) continue the perfection of the Liens granted or purported to be granted by the Collateral Documents or (b) otherwise ensure that the Collateral and Guarantee Requirement is satisfied, the Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, discretion, privileges, and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations under the Loan Documents.  After the retiring Administrative Agent’s resignation hereunder as the Administrative Agent, the provisions of this Article IX shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as the Administrative Agent.

Section 9.10.  Administrative Agent May File Proofs of Claim.  In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to any Loan Party, the Administrative Agent (irrespective of whether the principal of any Loan or L/C Obligation shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether the Administrative Agent shall have made any demand on any Borrower) shall be entitled and empowered, by intervention in such proceeding or otherwise:

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(a)  to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Loans, L/C Obligations and all other Obligations that are owing and unpaid and to file such other documents as may be necessary or advisable in order to have the claims of the Lenders and the Administrative Agent (including any claim for the reasonable compensation, expenses, disbursements and advances of the Lenders and the Administrative Agent and their respective agents and counsel and all other amounts due the Lenders and the Administrative Agent under Sections 2.03(h) and (i), 2.09 and 10.04) allowed in such judicial proceeding; and

(b)  to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same;

and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender to make such payments to the Administrative Agent and, in the event that the Administrative Agent shall consent to the making of such payments directly to the Lenders, to pay to the Administrative Agent any amount due for the reasonable compensation, expenses, disbursements and advances of the Agents and their respective agents and counsel, and any other amounts due the Administrative Agent under Sections 2.09 and 10.04.

Nothing contained herein shall be deemed to authorize the Administrative Agent to authorize or consent to or accept or adopt on behalf of any Lender any plan of reorganization, arrangement, adjustment or composition affecting the Obligations or the rights of any Lender or to authorize the Administrative Agent to vote in respect of the claim of any Lender in any such proceeding.

Section 9.11.  Collateral and Guarantee Matters.  The Lenders irrevocably agree:

(a)  that any Lien on any property granted to or held by the Administrative Agent under any Loan Document shall be automatically released (i) upon termination of the Aggregate Commitments and payment in full of all Obligations (other than (x) obligations under Secured Hedge Agreements, (y) Cash Management Obligations and (z) contingent reimbursement and indemnification obligations not yet accrued and payable) and the expiration or termination of all Letters of Credit, (ii) at the time the property subject to such Lien is transferred or to be transferred as part of or in connection with any transfer permitted hereunder or under any other Loan Document to any Person other than Holdings, the Company or any of its Domestic Subsidiaries that are Restricted Subsidiaries, (iii) subject to Section 10.01, if the release of such Lien is approved, authorized or ratified in writing by the Required Lenders (or such greater number of Lenders as may be required pursuant to Section 10.01), (iv) if the property subject to such Lien is owned by a Guarantor, upon release of such Guarantor from its obligations under its Guarantee under the Guarantee and Security Agreement pursuant to clause (c) below, or (v) at the time such property subject to such Lien becomes a Specified Asset (as defined in the Guarantee and Security Agreement) described in clause (b) of the definition thereof (taking into account the proviso thereto);

(b)  (i) to release or subordinate any Lien on any property granted to or held by the Administrative Agent under any Loan Document to the holder of any Lien on such property that is permitted by Section 7.01(i) and (ii) that the Administrative Agent is authorized (but not required) to release or subordinate any Lien on any property granted to or held by the Administrative Agent under any Loan Document to the holder of any Lien on such property that is permitted by any other clause of Section 7.01; and

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(c)  that any Guarantor shall be automatically released from its obligations under the Guarantee and Security Agreement if such Person ceases to be a Restricted Subsidiary as a result of a transaction or designation permitted hereunder; provided that no such release shall occur if such Guarantor continues to be a guarantor in respect of any Junior Financing.

Upon request by the Administrative Agent at any time, the Required Lenders (or such greater number of Lenders as may be required pursuant to Section 10.01) will confirm in writing the Administrative Agent’s authority to release or subordinate its interest in particular types or items of property, or to release any Guarantor from its obligations under the Guarantee and Security Agreement pursuant to this Section 9.11.  In each case as specified in this Section 9.11, the Administrative Agent will (and each Lender irrevocably authorizes the Administrative Agent to), at the Company’s expense, execute and deliver to the applicable Loan Party such documents as such Loan Party may reasonably request to evidence the release or subordination of such item of Collateral from the assignment and security interest granted under the Collateral Documents, or to evidence the release of such Guarantor from its obligations under the Guarantee and Security Agreement, in each case in accordance with the terms of the Loan Documents and this Section 9.11.

Section 9.12.  Other Agents; Arrangers and Managers.  None of the Lenders or other Persons identified on the facing page or signature pages of this Agreement as a “co-syndication agent,” “documentation agent”, “joint bookrunner” or “co-lead arranger” shall have any right, power, obligation, liability, responsibility or duty under this Agreement other than those applicable to all Lenders as such.  Without limiting the foregoing, none of the Lenders or other Persons so identified shall have or be deemed to have any fiduciary relationship with any Lender.  Each Lender acknowledges that it has not relied, and will not rely, on any of the Lenders or other Persons so identified in deciding to enter into this Agreement or in taking or not taking action hereunder.

Section 9.13.  Appointment of Supplemental Administrative Agents.  (a)  It is the purpose of this Agreement and the other Loan Documents that there shall be no violation of any Law of any jurisdiction denying or restricting the right of banking corporations or associations to transact business as agent or trustee in such jurisdiction.  It is recognized that in case of litigation under this Agreement or any of the other Loan Documents, and in particular in case of the enforcement of any of the Loan Documents, or in case the Administrative Agent deems that by reason of any present or future Law of any jurisdiction it may not exercise any of the rights, powers or remedies granted herein or in any of the other Loan Documents or take any other action which may be desirable or necessary in connection therewith, the Administrative Agent is hereby authorized to appoint an additional individual or institution selected by the Administrative Agent in its sole discretion as a separate trustee, co-trustee, administrative agent, collateral agent, administrative sub-agent or administrative co-agent (any such additional individual or institution being referred to herein individually as a “Supplemental Administrative Agent” and collectively as “Supplemental Administrative Agents”).

(b)  In the event that the Administrative Agent appoints a Supplemental Administrative Agent with respect to any Collateral, (i) each and every right, power, privilege or duty expressed or intended by this Agreement or any of the other Loan Documents to be exercised by or vested in or conveyed to the Administrative Agent with respect to such Collateral shall be exercisable by and vest in such Supplemental Administrative Agent to the extent, and only to the extent, necessary to enable such Supplemental Administrative Agent to exercise such rights, powers and privileges with respect to such Collateral and to perform such duties with respect to such Collateral, and every covenant and obligation contained in the Loan Documents and necessary to

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the exercise or performance thereof by such Supplemental Administrative Agent shall run to and be enforceable by either the Administrative Agent or such Supplemental Administrative Agent, and (ii) the provisions of this Article IX and of Sections 10.04 and 10.05 that refer to the Administrative Agent shall inure to the benefit of such Supplemental Administrative Agent and all references therein to the Administrative Agent shall be deemed to be references to the Administrative Agent and/or such Supplemental Administrative Agent, as the context may require.

(c)  Should any instrument in writing from the Company, Holdings or any other Loan Party be required by any Supplemental Administrative Agent so appointed by the Administrative Agent for more fully and certainly vesting in and confirming to him or it such rights, powers, privileges and duties, the Company or Holdings, as applicable, shall, or shall cause such Loan Party to, execute, acknowledge and deliver any and all such instruments promptly upon request by the Administrative Agent.  In case any Supplemental Administrative Agent, or a successor thereto, shall die, become incapable of acting, resign or be removed, all the rights, powers, privileges and duties of such Supplemental Administrative Agent, to the extent permitted by Law, shall vest in and be exercised by the Administrative Agent until the appointment of a new Supplemental Administrative Agent.

ARTICLE X

MISCELLANEOUS

SECTION 10.01.  Amendments, Etc.  Except as otherwise set forth in this Agreement or any other Loan Document, no amendment or waiver of any provision of this Agreement or any other Loan Document, and no consent to any departure by the Company or any other Loan Party therefrom, shall be effective unless in writing signed by the Required Lenders and the Company or the applicable Loan Party, as the case may be, and each such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided that, no such amendment, waiver or consent shall:

(a)  extend or increase the Commitment of any Lender without the written consent of each Lender directly affected thereby (it being understood that a waiver of any condition precedent set forth in Section 4.02 or the waiver of any Default, mandatory prepayment or mandatory reduction of the Commitments shall not constitute an extension or increase of any Commitment of any Lender);

(b)  postpone any date scheduled for, or reduce or forgive the amount of, any payment of principal or interest under Section 2.07 or 2.08 without the written consent of each Lender directly affected thereby, it being understood that the waiver of (or amendment to the terms of) any mandatory prepayment of the Term Loans shall not constitute a postponement of any date scheduled for the payment of principal or interest;

(c)  reduce or forgive the principal of, or the rate of interest specified herein on, any Loan or L/C Borrowing or (subject to clause (iii) of the second proviso to this Section 10.01) any fees (including fees set forth in Section 2.09 or other amounts payable hereunder or under any other Loan Document), or extend, postpone or waive the date upon which any fees are to be paid, without the written consent of each Lender directly affected thereby, it being understood that any change to the definition of Total Leverage Ratio or in the component definitions thereof shall not constitute a reduction in the rate; provided that, only the consent of the Required Lenders shall be

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necessary to amend the definition of “Default Rate” or to waive any obligation of the Borrowers to pay interest at the Default Rate;

(d)  change any provision of this Section 10.01, the definition of “Required Lenders” or “Pro Rata Share”, Section 2.06(c), the third sentence of Section 2.12(a), Section 2.13, Section 8.04 or Section 10.07(a)(x) without the written consent of each Lender affected thereby;

(e)  other than in a transaction permitted under Section 7.05, release all or substantially all of the Collateral in any transaction or series of related transactions, without the written consent of each Lender; or

(f)  other than in connection with a transaction permitted under Section 7.04 or 7.05, release all or substantially all of the aggregate value of the Guarantees, without the written consent of each Lender;

and provided further that (i) no amendment, waiver or consent shall, unless in writing and signed by each L/C Issuer in addition to the Lenders required above, affect the rights or duties of an L/C Issuer under this Agreement or any Letter of Credit Application relating to any Letter of Credit issued or to be issued by it; (ii) no amendment, waiver or consent shall, unless in writing and signed by the Swing Line Lender in addition to the Lenders required above, affect the rights or duties of the Swing Line Lender under this Agreement; (iii) no amendment, waiver or consent shall, unless in writing and signed by the Administrative Agent in addition to the Lenders required above, affect the rights or duties of, or any fees or other amounts payable to, the Administrative Agent under this Agreement or any other Loan Document; (iv) Section 10.07(h) may not be amended, waived or otherwise modified without the consent of each Granting Lender all or any part of whose Loans are being funded by an SPC at the time of such amendment, waiver or other modification; and (v) the consent of Lenders holding more than 50% of any Class of Commitments shall be required with respect to any amendment that by its terms adversely affects the rights of such Class in respect of payments hereunder in a manner different than such amendment affects other Classes.  Notwithstanding anything to the contrary herein, no Defaulting Lender shall have any right to approve or disapprove any amendment, waiver or consent hereunder, except that the Commitment of such Lender may not be increased or extended without the consent of such Lender (it being understood that any Commitments or Loans held or deemed held by any Defaulting Lender shall be excluded for a vote of the Lenders hereunder requiring any consent of the Lenders).

Notwithstanding the foregoing, this Agreement may be amended (or amended and restated) with the written consent of the Required Lenders, the Administrative Agent and the Company (a) to add one or more additional credit facilities to this Agreement and to permit the extensions of credit from time to time outstanding thereunder and the accrued interest and fees in respect thereof to share ratably in the benefits of this Agreement and the other Loan Documents with the U.S. Term Loans, the Euro Term Loans and the Revolving Credit Loans and the accrued interest and fees in respect thereof and (b) to include appropriately the Lenders holding such credit facilities in any determination of the Required Lenders.

In addition, notwithstanding the foregoing, this Agreement may be amended with the written consent of the Administrative Agent, the Company and the Lenders (and, in the case of any amendment with respect to Euro Replacement Term Loans (as defined below), the German Borrower) providing the relevant U.S. Replacement Term Loans or Euro Replacement Term Loans (as defined below) to permit the refinancing of all outstanding U.S. Term Loans (“U.S. Refinanced Term Loans”) or Euro Term Loans (the “Euro Refinanced Term Loans”) with a

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replacement U.S. term loan tranche denominated in Dollars (“U.S. Replacement Term Loans”) or Euro term loan tranche denominated in Euros (“Euro Replacement Term Loans”), respectively, hereunder; provided that (a) the aggregate principal amount of such U.S. Replacement Term Loans or Euro Replacement Term Loans shall not exceed the aggregate principal amount of such U.S. Refinanced Term Loans or Euro Refinanced Term Loans, respectively, (b) the Applicable Rate for such U.S. Replacement Term Loans or Euro Replacement Term Loans shall not be higher than the Applicable Rate for such U.S. Refinanced Term Loans or Euro Refinanced Term Loans, respectively, (c) the Weighted Average Life to Maturity of such U.S. Replacement Term Loans or Euro Replacement Term Loans shall not be shorter than the Weighted Average Life to Maturity of such U.S. Refinanced Term Loans or Euro Refinanced Term Loans, respectively, at the time of such refinancing (except to the extent of nominal amortization for periods where amortization has been eliminated as a result of prepayment of the applicable Term Loans) and (d) all other terms applicable to such U.S. Replacement Term Loans or Euro Replacement Term Loans shall be substantially identical to, or less favorable to the Lenders providing such U.S. Replacement Term Loans or Euro Replacement Term Loans than, those applicable to such U.S. Refinanced Term Loans or Euro Refinanced Term Loans, respectively, except to the extent necessary to provide for covenants and other terms applicable to any period after the latest final maturity of the Term Loans in effect immediately prior to such refinancing.

Notwithstanding anything to the contrary contained in Section 10.01, guarantees, collateral security documents and related documents executed by Foreign Subsidiaries in connection with this Agreement may be in a form reasonably determined by the Administrative Agent and may be, together with this Agreement, amended and waived with the consent of the Administrative Agent at the request of the Company without the need to obtain the consent of any other Lender if such amendment or waiver is delivered in order (i) to comply with local Law or advice of local counsel, (ii) to cure ambiguities or defects or (iii) to cause such guarantee, collateral security document or other document to be consistent with this Agreement and the other Loan Documents.

Section 10.02.  Notices and Other Communications; Facsimile Copies.  (a)  General.  Unless otherwise expressly provided herein, all notices and other communications provided for hereunder or under any other Loan Document shall be in writing (including by facsimile transmission).  All such written notices shall be mailed, faxed or delivered to the applicable address, facsimile number or electronic mail address, and all notices and other communications expressly permitted hereunder to be given by telephone shall be made to the applicable telephone number, as follows:

(i)  if to any Borrower, the Administrative Agent, an L/C Issuer or the Swing Line Lender, to the address, facsimile number, electronic mail address or telephone number specified for such Person on Schedule 10.02 or to such other address, facsimile number, electronic mail address or telephone number as shall be designated by such party in a notice to the other parties; and

(ii)  if to any other Lender, to the address, facsimile number, electronic mail address or telephone number specified in its Administrative Questionnaire or to such other address, facsimile number, electronic mail address or telephone number as shall be designated by such party in a notice to the Company, the Administrative Agent, the L/C Issuers and the Swing Line Lender.

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All such notices and other communications shall be deemed to be given or made, if given or made during the recipient’s normal business hours (and if not, shall be deemed to be given or made on the next succeeding Business Day), upon the earlier to occur of (i) actual receipt by the relevant party hereto and (ii) (A) if delivered by hand or by courier, when signed for by or on behalf of the relevant party hereto; (B) if delivered by mail, four (4) Business Days after deposit in the mails, postage prepaid; (C) if delivered by facsimile, when sent and receipt has been confirmed by telephone; and (D) if delivered by electronic mail (which form of delivery is subject to the provisions of Section 10.02(d)), when delivered; provided that notices and other communications to the Administrative Agent, the L/C Issuers and the Swing Line Lender pursuant to Article II shall not be effective until actually received by such Person.  In no event shall a voice mail message be effective as a notice, communication or confirmation hereunder.

(b)  Effectiveness of Facsimile Documents and Signatures.  Loan Documents may be transmitted and/or signed by facsimile or “PDF” (subject to Section 10.02(d).  The effectiveness of any such documents and signatures shall, subject to applicable Law, have the same force and effect as manually signed originals and shall be binding on all Loan Parties, the Agents and the Lenders.

(c)  Reliance by Agents and Lenders.  The Administrative Agent and the Lenders shall be entitled to rely and act upon any notices (including telephonic Committed Loan Notices and Swing Line Loan Notices) purportedly given by or on behalf of any Borrower even if (i) such notices were not made in a manner specified herein, were incomplete or were not preceded or followed by any other form of notice specified herein, or (ii) the terms thereof, as understood by the recipient, varied from any confirmation thereof.  The Borrowers shall indemnify each Agent-Related Person and each Lender from all losses, liabilities and related reasonable out-of-pocket costs and expenses resulting from the reliance by such Person on each notice purportedly given by or on behalf of the Borrowers in the absence of gross negligence or willful misconduct.  All telephonic notices to the Administrative Agent may be recorded by the Administrative Agent, and each of the parties hereto hereby consents to such recording.

(d)  Electronic Communications.  Notices and other communications to the Lenders hereunder may be delivered or furnished by electronic communication (including e-mail and Internet or intranet websites) pursuant to procedures approved by the Administrative Agent, provided that the foregoing shall not apply to notices to any Lender pursuant to Articles II and III, if such Lender has notified the Administrative Agent that it is incapable of receiving notices thereunder by electronic communication.  The Administrative Agent or the Company may, in their discretion, agree to accept notices and other communications to them hereunder by electronic communications pursuant to procedures approved by it, provided that approval of such procedures may be limited to particular notices or communications.  Unless the Administrative Agent otherwise prescribes, (i) notices and other communications sent to an e-mail address shall be deemed received upon the sender’s receipt of an acknowledgment from the intended recipient (such as by the “return receipt requested” function, as available, return e-mail or other written acknowledgment), provided that if such notice or other communication is not sent during the normal business hours of the recipient, such notice or communication shall be deemed to have been sent at the opening of business on the next Business Day for the recipient, and (ii) notices or communications posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient at its e-mail address as described in the foregoing clause (i) of notification that such notice or communication is available and identifying the website address therefor.

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(e)  Designation by Overseas Borrowers.  Each Overseas Borrower hereby designates the Company as its representative and agent on its behalf for the purposes of giving and receiving all notices (other than Committed Loan Notices) and any other documentation required to be delivered to it pursuant to this Agreement and any other Loan Document by the Administrative Agent or any Lender.  The Company hereby accepts such appointment.  The Agents and the Lenders may regard any notice (other than Committed Loan Notices) or other communication pursuant to any Loan Document from the Company as a notice or communication from all Borrowers, and may give any notice or communication required or permitted to be given to any Overseas Borrower or Overseas Borrowers hereunder to the Company on behalf of such Overseas Borrower or Overseas Borrowers.  Each Overseas Borrower agrees that each notice, election, representation and warranty, covenant, agreement and undertaking made on its behalf by the Company shall be deemed for all purposes to have been made by such Overseas Borrower and shall be binding upon and enforceable against such Overseas Borrower to the same extent as if the same had been made directly by such Overseas Borrower.

