Exhibit 10.37
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$385,000,000
AMENDED AND RESTATED TERM LOAN AGREEMENT
Dated as of May 24, 2004
among
THE READER'S DIGEST ASSOCIATION, INC.
as Borrower and Guarantor
BOOKS ARE FUN, LTD.
QSP, INC.
and
REIMAN MEDIA GROUP, INC.
as Borrowing Subsidiaries
The Lenders Party Hereto
JPMORGAN CHASE BANK,
as Administrative Agent
and Collateral Agent
and
ABN AMRO BANK N.V.
and
NATIONAL AUSTRALIA BANK LIMITED
and,
THE ROYAL BANK OF SCOTLAND plc
as Co-Documentation Agents
and
J.P. MORGAN SECURITIES INC.,
as Sole Arranger and Bookrunner
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TABLE OF CONTENTS
Page
ARTICLE I
Definitions
SECTION 1.01. Definitions..............................................1
SECTION 1.02. Classification of Loans and Borrowings..................27
SECTION 1.03. Terms Generally.........................................27
SECTION 1.04. Accounting Terms and Determinations.....................27
ARTICLE II
The Loans
SECTION 2.01. Tranche A Commitments; Continuation of Tranche B
Term Loans..............................................28
SECTION 2.02. Loans...................................................28
SECTION 2.03. Requests for Borrowings............ ....................29
SECTION 2.04. Funding of Borrowings...................................29
SECTION 2.05. Evidence of Debt........................................30
SECTION 2.06. Interest Elections......................................31
SECTION 2.07. Interest on Loans.......................................32
SECTION 2.08. Default Interest........................................32
SECTION 2.09. Alternate Rate of Interest..............................33
SECTION 2.10. Termination of Tranche A Commitments....................33
SECTION 2.11. Amortization of Term Loans..............................33
SECTION 2.12. Prepayment..............................................34
SECTION 2.13. Reserve Requirements; Change in Circumstances...........37
SECTION 2.14. Change in Legality......................................38
SECTION 2.15. Indemnity...............................................39
SECTION 2.16. Pro Rata Treatment......................................39
SECTION 2.17. Sharing of Setoffs......................................40
SECTION 2.18. Payments................................................40
SECTION 2.19. Taxes...................................................40
SECTION 2.20. Duty to Mitigate; Assignment of Rights Under Certain
Circumstances...........................................42
ARTICLE III
Conditions
SECTION 3.01. Effectiveness...........................................43
ARTICLE IV
Representations and Warranties
SECTION 4.01. Organization; Powers....................................43
SECTION 4.02. Authorization; Enforceability...........................43
SECTION 4.03. Governmental Approvals; No Conflicts....................43
SECTION 4.04. Financial Condition; No Material Adverse Change.........44
SECTION 4.05. Properties..............................................44
SECTION 4.06. Litigation and Environmental Matters....................44
SECTION 4.07. Compliance with Laws and Agreements.....................45
SECTION 4.08. Not an Investment Company or Holding Company............45
SECTION 4.09. Taxes...................................................45
SECTION 4.10. ERISA...................................................45
SECTION 4.11. Disclosure..............................................45
SECTION 4.12. Federal Reserve Regulations.............................46
SECTION 4.13. Subsidiaries............................................46
SECTION 4.14. Security Documents......................................46
ARTICLE V
Affirmative Covenants
SECTION 5.01. Financial Statements and Other Information..............47
SECTION 5.02. Notices of Material Events..............................48
SECTION 5.03. Existence; Conduct of Business..........................49
SECTION 5.04. Payment of Obligations..................................49
SECTION 5.05. Maintenance of Properties; Insurance....................49
SECTION 5.06. Books and Records; Inspection Rights....................49
SECTION 5.07. Compliance with Laws....................................49
SECTION 5.08. Use of Proceeds.........................................50
SECTION 5.09. Information Regarding Collateral........................50
SECTION 5.10. Casualty and Condemnation...............................51
SECTION 5.11. Additional Subsidiaries.................................51
SECTION 5.12. Further Assurances......................................51
SECTION 5.13. Interest Rate Protection................................51
SECTION 5.14. Compliance with Federal Reserve Regulations.............51
ARTICLE VI
Negative Covenants
SECTION 6.01. Debt and Preferred Stock of Subsidiaries................52
SECTION 6.02. Liens...................................................53
SECTION 6.03. Sale and Leaseback Transactions.........................54
SECTION 6.04. Fundamental Changes.....................................55
SECTION 6.05. Asset Sales.............................................55
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SECTION 6.06. Investments, Loans, Advances, Guarantees and
Acquisitions............................................56
SECTION 6.07. Transactions with Affiliates............................57
SECTION 6.08. Restrictive Agreements..................................58
SECTION 6.09. Swap Agreements.........................................58
SECTION 6.10. Restricted Payments; Certain Payments of Indebtedness...58
SECTION 6.11. Amendment of Material Documents.........................60
SECTION 6.12. Consolidated Interest Coverage Ratio....................60
SECTION 6.13. Consolidated Leverage Ratio.............................60
SECTION 6.14. Consolidated Fixed Charge Coverage Ratio................60
SECTION 6.15. Capital Expenditures....................................60
ARTICLE VII
Events Of Default
ARTICLE VIII
The Agents
ARTICLE IX
Joint And Several Liability Of Borrowers; Guarantee
SECTION 9.01. Joint and Several Liability of Borrowers................65
SECTION 9.02. Guarantee...............................................65
ARTICLE X
Miscellaneous
SECTION 10.01. Notices.................................................67
SECTION 10.02. Waivers; Amendments.....................................67
SECTION 10.03. Expenses; Indemnity; Damage Waiver......................69
SECTION 10.04. Successors and Assigns..................................70
SECTION 10.05. Survival................................................74
SECTION 10.06. Counterparts; Integration; Effectiveness................74
SECTION 10.07. Severability............................................75
SECTION 10.08. Right of Setoff.........................................75
SECTION 10.09. Governing Law; Jurisdiction; Consent to Service of
Process.................................................75
SECTION 10.10. WAIVER OF JURY TRIAL....................................76
SECTION 10.11. Headings................................................76
SECTION 10.12. Confidentiality.........................................76
SECTION 10.13. Conversion of Currencies................................77
SECTION 10.14. Release of Grantors and Collateral......................78
SECTION 10.15. Incorporation of Amendments to Five-Year Credit
Agreement...............................................78
SECTION 10.16. Security Documents......................................79
SECTION 10.17. Power of Attorney.......................................79
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SECTION 10.18. Appointment.............................................79
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EXHIBITS
Exhibit A - Administrative Questionnaire
Exhibit B - Form of Assignment and Assumption
Exhibit C - Executed 2002 Form of Guarantee and Collateral
Agreement
Exhibit D - Executed 2002 Perfection Certificate
Exhibit E-1 - Executed 2002 New York Mortgage
Exhibit E-2 - Executed 2002 Wisconsin Mortgage
Exhibit E-3 - Executed 2002 Iowa Mortgage
SCHEDULES
Schedule 1.01(a) Cash Restructuring Charges
Schedule 1.01(b) Property Subject to Sales Contract Located in or near
Sydney, New South Wales, Australia
Schedule 2.01 Commitments
Schedule 4.02 Required Authorizations
Schedule 4.03 Required Approvals
Schedule 4.05 Real Properties
Schedule 4.06 Disclosed Matters
Schedule 4.13 Subsidiaries and Loan Parties
Schedule 4.14 Filing Offices
Schedule 6.01 Debt
Schedule 6.02 Liens
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AMENDED AND RESTATED TERM LOAN AGREEMENT dated as of May
24, 2004 (this "Agreement"), among THE READER'S DIGEST
ASSOCIATION, INC., as a Borrower and as the Guarantor (each
as defined herein), BOOKS ARE FUN, LTD., QSP, INC., and
REIMAN MEDIA GROUP, INC., as Borrowing Subsidiaries (as
defined herein), the LENDERS (as defined herein), ABN AMRO
BANK N.V., NATIONAL AUSTRALIA BANK LIMITED and THE ROYAL
BANK OF SCOTLAND plc, as co-documentation agents, and
JPMORGAN CHASE BANK, as administrative agent and as
collateral agent.
The Borrowers (such term and each other capitalized term used but not
otherwise defined herein having the meaning assigned to it in Article I),
certain of the Lenders and the Administrative Agent are parties to the Existing
Term Loan Agreement, under which Tranche B Term Loans in an aggregate principal
amount of $385,000,000 are outstanding on the date hereof and no Tranche A Term
Loans are outstanding. The Borrowers, certain of the Lenders representing the
Required Lenders under and as defined in the Existing Term Loan Agreement and
the Administrative Agent have entered into Amendment Agreement pursuant to
which, on the date hereof, subject to the conditions set forth therein, (a) the
Tranche A Lenders are making new Tranche A Term Loans to the Borrowers in an
aggregate principal amount of $200,000,000, (b) the proceeds of such Tranche A
Term Loans are being used to prepay a like principal amount of the outstanding
Tranche B Term Loans, with the result that $185,000,000 in aggregate principal
amount of the Tranche B Term Loans will remain outstanding and (c) the Existing
Term Loan Agreement is being amended and restated in the form of this Agreement.
The Lenders are willing to make the Tranche A Term Loans and continue the
remaining Tranche B Term Loans to the Borrowers on the terms and subject to the
conditions herein set forth.
Accordingly, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. DEFINITIONS. The following terms, as used herein, have the
following meanings:
"ABR Borrowing" means a Borrowing comprised of ABR Loans.
"ABR Loan" means any Loan bearing interest at a rate
determined by reference to the Alternate Base Rate in accordance with the
provisions of Article II.
"Acquisition" means the purchase of substantially all the
assets and rights, and assumption of certain liabilities, of Reiman Holding
Company, LLC; Reiman Publications, LLC; Reiman Management Company; Reiman
Advertising and Promotion, LLC; World Wide Country Tours, LLC and Homemaker
Schools, LLC pursuant to the Asset Purchase Agreement.
"Adjusted LIBO Rate" means, with respect to any Eurodollar
Borrowing for any Interest Period, an interest rate per annum (rounded upwards,
if necessary, to the next 1/16 of 1%) equal to (a) the LIBO Rate for such
Interest Period multiplied by (b) the Statutory Reserve Rate.
"Administrative Agent" means JPMCB in its capacity as
administrative agent for the Lenders hereunder, and its successors in such
capacity.
"Administrative Questionnaire" means an administrative
questionnaire in the form of Exhibit A hereto.
"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.
"Agents" means the Administrative Agent, the Collateral Agent
and the Syndication Agent.
"Agreement Currency" has the meaning set forth in Section
10.13(b).
"Alternate Base Rate" means, for any day, a rate per annum
(rounded upwards, if necessary, to the next 1/16 of 1%) equal to the greater of
(a) the Prime Rate in effect on such day and (b) the Federal Funds Effective
Rate in effect on such day plus 1/2 of 1%. Any change in the Alternate Base Rate
due to a change in the Prime Rate or the Federal Funds Effective Rate shall be
effective from and including the effective date of such change in the Prime Rate
or the Federal Funds Effective Rate, respectively.
"Amendment Agreement" means the Amendment Agreement dated as
of the date hereof among the Borrowers, certain of the Lenders and the
Administrative Agent, providing for the amendment and restatement of the
Existing Term Loan Agreement in the form of this Agreement.
"Applicable Creditor" has the meaning set forth in Section
10.13(b).
"Applicable Lending Office" means, with respect to each
Lender, such Lender's Domestic Lending Office in the case of an ABR Loan, or
such Lender's Eurodollar Lending Office in the case of a Eurodollar Loan.
"Applicable Rate" means on any date, with respect to any
Tranche A Term Loan or Tranche B Term Loan, the applicable rate per annum set
forth below in the applicable table under the caption "Eurodollar Spread" (in
the case of a Eurodollar Loan)
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or "ABR Spread" (in the case of an ABR Loan), as the case may be, based upon the
Ratings:
Tranche A Pricing Table
Ratings Eurodollar Spread ABR Spread
(S&P/Moody's)
Level 1 1.75% 0.75%
BBB/Baa2 or higher
Level 2 2.00% 1.00%
BB/Ba2 or higher and lower than
BBB/Baa2
Level 3 2.25% 1.25%
lower than BB and Ba2 or unrated
Tranche B Pricing Table
Ratings Eurodollar Spread ABR Spread
(S&P/Moody's)
Level 1 2.00% 1.00%
BB/Ba2 or higher
Level 2 2.25% 1.25%
lower than BB and Ba2 or unrated
For purposes of the foregoing tables, (i) if the Ratings in effect or deemed to
be in effect on any date fall in different Levels, the Applicable Rate shall be
determined on such date by reference to the Level corresponding to the lower
Rating, (ii) if either Moody's or S&P shall not have, or shall be deemed not to
have, a Rating in effect (other than because such rating agency shall no longer
be in the business of rating corporate debt obligations or corporate credit),
then such rating agency will be deemed to have in effect a Rating in Level 3 for
purposes of the Tranche A Pricing Table and Level 2 for purposes of the Tranche
B Pricing Table; and (iii) if any Rating established or deemed to have been
established by Moody's or S&P shall be changed (other than as a result of a
change in the rating system of either Moody's or S&P), such change shall be
effective as of the day after the date on which such change is first announced
by the rating agency making such change. Each change in the Applicable Rate
shall apply during the period commencing on the effective date of such change
and ending on the date immediately preceding the effective date of the next such
change. If the rating system of either Moody's or S&P shall change, or if either
such rating agency shall cease to be in the business of rating corporate debt
obligations or corporate credit, the Company and the Lenders shall negotiate in
good faith to amend the references to specific ratings in this definition to
reflect such changed rating system or the non-availability of ratings from such
rating agency, and pending any such amendment the Applicable Rate shall be
determined by reference to the ratings provided immediately prior to such change
or cessation.
"Approved Fund" has the meaning set forth in Section 10.04.
"Asset Purchase Agreement" means the Asset Purchase Agreement
dated as of March 21, 2002, among The Reader's Digest Association, Inc., Reiman
Holding Company, LLC and certain other parties.
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"Assignee" means a Person to whom any Lender has assigned all
or a portion of its rights and obligations under this Agreement (including, if
the Tranche A Commitments remain in effect, all or a portion of its Tranche A
Commitment and the Loans at the time owing to it) pursuant to Section 10.04.
"Assignment and Assumption" means an agreement substantially
in the form of Exhibit B hereto.
"Board" means the Board of Governors of the Federal Reserve
System of the United States.
"Borrower" means the Company or any Borrowing Subsidiary.
"Borrowing" means Loans of the same Class and, in the case of
Eurodollar Loans, as to which a single Interest Period is in effect.
"Borrowing Subsidiary" means any Subsidiary named as such in
the heading of this Agreement.
"Borrowing Request" means a request for a Borrowing in
accordance with Section 2.03.
"Business Day" means any day (other than a Saturday, Sunday or
legal holiday in the State of New York) on which banks are open for business in
New York City; provided, however, that when used in connection with a Eurodollar
Loan, the term "Business Day" shall also exclude any day on which banks are not
open for dealings in dollar deposits in the London interbank market.
"Capital Lease Obligations" of any Person means the
obligations of such Person to pay rent or other amounts under any lease of (or
other arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such Person under GAAP,
and the amount of such obligations shall be the capitalized amount thereof
determined in accordance with GAAP.
A "Change in Control" shall be deemed to have occurred (a) if
the equity capital structure of the Reader's Digest Association, Inc. consists
of Class A Non-Voting Common Stock and Class B Voting Common Stock, then if (i)
The DeWitt Wallace-Reader's Digest Fund, Inc., the Lila Wallace-Reader's Digest
Fund, Inc., The Employee Ownership Plan and 401(k) Partnership of the Reader's
Digest Association, Inc. and any other employee benefit plans of the Company or
any Subsidiary, taken together (the "Current Control Group"), shall cease to be
the "beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange
Act of 1934, as in effect as of the date hereof) of shares representing 30% or
more of the voting power represented by the issued and outstanding capital stock
of the Company; (ii) any person or group (other than the Current Control Group)
shall acquire "beneficial ownership" (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934, as in effect as of the date hereof) of shares
representing a greater percentage of the voting power represented by the issued
and
4
outstanding capital stock of the Company than the percentage of such voting
power represented by the shares beneficially owned by the Current Control Group;
or (iii) during any period of 12 consecutive calendar months, (A) the directors
(the "preceding directors") constituting the Company's board of directors at the
beginning of such period and (B) any new directors (x) whose election by the
Company's directors or whose nomination for election by the Company's
stockholders was, in each case, approved by a majority of the Company's
directors then still in office who were either preceding directors or whose
election or nomination for election was previously so approved or (y) whose
election or nomination for election was voted for or approved, as the case may
be, by the Current Control Group, when all such directors are taken together,
shall cease for any reason to constitute a majority of the Company's board of
directors, and (b) if the equity capital structure of the Company is different
from that described in clause (a) above, then if (i) any person or group shall
acquire "beneficial ownership" (as defined in Rule 13d-3 under the Securities
Exchange Act of 1934, as in effect as of the date hereof) of Equity Interests
representing 35% or more of the voting power represented by the issued and
outstanding Equity Interests of the Company; or (ii) during any period of 12
consecutive calendar months, (A) the directors (the "preceding directors")
constituting the Company's board of directors at the beginning of such period
and (B) any new directors whose election by the Company's directors or whose
nomination for election by the Company's stockholders was, in each case,
approved by a majority of the Company's directors then in office who were either
preceding directors or whose election or nomination for election was previously
so approved, when all such directors are taken together, shall cease for any
reason to constitute a majority of the Company's board of directors. As used in
this definition, "group" shall have the meaning given to such term in Rule 13d-5
of the Securities Exchange Act of 1934 as in effect on the date hereof.
Notwithstanding anything to the contrary in clause (a) above, no Change of
Control shall be deemed to have occurred as a result of the Recapitalization.
"Change in Law" means (a) the adoption of any law, rule or
regulation after the date of this Agreement, (b) any change in any law, rule or
regulation or in the interpretation or application thereof after the date of
this Agreement or (c) compliance by any Lender with any request, guideline or
directive (whether or not having the force of law) of any Governmental Authority
made or issued after the date of this Agreement.
"Class", when used in reference to any Loan or Borrowing,
refers to whether such Loan, or the Loans comprising such Borrowing, are Tranche
A Term Loans or Tranche B Term Loans.
"Class B Repurchase" means the purchase by the Company of
shares of its Class B Voting Common Stock for consideration not to exceed
$100,000,000 pursuant to and on the terms set forth in the Recapitalization
Agreement.
"CLO" has the meaning set forth in Section 10.04.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time.
5
"Collateral" means "Collateral" as defined in the Guarantee
and Collateral Agreement and any other property or assets in which Liens are
created to secure the Obligations under any other Security Document.
"Collateral Agent" means JPMCB, in its capacity as collateral
agent for the Lenders.
"Collateral and Guarantee Requirement" means, at any time, the
requirement that:
(a) the Administrative Agent shall have received from the Company and each
Domestic Subsidiary (other than (i) the Excluded Subsidiaries and (ii)
gifts.com, Inc. for so long as efforts to sell or wind down such
Subsidiary shall not have been terminated) existing at such time either
a counterpart of the Guarantee and Collateral Agreement duly executed
and delivered on behalf of the Company or such Subsidiary or, in the
case of any Person (other than an Excluded Subsidiary) that shall have
become a Domestic Subsidiary after the Original Effective Date, a
supplement to the Guarantee and Collateral Agreement, in the form
specified therein, duly executed and delivered on behalf of such
Domestic Subsidiary;
(b) the Administrative Agent shall have received any Foreign Pledge
Agreements that it determines, based on the advice of counsel, to be
necessary or advisable in connection with the pledge of 65% of the
outstanding voting Equity Interests of The Reader's Digest Association
Limited, Verlag das Beste GmbH and Selection du Reader's Digest S.A.,
or any other first-tier Foreign Subsidiary that has accounted for 5% or
more of Consolidated Revenue for any period of four fiscal quarters;
(c) all outstanding Equity Interests of any Subsidiary or any other Person
directly owned by any Grantor at such time shall have been pledged
pursuant to the Guarantee and Collateral Agreement (except that the
Grantors shall not be required to pledge more than 65% of outstanding
voting Equity Interests of any Foreign Subsidiary) and the Collateral
Agent shall have received certificates representing all such Equity
Interests (other than (i) uncertificated Equity Interests, (ii) Equity
Interests in gifts.com, Inc. for so long as efforts to sell or wind
down such Subsidiary shall not have been terminated, and (iii) Equity
Interests in LookSmart, Ltd. and WebMD Corporation), together with
undated stock powers or other instruments of transfer with respect
thereto endorsed in blank;
(d) all Debt of any Person that is owed to any Grantor at such time (other
than obligations that individually do not exceed $1,000,000) shall have
been pledged pursuant to the Guarantee and Collateral Agreement, and
the Collateral Agent shall have received all promissory notes or other
instruments evidencing any such Debt, together with undated instruments
of transfer with respect thereto endorsed in blank;
6
(e) all documents and instruments, including all Uniform Commercial Code
financing statements and filings with the United States Copyright
Office and the United States Patent and Trademark Office, required by
law or reasonably requested by the Collateral Agent to be filed,
registered or recorded to perfect the Liens intended to be created by
the Guarantee and Collateral Agreement shall have been filed,
registered or recorded or delivered to the Collateral Agent for filing,
registration or recording; provided that Liens on Intellectual
Property, as defined in the Guarantee and Collateral Agreement, will be
perfected by filings in the United States Copyright Office and the
United States Patent and Trademark Office only insofar as they relate
to items of Intellectual Property deemed by the Collateral Agent, after
consultation with the Company, to be material to the Company and the
Subsidiaries, taken as a whole, and will not be perfected by filings in
any jurisdiction outside the United States;
(f) the Collateral Agent shall have received (i) counterparts of a Mortgage
with respect to each Mortgaged Property existing at such time, duly
executed and delivered by the record owner of such Mortgaged 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 first Lien on the Mortgaged Property described
therein, free of any other Liens except as expressly permitted by
Section 6.02, together with such endorsements, coinsurance and
reinsurance as the Collateral Agent or the Required Lenders may
reasonably request, and (iii) such appraisals, surveys, legal opinions
and other documents as may be required by applicable law or regulation
or as the Collateral Agent or the Required Lenders may reasonably
request with respect to any such Mortgage or Mortgaged Property; and
(g) each Grantor shall have obtained all consents and approvals required to
be obtained by it in connection with the execution and delivery of the
Guarantee and Collateral Agreement and each other Security Document to
which it is a party, the performance of its obligations thereunder and
the granting by it of the Liens thereunder;
provided, that the foregoing definition shall not require the
creation or perfection of pledges of or security interests in, or the obtaining
of title insurance or legal opinions with respect to, particular assets of the
Grantors if and for so long as, the Collateral Agent, in consultation with the
Company, determines that the cost of creating or perfecting such pledges or
security interests in such assets or obtaining title insurance or legal opinions
in respect of such assets shall be excessive in view of the benefits to be
obtained by the Lenders therefrom. The Collateral Agent may grant extensions of
time for the perfection of security interests in or the obtaining of title
insurance or legal opinions with respect to particular assets (including
extensions beyond the Effective Date for the perfection of security interests in
the assets of the Company and the Subsidiaries on such date) where it determines
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
Security Documents.