Section 10.03.  No Waiver; Cumulative Remedies.  No failure by any Lender or the Administrative Agent to exercise, and no delay by any such Person in exercising, any right, remedy, power or privilege hereunder or under any other Loan Document shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.  The rights, remedies, powers and privileges herein provided, and provided under each other Loan Document, are cumulative and not exclusive of any rights, remedies, powers and privileges provided by Law.

Section 10.04.  Attorney Costs, Expenses and Taxes.  The Company agrees (a) if the Closing Date occurs, to pay or reimburse the Administrative Agent, the Syndication Agent, the Co-Documentation Agents and the Arrangers for all reasonable out-of-pocket costs and expenses incurred in connection with the preparation, negotiation, syndication and execution of this Agreement and the other Loan Documents, and any amendment, waiver, consent or other modification of the provisions hereof and thereof (whether or not the transactions contemplated thereby are consummated), and the consummation and administration of the transactions contemplated hereby and thereby, including all Attorney Costs of Simpson Thacher & Bartlett LLP and, if necessary, one local counsel in each applicable jurisdiction, and (b) to pay or reimburse the Administrative Agent, the Syndication Agent, the Co-Documentation Agents, the Arrangers and each Lender for all reasonable out-of-pocket costs and expenses incurred in connection with the enforcement of any rights or remedies under this Agreement or the other Loan Documents (including all such costs and expenses incurred during any legal proceeding, including any proceeding under any Debtor Relief Law, and including all Attorney Costs of one counsel to the Administrative Agent and the Lenders and, if necessary, one local counsel in each applicable jurisdiction).  The foregoing costs and expenses shall include all reasonable search, filing, recording and title insurance charges and fees and taxes related thereto, and other reasonable out-of-pocket expenses incurred by any Agent.  The agreements in this Section 10.04 shall survive the termination of the Aggregate Commitments and repayment of all other Obligations.  All amounts due under this Section 10.04 shall be paid within ten (10) Business Days of receipt by the Company of an invoice relating thereto setting forth such expenses in reasonable detail.  If any Loan Party fails to pay when due any costs, expenses or other amounts payable by it hereunder or under any Loan Document, such amount may be paid on behalf of such Loan Party by the Administrative Agent in its sole discretion.

Section 10.05.  Indemnification by the Company.  Whether or not the transactions contemplated hereby are consummated, the Company shall indemnify and hold harmless each

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Agent-Related Person, each Lender and their respective Affiliates, directors, officers, employees, counsel, agents, trustees, investment advisors and attorneys-in-fact (collectively the “Indemnitees”) from and against any and all liabilities, obligations, losses, damages, penalties, claims, demands, actions, judgments and suits and related reasonable out-of-pocket expenses (including Attorney Costs) of any kind or nature whatsoever which may at any time be imposed on, incurred by or asserted against any such Indemnitee in any way relating to or arising out of or in connection with (a) the execution, delivery, enforcement, performance or administration of any Loan Document or any other agreement, letter or instrument delivered in connection with the transactions contemplated thereby or the consummation of the transactions contemplated thereby, (b) any Commitment, Loan or Letter of Credit or the use or proposed use of the proceeds therefrom (including any refusal by an L/C Issuer to honor a demand for payment under a Letter of Credit if the documents presented in connection with such demand do not strictly comply with the terms of such Letter of Credit), or (c) to the extent relating to or arising from any of the foregoing, any actual or alleged presence or release of Hazardous Materials on or from any property currently or formerly owned or operated by the Company, any Subsidiary or any other Loan Party, or any Environmental Liability related in any way to the Company, any Subsidiary or any other Loan Party, or (d) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory (including any investigation of, preparation for, or defense of any pending or threatened claim, investigation, litigation or proceeding) and regardless of whether any Indemnitee is a party thereto (all the foregoing, collectively, the “Indemnified Liabilities”), in all cases, whether or not caused by or arising, in whole or in part, out of the negligence of the Indemnitee; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such liabilities, obligations, losses, damages, penalties, claims, demands, actions, judgments, suits or expenses are found in a final non-appealable judgment of a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of such Indemnitee, any Affiliate of such Indemnitee or any officer, director, employee, advisor, representative or agent of such Indemnitee or any such Affiliate.  No Indemnitee shall be liable to any Group Member for any damages arising from the use by others of any information or other materials obtained through IntraLinks or other similar information transmission systems in connection with this Agreement.  No Indemnitee shall be liable (whether direct or indirect, in contract, tort or otherwise) to any Group Member (other than the Lenders’ contractual liability for breach under this Agreement) except to the extent such liability is found in a non-appealable judgment of a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of such Indemnitee, any Affiliate of such Indemnitee or any officer, director, employee, advisor, representative or agent of such Indemnitee or any such Affiliate.  No Indemnitee shall have any liability to any Group Member, nor any Group Member to any Indemnitee, for any special, punitive, indirect or consequential damages (including, without limitation, loss of profits, business or anticipated savings) relating to this Agreement or any other Loan Document or arising out of its activities in connection herewith or therewith (whether before or after the Closing Date).  All amounts due under this Section 10.05 shall be paid within ten (10) Business Days after demand therefor; provided, however, that such Indemnitee shall promptly refund any amount received under this Section 10.05 to the extent that there is a final judicial or arbitral determination that such Indemnitee was not entitled to indemnification or contribution rights with respect to such payment pursuant to the express terms of this Section 10.05.  The agreements in this Section 10.05 shall survive the resignation of the Administrative Agent, the replacement of any Lender, the termination of the Aggregate Commitments and the repayment, satisfaction or discharge of all the other Obligations.

Section 10.06.  Payments Set Aside.  To the extent that any payment by or on behalf of the Company is made to any Agent or any Lender, or any Agent or any Lender exercises its

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right of setoff, and such payment or the proceeds of such setoff or any part thereof is subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by such Agent or such Lender in its discretion) to be repaid to a trustee, receiver or any other party, in connection with any proceeding under any Debtor Relief Law or otherwise, then (a) to the extent of such recovery, the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such setoff had not occurred, and (b) each Lender severally agrees to pay to the Administrative Agent upon demand its applicable share of any amount so recovered from or repaid by any Agent, plus interest thereon from the date of such demand to the date such payment is made at a rate per annum equal to the applicable Overnight Rate from time to time in effect.

Section 10.07.  Successors and Assigns.  (a)  The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that (x) neither Holdings nor any Borrower may assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender and (y) no Lender may assign or otherwise transfer any of its rights or obligations hereunder except (i) to an Eligible Assignee, (ii) by way of participation in accordance with the provisions of Section 10.07(e), (iii) by way of pledge or assignment of a security interest subject to the restrictions of Sections 10.07(g) or 10.07(i) or (iv) to an SPC in accordance with the provisions of Section 10.07(h) (and any other attempted assignment or transfer by any party hereto shall be null and void).  Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby, Participants to the extent provided in Section 10.07(e) and, to the extent expressly contemplated hereby, the Indemnitees) any legal or equitable right, remedy or claim under or by reason of this Agreement.

(b)  (i)  Subject to the conditions set forth in paragraph (b)(ii) below, any Lender may assign to one or more assignees (“Assignees”) all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans (including for purposes of this Section 10.07(b), participations in L/C Obligations and in Swing Line Loans) at the time owing to it) with the prior written consent (such consent not to be unreasonably withheld or delayed) of:

(A)  the Company, provided that no consent of the Company shall be required for an assignment to a Lender, an Affiliate of a Lender, an Approved Fund or, if an Event of Default under Section 8.01(a), (f) or (g) has occurred and is continuing, any Assignee;

(B)  the Administrative Agent, provided that no consent of the Administrative Agent shall be required for an assignment of all or any portion of a Term Loan to a Lender, an Affiliate of a Lender or an Approved Fund;

(C)  each L/C Issuer at the time of such assignment, provided that no consent of the L/C Issuers shall be required for any assignment of a Term Loan; and

(D)  the Swing Line Lender; provided that no consent of the Swing Line Lender shall be required for any assignment of a Term Loan.

(ii)  Assignments shall be subject to the following additional conditions:

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(A)  except in the case of an assignment to a Lender, an Affiliate of a Lender or an Approved Fund or an assignment of the entire remaining amount of the assigning Lender’s Commitment or Loans of any Class, the amount of the Commitment or Loans of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the Administrative Agent) shall not be less than $5,000,000 (in the case of each Revolving Credit Facility), or $1,000,000 (in the case of a Term Loan) and in increments of $1,000,000 in excess thereof unless each of the Company and the Administrative Agent otherwise consents, provided that such amounts shall be aggregated in respect of each Lender and its Affiliates or Approved Funds, if any;

(B)  the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Assumption, together with a processing and recordation fee of $3,500; and

(C)  the Assignee, if it shall not be a Lender, shall deliver to the Administrative Agent (1) an Administrative Questionnaire in which the assignee designates one or more Credit Contacts (as defined in the Administrative Questionnaire) to whom all syndicate-level information (which may contain material non-public information about Holdings, the Borrowers, the other Loan Parties and their Affiliates and related parties or their respective securities) will be made available and who may receive such information in accordance with the Assignee’s compliance procedures and applicable laws, including Federal and state securities laws.

This paragraph (b) shall not prohibit any Lender from assigning all or a portion of its rights and obligations among separate Facilities on a non-pro rata basis.

(c)  Subject to acceptance and recording thereof by the Administrative Agent pursuant to Section 10.07(d), from and after the effective date specified in each Assignment and Assumption, the Eligible Assignee thereunder shall be a party to this Agreement and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 3.01, 3.04, 3.05, 10.04 and 10.05 with respect to facts and circumstances occurring prior to the effective date of such assignment).  Upon request, and the surrender by the assigning Lender of its Note, the relevant Borrower (at its expense) shall execute and deliver a Note to the assignee Lender.  Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this clause (c) shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with Section 10.07(e).

(d)  The Administrative Agent, acting solely for this purpose as an agent of the Borrowers, shall maintain at the Administrative Agent’s Office a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitments of, and principal amounts (and related interest amounts) of the Loans, L/C Obligations (specifying the Unreimbursed Amounts), L/C Borrowings and amounts due under Section 2.03, owing to, each Lender pursuant to the terms hereof from time to time (the “Register”).  The entries in the Register shall be conclusive, absent manifest error, and the Borrowers, the Agents and the Lenders shall treat each Person whose name is recorded in the

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Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary.  The Register shall be available for inspection by the Company, any Agent and any Lender, at any reasonable time and from time to time upon reasonable prior notice.

(e)  Any Lender may at any time, without the consent of, or notice to, the Borrowers or the Administrative Agent, sell participations to any Person (other than a natural person) (each, a “Participant”) in all or a portion of such Lender’s rights and/or obligations under this Agreement (including all or a portion of its Commitment and/or the Loans (including such Lender’s participations in L/C Obligations and/or Swing Line Loans) owing to it); provided that (i) such Lender’s obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Borrowers, the Agents and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement.  Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and the other Loan Documents and to approve any amendment, modification or waiver of any provision of this Agreement or the other Loan Documents; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, waiver or other modification described in the first proviso to Section 10.01 that directly affects such Participant.  Subject to Section 10.07(f), the Borrowers agree that each Participant shall be entitled to the benefits of Sections 3.01, 3.04 and 3.05 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to Section 10.07(c) but shall not be entitled to recover greater amounts under such Sections than the selling Lender would be entitled to recover.  To the extent permitted by applicable Law, each Participant also shall be entitled to the benefits of Section 10.09 as though it were a Lender; provided that such Participant agrees to be subject to Section 2.13 as though it were a Lender.

(f)  A Participant shall not be entitled to receive any greater payment under Section 3.01, 3.04 or 3.05 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the relevant Borrower’s prior written consent.  A Participant shall not be entitled to the benefits of Section 3.01 unless the relevant Borrower is notified of the participation sold to such Participant and such Participant agrees, for the benefit of the relevant Borrower, to comply with Section 10.15 as though it were a Lender.

(g)  Any Lender may at any time, without the consent of the Company or the Administrative Agent, pledge or assign a security interest in all or any portion of its rights under this Agreement (including under its Note, if any) to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank; provided that no such pledge or assignment shall release such Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.

(h)  Notwithstanding anything to the contrary contained herein, any Lender (a “Granting Lender”) may grant to a special purpose funding vehicle identified as such in writing from time to time by the Granting Lender to the Administrative Agent and the relevant Borrower (an “SPC”) the option to provide all or any part of any Loan that such Granting Lender would otherwise be obligated to make pursuant to this Agreement; provided that (i) nothing herein shall constitute a commitment by any SPC to fund any Loan, and (ii) if an SPC elects not to exercise such option or otherwise fails to make all or any part of such Loan, the Granting Lender shall be obligated to make such Loan pursuant to the terms hereof.  Each party hereto hereby agrees that

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(i) neither the grant to any SPC nor the exercise by any SPC of such option shall increase the costs or expenses or otherwise increase or change the obligations of the relevant Borrower under this Agreement (including its obligations under Section 3.01, 3.04 or 3.05), (ii) no SPC shall be liable for any indemnity or similar payment obligation under this Agreement for which a Lender would be liable, and (iii) the Granting Lender shall for all purposes, including the approval of any amendment, waiver or other modification of any provision of any Loan Document, remain the lender of record hereunder.  The making of a Loan by an SPC hereunder shall utilize the Commitment of the Granting Lender to the same extent, and as if, such Loan were made by such Granting Lender.  Notwithstanding anything to the contrary contained herein, any SPC may (i) with notice to, but without prior consent of the relevant Borrower and the Administrative Agent and with the payment of a processing fee of $3,500, assign all or any portion of its right to receive payment with respect to any Loan to the Granting Lender and (ii) disclose on a confidential basis any non-public information relating to its funding of Loans to any rating agency, commercial paper dealer or provider of any surety or Guarantee or credit or liquidity enhancement to such SPC.

(i)  Notwithstanding anything to the contrary contained herein, (1) any Lender may in accordance with applicable Law create a security interest in all or any portion of the Loans owing to it and the Note, if any, held by it and (2) any Lender that is a Fund may, without the consent of the Company or the Administrative Agent, create a security interest in all or any portion of the Loans owing to it and the Note, if any, held by it to the trustee for holders of obligations owed, or securities issued, by such Fund as security for such obligations or securities; provided that unless and until such trustee actually becomes a Lender in compliance with the other provisions of this Section 10.07, (i) no such pledge shall release the pledging Lender from any of its obligations under the Loan Documents and (ii) such trustee shall not be entitled to exercise any of the rights of a Lender under the Loan Documents.

(j)  Notwithstanding anything to the contrary contained herein, any L/C Issuer or the Swing Line Lender may, upon thirty (30) days’ notice to the Company and the Lenders, resign as an L/C Issuer or the Swing Line Lender, respectively; provided that on or prior to the expiration of such 30-day period with respect to such resignation, the relevant L/C Issuer or the Swing Line Lender shall have identified a successor L/C Issuer or Swing Line Lender reasonably acceptable to the Company willing to accept its appointment as successor L/C Issuer or Swing Line Lender, as applicable.  In the event of any such resignation of an L/C Issuer or the Swing Line Lender, the Company shall be entitled to appoint from among the Lenders willing to accept such appointment a successor L/C Issuer or Swing Line Lender hereunder; provided that no failure by the Company to appoint any such successor shall affect the resignation of the relevant L/C Issuer or the Swing Line Lender, as the case may be, except as expressly provided above.  If an L/C Issuer resigns as an L/C Issuer, it shall retain all the rights and obligations of an L/C Issuer hereunder with respect to all Letters of Credit outstanding as of the effective date of its resignation as an L/C Issuer and all L/C Obligations with respect thereto (including the right to require the Lenders to make Base Rate Loans or fund risk participations in Unreimbursed Amounts pursuant to Section 2.03(c)).  If the Swing Line Lender resigns as Swing Line Lender, it shall retain all the rights of the Swing Line Lender provided for hereunder with respect to Swing Line Loans made by it and outstanding as of the effective date of such resignation, including the right to require the Lenders to make Base Rate Loans or fund risk participations in outstanding Swing Line Loans pursuant to Section 2.04(c).

SECTION 10.08.  Confidentiality.  Each of the Agents and the Lenders agrees to maintain the confidentiality of the Information, except that Information may be disclosed (a) to its Affiliates and its and its Affiliates’ directors, officers, employees, trustees, investment advisors

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and agents, including accountants, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential pursuant to the terms hereof); (b) to the extent requested by any Governmental Authority; (c) to the extent  required by applicable Laws or regulations or by any subpoena or similar legal process; (d) to any other party to this Agreement; (e) subject to an agreement for the benefit of the Company containing provisions substantially the same as those of this Section 10.08 (or as may otherwise be reasonably acceptable to the Company), to any pledgee referred to in Section 10.07(g), counterparty to a Swap Contract, Eligible Assignee of or Participant in, or any prospective Eligible Assignee of or Participant in, any of its rights or obligations under this Agreement; (f) with the written consent of the Company; (g) to the extent such Information becomes publicly available other than as a result of a breach of this Section 10.08; (h) to any Governmental Authority or examiner (including the National Association of Insurance Commissioners or any other similar organization) regulating any Lender; or (i) to any rating agency when required by it (it being understood that, prior to any such disclosure, such rating agency shall undertake to preserve the confidentiality of any Information relating to the Loan Parties received by it from such Lender).  In addition, the Agents and the Lenders may disclose the existence of this Agreement and information about this Agreement to market data collectors, similar service providers to the lending industry, and service providers to the Agents and the Lenders in connection with the administration and management of this Agreement, the other Loan Documents, the Commitments, and the Credit Extensions.  For the purposes of this Section 10.08, “Information” means all information received from any Loan Party relating to any Loan Party or its business, other than any such information that is publicly available to any Agent or any Lender prior to disclosure by any Loan Party other than as a result of a breach of this Section 10.08; provided that, in the case of information received from a Loan Party after the date hereof, such information (i) is clearly identified at the time of delivery as confidential or (ii) is delivered pursuant to Section 6.01, 6.02 or 6.03 hereof.

EACH LENDER ACKNOWLEDGES THAT INFORMATION FURNISHED TO IT PURSUANT TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS MAY INCLUDE MATERIAL NON-PUBLIC INFORMATION CONCERNING HOLDINGS, THE BORROWERS, THE OTHER LOAN PARTIES AND THEIR AFFILIATES AND RELATED PARTIES OR THEIR RESPECTIVE SECURITIES, AND CONFIRMS THAT IT HAS DEVELOPED COMPLIANCE PROCEDURES REGARDING THE USE OF MATERIAL NON-PUBLIC INFORMATION AND THAT IT WILL HANDLE SUCH MATERIAL NON-PUBLIC INFORMATION IN ACCORDANCE WITH THOSE PROCEDURES AND APPLICABLE LAW, INCLUDING FEDERAL AND STATE SECURITIES LAWS.