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"Company" means The Reader's Digest Association, Inc., a
Delaware corporation.
"Consolidated Assets" means, at any time, all assets of the
Company and its consolidated Subsidiaries at such date, as determined on a
consolidated basis in accordance with GAAP.
"Consolidated Capital Expenditures" means, for any period, (a)
the additions to property, plant and equipment and other capital expenditures of
the Company and its consolidated Subsidiaries that are (or would be) set forth
in a consolidated statement of cash flows of the Company for such period
prepared in accordance with GAAP and (b) Capital Lease Obligations incurred by
the Company and its consolidated Subsidiaries during such period.
"Consolidated EBITDA" means, for any period, Consolidated Net
Income for such period plus, to the extent not otherwise included in such
Consolidated Net Income, the sum (without duplication) of (a) income tax
expense, (b) Interest Expense, (c) depreciation and amortization, (d)
non-recurring, non-cash restructuring charges and cash restructuring charges
identified in Schedule 1.01(a), (e) losses on the contemplated sale of the
Company's subsidiary gifts.com, Inc., and extraordinary losses, (f) non-cash
charges in respect of compensation paid to employees or members of the Board of
Directors of the Company in the form of equity incentives (including, but not
limited to, stock options, restricted stock and deferred stock) and (g) the
cumulative effect of changes in accounting principles, minus, to the extent
added in computing such Consolidated Net Income, the sum (without duplication)
of (x) consolidated interest income, (y) extraordinary gains and (z) the
cumulative effect of changes in accounting principles.
"Consolidated Fixed Charge Coverage Ratio" means the ratio of
(a) Consolidated EBITDA minus the sum of (i) Consolidated Capital Expenditures,
(ii) taxes actually paid in cash, (iii) permitted dividends actually paid in
cash, (iv) amounts paid in cash or other consideration other than Equity
Interests in connection with share repurchases (other than the Class B
Repurchase and payments to holders of not more than $5,000,000 in stated value
of preferred stock of the Company that are required to be made as a result of
the exercise of appraisal rights to which they may be entitled in connection
with the Recapitalization), and (v) scheduled amortization payments in respect
of Debt, to (b) Consolidated Net Interest Expense.
"Consolidated Interest Coverage Ratio" means the ratio of (a)
Consolidated EBITDA to (b) Consolidated Net Interest Expense.
"Consolidated Leverage Ratio" means, at any time, the ratio of
(a) Consolidated Total Debt at such time to (b) Consolidated EBITDA for the
period of four fiscal quarters ended at or most recently prior to such time.
8
"Consolidated Net Income" means, for the Company and the
consolidated Subsidiaries for any period, the aggregate net income (or net
deficit) of such persons, determined on a consolidated basis in accordance with
GAAP consistently applied.
"Consolidated Net Interest Expense" means, with respect to the
Company and the consolidated Subsidiaries for any period, Interest Expense (net
of any interest income for such period determined on a consolidated basis in
accordance with GAAP).
"Consolidated Revenue" means, for the Company and the
consolidated Subsidiaries for any period, the aggregate revenues of such
persons, determined on a consolidated basis in accordance with GAAP consistently
applied.
"Consolidated Total Debt" means, for the Company and the
consolidated Subsidiaries at any date, the aggregate Debt of such persons,
determined on a consolidated basis in accordance with GAAP consistently applied.
"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" shall have meanings correlative
thereto.
"Current Control Group" has the meaning set forth in the
definition of "Change in Control".
"Debt" of any Person means, without duplication, (a) all
obligations of such Person for borrowed money, (b) all obligations of such
Person evidenced by bonds, debentures, notes or similar instruments, (c) all
obligations of such Person upon which interest charges are customarily paid, (d)
the principal amounts (as defined in the definition of "Swap" herein) of the
obligations of such Person under Swap Agreements, (e) all obligations of such
Person under conditional sale or other title retention agreements relating to
property acquired by such Person, (f) all obligations of such Person in respect
of the deferred purchase price of property or services, (g) all Debt of others
secured by (or for which the holder of such Debt has an existing right,
contingent or otherwise, to be secured by) any Lien on property owned or
acquired by such Person, whether or not the Debt secured thereby has been
assumed, (h) all Guarantees by such Person of Debt of others, (i) all Capital
Lease Obligations of such Person, (j) all Securitization Transactions of such
Person and (k) all obligations, contingent or otherwise, of such Person as an
account party in respect of letters of credit, letters of guaranty and banker's
acceptances; provided, however, that Debt of any Person shall not include (i)
trade payables, (ii) any obligations of such Person incurred in connection with
letters of credit, letters of guaranty, banker's acceptances, bills of exchange
and similar instruments obtained or created in the ordinary course of business
to support or evidence obligations of such Person that do not constitute Debt,
(iii) endorsements of checks, bills of exchange and other instruments for
deposit or collection in the ordinary course of business, (iv) 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
9
basis customarily extended to such Person, (v) any Debt secured on a
non-recourse basis by any assets of such Person to the extent that the
outstanding balance thereof exceeds the fair market value of such assets, (vi)
statutory or other legal requirements to make deposits in connection with
sweepstakes or similar contests, or surety bonds posted pursuant to such
requirements and (vii) obligations under overdraft arrangements with banks
outside the United States incurred in the ordinary course of business to cover
working capital needs, but only to the extent that such overdrafts remain
outstanding for not more than three Business Days and do not in the aggregate at
any time exceed $5,000,000.
"Default" means any condition or event which constitutes an
Event of Default or which upon notice, lapse of time or both would, unless cured
or waived, become an Event of Default.
"Disclosed Matters" means the actions, suits and proceedings
and the environmental matters disclosed in Schedule 4.06.
"Dollars" or "$" means lawful currency of the United States.
"Domestic Lending Office" means, with respect to any Lender,
the office of such Lender specified as its "Domestic Lending Office" on Schedule
2.01 or, as to any person who becomes a Lender after the date hereof, on the
Assignment and Assumption executed by such person or such other office of such
Lender as such Lender may hereafter designate from time to time as its "Domestic
Lending Office" by notice to the Company and the Administrative Agent.
"Domestic Subsidiary" means any Subsidiary organized under the
laws of the United States, any State thereof, the District of Columbia or any of
its territories or possessions or any political subdivision thereof.
"Effective Date" means the date on which the conditions
specified in Section 7 of the Amendment Agreement are satisfied and this
Agreement becomes effective.
"Environmental Laws" means any and all federal, state and
local statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees, permits, concessions, grants, franchises, licenses, agreements or other
governmental restrictions relating to the environment or to emissions,
discharges or releases of pollutants, contaminants, petroleum or petroleum
products, chemicals or industrial, toxic or hazardous substances or wastes into
the environment including, without limitation, ambient air, surface water,
ground water, or land, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
pollutants, contaminants, petroleum or petroleum products, chemicals or
industrial, toxic or hazardous substances or wastes or the clean-up or other
remediation thereof.
"Environmental Liability" means any liability, contingent or
otherwise (including any liability for damages, costs of environmental
remediation, fines, penalties or indemnities), of the Company or any Subsidiary
directly or indirectly resulting from or
10
based upon (a) violation or alleged 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.
"Equity Interest" means shares of capital stock, partnership
interests, membership interests in a limited liability company, beneficial
interests in a trust or other equity ownership interests in a Person, and any
warrants or options or other rights to acquire any of the foregoing.
"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, together with the Company, is treated as a single employer
under Section 414 of the Code.
"ERISA Event" means (a) any "reportable event", as defined in
Section 4043 of ERISA or the regulations issued thereunder (other than an event
for which the 30-day notice period is waived), with respect to a Plan; (b) the
existence with respect to any Plan of an "accumulated funding deficiency" (as
defined in Section 412 of the Code or Section 302 of ERISA), whether or not
waived; (c) the filing pursuant to Section 412(d) of the Code or Section 303(d)
of ERISA of an application for a waiver of the minimum funding standard with
respect to any Plan; (d) the incurrence by the Company or any of its ERISA
Affiliates of any liability under Title IV of ERISA with respect to the
termination of any Plan; (e) the receipt by the Company or any ERISA Affiliate
from the PBGC or a plan administrator of any notice of termination, or the
intention to terminate, any Plan or Plans or to appoint a trustee to administer
any Plan where the Administrative Agent or the Required Lenders shall have
determined in good faith that such termination or appointment is reasonably
likely to result; (f) the incurrence by the Company or any of its ERISA
Affiliates of any liability with respect to the withdrawal or partial withdrawal
from any Plan or Multiemployer Plan; or (g) the receipt by the Company or any
ERISA Affiliate of any notice of the imposition of, or an intention to impose,
Withdrawal Liability, where the Administrative Agent or the Required Lenders
shall have determined in good faith that such imposition is reasonably likely to
result or a determination that a Multiemployer Plan is, or is expected to be,
insolvent or in reorganization, within the meaning of Title IV of ERISA.
"Eurodollar Borrowing" means a Borrowing comprised of
Eurodollar Loans.
"Eurodollar Lending Office" means, with respect to each
Lender, the branch or Affiliate of such Lender which such Lender has designated
as its "Eurodollar Lending Office" on Schedule 2.01 or, as to any person who
becomes a Lender after the date hereof, on the Assignment and Assumption
executed by such person or such other
11
office of such Lender as such Lender may hereafter designate from time to time
as its "Eurodollar Lending Office" by notice to the Company and the
Administrative Agent.
"Eurodollar Loan" means any Loan bearing interest at a rate
determined by reference to the Adjusted LIBO Rate in accordance with the
provisions of Article II.
"Event of Default" has the meaning set forth in Article VII.