ALL INFORMATION, INCLUDING WAIVERS AND AMENDMENTS, FURNISHED BY HOLDINGS, THE BORROWERS OR THE ADMINISTRATIVE AGENT PURSUANT TO, OR IN THE COURSE OF ADMINISTERING, THIS AGREEMENT WILL BE SYNDICATE-LEVEL INFORMATION, WHICH MAY CONTAIN MATERIAL NON-PUBLIC INFORMATION ABOUT HOLDINGS, THE BORROWERS, THE OTHER LOAN PARTIES AND THEIR AFFILIATES AND RELATED PARTIES OR THEIR RESPECTIVE SECURITIES.  ACCORDINGLY, EACH LENDER REPRESENTS TO HOLDINGS, THE BORROWERS AND THE ADMINISTRATIVE AGENT THAT IT HAS IDENTIFIED IN ITS ADMINISTRATIVE QUESTIONNAIRE A CREDIT CONTACT WHO MAY RECEIVE INFORMATION THAT MAY CONTAIN MATERIAL NON-PUBLIC INFORMATION IN

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ACCORDANCE WITH ITS COMPLIANCE PROCEDURES AND APPLICABLE LAW, INCLUDING FEDERAL AND STATE SECURITIES LAWS.

SECTION 10.09.  Setoff.  In addition to any rights and remedies of the Lenders provided by Law, upon the occurrence and during the continuance of any Event of Default, each Lender and its Affiliates is authorized at any time and from time to time, without prior notice to the Company or any other Loan Party, any such notice being waived by the Company (on its own behalf and on behalf of each Loan Party and its Subsidiaries) to the fullest extent permitted by applicable Law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held by, and other Indebtedness at any time owing by, such Lender and its Affiliates to or for the credit or the account of the respective Loan Parties and their Subsidiaries against any and all Obligations owing to such Lender and its Affiliates hereunder or under any other Loan Document, now or hereafter existing, irrespective of whether or not such Agent or such Lender or Affiliate shall have made demand under this Agreement or any other Loan Document and although such Obligations may be contingent or unmatured or denominated in a currency different from that of the applicable deposit or Indebtedness; provided that, in the case of any such deposits or other Indebtedness for the credit or the account of any Foreign Subsidiary, such set off may only be against any Obligations of Foreign Subsidiaries.  Each Lender agrees promptly to notify the Company and the Administrative Agent after any such set off and application made by such Lender; provided, that the failure to give such notice shall not affect the validity of such setoff and application.  The rights of the Administrative Agent and each Lender under this Section 10.09 are in addition to other rights and remedies (including other rights of setoff) that the Administrative Agent and such Lender may have.  Notwithstanding anything herein or in any other Loan Document to the contrary, in no event shall the assets of any Foreign Subsidiary that is not a Loan Party constitute collateral security for payment of the Obligations of the Company or any Domestic Subsidiary, it being understood that (a) the Equity Interests of any Foreign Subsidiary that is not a Loan Party do not constitute such an asset and (b) the provisions hereof shall not limit, reduce or otherwise diminish in any respect the Borrowers’ obligations to make any mandatory prepayment pursuant to Section 2.05(b)(ii).

SECTION 10.10.  Interest Rate Limitation.  Notwithstanding anything to the contrary contained in any Loan Document, if at any time the interest rate applicable to any Loan, together with all fees, charges and other amounts which are treated as interest on such Loan under applicable Law (collectively the “Charges”), shall exceed the maximum lawful rate (the “Maximum Rate”) which may be contracted for, charged, taken, received or reserved by the Lender holding such Loan in accordance with applicable Law, the rate of interest payable in respect of such Loan hereunder, together with all Charges payable in respect thereof, shall be limited to the Maximum Rate and, to the extent lawful, the interest and Charges that would have been payable in respect of such Loan but were not payable as a result of the operation of this Section shall be cumulated and the interest and Charges payable to such Lender in respect of other Loans or periods shall be increased (but not above the Maximum Rate therefor) until such cumulated amount, together with interest thereon at the Federal Funds Rate to the date of repayment, shall have been received by such Lender.

SECTION 10.11.  Counterparts.  This Agreement and each other Loan Document may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.  Delivery by telecopier of an executed counterpart of a signature page to this Agreement and each other Loan Document shall be effective as delivery of an original executed counterpart of this Agreement and such other Loan Document.  The Agents may also require that any such documents and signatures delivered by telecopier be confirmed by a manually signed original thereof; provided that the failure to request

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or deliver the same shall not limit the effectiveness of any document or signature delivered by telecopier.

SECTION 10.12.  Integration.  This Agreement, together with the other Loan Documents, comprises the complete and integrated agreement of the parties on the subject matter hereof and thereof and supersedes all prior agreements, written or oral, on such subject matter.  In the event of any conflict between the provisions of this Agreement and those of any other Loan Document, the provisions of this Agreement shall control; provided that the inclusion of supplemental rights or remedies in favor of the Agents or the Lenders in any other Loan Document shall not be deemed a conflict with this Agreement.  Each Loan Document was drafted with the joint participation of the respective parties thereto and shall be construed neither against nor in favor of any party, but rather in accordance with the fair meaning thereof.

SECTION 10.13.  Survival of Representations and Warranties.  All representations and warranties made hereunder and in any other Loan Document or other document delivered pursuant hereto or thereto or in connection herewith or therewith shall survive the execution and delivery hereof and thereof.  Such representations and warranties have been or will be relied upon by each Agent and each Lender, regardless of any investigation made by any Agent or any Lender or on their behalf and notwithstanding that any Agent or any Lender may have had notice or knowledge of any Default at the time of any Credit Extension, and shall continue in full force and effect as long as any Loan or any other Obligation hereunder shall remain unpaid or unsatisfied or any Letter of Credit shall remain outstanding.

SECTION 10.14.  Severability.  If any provision of this Agreement or the other Loan Documents is held to be illegal, invalid or unenforceable, the legality, validity and enforceability of the remaining provisions of this Agreement and the other Loan Documents shall not be affected or impaired thereby.  The invalidity of a provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

SECTION 10.15.  Tax Forms.  (a)  (i)  Each Lender and Agent that is not a “United States person” within the meaning of Section 7701(a)(30) of the Code (each, a “Foreign Lender”) shall deliver to the Company and the Administrative Agent, on or prior to the date which is ten (10) Business Days after the Closing Date (or upon accepting an assignment of an interest herein), two duly signed, properly completed copies of either IRS Form W-8BEN or any successor thereto (relating to such Foreign Lender and entitling it to an exemption from, or reduction of, United States withholding tax on all payments to be made to such Foreign Lender by the Company or any other Loan Party pursuant to this Agreement or any other Loan Document) or IRS Form W-8ECI or any successor thereto (relating to all payments to be made to such Foreign Lender by the Company or any other Loan Party pursuant to this Agreement or any other Loan Document) or such other evidence reasonably satisfactory to the Company and the Administrative Agent that such Foreign Lender is entitled to an exemption from, or reduction of, United States withholding tax, including any exemption pursuant to Section 871(h) or 881(c) of the Code, and in the case of a Foreign Lender claiming such an exemption under Section 881(c) of the Code, a certificate that establishes in writing to the Company and the Administrative Agent that such Foreign Lender is not (i) a “bank” as defined in Section 881(c)(3)(A) of the Code, (ii) a 10-percent stockholder within the meaning of Section 871(h)(3)(B) of the Code, or (iii) a controlled foreign corporation related to the Company with the meaning of Section 864(d) of the Code.  Thereafter and from time to time, each such Foreign Lender shall (A) promptly submit to the Company and the Administrative Agent such additional duly completed and signed copies of one or more of such forms or certificates (or such successor forms or certificates as shall be adopted from time to time by the relevant United States taxing authorities) as may then be

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available under then current United States Laws and regulations to avoid, or such evidence as is reasonably satisfactory to the Company and the Administrative Agent of any available exemption from, or reduction of, United States withholding taxes in respect of all payments to be made to such Foreign Lender by the Company or other Loan Party pursuant to this Agreement, or any other Loan Document, in each case, (1) on or before the date that any such form, certificate or other evidence expires or becomes obsolete, (2) after the occurrence of any event requiring a change in the most recent form, certificate or evidence previously delivered by it to the Company and the Administrative Agent and (3) from time to time thereafter if reasonably requested by the Company or the Administrative Agent, and (B) promptly notify the Company and the Administrative Agent of any change in circumstances which would modify or render invalid any claimed exemption or reduction.

(ii)  Each Foreign Lender, to the extent it does not act or ceases to act for its own account with respect to any portion of any sums paid or payable to such Foreign Lender under any of the Loan Documents (for example, in the case of a typical participation by such Foreign Lender), shall deliver to the Company and the Administrative Agent on the date when such Foreign Lender ceases to act for its own account with respect to any portion of any such sums paid or payable, and at such other times as may be necessary in the determination of the Company or the Administrative Agent (in either case, in the reasonable exercise of its discretion), (A) two duly signed completed copies of the forms or statements required to be provided by such Foreign Lender as set forth above, to establish the portion of any such sums paid or payable with respect to which such Foreign Lender acts for its own account that is not subject to United States withholding tax, and (B) two duly signed completed copies of IRS Form W-8IMY (or any successor thereto), together with any information such Foreign Lender chooses to transmit with such form, and any other certificate or statement of exemption required under the Code, to establish that such Foreign Lender is not acting for its own account with respect to a portion of any such sums payable to such Foreign Lender.

(iii)  Each Lender and Agent (or Participant) that is entitled to an exemption from or reduction of non-U.S. withholding tax under the law of the jurisdiction in which a Borrower is formed or organized, or any treaty to which such jurisdiction is a party, with respect to payments under this Agreement shall deliver to such Borrower (with a copy to the Administrative Agent), at the time or times prescribed by applicable law or reasonably requested by such Borrower, such properly completed and executed documentation prescribed by applicable law as will permit such payments to be made without withholding, or at a reduced rate, provided that such Lender or Agent (or Participant) is legally entitled to complete, execute and deliver such documentation.  Each Lender and Agent (or Participant) shall promptly notify such Borrower and the Administrative Agent of any change in circumstances which would modify or render invalid any claimed exemption or reduction.

(iv)  No Borrower shall be required to pay any additional amount or any indemnity payment under Section 3.01 to (A) any Lender if such Lender shall have failed to satisfy the foregoing provisions of this Section 10.15(a), or (B) any U.S. Lender if such U.S. Lender shall have failed to satisfy the provisions of Section 10.15(b); provided that (i) if such Lender shall have satisfied the requirement of this or Section 10.15(b), as applicable, on the date such Lender became a Lender or, if later, the date such Lender made an Incremental Overseas Term Loan to any Borrower or the date a CAM Exchange occurred, or ceased to act for its own account with respect to any payment under any of the Loan Documents, nothing in this Section 10.15(a) or Section 10.15(b) shall relieve any Borrower of its obligation to pay any amounts pursuant to Section 3.01 in the event that, as a result of any change in any applicable Law, treaty or governmental rule, regulation or order, or any change in the interpretation, administration or

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application thereof, such Lender is no longer properly entitled to deliver forms, certificates or other evidence at a subsequent date establishing the fact that such Lender or other Person for the account of which such Lender receives any sums payable under any of the Loan Documents is not subject to withholding or is subject to withholding at a reduced rate and (ii) nothing in this Section 10.15(a) shall relieve any Borrower of its obligation to pay any amounts pursuant to Section 3.01 in the event that the requirements of Section 10.15(a)(ii) or 10.15(a)(iii) have not been satisfied if such Borrower is entitled, under applicable Law, to rely on any applicable forms and statements required to be provided under this Section 10.15 by the Lender that does not act or has ceased to act for its own account under any of the Loan Documents, including in the case of a typical participation.

(v)  The Administrative Agent may deduct and withhold any taxes required by any Laws to be deducted and withheld from any payment under any of the Loan Documents.

(b)  Each Lender and Agent that is a “United States person” within the meaning of Section 7701(a)(30) of the Code (each, a “U.S. Lender”) shall deliver to the Administrative Agent and the Company two duly signed, properly completed copies of IRS Form W-9 on or prior to the Closing Date (or on or prior to the date it becomes a party to this Agreement), certifying that such U.S. Lender is entitled to an exemption from United States backup withholding tax, or any successor form.  If such U.S. Lender fails to deliver such forms, then the Administrative Agent may withhold from any payment to such U.S. Lender an amount equivalent to the applicable backup withholding tax imposed by the Code.  Thereafter and from time to time, each such U.S. Lender shall (A) promptly submit to the Company and the Administrative Agent such additional duly completed and signed copies of one or more of such forms or certificates (or such successor forms) as may then be available under then current United States Laws and regulations to avoid, or such evidence as is reasonably satisfactory to the Company and the Administrative Agent of any available exemption from United States back up withholding taxes in respect of all payments to be made to such U.S. Lender by the Company or other Loan Party pursuant to this Agreement, or any other Loan Document, in each case, (1) on or before the date that any such form or other evidence expires or becomes obsolete, (2) after the occurrence of any event requiring a change in the most recent form or evidence previously delivered by it to the Company and the Administrative Agent and (3) from time to time thereafter if reasonably requested by the Company or the Administrative Agent, and (B) promptly notify the Company and the Administrative Agent of any change in circumstances which would modify or render invalid any claimed exemption.

SECTION 10.16.  Governing Law.  (a)  THIS AGREEMENT AND EACH OTHER LOAN DOCUMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

(b)  ANY LEGAL ACTION OR PROCEEDING ARISING UNDER ANY LOAN DOCUMENT OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO ANY LOAN DOCUMENT, OR THE TRANSACTIONS RELATED THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK CITY OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF SUCH STATE, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH BORROWER, HOLDINGS, EACH AGENT AND EACH LENDER CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS.  EACH BORROWER, HOLDINGS, EACH AGENT AND EACH LENDER IRREVOCABLY WAIVES

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ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH COURTS IN RESPECT OF ANY LOAN DOCUMENT OR OTHER DOCUMENT RELATED THERETO.

SECTION 10.17.  Waiver of Right to Trial by Jury.  EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER ANY LOAN DOCUMENT OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO ANY LOAN DOCUMENT, OR THE TRANSACTIONS RELATED THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER FOUNDED IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION 10.17 WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

SECTION 10.18.  Binding Effect.  This Agreement shall become effective when it shall have been executed by the Borrowers and Holdings and the Administrative Agent shall have been notified by each Lender, Swing Line Lender and L/C Issuer that each such Lender, Swing Line Lender and L/C Issuer has executed it and thereafter shall be binding upon and inure to the benefit of the Company, each Agent and each Lender and their respective permitted successors and assigns, except that the Company shall not have the right to assign its rights hereunder or any interest herein without the prior written consent of the Lenders except as permitted by Section 7.04.

SECTION 10.19.  Lender Action.  Each Lender agrees that it shall not take or institute any actions or proceedings, judicial or otherwise, for any right or remedy against any Loan Party or any other obligor under any of the Loan Documents or the Secured Hedge Agreements (including the exercise of any right of setoff, rights on account of any banker’s lien or similar claim or other rights of self-help), or institute any actions or proceedings, or otherwise commence any remedial procedures, with respect to any Collateral or any other property of any such Loan Party, without the prior written consent of the Administrative Agent.  The provision of this Section 10.19 are for the sole benefit of the Lenders and shall not afford any right to, or constitute a defense available to, any Loan Party.

SECTION 10.20.  USA PATRIOT Act.  Each Lender hereby notifies the Borrowers that pursuant to the requirements of the Patriot Act, it is required to obtain, verify and record information that identifies the Borrowers, which information includes the name and address of the Borrowers and other information that will allow such Lender to identify the Borrowers in accordance with the Act.

SECTION 10.21.  Agent for Service of Process.  The Company agrees that promptly following request by the Administrative Agent it shall cause each Foreign Subsidiary which is a Loan Party or for whose account a Letter of Credit is issued to appoint and maintain an agent reasonably satisfactory to the Administrative Agent to receive service of process in New York City on behalf of such Foreign Subsidiary.

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SECTION 10.22.  Effectiveness of the Merger; Assignment and Delegation to and Assumption by Reader’s Digest.  Reader’s Digest shall have no rights or obligations hereunder until the consummation of the Merger and any representations and warranties of Reader’s Digest hereunder shall not become effective until such time.  Upon consummation of the Merger, and without any further action by any Person, (a) Reader’s Digest hereby irrevocably and unconditionally (i) assumes and agrees punctually to pay, perform and discharge when due each of the Obligations and each and every debt, covenant and agreement incurred, made or to be paid, performed or discharged by the Company under the Loan Documents, (ii) agrees to be bound by all the terms, provisions and conditions of the Loan Documents applicable to the Company and (iii) agrees that it will be responsible for and deemed to have made all the representations and warranties of the Company, whenever made or deemed to have been made and (b) Reader’s Digest automatically assumes and agrees to perform all the obligations of Acquisition Co under the Commitment Letter dated November 16, 2006, among Holdings, Acquisition Co, the Arrangers and the Agents and the Fee Letter referred to therein.  Upon the effectiveness of the assumption provided for above, Reader’s Digest will be the Company for all purposes of this Agreement and the other Loan Documents and may exercise every right and power of the Company under this Agreement and the other Loan Documents.

SECTION 10.23.  Judgment Currency.  If, for the purposes of obtaining judgment in any court, it is necessary to convert a sum due hereunder or any other Loan Document in one currency into another currency, the rate of exchange used shall be that at which in accordance with normal banking procedures the Administrative Agent could purchase the first currency with such other currency on the Business Day preceding that on which final judgment is given.  The obligation of each Borrower in respect of any such sum due from it to the Administrative Agent or the Lenders hereunder or under the other Loan Documents shall, notwithstanding any judgment in a currency (the “Judgment Currency”) other than that in which such sum is denominated in accordance with the applicable provisions of this Agreement (the “Agreement Currency”), be discharged only to the extent that on the Business Day following receipt by the Administrative Agent of any sum adjudged to be so due in the Judgment Currency, the Administrative Agent may in accordance with normal banking procedures purchase the Agreement Currency with the Judgment Currency.  If the amount of the Agreement Currency so purchased is less than the sum originally due to the Administrative Agent from any Borrower in the Agreement Currency, such Borrower agrees, as a separate obligation and notwithstanding any such judgment, to indemnify the Administrative Agent or the Person to whom such obligation was owing against such loss.  If the amount of the Agreement Currency so purchased is greater than the sum originally due to the Administrative Agent in such currency, the Administrative Agent agrees to return the amount of any excess to such Borrower (or to any other Person who may be entitled thereto under applicable Law).

SECTION 10.24.  German Tax Confirmation.  (a)   If, at any time after the Closing Date, the German Borrower determines that a confirmation by the Administrative Agent and/or each of the Euro Term Lenders substantially in the form of the Decree issued by the German Federal Ministry of Finance as of October 20, 2005 (substantially in the form of Exhibit L, the “Tax Confirmation”) may be required under the decrees to § 8a of the German Corporate Income Tax Act (Körperschaftsteuergesetz or KStG) dated July 15, 2004, July 22, 2005, and October 20, 2005 (as in effect on the date hereof, the “Decrees”) with respect to the Euro Term Loans, the German Borrower may prepare and deliver to the Euro Term Lenders (through the Administrative Agent) a complete and accurate draft Tax Confirmation listing all guarantees and security interests securing the claims of the Euro Term Lenders under the Loan Documents and the Secured Hedge Agreements and provide to the Euro Term Lenders any further information which may reasonably be required by the Administrative Agent or any Euro Term Lender to issue the

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Tax Confirmation (based on the then applicable practice of the German tax authorities), such information to be requested within fifteen (15) Business Days after the delivery of the draft Tax Confirmation by the German Borrower to the Euro Term Lenders (through the Administrative Agent).