"Excess Cash Flow" means, for any fiscal year, the sum
(without duplication) of:
(a) the Consolidated Net Income of the Company and the consolidated
Subsidiaries for such fiscal year, adjusted to exclude any gains or
losses attributable to Prepayment Events; plus
(b) the excess, if any, of the Net Proceeds received during such fiscal
year by the Company and its consolidated Subsidiaries in respect of any
Prepayment Events over the sum of (i) the aggregate principal amount of
Term Loans prepaid pursuant to Section 2.12(b) with such Net Proceeds
and (ii) the aggregate amount of such Net Proceeds reinvested or held
for reinvestment in property, plant or equipment of the Company and the
Subsidiaries as provided in Section 2.12(b); plus
(c) depreciation, amortization and other non-cash charges or losses
deducted in determining such Consolidated Net Income for such fiscal
year; plus
(d) the amount, if any, by which Net Working Capital decreased during such
fiscal year; minus
(e) the sum of (i) any non-cash gains included in determining such
consolidated net income (or loss) for such fiscal year plus (ii) the
amount, if any, by which Net Working Capital increased during such
fiscal year; minus
(f) the sum of (i) Consolidated Capital Expenditures for such fiscal year
(except to the extent attributable to the incurrence of Capital Lease
Obligations or otherwise financed by incurring Long-Term Debt) plus
(ii) cash consideration paid during such fiscal year to make
acquisitions or other capital investments (except to the extent
financed by incurring Long-Term Debt) plus (iii) the principal amount
of any Long-Term Debt referred to in the preceding clauses (i) and (ii)
that is incurred to finance capital expenditures, acquisitions or other
capital investments in such fiscal year and that is repaid in such
fiscal year; minus
(g) the aggregate principal amount of Long-Term Debt or Capital Lease
Obligations repaid by the Company and the consolidated Subsidiaries
during such fiscal year, excluding (i) Term Loans prepaid pursuant to
Section 2.12(a), (b), (c) or (d), (ii) repayments or prepayments of
Long-Term Debt financed by the incurrence of other Long-Term Debt and
(iii) repayments or prepayments under
12
revolving credit or similar arrangements without concomitant reductions
of the lenders' commitments by the amounts repaid or prepaid; minus
(h) payments to holders of not more than $5,000,000 in stated value of
preferred stock of the Company that are required to be made as a result
of the exercise of appraisal rights to which they may be entitled in
connection with the Recapitalization.
"Excluded Subsidiaries" means, at any time, Domestic
Subsidiaries that do not represent more than 1% for any such Subsidiary, or more
than 5% in the aggregate for all such Subsidiaries, of either (a) Consolidated
Assets or (b) the consolidated revenues of the Company and the Subsidiaries for
the period of four fiscal quarters most recently ended, and that (i) do not own
Equity Interests or Debt (other than de minimis Debt) of any Material
Subsidiary, (ii) do not own material intellectual property and (iii) do not have
any Debt that is guaranteed by the Company or any Material Subsidiary; provided
that no Subsidiary that is a Borrowing Subsidiary under this Agreement or the
Five-Year Credit Agreement shall be an Excluded Subsidiary.
"Excluded Taxes" means, with respect to the Administrative
Agent, any Lender or any other recipient of any payment to be made by or on
account of any obligation of any Borrower hereunder, (a) income, franchise or
other taxes imposed on (or measured by) its net income by the United States, or
by the jurisdiction under the laws of which such recipient is organized or in
which its principal office is located or, in the case of any Lender, in which
its Applicable Lending Office is located, (b) any branch profits taxes imposed
by the United States or any similar tax imposed by any other jurisdiction in
which such Borrower is located and (c) in the case of a Foreign Lender (other
than an assignee pursuant to a request by the Borrower under Section 2.20(b)),
any withholding tax that is imposed by the United States or by any other
jurisdiction in which such Lender is organized, has its principal office or its
Applicable Lending Office on amounts payable to such Foreign Lender at the time
such Foreign Lender becomes a party to this Agreement (or designates a new
lending office) or is attributable to such Foreign Lender's failure to comply
with Section 2.19(e), except to the extent that such Foreign Lender (or its
assignor, if any) was entitled, at the time of designation of a new lending
office (or assignment), to receive additional amounts from any Borrower with
respect to such withholding tax pursuant to Section 2.19(a).
"Existing Term Loan Agreement" means the Term Loan Agreement
dated as of May 20, 2002, among the Company, certain borrowing subsidiaries,
certain lenders and JPMorgan Chase Bank, as administrative agent.
"Federal Funds Effective Rate" means, for any day, the
weighted average (rounded upwards, if necessary, to the next 1/100 of 1%) of the
rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published on the next
succeeding Business Day by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day that is a Business Day, the average
(rounded upwards, if necessary, to the next 1/100 of 1%) of
13
the quotations for such day for such transactions received by the Administrative
Agent from three Federal funds brokers of recognized standing selected by it.
"Financial Officer" of any Person shall mean the chief
financial officer, principal accounting officer, treasurer or comptroller of
such Person.
"Five-Year Credit Agreement" means the Amended and Restated
Five-Year Revolving Credit and Competitive Advance Facility Agreement dated as
of May 20, 2002, among the Company, certain borrowing subsidiaries, certain
lenders and JPMorgan Chase Bank, as administrative agent.
"Foreign Lender", with respect to any Loan, means any Lender
making such Loan that is organized under the laws of a jurisdiction other than
the United States.
"Foreign Pledge Agreement" means a pledge agreement governed
by the law of a jurisdiction other than the United States and satisfactory in
form and substance to the Administrative Agent and the Company.
"Foreign Subsidiary" means any Subsidiary organized under the
laws of a jurisdiction outside the United States or any of its territories or
possessions or any political subdivision thereof.
"GAAP" means United States generally accepted accounting
principles, applied on a consistent basis.
"Governmental Authority" means the government of the United
States, any other nation or any political subdivision thereof, whether state or
local, and any agency, authority, instrumentality, regulatory body, court,
central bank or other entity exercising executive, legislative, judicial,
taxing, regulatory or administrative powers or functions of or pertaining to
government.
"Granting Lender" shall have the meaning assigned to such term
in Section 10.04(h).
"Grantors" means the Company and each Domestic Subsidiary that
is, or is required to be, a party to the Guarantee and Collateral Agreement or
any other Security Document.
"Guarantee" means any agreement by which the Company or any
Subsidiary assumes, guarantees, endorses, contingently agrees to purchase or
provide funds for the payment of, or otherwise becomes liable upon, the Debt of
another Person, or agrees to maintain the net worth or working capital or other
financial condition of such Person so as to enable such Person to pay such Debt
or otherwise assure any creditor of such Person against loss with respect to
such Debt, but shall not include (i) customary indemnifications, representations
and warranties made in connection with purchases, sales or leasing of property
or assets or issuances of securities, (ii) assurances given in the ordinary
course of business of the payment of obligations of customers or suppliers of
the Company or any Subsidiary, (iii) retained liability in connection with sales
of accounts
14
receivable or chattel paper in the ordinary course of business (but
only to the extent customary in connection with sales accounted for as true
sales) or (iv) guarantees of loans or advances made to present or former
officers and directors of the Company or any Subsidiary (x) to enable them to
acquire Equity Interests of the Company or any Subsidiary or (y) so long as the
aggregate amount thereof does not exceed $3,000,000, for any other purpose.
"Guarantee and Collateral Agreement" means the Guarantee and
Collateral Agreement among the Company, the Collateral Agent and the Subsidiary
Guarantors substantially in the form of Exhibit C.
"Guarantor" means the Company, in its capacity as guarantor of
the Obligations hereunder.
"Hazardous Materials" means all explosive or radioactive
substances or wastes and all hazardous or toxic substances, wastes or other
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 which in each
case are regulated pursuant to any Environmental Law.
"Headquarters Sale and Leaseback" means a sale and leaseback
transaction consisting of the sale of the Company's headquarters located in the
town of New Castle and having a mailing address at Reader's Digest Road,
Pleasantville, NY 10570, for Net Proceeds of not less than $35,000,000, which
Net Proceeds shall be used to repay (a) amounts outstanding under this Agreement
as required pursuant to Section 2.12(b) hereof or (b) Standby Loans under the
Five-Year Credit Agreement to the extent such Standby Loans have been borrowed
to prepay Term Loans outstanding hereunder, and the partial leaseback of such
headquarters by the Company.
"Indemnified Taxes" means Taxes, including Other Taxes, but
excluding Excluded Taxes.
"Indemnitee" shall have the meaning assigned to such term in
Section 10.03(b).
"Information" shall have the meaning assigned to such term in
Section 10.12.
"Information Memorandum" means the Confidential Information
Memorandum dated April 2002 relating to the Company and the Transactions.
"Intellectual Property" shall have the meaning assigned to
such term in the Guarantee and Collateral Agreement.
"Interest Election Request" means, a request by any Company to
convert or continue a Borrowing in accordance with Section 2.06.
15
"Interest Expense" means, for any period, the interest expense
of the Company and the consolidated Subsidiaries for such period determined on a
consolidated basis in accordance with GAAP (and giving effect to any Swap
Agreements that have the effect of increasing or decreasing such interest
expense), including (i) the amortization of debt discounts to the extent
included in interest expense in accordance with GAAP, (ii) the amortization of
all fees (including fees with respect to interest rate protection agreements or
other interest rate hedging agreements) payable in connection with the
incurrence of indebtedness to the extent included in interest expense in
accordance with GAAP, (iii) the portion of any rents payable under capital
leases allocable to interest expense in accordance with GAAP and (iv) the amount
of commitment fees incurred prior to the Original Effective Date under the Fee
Letter dated as of March 21, 2002, as amended as of April 19, 2002, among the
Company, JPMCB and GSCP; provided, that for purposes of computing the
Consolidated Interest Coverage Ratio and the Consolidated Fixed Charge Coverage
Ratio for any period, Interest Expense will exclude the effect of any
acceleration of the amortization of deferred financing fees paid in cash in
earlier periods as a result of the making of the Tranche A Term Loans and the
application of the proceeds thereof as provided herein.
"Interest Payment Date" means (a) with respect to any Loan,
the last day of each Interest Period applicable to the Borrowing of which such
Loan is a part and, in addition, the date of any prepayment of such Loan or
conversion of such Loan to a Loan of a different Type and (b) in the case of a
Eurodollar Loan with an Interest Period of more than three months' duration,
each day that would have been an Interest Payment Date for such Loan had
successive Interest Periods of three months' duration been applicable to such
Loan.
"Interest Period" means (a) as to any Eurodollar Borrowing,
the period commencing on the date of such Borrowing or on the last day of the
immediately preceding Interest Period applicable to such Borrowing, as the case
may be, and ending on the numerically corresponding day (or, if there is no
numerically corresponding day, on the last day) in the calendar month that is 1,
2, 3 or 6 months thereafter, as the Borrower may elect and (b) as to any ABR
Borrowing, the period commencing on the date of such Borrowing or on the last
day of the immediately preceding Interest Period applicable to such Borrowing,
as the case may be, and ending on the earliest of (i) the next succeeding March
31, June 30, September 30 or December 31, (ii) the Tranche A Maturity Date or
the Tranche B Maturity Date, as the case may be, and (iii) the date such
Borrowing is converted to a Borrowing of a different Type or repaid or prepaid
in accordance with Section 2.11 or Section 2.12; provided, however, that if any
Interest Period would end on a day other than a Business Day, such Interest
Period shall be extended to the next succeeding Business Day unless, in the case
of Eurodollar Loans only, such next succeeding Business Day would fall in the
next calendar month, in which case such Interest Period shall end on the next
preceding Business Day. Interest shall accrue from and including the first day
of an Interest Period to but excluding the last day of such Interest Period.
"JPMCB" means JPMorgan Chase Bank, and its successors.
16
"Judgment Currency" shall have the meaning assigned to such
term in Section 10.13(b).
"Lenders" means the Tranche A Lenders and the Tranche B
Lenders.
"LIBO Rate" means, with respect to any Eurodollar Borrowing
for any Interest Period, an interest rate per annum (rounded upwards, if
necessary, to the next 1/100 of 1%) equal to the arithmetic average of the rates
that appear on the Reuters Screen LIBO Page as of 11:00 a.m. (London time) on
the date two Business Days prior to the commencement of such Interest Period for
deposits in Dollars with a maturity comparable to such Interest Period or, in
the event no such rates appear on the Reuters Screen LIBO Page, the rate at
which deposits in Dollars approximately equal in principal amount to such
Borrowing and for a maturity comparable to such Interest Period are offered to
the principal London office of the Administrative Agent in immediately available
funds in the London interbank market at approximately 11:00 a.m., London time,
two Business Days prior to the commencement of such Interest Period.
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
asset. For the purposes of this Agreement, the Company or any Subsidiary shall
be deemed to own subject to a Lien any asset which it has acquired or holds
subject to the interest of a vendor or lessor under any conditional sale
agreement, capital lease or other title retention agreement relating to such
asset.
"Loan" means a Tranche A Term Loan or a Tranche B Term Loan.
"Loan Documents" means this Agreement, the Guarantee and
Collateral Agreement, each Mortgage and the notes and each amendment,
supplement, modification, consent or waiver of, to or in respect of any of the
foregoing.
"Loan Parties" means the Company, the Borrowing Subsidiaries
and the Grantors.
"Long-Term Debt" means any Debt that, in accordance with GAAP,
constitutes (or, when incurred, constituted) a long-term liability.
"Material Adverse Effect" means (a) a materially adverse
effect on the business, assets, operations or financial condition of the Company
and its Subsidiaries, taken as a whole, (b) material impairment of the ability
of the Company and its Subsidiaries, taken as a whole, to perform the
Obligations or (c) material impairment of the rights available to the Lenders or
the Agents under any Loan Document.
"Material Debt" means Debt (other than the Loans), or
obligations in respect of one or more Swap Agreements, of any one or more of the
Company and its Subsidiaries in an aggregate principal amount exceeding
$20,000,000 (or the equivalent thereof in one or more other currencies).
17
"Material Subsidiary" means, at any time, each Subsidiary
other than (a) Excluded Subsidiaries and (b) Foreign Subsidiaries that do not
represent more than 1% for any such Foreign Subsidiary, or more than 5% in the
aggregate for all such Foreign Subsidiaries, of either (a) Consolidated Assets
or (b) the Consolidated Revenues of the Company and the Subsidiaries for the
period of four fiscal quarters most recently ended, and that (i) do not own
Equity Interests or Debt (other than de minimis Debt) of any Material
Subsidiary, (ii) do not own material intellectual property and (iii) do not have
any Debt that is guaranteed by the Company or any Material Subsidiary; provided
that each Subsidiary that is a Borrowing Subsidiary under this Agreement or the
Five-Year Credit Agreement or that is a Grantor shall be a Material Subsidiary.
"Moody's" means Moody's Investors Service, Inc.
"Mortgage" means a mortgage or deed of trust, assignment of
leases and rents, or other security documents reasonably satisfactory in form
and substance to the Collateral Agent granting a Lien on any Mortgaged Property
to secure the Obligations.
"Mortgaged Property" means, at any time, each parcel of real
property and the improvements thereto owned by any Grantor, including each such
parcel identified on Schedule 4.05 and each other parcel with respect to which a
Mortgage is required to be granted pursuant to Section 5.11 or 5.12; provided
that any parcel of real property and improvements thereto with a fair market
value of less than $1,000,000 shall not be a Mortgaged Property.
"Multiemployer Plan" means a multiemployer plan as defined in
Section 4001(a)(3) of ERISA.
"Net Proceeds" means, with respect to any Prepayment Event,
(a) the cash proceeds received by the Company or any Subsidiary in respect of
such Prepayment Event, including (i) any cash received in respect of any
non-cash proceeds, but only as and when received, (ii) in the case of a
casualty, insurance proceeds in excess of $500,000, and (iii) in the case of a
condemnation or similar event, condemnation awards and similar payments in
excess of $500,000, net of (b) the sum of (i) all fees, discounts, commissions
and out-of-pocket expenses paid by the Company and the Subsidiaries to third
parties (other than Affiliates) in connection with such Prepayment Event, (ii)
in the case of a sale, transfer or other disposition of an asset (including
pursuant to a sale and leaseback transaction or a casualty or a condemnation or
similar proceeding), the amount of all payments required to be made by the
Company and the Subsidiaries as a result of such Prepayment Event to repay Debt
(other than Loans) secured by such asset or otherwise subject to mandatory
prepayment as a result of such event, and (iii) the amount of all taxes paid (or
reasonably estimated to be payable) by the Company and the Subsidiaries, and the
amount of any reserves established by the Company and the Subsidiaries to fund
contingent liabilities reasonably estimated to be payable, to the extent such
taxes and reserves are directly attributable to such Prepayment Event (as
determined reasonably and in good faith by the chief financial officer of the
Company).
18
"Net Working Capital" means, at any date, (a) the consolidated
current assets of the Company and its consolidated Subsidiaries as of such date
(excluding cash and Permitted Investments or other cash equivalents) minus (b)
the consolidated current liabilities of the Company and its consolidated
Subsidiaries as of such date (excluding current liabilities in respect of Debt
and excluding unearned revenue). Net Working Capital at any date may be a
positive or negative number. Net Working Capital increases when it becomes more
positive or less negative and decreases when it becomes less positive or more
negative.
"Obligations" means (a) the due and punctual payment of (i)
the principal of and interest (including interest accruing during the pendency
of any bankruptcy, insolvency, receivership or other similar proceeding,
regardless of whether allowed or allowable in such proceeding) on the Loans,
when and as due, whether at maturity, by acceleration, upon one or more dates
set for prepayment or otherwise, and (ii) all other monetary obligations of the
Loan Parties to any of the Secured Parties under this Agreement and each of the
other Loan Documents, including fees, costs, expenses and indemnities, whether
primary, secondary, direct, contingent, fixed or otherwise (including monetary
obligations incurred during the pendency of any bankruptcy, insolvency,
receivership or other similar proceeding, regardless of whether allowed or
allowable in such proceeding), (b) the due and punctual performance of all other
obligations of the Loan Parties under this Agreement and the other Loan
Documents and (c) the due and punctual payment and performance of all
obligations of the Company or any Subsidiary under each Swap Agreement that (i)
shall have been in effect on the Effective Date with a counterparty that shall
have been a Lender or an Affiliate of a Lender as of the Effective Date or (ii)
shall have been entered into after the Effective Date with any counterparty that
shall have been a Lender or an Affiliate of a Lender at the time such Swap
Agreement was entered into.
"Original Effective Date" means May 20, 2002.
"Other Taxes" means any and all present or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies arising from any payment made hereunder or from the execution or delivery
of, or otherwise with respect to, this Agreement.
"Participant" has the meaning set forth in Section 10.04.
"Participation Percentage" means, with respect to any Lender,
the percentage of the aggregate outstanding Loans represented by such Lender's
outstanding Loans.
"Payment Location" shall mean an office, branch or other place
of business of any Borrower.
"PBGC" means the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
19
"Perfection Certificate" means a certificate in the form of
Exhibit D or any other form approved by the Collateral Agent.
"Permitted Encumbrances" means:
(a) Liens imposed by law for Taxes, fees, assessments or other governmental
charges or levies that are not yet due and payable or are being
contested in compliance with Section 5.04;
(b) carriers', warehousemen's, mechanics', materialmen's, repairmen's,
vendors' or lessors' Liens (and deposits to obtain the release of such
Liens), set-off rights and other like Liens imposed by law (or
contract, to the extent that such contractual Liens are similar in
nature and scope to Liens imposed by law), in each case arising in the
ordinary course of business and securing obligations that either (i)
are not overdue by more than 60 days or (ii) are being contested in
compliance with Section 5.04;
(c) Liens incurred and pledges and deposits made in the ordinary course of
business in connection with workers' compensation, disability or
unemployment insurance, old-age pensions, retiree health benefits and
other similar plans or programs and other social security laws or
regulations;
(d) 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, leases, statutory
obligations, surety and appeal bonds, performance bonds and other
obligations of a like nature, in each case in the ordinary course of
business;
(e) (i) easements, covenants, conditions, restrictions, zoning
restrictions, building codes, land use laws, leases, subleases,
licenses, rights of way, minor irregularities in, or lack of, title
and similar encumbrances affecting real property, (ii) with respect to
any lessee's or licensee's interest in real or personal property,
mortgages, liens, rights and obligations and other encumbrances
arising by, through or under any owner, lessor or licensor thereof,
with or without the lessee's or licensee's consent, and (iii) leases,
licenses, rights and obligations in connection with patents,
copyrights, trademarks, tradenames and other intellectual property, in
each case that do not secure the payment of borrowed money (other
than, with respect to any lessee's or licensee's interest in real or
personal property, mortgages, liens, rights and obligations and other
encumbrances arising by, through or under any owner, lessor or
licensor thereof) to the extent, in the case of each of (i), (ii) and
(iii), that the Liens referred to therein do not, in the aggregate,
materially detract from the value of the affected property as used by
the Company or any Subsidiary in the ordinary course of business or
materially interfere with the ordinary conduct of the business of the
Company and its Subsidiaries, taken as a whole;
20
(f) Liens in favor of customs and revenue authorities to secure payment of
customs duties in connection with the importation of goods;
provided that "Permitted Encumbrances" shall not include any Lien securing Debt.
"Permitted Investments" shall mean:
(a) direct obligations of, or obligations the principal of and interest on
which are unconditionally guaranteed by, the United States (or by any
agency thereof to the extent such obligations are backed by the full
faith and credit of the United States), in each case maturing within
one year from the date of acquisition thereof;
(b) investments in commercial paper maturing within 270 days from the date
of acquisition thereof and having, at such date of acquisition, the
highest credit rating obtainable from S&P or from Moody's;
(c) investments in certificates of deposit, banker's acceptances and time
deposits maturing within 180 days from the date of acquisition thereof
issued or guaranteed by or placed with, and money market deposit
accounts issued or offered by, any domestic office of any commercial
bank organized under the laws of the United States or any State thereof
which has a short term deposit rating of A1 from S&P and P1 from
Moody's and has a combined capital and surplus and undivided profits of
not less than $500,000,000;
(d) fully collateralized repurchase agreements with a term of not more than
30 days for securities described in clause (a) above and entered into
with a financial institution satisfying the criteria described in
clause (c) above; and
(e) money market funds that (i) comply with the criteria set forth in
Securities and Exchange Commission Rule 2a-7 under the Investment
Company Act of 1940, (ii) are rated AAA by S&P and Aaa by Moody's and
(iii) have portfolio assets of at least $5,000,000,000.
"Person" means an individual, a corporation, a partnership, a
limited liability company, a limited liability partnership, an association, a
trust or any other entity or organization, including a government or political
subdivision or an agency or instrumentality thereof.
"Plan" means any employee pension benefit plan (other than a
Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section
412 of the Code or Section 302 of ERISA, and in respect of which the Company or
any ERISA Affiliate is (or, if such plan were terminated, would under Section
4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of
ERISA.