(b)  The Tax Confirmation shall only include factual but not legal statements to be issued by the Euro Term Lenders.  The Tax Confirmation shall not contain any statement that any Euro Term Lender is not permitted to issue by law, administrative rule or regulation of the jurisdiction to which the relevant Euro Term Lender is subject.

(c)  Each Euro Term Lender (including any Person that becomes a Euro Term Lender subsequent to the date hereof pursuant to Section 10.07) hereby authorizes the Administrative Agent on behalf of such Euro Term Lender to issue a Tax Confirmation and provide it to the German Borrower within sixteen (16) Business Days after such Euro Term Lender’s receipt of the following (which receipt shall be deemed to have occurred upon the Administrative Agent’s posting of the following to Intralinks or other similar information transmission system):

(i)  the German Borrower’s request therefor,

(ii)  a complete and accurate draft of such Tax Confirmation listing all guarantees and security interests pursuant to clause (a) above, and

(iii)  all further information reasonably requested within the period set forth for such request pursuant to clause (a) above to enable the Euro Term Lenders to complete such Tax Confirmation,

unless such Euro Term Lender notifies the Administrative Agent within the 15-Business Day period described in clause (a) above that (x) it is prohibited from doing so by law, administrative rule or regulation of the jurisdiction to which such Euro Term Lender is subject or (y) it has reasonably determined that the factual information provided by the German Borrower is not correct or not complete or, in the view of such Euro Term Lender (acting in good faith), is misleading or (z) such Euro Term Lender has not been released from confidentiality obligations to any Loan Party under applicable banking secrecy rules with respect to confidential information with respect to such Loan Party contained in such Tax Confirmation or, to the extent applicable, has not been instructed to disclose any such information by the relevant Loan Party.  Subject to the terms of the preceding sentence, within the 16-Business Day period set forth above, the Administrative Agent acting also on behalf of the Euro Term Lenders shall issue and provide to the German Borrower the requested Tax Confirmation.

(d)  The Company agrees to pay or reimburse the Administrative Agent and each Euro Term Lender for all reasonable expenses incurred in connection with any Tax Confirmation in accordance with the principles set forth in Section 10.04, including Attorney Costs.  The Company shall indemnify and hold harmless each Indemnitee from and against any and all liabilities, obligations, losses, damages, penalties, claims, demands, actions, judgments and suits and related reasonable expenses (including all reasonable Attorney Costs) of any kind or nature whatsoever which may at any time be imposed on, incurred by or asserted against any such Indemnitee in any way relating to or arising out of or in connection with any Tax Confirmation in accordance with the principles set forth in Section 10.05.  The agreements in this clause (d) shall survive the resignation of the Administrative Agent, the replacement of any Lender, the termination of the Aggregate Commitments and repayment, satisfaction or discharge of all other Obligations.

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(e)  The German Borrower confirms to the Administrative Agent and each Euro Term Lender that (i) the Euro Term Lenders will issue their respective Tax Confirmations exclusively at the request of the German Borrower and solely for the purpose of providing information to the German tax authorities as required pursuant to the Decrees, (ii) the Euro Term Lenders are not responsible for examining any Borrower’s tax position or for achieving any certain tax treatment with respect to any Borrower and (iii) no Loan Party will raise any claims against the Administrative Agent or any Euro Term Lender based on, or in connection with, any Tax Confirmation and no Euro Term Lender will have any liability to any Loan Party with respect to any Tax Confirmation (other than, subject to the principles of Section 10.05, for failure to comply with the last sentence of Section 10.24(c)).

(f)  It is the common understanding of the parties hereto that no party is providing any legal and/or tax advice to any other party with respect to this Agreement or, in particular, with respect to the application of § 8a KStG and the interpretation of § 8a KStG in the Decrees, and that it is the responsibility of each party, in particular each Loan Party, to consult with its own legal/tax advisers.

(g)  Each Loan Party releases each Euro Term Lender from its duty of confidentiality and/or obligation of bank secrecy (Bankgeheimnis) with regard to the issuance of a Tax Confirmation to the German Borrower and its submission to the German tax authorities.

(h)  If, after the date of this Agreement, changes occur to German tax legislation or its interpretation materially prejudicing the tax treatment of interest payments of the German Borrower, the Administrative Agent and the Euro Term Lenders agree that they will negotiate in good faith (without any legal obligation to agree) with the Company and the German Borrower to restructure the Collateral securing the Euro Term Loans to seek to reduce the impact of such materially prejudicial tax treatment while retaining Collateral acceptable to the Euro Term Lenders.

[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]

149

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written.

DOCTOR ACQUISITION CO.
by
	Name:
	Title:

Senior Secured Credit Agreement

RDA HOLDING CO.
by
	Name:
	Title:

Senior Secured Credit Agreement

THE READER’S DIGEST ASSOCIATION, INC.
by
	Name:
	Title:

Senior Secured Credit Agreement

RD GERMAN HOLDINGS GMBH
by
	Name:
	Title:

Senior Secured Credit Agreement

JPMORGAN CHASE BANK, N.A., as Administrative Agent and a Lender,
by
	Name:
	Title:

Senior Secured Credit Agreement

CITICORP NORTH AMERICA, INC., as Co-Syndication Agent and a Lender,
by
	Name:
	Title:

Senior Secured Credit Agreement

MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED, as Co- Syndication Agent,
by
	Name:
	Title:

Senior Secured Credit Agreement

MERRILL LYNCH CAPITAL CORPORATION, as a Lender,
by
	Name:
	Title:

Senior Secured Credit Agreement

THE ROYAL BANK OF SCOTLAND PLC, as Documentation Agent and a Lender,
by
	Name:
	Title:

Senior Secured Credit Agreement

EX-10.14

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:

EX-10.15

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.

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(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). 

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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.

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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

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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

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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

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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.

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(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

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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

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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

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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.

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(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

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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

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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

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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

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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.

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(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

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(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

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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

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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

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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.

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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

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EX-10.16

Exhibit 10.16

THE READER’S DIGEST ASSOCIATION, INC.

READER’S DIGEST ROAD

PLEASANTVILLE, NY  10570-7000

August 7, 2007

Ms. Jean B. Clifton

6 Weatherfield Drive

Newtown, PA  18940

Dear Jean:

I am pleased to confirm the verbal offer of employment extended to you for the position of Senior Vice President, Chief Financial Officer, reporting to Mary Berner, Chief Executive Officer, Reader’s Digest Association, Inc., the details of which are outlined below.   As discussed, your start date will be September 4, 2007.

COMPENSATION AND BENEFITS

1.As previously discussed, your annual base salary will be $500,000 payable in biweekly installments, and subject to periodic increases based upon performance reviews, which are typically done on an annual basis.

2.You will receive an annual guaranteed payment of $50,000, less appropriate tax withholding, payable each July, beginning in July of 2008.

3.You will participate in our annual incentive plan, the Reader’s Digest Management Incentive Plan.  The bonus target for this position is $400,000 with a range of opportunity of up to 200% of target (or up to $800,000).  This plan will begin in FY2008 (July 1, 2007 — June 30, 2008).  Awards are based on Company and individual performance against pre-established goals.  Receipt of a bonus requires that you be on the active payroll at the time awards are paid, which is typically in August.  Your incentive target for FY2008 will not be prorated based upon your effective date of hire.

4.You will receive an equity stake in the company, commensurate with your level of responsibility and consistent with other senior executive positions. This equity stake equals 0.45%  or approximately 268,383 shares delivered in a combination of 201,287 stock options and 67,096 restricted shares.

5.You will participate in Reader’s Digest’s Senior Executive Long-Term Incentive Program (LTIP).  This plan measures and rewards performance over a multi-year period.  A new performance cycle begins each year.  The award earned can range up to 250% of target depending on the extent to which the performance goals are achieved.  Performance cycles and incentive targets are outlined below.

Cycle	Target		Anticipated  Payout Date
2008-2009	$	500,000	December 2009
2008-2010	$	500,000	December 2010

6.You will be eligible to participate in the benefit programs that are made generally available to Reader’s Digest employees in accordance with their terms, as from time to time in effect, including The Reader’s Digest Association, Inc. Retirement Plan (cash balance account), which currently provides an annual age-based contribution ranging from 3% to 12% of eligible compensation, The 401(k) Partnership of The Reader’s Digest Association, Inc., a savings plan which currently provides a 50% match on the first 6% of pre-tax contributions, and medical, dental, life insurance, short- and long-term disability plans.  Details of these benefit plans are included in the attached information packet.

7.You will be eligible for the following executive level perquisites:  financial planning benefits provided through Ayco, the Company’s service provider; a calendar year flexible perquisite allowance (under the “Flexnet Program”) of $25,500 or an annual payment in the gross amount of $25,500 in lieu of participation in the Flexnet Program, to be used for transportation and/or other miscellaneous expenses.

8.You will be eligible for temporary housing, paid for and provided by the Company, for up to twelve months.   In addition, you are eligible for relocation assistance under Reader’s Digest’s relocation policy (see attached) including but not limited to the following:  home sale assistance, home search, home purchase assistance, shipment of household goods and storage for up to three months, miscellaneous relocation allowance of $15,000 net of taxes and related tax assistance.   You will have up to two years from your start date to complete the relocation process.  The term “transfer date” in the relocation package documentation is your start date with the Company.  The definition of “cause” for purposes of the repayment agreement will be consistent with the definition of “Cause” referred to in paragraph 9 below.

9.You will be eligible for severance totaling 24 months of base salary and two times your annual bonus target if your employment is terminated involuntarily by the company for reasons other than “Cause” (as defined in the attached) provided you execute a release in a reasonable and customary form satisfactory to the company and return all company property.  For clarification purposes, this is an obligation of the company that will be binding on any successor or assign in connection with a transfer of the business or otherwise.

10.By virtue of accepting these terms of employment with Reader’s Digest, you also agree that, for the 24 month period following your termination for any reason at any time, you will not, directly solicit (or have a third party solicit for your benefit) any employee of Reader’s Digest (or their affiliates or subsidiaries) to cease employment with those entities or seek employment elsewhere.

11.Your employment is contingent upon verification of the accuracy of information obtained in the employment process through an independently conducted background investigation, and authorization to work pursuant to the Immigration Reform and Control Act of 1986 (“IRCA”).  In addition, your current consulting arrangement with your prior employer must be terminated prior to your start date. Your employment cannot commence until these conditions have been satisfied.

Jean, while this letter provides you with information about compensation and benefits, neither this letter nor any conversation is intended to create an employment contract.  In all instances mentioned above, the specific terms of the applicable plans and awards govern, and Reader’s Digest reserves the right to amend or terminate those plans or policies in accordance with their terms.  Additionally, our policy is that “all employment by the Company is at will and the Company reserves the right to terminate any employee at any time with or without cause.”

We look forward to you joining the senior leadership team of Reader’s Digest and are confident that you will make a significant difference for our Company.

Sincerely,

Lisa Cribari

Vice President,

Global Human Resources

cc:  Mary Berner

EX-10.17

Exhibit 10.17

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

MARY G. BERNER
President and CEO TELEPHONE: (914) 244-5105
FAX: (914) 244-7555
mary_berner@rd.com

March 20, 2007

Michael Geltzeiler

61 Rockwell Road

Ridgefield, CT 06877

Dear Mike:

This letter (the “Agreement”) serves to confirm those payments and benefits that you will receive in consideration of your agreement to waive your participation in The Reader’s Digest Association, Inc. 2001 Income Continuation Plan for Senior Management, The Reader’s Digest Association, Inc. 2006 Income Continuation Plan for Senior Management (the “ICPs”), your agreement to cancel that certain agreement between you and The Reader’s Digest Association, Inc. (the “Company”) dated December 18, 2001 providing for certain benefits upon your termination of employment (the “Termination Agreement”), your agreement to waive participation in The Reader’s Digest Association, Inc. Severance Plan and in any and all successors to such plan and any other Company plan or policy respecting severance and/or separation pay or benefits (all such plans are referred to herein as the “Severance Plans”) and your agreement to the non-compete and non-solicitation restrictions stated below.

Within 20 days of the execution of this Agreement, the Company will pay you in a single lump sum $1,200,000. In consideration and exchange for this payment you agree to waive your participation in the ICPs, cancel the Termination Agreement and waive your right to participate in the Severance Plans, all effective on the date payment is received. You also acknowledge and agree that no conditions exist currently that would constitute a Constructive Termination under the ICPs, that this Agreement does not constitute a Constructive Termination under the ICPs and that you waive any right you may have to declare a Constructive Termination under the ICPs.

Within 20 days of the execution of this Agreement, the Company will also:

1.Pay you in a single lump sum $1,300,000 (the “Non-Compete Advance”);

2.Make an additional Contribution Credit (the “Supplemental Contribution Credit”) to your account under The Reader’s Digest Association, Inc. Executive Cash Balance Plan (the “Executive Cash Balance Plan”) equal to $240,000; and

3.Credit you with 9.000 additional years of service for purposes of determining your vesting under Section 4.2 of the Executive Cash Balance Plan (the “Supplemental Service Credit”); provided, that such Supplemental Service Credit shall apply only to your balance under the Executive Cash Balance Plan as determined immediately following the

addition of the Supplemental Contribution Credit above together with any Investment Adjustments (as such term is defined in the Executive Cash Balance Plan) thereon.

In consideration and exchange for the Non-Compete Advance, the Supplemental Contribution Credit and the Supplemental Service Credit, you agree: (a) not to render any services at any time during the 24-month period after your termination of employment with the Company and its affiliates for any organization, or to engage, directly or indirectly, in any business which is competitive with the Company or its affiliates, or which organization or business, or the rendering of services to such organization or business, is otherwise prejudicial to or in conflict with the interests of the Company or its affiliates, provided, however, that the only organizations and businesses which shall be covered by this non-compete restriction shall be those set forth on Exhibit A hereto and (b) not to directly or indirectly, solicit or hire any non-clerical employee of the Company or its affiliates during the 12-month period after your termination of employment with the Company; provided, however, the foregoing will not apply to any individual hired as a result of such individual’s response to a general solicitation (such as a newspaper, radio, television or internet advertisement or by an independent employment agency) not specifically directed at such individual. Should the Company determine that you are in breach of any aspect of these non-compete and/or non-solicitation restrictions, you agree to repay to the Company within 10 business days of receiving written notice from the Company, the Non-Compete Advance, the Supplemental Contribution Credit and the value of the Supplemental Service Credit (including the value of any Investment Adjustments thereon), as determined by the Company in its discretion.

The Company believes that the payments and benefits made to you under this Agreement will not result in the imposition of an excise tax under Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”) or the additional income tax imposed under Section 409A of the Code. However, in the event that an excise tax under Section 4999 of the Code is imposed on you based on the payments and benefits made to you under this Agreement, the Company agrees to provide you with a tax gross up equal to the tax gross up that would have been provided had the payments and benefits been made pursuant to The Reader’s Digest Association, Inc. 2001 Income Continuation Plan for Senior Management under the same terms and conditions. In the event that any additional tax is imposed on you under Section 409A of the Code, including any interest and penalties related thereto, as a result of the payments and benefits made to you under this Agreement, you shall be entitled to a full gross-up payment, on an after-tax basis, with respect to such taxes, interest and penalties in accordance with the terms of Exhibit B hereto.

The Company agrees to (i) reimburse you (within ten (10) days following the Company’s receipt of an invoice from you) for any legal fees and reasonable expenses incurred in the negotiation and documentation of this Agreement and (ii) agrees to pay as incurred (within ten (10) days following the Company’s receipt of an invoice from you), to the fullest extent permitted by law, all legal fees and expenses that you may reasonably incur as a result of any contest (regardless of the outcome thereof) by the Company, yourself or others of the validity or enforceability of, or liability under, any provision of this Agreement or any guarantee of performance thereof (including as a result of any contest by you about the amount of any payment pursuant to this Agreement), plus, in each case, interest on any delayed payment at the applicable federal rate provided for in Section 7872(f)(2)(A) of the Code.

Except as otherwise provided herein, this Agreement constitutes the entire agreement between the parties relating to the subject matter hereof and supersedes any and all prior agreements, or understandings, written or oral, relating to the subject matter hereof, including, but not limited to,

2

the ICPs, the Termination Agreement and the Severance Plans. The Company may withhold from any payments under this Agreement all federal, state, local or other applicable taxes as shall be required pursuant to any law or governmental regulation or ruling. In the event of your death while any amounts are still payable to you under this Agreement, the Company shall pay all such unpaid amounts to your designated beneficiary or, if none has been designated, to your estate.

This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns; provided, however, that this Agreement may not be assigned by either party without the consent of the other party.

Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of such provision in any other jurisdiction.

This Agreement shall be governed by and interpreted in accordance with the laws of the State of New York applicable to contracts executed in and to be wholly performed within that State. The parties hereby agree and consent to exclusive jurisdiction of any dispute under this Agreement in the federal or state courts of Westchester County in New York State.

			Very truly yours,
			The Reader’s Digest Association, Inc.
			By:	/s/ Mary G. Berner
				Name:	Mary G. Berner
				Title:	President and CEO
Agreed to and accepted as of /I/, 2007
By:	/s/ Michael Geltzeiler
	Name:	Michael Geltzeiler
	Title:	SVP and Chief Financial Officer

3

EX-10.18

Exhibit 10.18

EXECUTION COPY

CONSULTING AGREEMENT

THIS CONSULTING AGREEMENT (this “Agreement”) is entered into as of March 5, 2007, by and between The Reader’s Digest Association, Inc. (“Company”) and Eric W. Schrier (“Consultant”).

W I T N E S S E T H:

WHEREAS, Consultant has heretofore been employed by the Company as President and Chief Executive Officer of the Company;

WHEREAS, as of the closing date of the Agreement and Plan of Merger, dated as of November 16, 2006, among RDA Holding Co. (“Parent”), Doctor Acquisition Co. and the Company (the “Merger”), Consultant no longer serves as President and Chief Executive Officer of the Company;

WHEREAS, as of the closing date of the Merger, Consultant has provided notice to the board of directors of the Company that he will terminate employment with the Company, effective immediately prior to the Effective Date (as defined below), due to Constructive Termination (as defined in The Reader’s Digest Association, Inc. 2001 Income Continuation Plan for Senior Management);

WHEREAS, the Company will accept Consultant’s termination of employment with the Company, effective immediately prior to the Effective Date, due to Constructive Termination;

WHEREAS, the Company desires to retain Consultant on the Effective Date as a consultant to the Company and to enter into an agreement embodying the terms of such retention;

WHEREAS, Consultant desires to accept such retention and enter into such an agreement;

NOW, THEREFORE, for and in consideration of the mutual promises, covenants, and undertakings contained in this Agreement, and intending to be legally bound, the parties hereto agree as follows:

I.Term.  Subject to the provisions of Section VI of this Agreement, Consultant shall be retained as a consultant by the Company for a period commencing on March 19, 2007 (the “Effective Date”) and ending on March 18, 2008 (the “Term”).

II.Consulting Services.  The Company hereby retains the Consultant, and the Consultant hereby agrees to serve as a consultant to the Company, on the terms and conditions set forth in this Agreement. During the Term, Consultant will, at

the direction of the Chief Executive Officer of the Company and on a non-exclusive basis, provide his expertise, advice and assistance with special projects for the Company (the “Consulting Services”). It is understood that the Consulting Services shall be incidental to, and shall not interfere with, the other business activities and commitments of the Consultant (in particular, the Consultant’s services and activities as an “industrial partner” of Ripplewood Holdings L.L.C.), and that the other business activities and commitments of the Consultant shall not interfere with the Consulting Services.