21
"Prepayment Event" means:
(a) any sale, transfer or other disposition (including pursuant to a sale
and leaseback transaction) of any property or asset of the Company or
any Subsidiary, other than (i) dispositions described in clauses (a)
and (b) of Section 6.05, (ii) dispositions resulting in Net Proceeds
not exceeding $500,000 for any such disposition, (iii) dispositions
resulting in aggregate Net Proceeds not exceeding $5,000,000 in the
aggregate during any fiscal year of the Company and (iv) dispositions
of real estate located in or near Sydney, New South Wales, Australia
as set forth on Schedule 1.01(b) for net proceeds not exceeding
$3,500,000 in the aggregate; or
(b) any casualty or other insured damage to, or any taking under power of
eminent domain or by condemnation or similar proceeding of, any
property or asset of the Company or any Subsidiary, but only to the
extent that the Net Proceeds therefrom have not been applied to repair,
restore or replace such property or asset within 180 days after such
event; or
(c) the incurrence by the Company or any Subsidiary of any Debt, other
than (i) Debt hereunder and under the Five-Year Credit Agreement, (ii)
Debt of Subsidiaries permitted under Section 6.01 as in effect on the
date hereof, (iii) unsecured Debt of the Company (1) the principal of
which is not by its terms payable or required to be prepaid, redeemed,
repurchased or defeased, in whole or in part, at the option of any
holder thereof or on any date prior to the Tranche B Maturity Date or
the "Maturity Date" under and as defined in the Five-Year Credit
Agreement, (2) that is not guaranteed by any Subsidiary, (3) that is
fully subordinated to the Obligations and to any obligations the
proceeds of which are used to refinance such Obligations
(collectively, the "Senior Obligations") in the event of any
bankruptcy, reorganization or insolvency proceeding with respect to
any Loan Party, (4) that provides that no payments will be made during
the continuance of any Default in the payment of the principal of or
interest on the Senior Obligations, (5) that provides on customary
terms that payments of interest may be suspended for a period of 180
days during the continuance of non-payment Defaults upon notice given
by the Administrative Agent on behalf of the Lenders and (6) the
subordination provisions of which, insofar as they relate to the
Senior Obligations, are otherwise customary for publicly offered
subordinated debt securities and (iv) other Debt for borrowed money in
an aggregate principal amount at any time outstanding not greater than
$25,000,000.
"Prime Rate" means the rate of interest per annum publicly
announced from time to time by JPMCB as its prime rate in effect at its
principal office in New York City; each change in the Prime Rate shall be
effective from and including the date such change is publicly announced as being
effective.
"Ratings" shall mean (a) the published ratings by Moody's and
S&P of the Company's senior, secured debt, or (b) if either such rating agency
shall not have such a published rating, any confidential or private rating by
such rating agency of the
22
Company's senior, secured debt. In the event either rating agency shall have
in effect a confidential or private rating of the sort referred to in clause (b)
of the preceding sentence, the Company shall cause such rating to be reissued by
such rating agency at least once during each 12 month period and at such other
times as the Administrative Agent, acting in good faith, shall reasonably
request, and shall provide a copy of such ratings to the Administrative Agent
and the Lenders. At any time when such rating shall not have been so renewed and
provided, such rating agency shall be deemed not to have a Rating in effect.
"Recapitalization" means the recapitalization transaction
provided for in the Recapitalization Agreement including the Class B Repurchase.
"Recapitalization Agreement" means the Recapitalization
Agreement dated as of April 12, 2002, by and among the DeWitt Wallace-Reader's
Digest Fund, Inc., a New York not-for-profit corporation, the Lila
Wallace-Reader's Digest Fund, Inc., a New York not-for-profit corporation, and
the Company.
"Register" shall have the meaning assigned to such term in
Section 10.04(b).
"Registered Note" shall have the meaning assigned to such term
in Section 2.05(d).
"Regulation U" means Regulation U of the Board, as in effect
from time to time.
"Regulation X" means Regulation X of the Board, as in effect
from time to time.
"Reiman" means Reiman Holding Company, LLC; Reiman
Publications, LLC; Reiman Management Company; Reiman Advertising and Promotion,
LLC; World Wide Country Tours, LLC and Homemaker Schools, LLC.
"Related Parties" means, with respect to any specified Person,
such Person's Affiliates and the respective directors, officers, employees,
agents and advisors of such Person and such Person's Affiliates.
"Required Lenders" means, at any time, Lenders having Loans
representing more that 50% of the aggregate principal amount of the total Loans
outstanding.
"Restricted Payment" means any dividend or other distribution
(whether in cash, securities or other property) with respect to any Equity
Interests in the Company or any 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, acquisition, cancelation or
termination of any Equity Interests in the Company or any Subsidiary or any
option, warrant or other right to acquire any such Equity Interests in the
Company or any Subsidiary.
23
"Reuters Screen LIBO Page" means the display designated as
page "LIBO" on the Reuters Monitor Money Rates Service (or such other page as
may replace the LIBO page on that service for the purpose of displaying London
interbank offered rates of major banks).
"S&P" means Standard and Poor's Ratings Group, a division of
McGraw-Hill.
"Secured Parties" means (a) the Agents, (b) the Lenders, (c)
the Agents and Lenders under and as defined in the credit agreement establishing
the Five-Year Credit Agreement, (d) each counterparty to any Swap Agreement with
the Company or any Subsidiary that either (i) is in effect on the Effective Date
if such counterparty is a Lender or an Affiliate of a Lender (or a Lender or an
Affiliate of a Lender under the Five-Year Credit Agreement) as of the Effective
Date or (ii) is entered into after the Effective Date if such counterparty is a
Lender or an Affiliate of a Lender (or a Lender or an Affiliate of a Lender
under the Five-Year Credit Agreement) at the time such Swap Agreement is entered
into, (e) the beneficiaries of each indemnification obligation undertaken by any
Loan Party under this Agreement or the Five-Year Credit Agreement or any other
Loan Document, (f) each holder from time to time of Designated Letter of Credit
Obligations (as defined in the Guarantee and Collateral Agreement) and (g) the
successors and assigns of each of the foregoing.
"Securitization Transaction" means any transfer by the Company
or any Subsidiary of accounts receivable or interests therein (a) to a trust,
partnership, corporation or other entity, which transfer is funded in whole or
in part, directly or indirectly, by the incurrence or issuance by the transferee
or any successor transferee of debt or other securities that are to receive
payments from, or that represent interests in, the cash flow derived from such
accounts receivable or interests, or (b) directly to one or more investors or
other purchasers. The amount of any Securitization Transaction shall be deemed
at any time to be the aggregate principal or stated amount of the Debt or other
securities referred to in the preceding sentence or, if there shall be no such
principal or stated amount, the uncollected amount of the accounts receivable
transferred pursuant to such Securitization Transaction net of any such accounts
receivable that have been written off as uncollectible.
"Security Documents" means the Guarantee and Collateral
Agreement, the Mortgages and the Foreign Pledge Agreements.
"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 Administrative Agent 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. Eurodollar 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
24
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.
"subsidiary" means, with respect to any Person (the "parent")
at any date, any corporation, limited liability company, partnership,
association or other entity the accounts of which would be consolidated with
those of the parent in the parent's consolidated financial statements if such
financial statements were prepared in accordance with GAAP as of such date, as
well as any other corporation, limited liability company, partnership,
association or other entity of which securities or other ownership interests
representing more than 50% of the equity or more than 50% of the ordinary voting
power or, in the case of a partnership, more than 50% of the general partnership
interests are, as of such date, owned by the parent or one or more subsidiaries
of the parent or by the parent and one or more subsidiaries of the parent.
"Subsidiary" means any subsidiary of the Company.
"Subsidiary Guarantor" has the meaning set forth in the
Guarantee and Collateral Agreement.
"Swap Agreement" means any agreement with respect to any swap,
forward, future or derivative transaction or option or similar agreement
involving, or settled by reference to, one or more rates, currencies,
commodities, equity or debt instruments or securities, or economic, financial or
pricing indices or measures of economic, financial or pricing risk or value or
any similar transaction or any combination of these transactions; provided that
no phantom stock or similar plan providing for payments only on account of
services provided by current or former directors, officers, employees or
consultants of the Company or the Subsidiaries shall be a Swap Agreement. The
"principal amount" of the obligations of the Company or any Subsidiary in
respect of any Swap Agreement at any time shall be the maximum aggregate amount
(giving effect to any netting agreements) that the Company or such Subsidiary
would be required to pay if such Swap Agreement were terminated at such time.
"Synthetic Purchase Agreement" means any agreement pursuant
to which the Company or a Subsidiary is or may become obligated to make (i) any
payment in connection with the purchase by any third party from a person other
than the Company or a Subsidiary of any Equity Interest or Debt or (ii) any
payment (other than on account of a permitted purchase by it of any Equity
Interest or Debt) the amount of which is determined by reference to the price or
value at any time of any Equity Interest or Debt of the Company or a Subsidiary;
provided that no phantom stock or similar plan providing for payments only to
current or former directors, officers or employees of the Company or the
Subsidiaries (or to their heirs or estates) shall be deemed to be a Synthetic
Purchase Agreement.
"Taxes" means any and all present or future taxes, levies,
imposts, duties, deductions, charges or withholdings imposed by any Governmental
Authority, and all
25
liabilities with respect thereto (including without limitation any interest,
penalties or other additions to tax).
"Tranche A Commitment" means, with respect to each Lender, the
commitment, if any, of such Lender to make a Tranche A Term Loan hereunder on
the Effective Date, expressed as an amount representing the maximum permitted
principal amount of the Tranche A Term Loan to be made by such Lender hereunder,
as such commitment may be (a) reduced from time to time pursuant to Section 2.10
and (b) reduced or increased from time to time pursuant to assignments by or to
such Lender pursuant to Section 10.04. The initial amount of each Lender's
Tranche A Commitment is set forth on Schedule 2.01 or in the Assignment and
Assumption pursuant to which such Lender shall have assumed its Tranche A
Commitment, as applicable. The initial aggregate amount of the Lenders' Tranche
A Commitments is $200,000,000.
"Tranche A Lender" means each financial institution listed as
such in Schedule 2.01, each Assignee that becomes a Tranche A Lender pursuant to
Section 10.04, and their respective successors, other than any such Person that
ceases to be a Tranche A Lender pursuant to an Assignment and Assumption.
"Tranche A Maturity Date" means November 20, 2007.
"Tranche A Term Loan" means a Loan made pursuant to paragraph
(a) of Section 2.01.
"Tranche B Lender" means each financial institution listed as
such in Schedule 2.01, each Assignee that becomes a Tranche B Lender pursuant to
Section 10.04, and their respective successors, other than any such Person that
ceases to be a Tranche B Lender pursuant to an Assignment and Assumption.
"Tranche B Maturity Date" means May 20, 2008.
"Tranche B Term Loan" means a Loan made as a Tranche B Term
Loan under the Existing Term Loan Agreement and remaining outstanding hereunder
as provided in clause (b) of Section 2.01.
"Transactions" means the execution, delivery and performance
by the Loan Parties of the Loan Documents, the borrowing of Loans hereunder, the
use of the proceeds of such Loans, the creation of the Guarantees and Liens
provided for in the Security Documents, the completion of the Acquisition, the
Class B Repurchase and the Recapitalization and the other transactions
contemplated hereby.
"Type", when used in respect of any Loan or Borrowing, shall
refer to the Rate by reference to which interest on such Loan or on the Loans
comprising such Borrowing is determined. For purposes hereof, "Rate" shall
include the LIBO Rate and the Alternate Base Rate.
"United States" and "U.S." each means the United States of
America.
26
"U.S. Person" means any Person that is (i) a citizen or
resident of the United States, (ii) a corporation, partnership or other entity
created or organized under the laws of the United States or any State thereof or
(iii) any estate or trust that is subject to U.S. Federal income taxation
regardless of the source of its income.
SECTION 1.02. Classification of Loans and Borrowings. For purposes of this
Agreement, Loans may be classified and referred to by Class (e.g., a "Tranche A
Term Loan") or by Type (e.g., a "Eurodollar Loan") or by Class and Type (e.g., a
"Eurodollar Tranche A Term Loan"). Borrowings also may be classified and
referred to by Class (e.g., a "Tranche A Term Loan Borrowing") or by Type (e.g.,
a "Eurodollar Borrowing") or by Class and Type (e.g., a "Eurodollar Tranche A
Term Loan Borrowing").
SECTION 1.03. Terms Generally. The definitions of terms herein shall apply
equally to the singular and plural forms of the terms defined. Whenever the
context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include", "includes" and "including" shall
be deemed to be followed by the phrase "without limitation". The word "will"
shall be construed to have the same meaning and effect as the word "shall".
Unless the context requires otherwise (a) any definition of or reference to any
agreement, instrument or other document herein shall be construed as referring
to such agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein), (b) any reference
herein to any Person shall be construed to include such Person's successors and
assigns, (c) the words "herein", "hereof" and "hereunder", and words of similar
import, shall be construed to refer to this Agreement in its entirety and not to
any particular provision hereof, (d) all references herein to Articles,
Sections, Exhibits and Schedules shall be construed to refer to Articles and
Sections of, and Exhibits and Schedules to, this Agreement, (e) the words
"asset" and "property" shall be construed to have the same meaning and effect
and to refer to any and all tangible and intangible assets and properties,
including cash, securities, accounts and contract rights and (f) any reference
herein to "the date hereof" or "the date of this Agreement" shall mean the date
of this Amended and Restated Term Loan Agreement.
SECTION 1.04. Accounting Terms and Determinations. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all financial statements
required to be delivered hereunder shall be prepared in accordance with GAAP as
in effect from time to time; provided that, if the Company notifies the
Administrative Agent that the Company wishes to amend any provision hereof,
including, without limitation, any covenant in Article VI, to eliminate the
effect of any change in generally accepted accounting principles adopted after
the Effective Date on the operation of such provision (or if the Administrative
Agent notifies the Company that the Required Lenders wish to amend any such
provision for such purpose), then the Company's compliance with such provision
shall be determined on the basis of GAAP in effect immediately before the
relevant change in GAAP became effective, until either such notice is withdrawn
or such provision is amended in a manner satisfactory to the Company and the
Required Lenders.
27
ARTICLE II
The Loans
SECTION 2.01. Tranche A Commitments; Continuation of Tranche B Term Loans.
(a) Subject to the conditions set forth in the Amendment Agreement and relying
upon the representations and warranties herein set forth, each Tranche A Lender
agrees, severally and not jointly to make a Tranche A Term Loan to any Borrower
on the Effective Date in a principal amount not exceeding its Tranche A
Commitment. The principal amounts of the Tranche A Lenders' Tranche A
Commitments are set forth opposite their respective names in Schedule 2.01. The
Tranche A Term Loans will be denominated in Dollars. Principal amounts prepaid
or repaid in respect of Tranche A Term Loans may not be reborrowed.
(b) Subject to the conditions set forth in the Amendment Agreement and
relying upon the representations and warranties herein set forth, all Tranche B
Term Loans made under the Existing Term Loan Agreement and outstanding on the
Effective Date after giving effect to the prepayments provided for in the
Amendment Agreement shall continue outstanding as Tranche B Term Loans under
this Agreement with the same Interest Periods as in effect under the Existing
Term Loan Agreement. The aggregate principal amounts of the Tranche B Term Loans
of the Lenders on the Effective Date are set forth opposite their respective
names in Schedule 2.01. Notwithstanding any other provision contained herein, no
Lender shall have any obligation to make any additional Tranche B Term Loan
hereunder. Principal amounts prepaid or repaid in respect of Tranche B Term
Loans may not be reborrowed.
SECTION 2.02. Loans. (a) The Tranche A Term Loans shall be made by the
Tranche A Lenders ratably in accordance with their respective Tranche A
Commitments. The failure of any Tranche A Lender to make any Tranche A Term Loan
required to be made by it shall not relieve any other Tranche A Lender of its
obligations hereunder; provided that the Tranche A Commitments of the Tranche A
Lenders are several and no Tranche A Lender shall be responsible for any other
Tranche A Lender's failure to make Tranche A Term Loans as required.
(b) Subject to Section 2.13, each Loan shall be comprised entirely of ABR
Loans or Eurodollar Loans as the Borrower may request in accordance herewith.
Each Lender at its option may make any Eurodollar Loan by causing any domestic
or foreign branch or Affiliate of such Lender to make such Loan; provided that
any exercise of such option shall not affect the obligation of the applicable
Borrower to repay such Loan in accordance with the terms of this Agreement.
(c) Notwithstanding any other provision of this Agreement, the Borrower
shall not be entitled to request, or to elect to convert or continue, any
Borrowing if the Interest Period requested with respect thereto would end after
the Tranche A Maturity Date or Tranche B Maturity Date, as applicable.
28
(d) Each Lender shall make each Loan to be made by it hereunder on the
proposed date thereof by wire transfer of immediately available funds to the
Administrative Agent in New York, New York, not later than 12:00 noon, New York
City time, and the Administrative Agent shall by 2:00 p.m., New York City time,
credit the amounts so received to the account or accounts specified from time to
time in one or more notices delivered by the Company to the Administrative Agent
or, if a Borrowing shall not occur on such date because any condition precedent
herein specified shall not have been met, return the amounts so received to the
respective Lenders.
SECTION 2.03. Requests for Borrowings. To request each Borrowing, the
Borrower shall notify the Administrative Agent of such request by telephone (a)
in the case of a Eurodollar Borrowing, not later than 11:00 a.m., New York City
time, three Business Days before the Effective Date or (b) in the case of an ABR
Borrowing, not later than 11:00 a.m., New York City time, one Business Day
before the Effective Date. Each such telephonic Borrowing Request shall be
irrevocable and shall be confirmed promptly by hand delivery or telecopy to the
Administrative Agent of a written Borrowing Request in a form approved by the
Administrative Agent and signed by the Borrower. Each such telephonic and
written Borrowing Request shall specify the following information in compliance
with Section 2.02:
(i) the aggregate amount of such Borrowing;
(ii) whether such Borrowing is to be an ABR Borrowing or a Eurodollar
Borrowing;
(iii) in the case of a Eurodollar Borrowing, the initial Interest Period to
be applicable thereto, which shall be a period contemplated by the
definition of the term "Interest Period"; and
(iv) the location and number of the Borrower's account to which funds are to
be disbursed, which shall comply with the requirements of Section 2.04.
If no election as to the Type of any Borrowing is specified, then the requested
Borrowing shall be an ABR Borrowing. If no Interest Period is specified with
respect to any requested Eurodollar Borrowing, then the Borrower shall be deemed
to have selected an Interest Period of one month's duration. Promptly following
receipt of a Borrowing Request in accordance with this Section, the
Administrative Agent shall advise each Lender of the details thereof and of the
amount of such Lender's Loan to be made as part of the requested Borrowing.
SECTION 2.04. Funding of Borrowings. (a) Each Lender shall make each Loan
to be made by it hereunder on the Effective Date by wire transfer of immediately
available funds by 12:00 noon, New York City time, to the account of the
Administrative Agent designated by it for such purpose by notice to the Lenders.
The Administrative Agent will make such Loans available to the Borrower by
promptly crediting the amounts so received, in like funds, to an account of the
Borrower
29
maintained with the Administrative Agent in New York City and
designated by the Borrower in the applicable Borrowing Request.
(b) Unless the Administrative Agent shall have received notice from a
Lender prior to the Effective Date that such Lender will not make available to
the Administrative Agent such Lender's share of any Borrowing, the
Administrative Agent may assume that such Lender has made such share available
on such date in accordance with paragraph (a) of this Section and may, in
reliance upon such assumption, make available to the Borrower a corresponding
amount. In such event, if a Lender has not in fact made its share of the
applicable Borrowing available to the Administrative Agent, then the applicable
Lender and the Borrower severally agree to pay to the Administrative Agent
forthwith on demand such corresponding amount with interest thereon, for each
day from and including the date such amount is made available to the Borrower to
but excluding the date of payment to the Administrative Agent, at (i) in the
case of such Lender, the greater of the Federal Funds Effective Rate and a rate
determined by the Administrative Agent in accordance with banking industry rules
on interbank compensation or (ii) in the case of the Borrower, the interest rate
applicable to ABR Loans. If such Lender pays such amount to the Administrative
Agent, then such amount shall constitute such Lender's Loan included in such
Borrowing.
SECTION 2.05. Evidence of Debt. (a) Each Lender shall maintain in
accordance with its usual practice an account or accounts evidencing the
indebtedness to such Lender resulting from each Loan made by such Lender,
including the amounts of principal and interest payable and paid to such Lender
from time to time.
(b) The Administrative Agent shall maintain accounts in which it will
record (i) the amount of each Loan made hereunder, the Borrower and the Interest
Period applicable thereto, (ii) the amount of any principal or interest due and
payable or to become due and payable from each Borrower to each Lender hereunder
and (iii) the amount of any sum received by the Administrative Agent hereunder
from each Borrower and each Lender's share thereof.
(c) The entries made in the accounts maintained pursuant to paragraphs (a)
and (b) of this Section shall be prima facie evidence of the existence and
amounts of the obligations therein recorded; provided, however, that the failure
of any Lender or the Administrative Agent to maintain such accounts or any error
therein shall not in any manner affect the obligations of the Borrowers to repay
the Loans in accordance with their terms.
(d) Any Lender may request that Loans made by it be evidenced by a
promissory note. In such event, the Borrower shall prepare, execute and deliver
to such Lender a promissory note or notes payable to the order of such Lender
(or, if requested by such Lender, to such Lender and its registered assigns (in
each such case, a "Registered Note")) and in a form reasonably approved by the
Administrative Agent. Thereafter, the Loans evidenced by such promissory note
and interest thereon shall at all times (including after assignment pursuant to
Section 10.04) be represented by one or
30
more promissory notes in such form payable to the order of the payee named
therein (or, if such promissory note is a Registered Note, to such payee and its
registered assigns).
SECTION 2.06. Interest Elections. (a) Each Borrowing initially shall be of
the Type specified in the applicable Borrowing Request (or, in the case of a
Tranche B Term Loan, most recently elected by the applicable Borrower in
accordance with the provisions of the Existing Term Loan Agreement) and, in the
case of a Eurodollar Borrowing, shall have an initial Interest Period as
specified in such Borrowing Request (or, in the case of a Tranche B Term Loan,
most recently selected by the applicable Borrower in accordance with the
provisions of the Existing Term Loan Agreement). Thereafter, the Borrower may
elect to convert such Borrowing to a different Type or to continue such
Borrowing and, in the case of a Eurodollar Borrowing, may elect Interest Periods
therefor, all as provided in this Section. The Borrower may elect different
options with respect to different portions of the affected Borrowing, in which
case each such portion shall be allocated ratably among the Lenders holding the
Loans comprising such Borrowing, and the Loans comprising each such portion
shall be considered a separate Borrowing.
(b) To make an election pursuant to this Section, the Borrower shall notify
the Administrative Agent of such election by telephone by the time that
a Borrowing Request would be required under Section 2.03 if the
Borrower were requesting a Borrowing of the Type resulting from such
election (with references in such Section 2.03 to the Effective Date
being deemed to be references to the effective date of such election).
Each such telephonic Interest Election Request shall be irrevocable and
shall be confirmed promptly by hand delivery or telecopy to the
Administrative Agent of a written Interest Election Request in a form
approved by the Administrative Agent and signed by the Borrower.