III.Annual Retainer.  The Company shall pay to Consultant an annual retainer of $840,000.00 (the “Annual Retainer”), which shall be paid, in advance, in monthly installments.

IV.Assistant.  In order to facilitate Consultant’s provision of the Consulting Services, the Company shall make available to Consultant the following:

A.An office in Westchester County, NY, which shall be to the reasonable satisfaction of Consultant, and an office in New York, NY, located in the Parent’s headquarters.

B.Secretarial support consistent with the secretarial support provided to Consultant during the period of Consultant’s employment with the Company or any of its affiliates prior to the Effective Date; provided that Consultant may decide the location at which and hours during which such secretarial support is to be provided.

V.Business Expenses.  Consultant shall be entitled to receive prompt reimbursement for all expenses incurred by Consultant in the performance of his Consulting Services hereunder, subject to the Company’s expense reimbursement policy and such written documentation as the Company may reasonably require.

VI.Termination.  Upon termination of this Agreement by the Company without Cause, the Company shall pay Consultant (or his beneficiaries, as applicable), within ten (10) days of such termination, the balance of the Annual Retainer for the Term in which such termination occurs. For any other termination of this Agreement, Consultant shall return to the Company, on a pro rata basis, any unearned Annual Retainer for the month in which such termination occurs and shall not be entitled to recover the remaining installments of the Annual Retainer for the Term.

A.For purposes of this Agreement, “Cause” shall mean (A) conviction of, or a plea of nolo contendere to, (x) a felony (other than traffic-related) under the laws of the United States or any state thereof or any similar criminal act in a jurisdiction outside the United States or (y) a crime involving moral turpitude that could be injurious to the Company or its reputation, (B) Consultant’s willful malfeasance or willful misconduct which is

2

materially and demonstrably injurious to the Company, (C) any act of fraud by Consultant in the performance of Consultant’s duties hereunder or (D) Consultant’s continued failure to perform the Consulting Services reasonably required of him hereunder after written notice of such failure is given to Consultant.

VII.Status as a Consultant.  Consultant shall perform the Consulting Services as an independent contractor of the Company. Consultant shall not be an employee of the Company and neither Consultant nor the Company shall engage in any actions that would cause Consultant to be considered an employee of the Company. Consultant shall not be entitled to participate in any employee benefit plans or other benefits or conditions of employment available to active employees of the Company. Consultant shall have no authority to act as an agent of the Company, except on authority specifically so delegated, and he shall not represent to the contrary to any person. Consultant shall only consult, render advice and perform such tasks as Consultant determines are necessary to achieve the results specified by the Company. Consultant shall not direct the work of any employee of the Company without the consent of the Chief Executive Officer of the Company or make any management decisions, or undertake to commit the Company to any course of action in relation to third persons. This Agreement shall not be construed, in any way, as a contract of employment with the Company.

VIII.Taxes.  It is intended that the Annual Retainer paid hereunder shall constitute revenues to Consultant. To the extent consistent with applicable law, the Company will not withhold any amounts therefrom as federal income tax withholding from wages or as employee contributions under the Federal Insurance Contributions Act or any other state or federal laws. Consultant shall be solely responsible for the withholding and/or payment of any federal, state or local income or payroll taxes and shall hold the Company, its officers, directors and employees harmless from any liabilities arising from the failure to withhold such amounts.

IX.Indemnification.  Company and its successors and/or assigns will indemnify, hold harmless, and defend Consultant to the fullest extent permitted by applicable law and the by-laws and certificate of incorporation of the Company with respect to any claims that may be brought against Consultant that arise out of relate to any action taken or not taken (i) while Consultant was an employee of the Company or any of its affiliates prior to the Effective Date and (ii) in Consultant’s capacity as a consultant to the Company or any of its affiliates after the Effective Date, including, without limitation, the advancement of legal fees and expenses, as such fees and expenses are incurred by Consultant, in each case if Consultant acted in good faith and in a manner reasonably believed to be in the best interests of the Company, and, with respect to any criminal action or proceeding, if Consultant’s actions were not unlawful. In addition, Company acknowledges that Consultant shall be covered, in respect of Consultant’s activities as an officer of the Company or any of its affiliates prior to the Effective Date, by the Company’s (or any of its

3

affiliates’) Directors and Officers liability policy or other comparable policies, if any, obtained by the Company’s (or any of its affiliates’) successors, to the fullest extent permitted by such policies.

X.Notices.  For purposes of this Agreement, notices, demands, and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when (a) delivered by hand; (b) sent by prepaid first class mail (airmail if to an address outside the country of posting); or (c) sent by facsimile transmission with confirmation of transmission, as follows:

If to Consultant, addressed to:

Eric W. Schrier

P.O. Box 283

Waccabuc, New York 10597

with a copy to:

Weil Gotshal & Manges, LLP

767 Fifth Avenue

New York, NY  10153

Attn:  Michael Nissan, Esq.

If to the Company, addressed to:

Reader’s Digest Association, Inc.

Roaring Brook Road

Pleasantville, New York 10570

Attn:  General Counsel

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

XI.Assignment/Successor Obligations.  The rights and obligations of the Company under this Agreement shall inure to the benefit of and be binding upon any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) of the Company. As used in this Agreement, “Company” shall mean the Company as hereinbefore defined and any successor thereto. This Agreement shall not be assignable by the Company without the prior written consent of

4

Consultant (which shall not be unreasonably withheld). Company shall be jointly and severally liable for all obligations and liabilities set forth in this Agreement.

XII.Amendment.  This Agreement may not be amended or modified except by an instrument in writing executed by the parties hereto.

XIII.Entire Agreement.   This Agreement constitutes the entire agreement and understanding between the Company and Consultant with respect to the subject matter hereof and supersedes all prior agreements and understandings (whether written or oral), between Consultant and the Company, relating to such subject matter; provided that Consultant shall continue to be bound by the Non Solicitation Agreement (the form of which is Exhibit A to the Reader’s Digest Association, Inc. 2001 Income Continuation Plan for Senior Management), between Consultant and the Company, in accordance with the terms thereof. 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

XIV.Dispute Resolution.  Any dispute or controversy arising under or in connection with this Agreement shall be subject to the exclusive jurisdiction of the federal or state courts of Westchester County in New York State. Each party shall pay its own fees and expenses of counsel and other experts retained in connection with such dispute or controversy, on a current basis as they may be incurred, provided that the Company shall reimburse the Consultant for any amounts so paid if at least one material matter in dispute or controversy is decided in favor of Consultant.

XV.Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to any choice of law or conflicts of law doctrines (whether of the State of New York or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of New York.

XVI.Validity.  The provisions of this Agreement shall be deemed to be severable, and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of any other provision. The parties hereto agree that a court of competent jurisdiction making a determination of the invalidity or unenforceability of any term or provision of this Agreement shall have the power to reduce the scope, duration or area of any such term or provision, to delete specific words or phrases or to replace any invalid or unenforceable term or provision in this Agreement with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision, and this Agreement shall be enforceable as so modified. The breach by the Company of any obligation or duty to Consultant shall entitle Consultant to his appropriate remedy at law but shall not, of itself, relieve Consultant of any other obligation set forth in this Agreement.

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XVII.Legal Fees.  The Company shall reimburse Consultant’s reasonable documented legal fees in connection with the negotiation of this Agreement, to be paid within ten (10) business date after the receipt of invoice.

XVIII.Counterparts.  This Agreement may be executed in any number of counterparts, each of which shall be considered an original for all purposes, and all of which taken together shall constitute a single instrument and any such counterpart may be delivered by facsimile, which shall be considered an original for all purposes.

6

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

READER’S DIGEST ASSOCIATION, INC.
By:	/s/ Mary G. Berner
Name: Mary G. Berner
Title: Chief Executive Officer
CONSULTANT
		/s/ Eric W. Schrier
ERIC W. SCHRIER

EX-12.1

Exhibit 12.1

The following table sets forth the ratio of earnings to fixed charges for the periods indicated.

	Three months ended Sept. 30,						Fiscal years ended June 30,
	2007			2006			2007			2006			2005			2004			2003
Earnings (1)
Income (loss) from continuing operations before income taxes	$	(136.4	)	$	(9.2	)	$	(95.4	)	$	(0.5	)	$	(144.6	)	$	(36.5	)	$	(18.4	)
Fixed Charges	47.5			5.3			82.6			27.1			61.0			45.5			31.0
Total Earnings	$	(88.9	)	$	(3.9	)	$	(12.8	)	$	26.6		$	(83.6	)	$	9.0		$	12.6
Fixed Charges (2)
Interest, including amortization of deferred financing fees	$	45.5		$	4.8		$	78.9		$	25.2		$	58.7		$	43.2		$	29.4
Interest component of rental expense	2.0			0.5			3.7			1.9			2.3			2.3			1.6
Total fixed charges	$	47.5		$	5.3		$	82.6		$	27.1		$	61.0		$	45.5		$	31.0
Ratio of earnings to fixed charges	(3		)	(3		)	(3		)	1.0		x	(3		)	0.2		x	0.4		x

(1)Earnings are defined as income from continuing operations before income taxes and fixed charges.

(2)Fixed charges consist of interest, amortization of deferred financing costs, and the portion of rental expense attributable to interest.

(3)Due to our loss during the three-month periods ended September 30, 2007 and 2006, fiscal 2007 and fiscal 2005, the coverage ratio was less than 1:1.  We would have needed to generate additional earnings of $136.4 million, $9.2 million, $144.6 million and $95.4 million, respectively, in each of those periods to achieve a ratio of 1:1.

EX-21.1

Exhibit 21.1

SUBSIDIARIES OF

THE READER’S DIGEST ASSOCIATION, INC.

Argentina

Reader’s Digest Argentina, SRL

Australia

The Reader’s Digest Association Pty. Limited

Reader’s Digest (Australia) Pty. Ltd.

Direct Holdings Asia Pacific Pty. Limited

Shop Australia Pty. Limited

Direct Holdings Australia Pty. Limited

Direct Holdings (N.Z.) Pty. Limited

Austria

Verlag Das Beste Ges.m.b.H.

Belgium

Reader’s Digest N.V.-S.A.

Reader’s Digest World Services, S.A.

Brazil

Reader’s Digest Brasil Ltda.

Bulgaria

Reader’s Digest EOOD

Canada

The Reader’s Digest Association (Canada) Ltd.

Reader’s Digest Magazine Limited

1302791 Alberta ULC

3634116 Canada Inc.

Quality Service Programs, Inc.

EFundraising.com Corporation Incorporated/Corporation eFundraising.com Incorporee

China

Guangdong Pegasus Marketing Information & Service Co. Ltd.

Reader’s Digest (Guangzhou) Direct Mail Service Co. Ltd.

Shanghai Ying Cui Advertising

Reader’s Digest (China) Direct Marketing Services Co., Ltd.

Czech Republic

Reader’s Digest Vyber s.r.o.

Finland

Oy Valitut Palat - Reader’s Digest Ab

France

Selection du Reader’s Digest S.A.

Selection du Reader’s Digest Assurances SARL

Germany

Verlag Das Beste GmbH

Optimail/Direcktwerbeservice GmbH

Pegasus Medien Produktions- und Vertriebsgesellschaft.mbH

Reader’s Digest Deutschland Holding GmbH

Target Direct Marketing Services GmbH

RD German Holdings GmbH

Greece

Reader’s Digest Hellas Publications Company Limited

Hong Kong

Reader’s Digest Association Far East Limited

Asian Qualiproducts Services, Limited

Reader’s Digest (East Asia) Limited

R.D. Properties, Ltd.

Direct Holdings Asia Pacific Pty. Limited

Hungary

Reader’s Digest Kiado KFT

India

Reader’s Digest Book and Home Entertainment (India) Private Limited

Italy

Libri e piu, Srl

Japan

The Reader’s Digest Ltd.

Reader’s Digest Global Advertising Ltd.

Kazakhstan

LLC “Publisher Reader’s Digest

Malaysia

Reader’s Digest (Malaysia) Sdn. Bhd

Mexico

Caribe Condor S.A. de C.V.

Corporativo Reader’s Digest Mexico S. de R.L. de CV

Grupo Editorial Reader’s Digest, S. de R.L. de C.V.

Reader’s Digest Mexico, S.A. de C.V.

Netherlands

Reader’s Digest Netherlands Holdings B.V.

Pegasus Netherlands Services CV

Reader’s Digest European Shared Services B.V.

Uitgeversmaatschappij The Reader’s Digest N.V.

Distrimedia Services B.V.

Direct Holdings International B.V.

Direct Holdings Holland B.V.

Philippines

Reader’s Digest (Philippines) Inc.

Poland

Reader’s Digest Przeglad Sp.z o.o.

Portugal

Seleccoes do Reader’s Digest (Portugal) S.A.

Euroseleccoes - Publicacoes E Artigos Promocionais, Lda.

Romania

Editura Reader’s Digest SRL

Russia

Publishing House Reader’s Digest, JSC

LLC Digest Direct

Singapore

Reader’s Digest Asia Pte. Ltd.

Reader’s Digest Asia, Ltd.

Slovak Republic

Reader’s Digest Vyber Slovensko, s.r.o.

Spain

Reader’s Digest Selecciones S.A.

Sociedad Difusion Cultural, S.L.

Sweden

Reader’s Digest Aktiebolag

Switzerland

Das Beste aus Reader’s Digest AG

Direct Holdings Switzerland GmbH

Thailand

Reader’s Digest (Thailand) Limited

Turkey

Reader’s Digest Secilmis Yayincilik Dagitim Pazarlama Ticaret Limited Sirketi

(Reader’s Digest Selected Publishing Distribution Trade Ltd Company)

Ukraine

LLC Direct Digest

LLC Publisher Reader’s Digest

United Kingdom

Reader’s Digest Children’s Publishing Limited

Reader’s Digest Europe Limited

The Reader’s Digest Association Limited

Reader’s Digest Holdings Limited

Fundraising For You Limited

Money Magazine Limited

RD Publications Limited

Reader’s Digest Central & Eastern Europe Limited

Reader’s Digest European Systems

Reader’s Digest Financial Services Limited

Direct Entertainment U.K. Limited

Pegasus UK Holdings Limited

United States*

Allrecipes.com, Inc.

Ardee Music Publishing, Inc.

Books Are Fun, Ltd.

Christmas Angel Productions, Inc.

Direct Holdings U.S. Corp.

Direct Holdings Americas Inc.

Alex Inc.

Direct Holdings Custom Publishing Inc.

Direct Holdings Customer Service Inc.

Direct Holdings Education Inc.

Direct Holdings Libraries Inc.

Direct Holdings IP L.L.C.

Pegasus Asia Investments Inc.

Pegasus Finance Corp.

Pegasus Investment, Inc.

Pegasus Sales, Inc.

Pleasantville Music Publishing, Inc.

QSP, Inc.

Family Reading Program Corp.

QSP Distribution Services, LLC

QSP Products and Programs, LLC

QSP Sales, LLC.

QSP Services, LLC

QSP Ventures, LLC

Fundraising.com, Inc.

Reiman Media Group, Inc.

Taste of Home Productions, Inc.

Taste of Home Media Group, Inc.

World Wide Country Tours, Inc.

VideOvation, Inc.

R.D. Manufacturing Corporation

Reiman Manufacturing, LLC

RD Publications, Inc.

Home Service Publications, Inc.

RD Large Edition, Inc.

RD Trade Shows, Inc.

RD Walking, Inc.

Retirement Living Publishing Company, Inc.

Travel Publications, Inc.

RD Member Services Inc.

Reader’s Digest Children’s Publishing, Inc.

Reader’s Digest Consumer Services, Inc.

RD Magazine Value Partners, Inc.

Reader’s Digest Entertainment, Inc.

Reader’s Digest Financial Services, Inc.

Taste of Home Entertaining, Inc.

Reader’s Digest Latinoamerica, S.A.

WAPLA, LLC

Reader’s Digest Sales and Services, Inc.

Reader’s Digest Sub Nine, Inc.

Reader’s Digest Young Families, Inc.

SMDDMS, Inc.

The Reader’s Digest Association (Russia) Incorporated

W.A. Publications, LLC

WRC Media, Inc.

Compass Learning, Inc.

Weekly Reader Corporation

Lifetime Learning Systems, Inc.

World Almanac Education Group, Inc.

Funk & Wagnalls Yearbook Corp.

Gareth Stevens, Inc.

*All are Delaware corporations except Allrecipes.com, Inc. which is a Washington corporation, Books Are Fun, Ltd., which is an Iowa corporation, Gareth Stevens, Inc. which is a Wisconsin company, and Direct Holdings Libraries, Inc. which is a New York company.

EX-23.2

Exhibit 23.2

Consent of Independent Registered Public Accounting Firm

We consent to the reference to our firm under the caption “Experts” and to the use of our reports dated December 12, 2007 and August 17, 2006, in the Registration Statement on Form S-4 and related Prospectus of The Reader’s Digest Association, Inc. for the registration of $600,000,000 of its 9% Senior Subordinated Notes due 2017.

/s/ Ernst & Young LLP

February 8, 2008

New York, New York

EX-23.3

Exhibit 23.3

Consent of Independent Registered Public Accounting Firm

The Board of Directors

The Reader’s Digest Association, Inc.:

We consent to the use of our report dated August 30, 2005, with respect to the consolidated balance sheet of The Reader’s Digest Association, Inc. and subsidiaries as of June 30, 2005, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the years in the two-year period ended June 30, 2005 incorporated herein and to the reference to our firm under the heading “Experts” in the prospectus.

/s/ KPMG LLP

New York, New York

February 8, 2008

Consent of Independent Registered Public Accounting Firm

The Board of Directors

WRC Media Inc :

We consent to the use of our report dated December 10, 2007 , with respect to the combined balance sheet of WRC Media Inc. and subsidiaries, now known as The Reader’s Digest Association, Inc., as of June 30, 2006, and the related combined statements of operations, changes in stockholders’ deficit, and cash flows in the two-year period ended June 30, 2006 and, included herein and to the reference to our firm under the heading “Experts” in the prospectus.

/s/ KPMG LLP

New York, New York

February 8, 2008

EX-25.1

Exhbit 25.1

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM T-1

STATEMENT OF ELIGIBILITY UNDER THE TRUST

INDENTURE ACT OF 1939 OF A CORPORATION

DESIGNATED TO ACT AS TRUSTEE

CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A

TRUSTEE PURSUANT TO SECTION 305(b)(2) o

THE BANK OF NEW YORK

(Exact name of trustee as specified in its charter)

New York	13-5160382
(Jurisdiction of incorporation	(I.R.S. Employer
if not a U.S. national bank)	Identification No.)
One Wall Street
New York, New York	10286
(Address of principal executive offices)	(Zip code)

The Reader’s Digest Association, Inc.

(Exact name of obligor as specified in its charter)

Delaware	13-1726769
(State or other jurisdiction	(I.R.S. Employer
of incorporation or organization)	Identification No.)
Reader’s Digest Road
Pleasantville, New York	10570-7000
(Address of principal executive offices)	(Zip code)

9% Senior Subordinated Notes due 2017

(Title of the indenture securities)

Item 1.   General Information.

Furnish the following information as to the Trustee:

(a)   Name and address of each examining or supervising authority to which it is subject.

Superintendent of Banks of the State of New York	2 Rector Street, New York, N.Y. 10006 and Albany, N.Y. 12203
Federal Reserve Bank of New York	33 Liberty Plaza, New York, N.Y. 10045
Federal Deposit Insurance Corporation	550 17th Street, N.W., Washington, D.C. 20429
New York Clearing House Association	New York, N.Y. 10005

(b)   Whether it is authorized to exercise corporate trust powers.

Yes.

Item 2.    Affiliations with Obligor.

If the obligor is an affiliate of the trustee, describe each such affiliation.

None.

Item 16. List of Exhibits.

Exhibits identified in parentheses below, on file with the Commission, are incorporated herein by reference as an exhibit hereto, pursuant to Rule 7a-29 under the Trust Indenture Act of 1939 (the “Act”) and 17 C.F.R. 229.10(d).

1.	·	A copy of the Organization Certificate of The Bank of New York (formerly Irving Trust Company) as now in effect, which contains the authority to commence business and a grant of powers to exercise corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1 filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to Form T-1 filed with Registration Statement No. 33-21672, Exhibit 1 to Form T-1 filed with Registration Statement No. 33-29637 and Exhibit 1 to Form T-1 filed with Registration Statement No. 333-121195.)
4.	·	A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1 with Registration Statement No. 333-121195.)
6.	·	The consent of the Trustee required by Section 321(b) of the Act. (Exhibit 6 to Form T-1 filed with Registration Statement No. 33-44051.)
7.	·	A copy of the latest report of condition of the Trustee published pursuant to law or to the requirements of its supervising or examining authority.

SIGNATURE

Pursuant to the requirements of the Act, the Trustee, The Bank of New York, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in The City of New York, and State of New York, on the [    ]^th day of February, 2008.

THE BANK OF NEW YORK
	By:	/s/ Jeremy Finkelstein
		Name: Jeremy Finkelstein
		Title: Vice President

EXHIBIT 7

Consolidated Report of Condition of

THE BANK OF NEW YORK

of One Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,

a member of the Federal Reserve System, at the close of business September 30, 2007, published in accordance with a call made by the Federal Reserve Bank of this District pursuant to the provisions of the Federal Reserve Act.

	Dollar Amounts
	In Thousands
ASSETS
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin	3,182,000
Interest-bearing balances	20,644,000
Securities:
Held-to-maturity securities	1,820,000
Available-for-sale securities	25,826,000
Federal funds sold and securities purchased under agreements to resell:
Federal funds sold in domestic offices	7,089,000
Securities purchased under agreements to resell	163,000
Loans and lease financing receivables:
Loans and leases held for sale	0
Loans and leases, net of unearned income	36,256,000
LESS: Allowance for loan and lease losses	253,000
Loans and leases, net of unearned income and allowance	36,003,000
Trading assets	4,581,000
Premises and fixed assets (including capitalized leases)	913,000
Other real estate owned	2,000
Investments in unconsolidated subsidiaries and associated companies	294,000
Not applicable
Intangible assets:
Goodwill	2,503,000
Other intangible assets	1,020,000
Other assets	8,484,000
Total assets	112,524,000
LIABILITIES
Deposits:
In domestic offices	29,462,000
Noninterest-bearing	16,865,000

Interest-bearing	12,597,000
In foreign offices, Edge and Agreement subsidiaries, and IBFs	54,612,000
Noninterest-bearing	3,956,000
Interest-bearing	50,656,000
Federal funds purchased and securities sold under agreements to repurchase:
Federal funds purchased in domestic offices	1,890,000
Securities sold under agreements to repurchase	87,000
Trading liabilities	3,807,000
Other borrowed money: (includes mortgage indebtedness and obligations under capitalized leases)	2,473,000
Not applicable
Not applicable
Subordinated notes and debentures	2,255,000
Other liabilities	9,442,000
Total liabilities	104,028,000
Minority interest in consolidated subsidiaries	158,000
EQUITY CAPITAL
Perpetual preferred stock and related surplus	0
Common stock	1,135,000
Surplus (exclude all surplus related to preferred stock)	2,156,000
Retained earnings	5,575,000
Accumulated other comprehensive income	-528,000
Other equity capital components	0
Total equity capital	8,338,000
Total liabilities, minority interest, and equity capital	112,524,000

I, Bruce W. Van Saun, Chief Financial Officer of the above-named bank do hereby declare that this Report of Condition is true and correct to the best of my knowledge and belief.

Bruce W. Van Saun,

Chief Financial Officer

We, the undersigned directors, attest to the correctness of this statement of resources and liabilities. We declare that it has been examined by us, and to the best of our knowledge and belief has been prepared in conformance with the instructions and is true and correct.

Gerald L. Hassell
Steven G. Elliott
Robert P. Kelly ]

Directors

EX-99.1

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Exhibit 99.1

Letter of Transmittal

The Reader's Digest Association, Inc.

Offer to Exchange
Up to $600,000,000 Principal Amount Outstanding of
9% Senior Subordinated Notes due 2017 and the guarantees thereof
for
a Like Principal Amount of
9% Senior Subordinated Notes due 2017 and the guarantees thereof
which have been registered under the Securities Act of 1933
Pursuant to the Prospectus, dated                        , 2008

        THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M. NEW YORK CITY TIME, ON                        , 2008, UNLESS EXTENDED (SUCH DATE AND TIME, AS IT MAY BE EXTENDED, THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.

EXCHANGE AGENT:
The Bank of New York

By Registered or Certified Mail:	By Hand or Overnight Courier:	By Facsimile:
The Bank of New York Corporate Trust Operations Reorganization Unit 101 Barclay Street —Floor 7 East New York, New York 10286 Attn: Evangeline Gonzales	The Bank of New York Corporate Trust Operations Reorganization Unit 101 Barclay Street —Floor 7 East New York, New York 10286 Attn: Evangeline Gonzales	The Bank of New York (212) 298-1915 Attn: Evangeline Gonzales
	For information, call: (212) 815-3738

Delivery of this instrument to an address other than as set forth above, or transmission of instructions via facsimile other than as set forth above, will not constitute a valid delivery.

        The undersigned acknowledges that he or she has received the prospectus, dated                        , 2008 (the "Prospectus"), of The Reader's Digest Association, Inc., a Delaware corporation (the "Company"), and this letter of transmittal (the "Letter"), which together constitute the Company's offer (the "Exchange Offer") to exchange an aggregate principal amount of up to $600,000,000 of registered 9% Senior Subordinated Notes due 2017 (the "Exchange Notes") of the Company and the guarantees thereof for an equal principal amount of the Company's outstanding 9% Senior Subordinated Notes due 2017 (the "Original Notes") and the guarantees thereof. Capitalized terms used but not defined herein shall have the same meaning given to them in the Prospectus.

        For each Original Note accepted for exchange, the holder of such Original Note will receive an Exchange Note having a principal amount equal to that of the surrendered Original Note. The Exchange Notes will bear interest at a rate of 9% per annum from the most recent date to which interest on the Original Notes has been paid or, if no interest has been paid, from March 2, 2007. Interest on the Exchange Notes will be payable semiannually in arrears on February 15 and August 15 of each year. The Exchange Notes will mature on February 15, 2017. The terms of the Exchange Notes

are substantially identical to the terms of the Original Notes, except that the Exchange Notes have been registered under the Securities Act and are free of any obligation regarding registration.

        In the event that, (i) the Exchange Offer is not completed, or, if required, a shelf registration statement (the "Shelf Registration Statement") is not declared effective by the Securities and Exchange Commission (the "Commission") on or prior to February 24, 2008, (ii) if the Company receives a Shelf Request (as defined in the Registration Rights Agreement dated March 2, 2007, among the Company, the guarantors listed on the signature pages thereto, and J.P. Morgan Securities Inc., as representative of the initial purchasers of the Original Notes, the "Registration Rights Agreement") and the Shelf Registration Statement required to be filed thereby has not become effective by the later of February 24, 2008 or 90 days after the delivery of such Shelf Request, (iii) if the Shelf Registration Statement, if required, is effective and thereafter ceases to be effective or the prospectus contained therein ceases to be usable, at any time during the Shelf Effectiveness Period (as defined in the Registration Rights Agreement) and such failure to remain effective or usable exists for more than 30 days (whether or not consecutive) in any 12-month period (each such event referred to in clauses (i) through (iii), a "Registration Default"), then additional interest with respect to the Securities (as defined in the Registration Rights Agreement) will accrue with respect to the first 90-day period immediately following the occurrence of the first Registration Default in an amount equal to 0.25% per annum and will increase by an additional 0.25% per annum for each subsequent 90-day period until all Registration Defaults have been cured, up to a maximum increase of 1.00% per annum. Following the cure of all Registration Defaults, the accrual of additional interest will cease.

        The Company reserves the right, at any time or from time to time, to extend the Exchange Offer at its discretion, in which event the term "Expiration Date" shall mean the latest time and date to which the Exchange Offer is extended. The Company shall publicly announce any extension by making a timely release through an appropriate news agency.

        This Letter is to be completed by a holder of Original Notes either if certificates are to be forwarded herewith or if tenders are to be made according to the guaranteed delivery procedures set forth in "The Exchange Offer—Guaranteed Delivery Procedures" section of the Prospectus. Holders of Original Notes whose certificates are not immediately available, or who are unable to deliver their certificates or confirmation of the book-entry tender (a "Book-Entry Confirmation") of their Original Notes into the account maintained by The Bank of New York at The Depository Trust Company (the "Book-Entry Transfer Facility") and all other documents required by this Letter to the Exchange Agent on or prior to the Expiration Date, must tender their Original Notes according to the guaranteed delivery procedures set forth in "The Exchange Offer—Guaranteed Delivery Procedures" section of the Prospectus. See Instruction 1. Delivery of documents to the Book-Entry Transfer Facility does not constitute delivery to the Exchange Agent.

        The undersigned has completed the appropriate boxes below and signed this Letter to indicate the action the undersigned desires to take with respect to the Exchange Offer.

2

        List below the Original Notes to which this Letter relates. If the space provided below is inadequate, the numbers and principal amount at maturity of Original Notes should be listed on a separate signed schedule affixed hereto.

DESCRIPTION OF ORIGINAL NOTES
		1	2	3
Name(s) and Address(es) of Registered Holder(s) (Please fill in, if blank)		Certificate Number(s)*	Aggregate Principal Amount of Original Notes Represented by Certificate	Principal Amount of Original Notes Tendered**
		Total
*	Need not be completed if Original Notes are being tendered by book-entry transfer.
**	Unless otherwise indicated in this column, a holder will be deemed to have tendered ALL of the Original Notes represented by the Original Notes indicated in column 2. See Instruction 2. Original Notes tendered must be in an amount equal to $2,000 in principal amount and integral multiples of $1,000 in excess thereof. See Instruction 1.

o

CHECK HERE IF TENDERED ORIGINAL NOTES ARE ENCLOSED HEREWITH.

o

CHECK HERE IF TENDERED ORIGINAL NOTES ARE BEING DELIVERED BY BOOK ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:

        Name of Tendering Institution

        Account Number Transaction Code Number

o

CHECK HERE IF TENDERED ORIGINAL NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING:

        Name of Registered Holder(s)

        Window Ticket Number (if any)

        Date of Execution of Notice of Guaranteed Delivery

        Name of Institution which guaranteed delivery

If Being Delivered by Book-Entry Transfer, Complete the Following:

        Account Number Transaction Code Number

o

CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO.

        Name:

        Address:

3

PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY

Ladies and Gentlemen:

        Upon the terms and subject to the conditions of the Exchange Offer, the undersigned hereby tenders to the Company the aggregate principal amount of the Original Notes indicated above. Subject to, and effective upon, the acceptance for exchange of the Original Notes tendered hereby, the undersigned hereby sells, assigns and transfers to, or upon the order of, the Company all right, title and interest in and to such Original Notes as are being tendered hereby.

        The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, sell, assign and transfer the Original Notes tendered hereby and that the Company will acquire good and unencumbered title thereto, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claim when the same are accepted by the Company. The undersigned hereby further represents that it is not an "affiliate", as defined in Rule 405 under the Securities Act of 1933, as amended (the "Securities Act"), of the Company, that any Exchange Notes to be received by it will be acquired in the ordinary course of business and that at the time of commencement of the Exchange Offer it had no arrangement with any person to participate in a distribution of the Exchange Notes.

        In addition, if the undersigned is a broker-dealer, the undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of the Exchange Notes. If the undersigned is a broker-dealer that will receive Exchange Notes for its own account in exchange for Original Notes, it represents that the Original Notes to be exchanged for Exchange Notes were acquired by it as a result of market-making activities or other trading activities and acknowledges that it will deliver a prospectus in connection with any resale of such Exchange Notes; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act.

        The undersigned also acknowledges that the Exchange Offer is being made by the Company based upon the Company's understanding of an interpretation by the staff of the Commission as set forth in no-action letters issued to third parties, that the Exchange Notes issued in exchange for the Original Notes pursuant to the Exchange Offer may be offered for resale, resold and otherwise transferred by holders thereof, without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that: (1) such holders are not affiliates of the Company within the meaning of Rule 405 under the Securities Act; (2) such Exchange Notes are acquired in the ordinary course of such holders' business; and (3) such holders are not engaged in, and do not intend to engage in, a distribution of such Exchange Notes and have no arrangement or understanding with any person to participate in the distribution of such Exchange Notes. However, the staff of the Commission has not considered the Exchange Offer in the context of a no-action letter, and there can be no assurance that the staff of the Commission would make a similar determination with respect to the Exchange Offer as in other circumstances. If a holder of Original Notes is an affiliate of the Company, acquires the Exchange Notes other than in the ordinary course of such holder's business or is engaged in or intends to engage in a distribution of the Exchange Notes or has any arrangement or understanding with respect to the distribution of the Exchange Notes to be acquired pursuant to the Exchange Offer, such holder could not rely on the applicable interpretations of the staff of the Commission and must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any secondary resale transaction.

        The undersigned will, upon request, execute and deliver any additional documents deemed by the Company to be necessary or desirable to complete the sale, assignment and transfer of the Original Notes tendered hereby. All authority conferred or agreed to be conferred in this Letter and every

4

obligation of the undersigned hereunder shall be binding upon the successors, assigns, heirs, executors, administrators, trustees in bankruptcy and legal representatives of the undersigned and shall not be affected by, and shall survive, the death or incapacity of the undersigned. This tender may be withdrawn only in accordance with the procedures set forth in "The Exchange Offer—Withdrawal of Tenders" section of the Prospectus.

        Unless otherwise indicated in the box entitled "Special Issuance Instructions" below, please deliver the Exchange Notes in the name of the undersigned or, in the case of a book-entry delivery of Original Notes, please credit the account indicated above maintained at the Book-Entry Transfer Facility. Similarly, unless otherwise indicated under the box entitled "Special Delivery Instructions" below, please send the Exchange Notes to the undersigned at the address shown above in the box entitled "Description of Original Notes."

5

THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF ORIGINAL NOTES" ABOVE AND SIGNING THIS LETTER, WILL BE DEEMED TO HAVE TENDERED THE ORIGINAL NOTES AS SET FORTH IN SUCH BOX ABOVE.

SPECIAL ISSUANCE INSTRUCTIONS
(See Instructions 3 and 4)

            To be completed ONLY if certificates for Original Notes not exchanged and/or Exchange Notes are to be issued in the name of and sent to someone other than the person(s) whose signature(s) appear(s) on this Letter above, or if Original Notes delivered by book-entry transfer which are not accepted for exchange are to be returned by credit to an account maintained at the Book-Entry Transfer Facility other than the account indicated above.

Issue Exchange Notes and/or Original Notes to:

Name(s):	(Please Type or Print)
	(Please Type or Print)
Address:
	(Including Zip Code)

(Complete accompanying Substitute Form W-9)
o	Credit unexchanged Original Notes delivered by book-entry transfer to the Book-Entry Transfer Facility account set forth below.
(Book-Entry Transfer Facility Account Number, if applicable)

SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 3 and 4)

            To be completed ONLY if certificates for Original Notes not exchanged and/or Exchange Notes are to be sent to someone other than the person(s) whose signature(s) appear(s) on this Letter above or to such person(s) at an address other than shown in the box entitled, "Description of Original Notes" on this Letter above.

Mail Exchange Notes and/or Original Notes to:

Name(s):	(Please Type or Print)
	(Please Type or Print)
Address:
	(Including Zip Code)

IMPORTANT: THIS LETTER OR A FACSIMILE HEREOF (TOGETHER WITH THE CERTIFICATES FOR ORIGINAL NOTES) OR A BOOK-ENTRY CONFIRMATION AND ALL OTHER REQUIRED DOCUMENTS OR THE NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE EXCHANGE AGENT PRIOR TO THE EXPIRATION DATE.

PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL CAREFULLY BEFORE COMPLETING ANY BOX ABOVE.

6

PLEASE SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS)
(Complete accompanying Substitute Form W-9 on reverse side)

X:		, 2008
X:		, 2008
(Signature(s) of Registered Owner(s))	(Date)

Area Code and Telephone Number:

            If a holder is tendering any Original Notes, this Letter must be signed by the registered holder(s) as the name(s) appear(s) on the certificate(s) for the Original Notes or by any person(s) authorized to become registered holder(s) by endorsements and documents transmitted herewith. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer or other person acting in a fiduciary or representative capacity, please set forth full title. See Instruction 3.

Name(s):
Title:
	(Please Type or Print)
Capacity:
Address:
	(Including Zip Code)

SIGNATURE GUARANTEE
(if Required by Instruction 3)

Signature Guaranteed by an Eligible Institution:
	(Authorized Signature)
(Title)
(Name and Firm)

Date:
, 2008

7

INSTRUCTIONS

Forming Part of the Terms and Conditions of the Offer to Exchange
Up to $600,000,000 Principal Amount Outstanding of
9% Senior Subordinated Notes due 2017 and the guarantees thereof
for
a Like Principal Amount of
9% Senior Subordinated Notes due 2017 and the guarantees thereof
which have been registered under the Securities Act of 1933

1.

Delivery of this Letter and Original Notes; Guaranteed Delivery Procedures.

        This Letter or, in lieu thereof, a message from the Book-Entry Transfer Facility stating that the holder has expressly acknowledged receipt of, and agrees to be bound by and held accountable by, this Letter (a "Book-Entry Acknowledgement") is to be completed by or received with respect to holders of Original Notes either if certificates are to be forwarded herewith or if tenders are to be made pursuant to the procedures for delivery by book-entry transfer set forth in "The Exchange Offer—Procedures for Tendering" section of the Prospectus. Certificates for all physically tendered Original Notes (or Book-Entry Confirmation), as well as a properly completed and duly executed letter of transmittal (or facsimile thereof) and any other documents required by this Letter (or, in lieu thereof, a Book-Entry Acknowledgement), must be received by the Exchange Agent at the address set forth herein on or prior to the Expiration Date, or the tendering holder must comply with the guaranteed delivery procedures set forth below. Original Notes tendered hereby must be in an amount equal to $2,000 in principal amount and integral multiples of $1,000 in excess thereof.

        Holders of Original Notes whose certificates for Original Notes are not immediately available or who cannot deliver their certificates and all other required documents to the Exchange Agent prior to the Expiration Date, or who cannot complete the procedure for book-entry transfer on a timely basis, may tender their Original Notes pursuant to the guaranteed delivery procedures set forth in "The Exchange Offer—Guaranteed Delivery Procedures" section of the Prospectus. Pursuant to such procedures, (i) such tender must be made through an Eligible Institution (as defined below), (ii) prior to the Expiration Date, the Exchange Agent must receive from such Eligible Institution a properly completed and duly executed notice of guaranteed delivery (or facsimile thereof), substantially in the form provided by the Company (by facsimile transmission, mail or hand delivery), setting forth the name and address of the holder of Original Notes, the certificate number(s) of such Original Notes, if any, and the principal amount of Original Notes tendered, stating that the tender is being made thereby and guaranteeing that within three New York Stock Exchange trading days after the Expiration Date, (a) the certificate or certificates representing the Original Notes to be tendered, or a confirmation of book-entry transfer, as the case may be, and (b) the letter of transmittal (or facsimile thereof) and any other documents required by this Letter or, in lieu thereof, a Book-Entry Acknowledgement, will be deposited by the Eligible Institution (as defined below) with the Exchange Agent, and (iii) (a) certificate or certificates representing all tendered Original Notes, or a confirmation of book-entry transfer, as the case may be, and (b) the properly completed and duly executed letter of transmittal (or facsimile thereof) and all other documents required by this Letter or, in lieu thereof, a Book-Entry Confirmation, are received by the Exchange Agent within three New York Stock Exchange trading days after the Expiration Date.

        The method of delivery of this Letter, the Original Notes and all other required documents is at the election and risk of the tendering holders. Instead of delivery by mail, it is recommended that holders use an overnight or hand delivery service. In all cases, sufficient time should be allowed to assure delivery to the Exchange Agent before the Expiration Date. No letter of transmittal or Original Notes should be sent to the Company. Holders may request their respective brokers, dealers, commercial banks, trust companies or nominees to effect the tenders for such holders.

8

        See "The Exchange Offer" section of the Prospectus.

2.

Partial Tenders (not applicable to holders of Original Notes who tender by book-entry transfer); Withdrawals.

        If less than all of the Original Notes evidenced by a submitted certificate are to be tendered, the tendering holder(s) should fill in the aggregate principal amount of Original Notes to be tendered in the box above entitled "Description of Original Notes—Principal Amount of Original Notes Tendered." A newly reissued certificate for the Original Notes submitted but not tendered will be sent to such holder as soon as practicable after the Expiration Date. All of the Original Notes delivered to the Exchange Agent will be deemed to have been tendered unless otherwise clearly indicated.

        If not yet accepted, a tender pursuant to the Exchange Offer may be withdrawn at any time prior to the Expiration Date. To be effective with respect to the tender of Original Notes, a written or facsimile transmission notice of withdrawal must: (i) be received by the Exchange Agent prior to the Expiration Date; (ii) specify the name of the person who deposited the Original Notes to be withdrawn; (iii) identify the Original Notes to be withdrawn (including the certificate number(s), if any, and principal amount of such Original Notes); (iv) be signed by the depositor in the same manner as the original signature on this Letter by which such Original Notes were tendered (including any required signature guarantees) or be accompanied by documents of transfer sufficient to have the trustee register the transfer of such Original Notes into the name of the person withdrawing the tender; and (v) specify the name in which any such Original Notes are to be registered, if different from that of the depositor. The Exchange Agent will return the properly withdrawn Original Notes promptly following receipt of notice of withdrawal. If Original Notes have been tendered pursuant to the procedure for book-entry transfer, any notice of withdrawal must specify the name and number of the account at the Book-Entry Transfer Facility to be credited with the withdrawn Original Notes or otherwise comply with the Book-Entry Transfer Facility's procedures. All questions as to the validity of notices of withdrawal, including time of receipt, will be determined by the Company, and such determination will be final and binding on all parties.

3.

Signatures on this Letter, Bond Powers and Endorsements; Guarantee of Signatures.

        If this Letter is signed by the registered holder(s) of the Original Notes tendered hereby, the signature must correspond exactly with the name as written on the face of the certificates without alteration, enlargement or any change whatsoever.

        If any tendered Original Notes are owned of record by two or more joint owners, all such owners must sign this Letter.

        If any tendered Original Notes are registered in different names on several certificates, it will be necessary to complete, sign and submit as many separate copies of this Letter as there are different registrations of certificates.

        When this Letter is signed by the registered holder(s) (which term, for the purposes described herein, shall include the Book-Entry Transfer Facility whose name appears on a security listing as the owner of the Original Notes) of the Original Notes specified herein and tendered hereby, no endorsements of certificates or separate bond powers are required. If, however, the Exchange Notes are to be issued to a person other than the registered holder(s), then endorsements of any certificates transmitted hereby or separate bond powers are required. Signatures on such certificates must be guaranteed by an Eligible Institution (as defined below).

        If this Letter is signed by a person other than the registered holder(s) of any Original Notes specified therein, such certificate(s) must be endorsed by such registered holder(s) or accompanied by separate written instruments of transfer or endorsed in blank by such registered holder(s) in form satisfactory to the Company and duly executed by the registered holder, in either case signed exactly as such registered holder's or holders' name(s) appear(s) on the Original Notes.

9

        If this Letter or any certificates of Original Notes or separate written instruments of transfer or exchange are signed or endorsed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing and, unless waived by the Company, evidence satisfactory to the Company of their authority to so act must be submitted with this Letter.

        Signature on a Letter or a notice of withdrawal, as the case may be, must be guaranteed by an Eligible Institution unless the Original Notes tendered pursuant thereto are tendered (i) by a registered holder who has not completed the box entitled "Special Payment Instructions" or "Special Delivery Instructions" on the Letter or (ii) for the account of an Eligible Institution. In the event that signatures on a Letter or a notice of withdrawal, as the case may be, are required to be guaranteed, such guarantee must be by a member firm of a registered national securities exchange or of the Financial Industry Regulatory Authority, Inc., a commercial bank or trust company having an office or correspondent in the United States or an "eligible guarantor institution" within the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended (an "Eligible Institution").

4.

Special Issuance and Delivery Instructions.

        Tendering holders of Original Notes should indicate in the applicable box the name and address to which Exchange Notes issued pursuant to the Exchange Offer are to be issued or sent, if different from the name or address of the person signing this Letter. In the case of issuance in a different name, the employer identification or social security number of the person named must also be indicated. Holders tendering Original Notes by book-entry transfer may request that Original Notes not exchanged be credited to such account maintained at the Book-Entry Transfer Facility as such holder may designate hereon. If no such instructions are given, such Original Notes not exchanged will be returned to the name and address of the person signing this Letter.

5.

Tax Identification Number and Backup Withholding.

        An exchange of Original Notes for Exchange Notes will not be treated as a taxable exchange or other taxable event for U.S. Federal income tax purposes. In particular, no backup withholding or information reporting is required in connection with such an exchange. However, U.S. Federal income tax law generally requires that payments of principal and interest on a note to a holder be subject to backup withholding unless such holder provides the payor with such holder's correct Taxpayer Identification Number ("TIN") on Substitute Form W-9 below or otherwise establishes a basis for exemption. If such holder is an individual, the TIN is his or her social security number. If the payor is not provided with the current TIN or an adequate basis for an exemption, such tendering holder may be subject to a $50 penalty imposed by the Internal Revenue Service. In addition, such holder may be subject to backup withholding in an amount that is currently 28% of all reportable payments of principal and interest.

        Certain holders (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. Such holders should nevertheless complete the attached Substitute Form W-9 below, and check the box marked "exempt" in Part 2, to avoid possible erroneous backup withholding. If the tendering holder of Original Notes is a nonresident alien or foreign entity not subject to backup withholding, such holder must give the Company a completed Form W-8BEN Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding, or other appropriate Form W-8. These forms may be obtained from the Exchange Agent or from the Internal Revenue Service's website, www.irs.gov. See the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 (the "W-9 Guidelines") for additional instructions.

        To prevent backup withholding on reportable payments of principal and interest, each tendering holder of Original Notes must provide its correct TIN by completing the Substitute Form W-9 set forth below, certifying that the TIN provided is correct (or that such holder is awaiting a TIN) and that

10

(i) the holder is exempt from backup withholding, (ii) the holder has not been notified by the Internal Revenue Service that such holder is subject to a backup withholding as a result of a failure to report all interest or dividends or (iii) the Internal Revenue Service has notified the holder that such holder is no longer subject to backup withholding. If the Original Notes are in more than one name or are not in the name of the actual owner, such holder should consult the W-9 Guidelines for information on which TIN to report. If such holder does not have a TIN, such holder should consult the W-9 Guidelines for instructions on applying for a TIN, check the box in Part 2 of the Substitute Form W-9 and write "applied for" in lieu of its TIN. Note: checking this box and writing "applied for" on the form means that such holder has already applied for a TIN or that such holder intends to apply for one in the near future. If a holder checks the box in Part 2 of the Substitute Form W-9 and writes "applied for" on that form, backup withholding at a rate currently of 28% will nevertheless apply to all reportable payments made by such holder. If such a holder furnishes its TIN to the Company within 60 calendar days, however, any amounts so withheld shall be refunded to such holder.

        If backup withholding applies, the payor will withhold the appropriate percentage (currently 28%) from payments to the payee. Backup withholding is not an additional Federal income tax. Rather, the Federal income tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in overpayment of taxes, a refund may be obtained from the Internal Revenue Service.

6.

Transfer Taxes.

        Holders who tender their Original Notes for exchange will not be obligated to pay any transfer taxes in connection therewith. If, however, Exchange Notes are to be delivered to, or are to be issued in the name of, any person other than the registered holder of the Original Notes tendered hereby, or if tendered Original Notes are registered in the name of any person other than the person signing this Letter, or if a transfer tax is imposed for any reason other than the exchange of Original Notes in connection with the Exchange Offer, the amount of any such transfer taxes (whether imposed on the registered holder or any other persons) will be payable by the tendering holder. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted herewith, the amount of such transfer taxes will be billed directly to such tendering holder.

Except as provided in this Instruction 6, it will not be necessary for transfer tax stamps to be affixed to the Original Notes specified in this Letter.

7.

Waiver of Conditions.

        The Company reserves the right to waive satisfaction of any or all conditions enumerated in the Prospectus at any time and from time to time prior to the Expiration Date.

8.

No Conditional Tenders.

        No alternative, conditional, irregular or contingent tenders will be accepted. All tendering holders of Original Notes, by execution of this Letter or, in lieu thereof, a Book-Entry Acknowledgement, shall waive any right to receive notice of the acceptance of their Original Notes for exchange.

        None of the Company, the Exchange Agent or any other person is obligated to give notice of any defect or irregularity with respect to any tender of Original Notes nor shall any of them incur any liability for failure to give any such notice.

9.

Mutilated, Lost, Stolen or Destroyed Original Notes.

        Any holder whose Original Notes have been mutilated, lost, stolen or destroyed should contact the Exchange Agent at the address indicated above for further instructions.

10.

Requests for Assistance or Additional Copies.

        Questions relating to the procedure for tendering, as well as requests for additional copies of the Prospectus and this Letter, may be directed to the Exchange Agent, at the address and telephone number indicated above.

11

TO BE COMPLETED BY ALL TENDERING HOLDERS (See Instruction 5)

SUBSTITUTE FORM W-9

REQUEST FOR TAXPAYER IDENTIFICATION NUMBER AND CERTIFICATION

PAYOR'S NAME: THE READER'S DIGEST ASSOCIATION, INC.

PAYEE INFORMATION
(Please print or type)

Individual or business name (if joint account list first and circle the name of person or entity whose number you furnish in Part 1 below):

Check appropriate box:	o	Individual/Sole proprietor
	o	Corporation
	o	Partnership
	o	Other

ADDRESS (NUMBER, STREETS AND APT. OR SUITE NO.)

CITY, STATE, AND ZIP CODE

PART 1:    TAXPAYER IDENTIFICATION NUMBER ("TIN")

Enter your TIN below. For individuals, this is your social security number. For other entities, it is your employer identification number. Refer to the chart on page 1 of the Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 (the "Guidelines") for further clarification. If you do not have a TIN, see instructions on how to obtain a TIN on page 2 of the Guidelines, check the appropriate box below indicating that you have applied for a TIN and, in addition to the Part 3 Certification, sign the attached Certification of Awaiting Taxpayer Identification Number.

Social Security Number:

Employer Identification number:

o

Applied For

PART 2:    PAYEES EXEMPT FROM BACKUP WITHHOLDING

Check box (See page 2 of the Guidelines for further clarification. Even if you are exempt from backup withholding, you should still complete and sign the certification below):

o

Exempt

12

PART 3: CERTIFICATION

            Certification instructions: You must cross out item 2 below if you have been notified by the Internal Revenue Service that you are currently subject to backup withholding because of underreporting interest or dividends on your tax return.

            Under penalties of perjury, I certify that:

1.

The number shown on this form is my correct taxpayer identification number (or I am waiting for a number to be issued to me) and



2.

I am not subject to backup withholding because (i) I am exempt from backup withholding, (ii) I have not been notified by the Internal Revenue Service that I am subject to backup withholding as a result of a failure to report all interest or dividends or (iii) the Internal Revenue Service has notified me that I am no longer subject to backup withholding.



3.

I am a U.S. person (including a U.S. resident alien).

Signature

Date

NOTE:	FAILURE TO COMPLETE AND RETURN THIS SUBSTITUTE FORM W-9 MAY RESULT IN BACKUP WITHHOLDING OF 28% OF ANY PAYMENT MADE TO YOU PURSUANT TO THE EXCHANGE OFFER. PLEASE REVIEW THE ENCLOSED "GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9" FOR ADDITIONAL DETAILS.
	YOU MUST COMPLETE THE FOLLOWING CERTIFICATION IF YOU CHECKED THE BOX "APPLIED FOR" IN PART 1 OF SUBSTITUTE FORM W-9

13

CERTIFICATION OF AWAITING TAXPAYER IDENTIFICATION NUMBER

            I certify, under penalties of perjury, that a TIN has not been issued to me, and either (i) I have mailed or delivered an application to receive a TIN to the appropriate Internal Revenue Service Center or Social Security Administration Office or (ii) I intend to mail or deliver an application in the near future. I understand that if I do not provide a TIN to the payor, the payor is required to withhold and remit to the Internal Revenue Service a percentage (currently 28%) of all reportable payments made to me until I furnish the payor with a TIN.

Signature

Date

NOTE:
FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING AT THE APPLICABLE WITHHOLDING RATE (WHICH IS CURRENTLY 28%) ON ANY REPORTABLE PAYMENTS MADE TO YOU.

14

QuickLinks

Exhibit 99.1

PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
INSTRUCTIONS
TO BE COMPLETED BY ALL TENDERING HOLDERS (See Instruction 5) SUBSTITUTE FORM W-9 REQUEST FOR TAXPAYER IDENTIFICATION NUMBER AND CERTIFICATION PAYOR'S NAME: THE READER'S DIGEST ASSOCIATION, INC.

EX-99.2

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Exhibit 99.2

Notice of Guaranteed Delivery
For Tender of
9% Senior Subordinated Notes Due 2017
of
The Reader's Digest Association, Inc.
Pursuant to the Prospectus dated                    , 2008

        This Notice of Guaranteed Delivery, or one substantially equivalent to this form, must be used to tender Original Notes (as defined below) pursuant to the Exchange Offer (as defined below) described in the prospectus dated                    , 2008 (the "Prospectus") of The Reader's Digest Association,  Inc., a Delaware corporation (the "Company"), if (i) certificates for the outstanding 9% Senior Subordinated Notes due 2017 of the Company (the "Original Notes") are not immediately available, (ii) time will not permit the Original Notes, the letter of transmittal and all other required documents to be delivered to The Bank of New York (the "Exchange Agent") prior to 5:00 p.m., New York City time, on                    , 2008 or such later date and time to which the Exchange Offer may be extended (such date and time, the "Expiration Date"), or (iii) the procedures for delivery by book-entry transfer cannot be completed on a timely basis. This Notice of Guaranteed Delivery, or one substantially equivalent to this form, must be delivered by hand or sent by facsimile transmission or mail to the Exchange Agent, and must be received by the Exchange Agent prior to the Expiration Date. See "The Exchange Offer—Guranteed Delivery Procedures" in the Prospectus. Capitalized terms used but not defined herein shall have the same meaning given them in the Prospectus.

The Exchange Agent for the Exchange Offer is:
THE BANK OF NEW YORK

By Registered or Certified Mail:	By Hand or Overnight Courier:	By Facsimile:
The Bank of New York Corporate Trust Operations Reorganization Unit 101 Barclay Street—Floor 7 East New York, New York 10286 Evangeline Gonzales	The Bank of New York Corporate Trust Operations Reorganization Unit 101 Barclay Street—Floor 7 East New York, New York 10286 Evangeline Gonzales	The Bank of New York (212) 298-1915 Evangeline Gonzales

For information, call:
(212) 815-3738

        DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF THIS NOTICE OF GUARANTEED DELIVERY VIA FACSIMILE TO A NUMBER OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY. THE METHOD OF DELIVERY OF ALL DOCUMENTS, INCLUDING CERTIFICATES, IS AT THE RISK OF THE HOLDER. INSTEAD OF DELIVERY BY MAIL, WE RECOMMEND USE OF AN OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, YOU SHOULD ALLOW SUFFICIENT TIME TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. YOU SHOULD READ THE INSTRUCTIONS ACCOMPANYING THE LETTER OF TRANSMITTAL CAREFULLY BEFORE YOU COMPLETE THIS NOTICE OF GUARANTEED DELIVERY.

        This Notice of Guaranteed Delivery is not to be used to guarantee signatures. If a signature on a letter of transmittal is required to be guaranteed by an "Eligible Institution" under the instructions thereto, such signature guarantee must appear in the applicable space provided in the signature box on the letter of transmittal.

Ladies and Gentlemen:

        The undersigned acknowledges receipt of the Prospectus and the related letter of transmittal (the "Letter of Transmittal") which describes the offer by the Company (the "Exchange Offer") to exchange registered 9% Senior Subordinated Notes due 2017 of the Company (the "Exchange Notes") and the guarantees thereof for a like principal amount of Original Notes and the guarantees thereof. The undersigned further acknowledges that it may tender some or all of its Original Notes in connection with the Exchange Offer, but only in an amount equal to $2,000 principal amount or in integral multiples of $1,000 in excess thereof.

        The undersigned hereby tenders to the Company, upon the terms and subject to the conditions set forth in the Prospectus and the Letter of Transmittal, the aggregate principal amount of Original Notes indicated below pursuant to the guaranteed delivery procedures set forth in the Prospectus under the caption "The Exchange Offer—Guaranteed Delivery Procedures."

        The undersigned understands that no withdrawal of a tender of Original Notes may be made after the Expiration Date. The undersigned understands that for a withdrawal of a tender of Original Notes to be effective, a written notice of withdrawal that complies with the requirements of the Exchange Offer must be timely received by the Exchange Agent at one of its addresses specified on the cover of this Notice of Guaranteed Delivery prior to the Expiration Date.

        The undersigned understands that the exchange of Original Notes for Exchange Notes pursuant to the Exchange Offer will be made only after timely receipt by the Exchange Agent of (1) such Original Notes (or confirmation of book-entry transfer of such Original Notes into the Exchange Agent's account at The Depository Trust Company ("DTC")) and (2) a Letter of Transmittal (or facsimile thereof) with respect to such Original Notes, properly completed and duly executed, with any required signature guarantees, and any other documents required by the Letter of Transmittal or, in lieu thereof, a message from DTC stating that the tendering holder has expressly acknowledged receipt of, and agrees to be bound by and held accountable under, the Letter of Transmittal.

        All authority conferred or agreed to be conferred by this Notice of Guaranteed Delivery shall not be affected by, and shall survive, the death or incapacity of the undersigned, and every obligation of the undersigned under this Notice of Guaranteed Delivery shall be binding on the heirs, executors, administrators, trustees in bankruptcy, personal and legal representatives, successors and assigns of the undersigned.

2

Name(s) of Registered Holder(s):
	(Please Print or Type)

Signature(s):

Address(es):

Area Code(s) and Telephone Number(s):

If Original Notes will be delivered by book-entry transfer
	at DTC, insert Depository Account Number:

Date:

Certificate Number(s)* Principal Amount of Original Notes Tendered**

*

Need not be completed if the Original Notes being tendered are in book-entry form.

**

Must be an amount equal to $2,000 principal amount or in integral multiples of $1,000 in excess thereof.

        This Notice of Guaranteed Delivery must be signed by the registered holder(s) of Original Notes exactly as its (their) name(s) appear(s) on certificates for Original Notes or on a security position listing as the owner of Original Notes, or by person(s) authorized to become registered holder(s) by endorsements and documents transmitted with this Notice of Guaranteed Delivery. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer or other person acting in a fiduciary or representative capacity, such person must provide the following information.

Name(s):

Title(s):

Signature(s):

Address(es):

DO NOT SEND ORIGINAL NOTES WITH THIS FORM. ORIGINAL NOTES SHOULD BE SENT TO THE EXCHANGE AGENT TOGETHER WITH A PROPERLY COMPLETED AND DULY EXECUTED LETTER OF TRANSMITTAL.

3

GUARANTEE OF DELIVERY
(NOT TO BE USED FOR SIGNATURE GUARANTEE)

        The undersigned, a member firm of a registered national securities exchange or of the Financial Industry Regulatory Authority, Inc., a commercial bank or trust company having an office or a correspondent in the United States or an "eligible guarantor institution" within the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), hereby (1) represents that each holder of Original Notes on whose behalf this tender is being made "owns" the Original Notes covered hereby within the meaning of Rule 13d-3 under the Exchange Act, (2) represents that such tender of Original Notes complies with Rule 14e-4 of the Exchange Act and (3) guarantees that the undersigned will deliver to the Exchange Agent the certificates representing the Original Notes being tendered hereby for exchange pursuant to the Exchange Offer in proper form for transfer (or a confirmation of book-entry transfer of such Original Notes into the Exchange Agent's account at the book-entry transfer facility of DTC) with delivery of a properly completed and duly executed Letter of Transmittal (or facsimile thereof), with any required signature guarantees, and any other documents required by the Letter of Transmittal, or in lieu of a Letter of Transmittal a message from DTC stating that the tendering holder has expressly acknowledged receipt of, and agrees to be bound by and held accountable under, the Letter of Transmittal, all within three New York Stock Exchange trading days after the Expiration Date.

Name of Firm:
	Authorized Signature

Address:	Name:
		(Please Print or Type)

Title:

Telephone Number: Date:

        The institution that completes the Notice of Guaranteed Delivery (a) must deliver the same to the Exchange Agent at its address set forth above by hand, or transmit the same by facsimile or mail, prior to the Expiration Date, and (b) must deliver the certificates representing any Original Notes (or a confirmation of book-entry transfer of such Original Notes into the Exchange Agent's account at DTC), together with a properly completed and duly executed Letter of Transmittal (or facsimile thereof), with any required signature guarantees, and any other documents required by the Letter of Transmittal or a message from DTC stating that the tendering holder has expressly acknowledged receipt of, and agrees to be bound by and held accountable under, the Letter of Transmittal in lieu thereof, to the Exchange Agent within the time period shown herein. Failure to do so could result in a financial loss to such institution.

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Exhibit 99.2

GUARANTEE OF DELIVERY (NOT TO BE USED FOR SIGNATURE GUARANTEE)

EX-99.3

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Exhibit 99.3

The Reader's Digest Association, Inc.

Offer to Exchange
Up to $600,000,000 Principal Amount Outstanding of
9% Senior Subordinated Notes due 2017 and the guarantees thereof
for
a Like Principal Amount of
9% Senior Subordinated Notes due 2017 and the guarantees thereof
which have been registered under the Securities Act of 1933

Pursuant to the Prospectus, dated                        , 2008

To Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees:

        The Reader's Digest Association, Inc., a Delaware corporation (the "Company"), hereby offers to exchange (the "Exchange Offer"), upon and subject to the terms and conditions set forth in the Prospectus dated                                    , 2008 (the "Prospectus") and the enclosed letter of transmittal (the "Letter of Transmittal"), up to $600,000,000 aggregate principal amount of registered 9% Senior Subordinated Notes due 2017 of the Company, which will be freely transferable (the "Exchange Notes"), and the guarantees thereof for any and all of the Company's outstanding 9% Senior Subordinated Notes due 2017, which have certain transfer restrictions (the "Original Notes"), and the guarantees thereof. The Exchange Offer is intended to satisfy certain obligations of the Company contained in the Registration Rights Agreement dated March 2, 2007, among the Company, the guarantors listed on the signature pages thereto, and J.P. Morgan Securities Inc., as representative of the initial purchasers of the Original Notes.

        We are requesting that you contact your clients for whom you hold Original Notes regarding the Exchange Offer. For your information and for forwarding to your clients for whom you hold Original Notes registered in your name or in the name of your nominee, or who hold Original Notes registered in their own names, we are enclosing the following documents:

1.

Prospectus dated                        , 2008;



2.

The Letter of Transmittal for your use and for the information of your clients;



3.

A Notice of Guaranteed Delivery to be used to accept the Exchange Offer if certificates for Original Notes are not immediately available or time will not permit all required documents to reach The Bank of New York (the "Exchange Agent") prior to the Expiration Date (as defined below) or if the procedure for book-entry transfer cannot be completed on a timely basis;



4.

A form of letter which may be sent to your clients for whose account you hold Original Notes registered in your name or the name of your nominee, with space provided for obtaining such clients' instructions with regard to the Exchange Offer;



5.

Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9; and



6.

Return envelopes addressed to The Bank of New York, the Exchange Agent.

Your prompt action is requested. The Exchange Offer will expire at 5:00 p.m., New York City time, on                        , 2008 (such date and time, the "Expiration Date"), unless extended by the Company. Any Original Notes tendered pursuant to the Exchange Offer may be withdrawn at any time prior to the Expiration Date.

        To participate in the Exchange Offer, a duly executed and properly completed Letter of Transmittal (or facsimile thereof), with any required signature guarantees, and any other documents required by the Letter of Transmittal or a message from The Depository Trust Company stating that the tendering holder has expressly acknowledged receipt of, and agrees to be bound by and held

accountable under, the Letter of Transmittal, must be sent to the Exchange Agent and certificates representing the Original Notes (or confirmation of book-entry transfer of such Original Notes into the Exchange Agent's account at The Depository Trust Company) must be delivered to the Exchange Agent, all in accordance with the instructions set forth in the Letter of Transmittal and the Prospectus.

        If holders of Original Notes wish to tender but it is impracticable for them to forward their certificates for Original Notes prior to the expiration of the Exchange Offer or to comply with the book-entry transfer procedures on a timely basis, a tender may be effected by following the guaranteed delivery procedures described in the Prospectus under "The Exchange Offer—Guaranteed Delivery Procedures."

        Any inquiries you may have with respect to the Exchange Offer or requests for additional copies of the enclosed materials should be directed to the Exchange Agent at its address and telephone number set forth on the front of the Letter of Transmittal.

Very truly yours,

The Reader's Digest Association, Inc.

NOTHING HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY OTHER PERSON AS AN AGENT OF THE COMPANY OR THE EXCHANGE AGENT, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENTS ON BEHALF OF ANY OF THEM WITH RESPECT TO THE EXCHANGE OFFER, EXCEPT FOR STATEMENTS EXPRESSLY MADE IN THE PROSPECTUS OR THE LETTER OF TRANSMITTAL.

2

QuickLinks

Exhibit 99.3

The Reader's Digest Association, Inc.
Offer to Exchange Up to $600,000,000 Principal Amount Outstanding of 9% Senior Subordinated Notes due 2017 and the guarantees thereof for a Like Principal Amount of 9% Senior Subordinated Notes due 2017 and the guarantees thereof which have been registered under the Securities Act of 1933
Pursuant to the Prospectus, dated , 2008

EX-99.4

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Exhibit 99.4

The Reader's Digest Association, Inc.

Offer to Exchange
Up to $600,000,000 Principal Amount Outstanding of
9% Senior Subordinated Notes due 2017 and the guarantees thereof
for
a Like Principal Amount of
9% Senior Subordinated Notes due 2017 and the guarantees thereof
which have been registered under the Securities Act of 1933

Pursuant to the Prospectus, dated                        , 2008

To Our Clients:

        Enclosed for your consideration is a Prospectus dated                        , 2008 (the "Prospectus") and the related letter of transmittal (the "Letter of Transmittal"), relating to the offer (the "Exchange Offer") of The Reader's Digest Assocation, Inc., a Delaware corporation (the "Company"), to exchange up to $600,000,000 aggregate principal amount of registered 9% Senior Subordinated Notes due 2017 of the Company, which will be freely transferable (the "Exchange Notes"), and the guarantees thereof for any and all of the Company's outstanding 9% Senior Subordinated Notes due 2017, which have certain transfer restrictions (the "Original Notes"), and the guarantees thereof, upon the terms and subject to the conditions described in the Prospectus and the related Letter of Transmittal. The Exchange Offer is intended to satisfy certain obligations of the Company contained in the Registration Rights Agreement dated March 2, 2007, among the Company, the guarantors listed on the signature pages thereto, and J.P. Morgan Securities Inc., as representative of the initial purchasers of the Original Notes.

        This material is being forwarded to you as the beneficial owner of the Original Notes carried by us for your account but not registered in your name. A tender of such Original Notes may only be made by us as the holder of record and pursuant to your instructions, unless you obtain a properly completed bond power from us or arrange to have the Original Notes registered in your name.

        Accordingly, we request instructions as to whether you wish us to tender on your behalf the Original Notes held by us for your account, pursuant to the terms and conditions set forth in the enclosed Prospectus and Letter of Transmittal.

        Please forward your instructions to us as promptly as possible in order to permit us to tender the Original Notes on your behalf in accordance with the provisions of the Exchange Offer. The Exchange Offer will expire at 5:00 p.m., New York City time, on                        , 2008 (such date and time, the "Expiration Date"), unless extended by the Company. Any Original Notes tendered pursuant to the Exchange Offer may be withdrawn any time prior to the Expiration Date.

        Your attention is directed to the following:

1.

The Exchange Offer is for any and all Original Notes.



2.

The Exchange Offer is subject to certain conditions set forth in the Prospectus in the section captioned "The Exchange Offer—Conditions to the Exchange Offer."



3.

The Exchange Offer expires at 5:00 p.m., New York City time, on the Expiration Date, unless extended by the Company.

        If you wish to have us tender your Original Notes, please instruct us to do so by completing, executing and returning to us the instruction form on the back of this letter.

The Letter of Transmittal is furnished to you for information only and may not be used directly by you to tender Original Notes, unless you obtain a properly completed bond power from us or arrange to have the Original Notes registered in your name.

INSTRUCTIONS WITH RESPECT TO THE EXCHANGE OFFER

        The undersigned acknowledge(s) receipt of this letter and the enclosed materials referred to herein relating to the Exchange Offer made by the Company with respect to the Original Notes.

        This will instruct you to tender the Original Notes held by you for the account of the undersigned, upon and subject to the terms and conditions set forth in the Prospectus and the related Letter of Transmittal.

        o Please tender the Original Notes held by you for the account of the undersigned as indicated below:

	Aggregate Principal Amount of Original Notes
9% Senior Subordinated Notes due 2017
	(must be an amount equal to $2,000 principal amount or integral multiples of $1,000 in excess thereof)
	o Please do not tender any Original Notes held by you for the account of the undersigned.
	Signature(s)
	Please print name(s) here
	Dated:	, 2008
	Address(es)
	Area Code(s) and Telephone Number(s)
	Tax Identification or Social Security No(s).

None of the Original Notes held by us for your account will be tendered unless we receive written instructions from you to do so. Unless a specific contrary instruction is given in the space provided, your signature(s) hereon shall constitute an instruction to us to tender all the Original Notes held by us for your account.

2

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Exhibit 99.4

The Reader's Digest Association, Inc.
Offer to Exchange Up to $600,000,000 Principal Amount Outstanding of 9% Senior Subordinated Notes due 2017 and the guarantees thereof for a Like Principal Amount of 9% Senior Subordinated Notes due 2017 and the guarantees thereof which have been registered under the Securities Act of 1933
Pursuant to the Prospectus, dated , 2008
INSTRUCTIONS WITH RESPECT TO THE EXCHANGE OFFER

EX-99.5

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Exhibit 99.5

GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9

Guidelines for Determining the Proper Identification Number to Give the Payor.—A Social Security Number (SSN) has nine digits separated by two hyphens: i.e. 000-00-0000. An Employer Identification Number (EIN) has nine digits separated by only one hyphen, i.e. 00-0000000. The table below will help determine the number to give the payor.

For this type of account:			Give the SOCIAL SECURITY number of—
1.	Individual		The individual
2.	Two or more individuals (joint account)		The actual owner of the account or, if combined funds, the first individual on the account(1)
3.	Custodian account of a minor (Uniform Gift to Minors Act)		The minor(2)
4.	a.	The usual revocable savings trust account (grantor is also trustee)	The grantor-trustee(1)
	b.	So-called trust account that is not a legal or valid trust under state law	The actual owner(1)
5.	Sole proprietorship or single-owner LLC		The owner(3)
For this type of account:			Give the EMPLOYER IDENTIFICATION number of—
6.	Sole proprietorship or single-owner LLC		The owner(3)
7.	A valid trust, estate, or pension trust		Legal Entity(4)
8.	Corporation or LLC electing corporate status on Form 8832		The corporation or LLC
9.	Association, club, religious, charitable, educational or other tax-exempt organization account		The organization
10.	Partnership or multi-member LLC		The partnership
11.	A broker or registered nominee		The broker or nominee
12.	Account with the Department of Agriculture in the name of a public entity (such as state or local government, school district, or prison) that receives agricultural program payments		The public entity

(1)

List first and circle the name of the person whose number you furnish. If only one person on a joint account has an SSN, that person's number should be furnished.

(2)

Circle the minor's name and furnish the minor's SSN.

(3)

You must show your individual name and you may also enter your business or "doing business as" name. You may use either your SSN or EIN (if you have one). If you are a sole proprietor, IRS encourages you to use your SSN.

(4)

List first and circle the name of the legal trust, estate, or pension trust. (Do not furnish the taxpayer identification number of the personal representatives or trustee unless the legal entity itself is not designated in the account title.)

Note: If no name is circled when more than one name is listed, the number will be considered to be that of the first name listed.

GUIDELINES FOR CERTIFICATE OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
Page 2

Obtaining a Number

         If you don't have a taxpayer identification number or you don't know your number, obtain Form SS-5, Application for a Social Security Card, or Form SS-4, Application for Employer Identification Number, or Form W-7, Application for Individual Taxpayer Identification Number at the local office of the Social Security Administration or the Internal Revenue Service and apply for a number. You can get IRS Forms from the IRS by calling 1-800-829-3676 or from the IRS's internet website at www.irs.gov.

Payees Exempt from Backup Withholding

         Payees specifically exempted from backup withholding on ALL payments include the following:

•

An organization exempt from tax under section 501(a), any IRA, or a custodial account under section 403(b)(7) if the account satisfies the requirements of section 401(f)(2).



•

The United States or any agency or instrumentalities thereof.



•

A state, the District of Columbia, a possession of the United States, or any political subdivision or instrumentality thereof.



•

A foreign government, a political subdivision of a foreign government, or any agency or instrumentality thereof.



•

An international organization or any agency, or instrumentality thereof.

         Other payees that may be exempt from backup withholding include:

•

A corporation.



•

A financial institution.



•

A middleman known in the investment community as a nominee or custodian.



•

A registered dealer in securities or commodities registered in the United States, the District of Columbia, or a possession of the United States.



•

A futures commission merchant registered with the Commodity Futures Trading Commission.



•

A real estate investment trust.



•

A common trust fund operated by a bank under section 584(a).



•

A trust exempt from tax under section 664 or described in section 4947.



•

An entity registered at all times during the tax year under the Investment Company Act of 1940.



•

A foreign central bank of issue.

         Payments of interest not generally subject to backup with-holding include the following:

•

Payments of interest on obligations issued by individuals. NOTE: You may be subject to backup withholding if this interest is $600 or more and is paid in the course of the payor's trade or business and you have not provided your correct taxpayer identification number to the payor.



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Payments otherwise subject to U.S. Federal income tax withholding.

         Exempt payees described above should file a Form W-9 to avoid possible erroneous backup withholding. FILE THIS FORM WITH THE PAYOR, FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, SIGN AND DATE THE FORM AND RETURN IT TO THE PAYOR. IF YOU ARE A NONRESIDENT ALIEN OR A FOREIGN ENTITY NOT SUBJECT TO BACKUP WITHHOLDING, FILE WITH THE PAYOR A COMPLETED INTERNAL REVENUE SERVICE FORM W-8BEN (CERTIFICATE OF FOREIGN STATUS OF BENEFICIAL OWNER FOR UNITED STATES TAX WITHHOLDING) OR, IF APPLICABLE, FORM W-8ECI (CERTIFICATE OF FOREIGN PERSON'S CLAIM FOR EXEMPTION FROM WITHHOLDING ON INCOME EFFECTIVELY CONNECTED WITH THE CONDUCT OF A TRADE OR BUSINESS IN THE UNITED STATES).

Privacy Act Notice

         Section 6109 requires most recipients of dividends, interest, or other payments to give taxpayer identification numbers to payors who must report the payments to the IRS. The IRS uses the numbers for identification purposes. Payors must be given the numbers whether or not recipients are required to file tax returns. Payors must generally withhold 28% (subject to further adjustment under applicable law) of taxable interest, dividends, and certain other payments, to a payee who does not furnish a taxpayer identification number to a payor. Certain penalties may also apply.

Penalties

(1)    Penalty for Failure to Furnish Taxpayer Identification Number.—If you fail to furnish your taxpayer identification number to a payor, you are subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect.

(2)    Civil penalty for false information with respect to withholding.—If you make a false statement with no reasonable basis that results in no backup withholding, you are subject to a $500 penalty.

(3)    Criminal penalty for falsifying information.—Willfully falsifying certifications or affirmations may subject you to criminal penalties including fines and/or imprisonment.

(4)    Misuse of Taxpayer Identification Numbers.—If the payor discloses or uses taxpayer identification numbers in violation of federal law, the payor may be subject to civil and criminal penalties.

FOR ADDITIONAL INFORMATION, CONTACT YOUR TAX ADVISOR OR THE INTERNAL REVENUE SERVICE.

QuickLinks

Exhibit 99.5

GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR CERTIFICATE OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 Page 2