(c) Each telephonic and written Interest Election Request shall specify the
following information in compliance with Section 2.02:
(i) the Borrowing to which such Interest Election Request applies and, if
different options are being elected with respect to different portions
thereof, the portions thereof to be allocated to each resulting
Borrowing (in which case the information to be specified pursuant to
clauses (iii) and (iv) below shall be specified for each resulting
Borrowing);
(ii) the effective date of the election made pursuant to such Interest
Election Request, which shall be a Business Day;
(iii) whether the resulting Borrowing is to be an ABR Borrowing or a
Eurodollar Borrowing; and
(iv) if the resulting Borrowing is a Eurodollar Borrowing, the Interest
Period to be applicable thereto after giving effect to such election,
which shall be a period contemplated by the definition of the term
"Interest Period".
31
If any such Interest Election Request requests a Eurodollar Borrowing but does
not specify an Interest Period, then the Borrower shall be deemed to have
selected an Interest Period of one month's duration.
(d) Promptly following receipt of an Interest Election Request, the
Administrative Agent shall advise each Lender of the details thereof and of
such Lender's portion of each resulting Borrowing.
(e) If the Borrower fails to deliver a timely Interest Election Request with
respect to a Eurodollar Borrowing prior to the end of the Interest Period
applicable thereto, then, unless such Borrowing is repaid as provided
herein, at the end of such Interest Period such Borrowing shall be
converted to an ABR Borrowing. Notwithstanding any contrary provision
hereof, if an Event of Default has occurred and is continuing and the
Administrative Agent, at the request of the Required Lenders, so notifies
the Borrower, then, so long as an Event of Default is continuing (i) no
outstanding Borrowing may be converted to or continued as a Eurodollar
Borrowing and (ii) unless repaid, each Eurodollar Borrowing shall be
converted to an ABR Borrowing at the end of the Interest Period applicable
thereto.
SECTION 2.07. Interest on Loans. (a) Subject to the provisions of Section
2.08, the Loans comprising each Eurodollar Borrowing shall bear interest
(computed on the basis of the actual number of days elapsed over a year of 360
days) at a rate per annum equal to the Adjusted LIBO Rate for the Interest
Period in effect for such Borrowing plus the Applicable Rate from time to time
in effect.
(b) Subject to the provisions of Section 2.08, the Loans comprising each
ABR Borrowing shall bear interest (computed on the basis of the actual number of
days elapsed over a year of 365 or 366 days, as the case may be, for periods
during which the Alternate Base Rate is determined by reference to the Prime
Rate and 360 days for other periods) at a rate per annum equal to the Alternate
Base Rate plus the Applicable Rate from time to time in effect.
(c) Interest on each Loan shall be payable on each Interest Payment Date
applicable to such Loan except as otherwise provided in this Agreement. The
applicable Adjusted LIBO Rate or Alternate Base Rate for each Interest Period or
day within an Interest Period, as the case may be, shall be determined by the
Administrative Agent, and such determination shall be conclusive absent manifest
error.
SECTION 2.08. Default Interest. If any Borrower shall default in the
payment of the principal of or interest on any Loan or any other amount becoming
due hereunder, whether by scheduled maturity, notice of prepayment, acceleration
or otherwise, such Borrower shall on demand from time to time from the
Administrative Agent pay interest from and including the date of such default,
to the extent permitted by law, on such defaulted amount up to (but not
including) the date of actual payment (after as well as before judgment) at a
rate per annum (computed as provided in Section 2.07) equal to the higher of (a)
the rate, if any, otherwise applicable to such amount hereunder
32
plus 2% per annum and (b) the Alternate Base Rate plus the Applicable Rate from
time to time in effect plus 2% per annum.
SECTION 2.09. Alternate Rate of Interest. In the event, and on each
occasion, that on the day two Business Days prior to the commencement of any
Interest Period for a Eurodollar Borrowing the Administrative Agent shall have
determined (i) that deposits in Dollars in the principal amounts of the Loans
comprising such Borrowing are not generally available in the London interbank
market or any other market in which the Lenders shall be funding such Loans,
(ii) that the rates at which such deposits are being offered will not adequately
and fairly reflect the cost to Lenders of making or maintaining their Loans
included in such Borrowing for such Interest Period or (iii) that reasonable
means do not exist for ascertaining the LIBO Rate, the Administrative Agent
shall, as soon as practicable thereafter, give telecopy notice of such
determination to the Company and the Lenders. In the event of any such
determination, until the Administrative Agent shall have advised the Company and
the Lenders that the circumstances giving rise to such notice no longer exist,
any affected Borrowing shall bear interest at the Alternate Base Rate. Each
determination by the Administrative Agent hereunder shall be conclusive absent
manifest error.
SECTION 2.10. Termination of Tranche A Commitments. Unless previously
terminated, the Tranche A Commitments shall terminate at 5:00 p.m., New York
City time, on the Effective Date.
SECTION 2.11. Amortization of Term Loans. (a) Subject to adjustment
pursuant to paragraph (d) of this Section, the Borrowers shall repay Tranche A
Term Loan Borrowings on each date set forth below in an amount (expressed as a
percentage of the aggregate original principal amount of the Tranche A Term
Loans) set forth opposite such date:
Date Amount
---- ------
June 30, 2004 3.75%
September 30, 2004 3.75%
December 31, 2004 3.75%
March 31, 2005 3.75%
June 30, 2005 7.50%
September 30, 2005 7.50%
December 31, 2005 7.50%
March 31, 2006 7.50%
June 30, 2006 10.00%
September 30, 2006 10.00%
December 31, 2006 10.00%
March 31, 2007 10.00%
June 30, 2007 7.50%
November 20, 2007 7.50%
33
(b) Subject to adjustment pursuant to paragraph (d) of this Section, the
Borrowers shall repay Tranche B Term Loan Borrowings on each date set
forth below in an amount (expressed as a percentage of the aggregate
original principal amount of the Tranche B Term Loans as of the
Effective Date) set forth opposite such date:
Date Amount
---- ------
June 30, 2004 0.25%
September 30, 2004 0.25%
December 31, 2004 0.25%
March 31, 2005 0.25%
June 30, 2005 0.25%
September 30, 2005 0.25%
December 31, 2005 0.25%
March 31, 2006 0.25%
June 30, 2006 0.25%
September 30, 2006 0.25%
December 31, 2006 0.25%
March 31, 2007 0.25%
June 30, 2007 0.25%
September 30, 2007 24.17%
December 31, 2007 24.17%
March 31, 2008 24.17%
May 20, 2008 24.17%
(a) To the extent not previously paid, (i) all Tranche A Term Loans shall
be due and payable on the Tranche A Maturity Date and (ii) all Tranche B Term
Loans shall be due and payable on the Tranche B Maturity Date.
(b) Each prepayment of the Borrowings pursuant to Section 2.12 will be
applied against the installments of principal becoming due after the date of
such prepayment in respect of Borrowings of the applicable Class ratably in
accordance with the amounts of such installments.
SECTION 2.12. Prepayment. (a) The Borrower shall have the right at any time
and from time to time to prepay any Borrowing, in whole or in part, without
premium or penalty (but including amounts owed under Section 2.15).
(b) In the event and on each occasion that any Net Proceeds are received by
or on behalf of the Company or any Subsidiary in respect of any Prepayment
Event, the Company shall, on the Business Day immediately following the date on
which such Net Proceeds are received, prepay Borrowings in an aggregate amount
equal to 100% of such Net Proceeds; provided that, in the case of any Prepayment
Event described in clause (a) or (b) of the definition of the term Prepayment
Event, if the Company shall
34
deliver to the Administrative Agent a certificate of a Financial Officer to the
effect that the Company and the Subsidiaries intend to apply the Net Proceeds
from such event (or a portion thereof specified in such certificate), within 6
months after receipt of such Net Proceeds, to acquire property, plant or
equipment to be used in the business of the Company and the Subsidiaries or to
acquire other Persons or business units, and certifying that no Default has
occurred and is continuing, then no prepayment shall be required pursuant to
this paragraph in respect of the Net Proceeds of such event (or the portion of
such Net Proceeds specified in such certificate, if applicable) except to the
extent of any such Net Proceeds that have not been so applied by the end of such
six month period, at which time a prepayment shall be required in an amount
equal to such Net Proceeds that have not been so applied. Notwithstanding the
foregoing, (i) if on the date a prepayment would be due under the preceding
sentence, the Ratings shall be lower than BBB- or Baa3 or shall be BBB- or Baa3
but not with a "stable" outlook but the Consolidated Leverage Ratio shall be
less than 2.50:1.00, in the case of a Prepayment Event described in clause (a)
or (b) of the definition of the term Prepayment Event, or the Consolidated
Leverage Ratio would be less than 2.50:1.00 on a pro forma basis after giving
effect to the incurrence of the applicable Debt in the case of a Prepayment
Event described in clause (c) of the definition of the term Prepayment Event,
then (A) in the case of a Prepayment Event described in clauses (a) or (b) of
the definition of the term Prepayment Event, references in the preceding
sentence to "six months" shall be deemed to be references to "one year" and (B)
in the case of a Prepayment Event described in clause (c) of the definition of
the term Prepayment Event, no prepayment shall be required, and (ii) if on the
date a prepayment would be due under the preceding sentences, the Ratings shall
be at least BBB- and Baa3, in each case with a "stable" outlook, then (A) in the
case of a Prepayment Event described in clauses (a) and (b) of the definition of
the term Prepayment Event, the references to "100%" in the preceding sentence
shall be deemed to be a reference to "50%" and the reference to "one year" in
clause (i) of this sentence shall remain a reference to "one year", and (B) in
the case of a Prepayment Event described in clause (c) of the definition of the
term Prepayment Event, no prepayment shall be required. Notwithstanding the
foregoing, (i) up to $52,000,000 of Net Proceeds received by or on behalf of the
Company or any Subsidiary on or after the Effective Date in respect of the
Headquarters Sale and Leaseback or any other Prepayment Event described in
clause (a) of the definition of the term Prepayment Event in Section 1.01 may be
applied to prepay borrowings made on or after May 1, 2004, under the Five-Year
Credit Agreement and applied on or prior to the Effective Date to prepay
Borrowings outstanding under the Existing Term Loan Agreement and, to the extent
so applied, shall not be required to be applied to prepay Borrowings under this
paragraph, and (ii) Net Proceeds received by or on behalf of the Company or any
Subsidiary in respect of sales of real properties located outside the United
States may be applied to prepay borrowings under the Five-Year Credit Agreement
and, to the extent so applied, shall not be required to be applied to prepay
Borrowings under this paragraph.
(c) The Company shall prepay Borrowings in an aggregate amount equal to 50%
of Excess Cash Flow for each of its fiscal years, commencing with the fiscal
year ending June 30, 2004, minus (i) the aggregate amount of all prepayments of
Borrowings made pursuant to Section 2.12(a) during such fiscal year and (ii) the
aggregate amount of all prepayments of Borrowings made pursuant to Section
2.12(d) during such fiscal year.
35
Each prepayment pursuant to this paragraph shall be made on the date on which
financial statements are delivered pursuant to Section 5.01 with respect to the
fiscal year for which Excess Cash Flow is being calculated (and in any event
within 90 days after the end of such fiscal year). Notwithstanding the
foregoing, if on the date a prepayment would be due under the preceding sentence
in respect of any fiscal year, (i) the Consolidated Leverage Ratio shall be less
than 2.50:1.00 or (ii) the Ratings shall be at least BBB- and Baa3, in each case
with a "stable" outlook, then no prepayment shall be required in respect of such
fiscal year.
(d) The Company shall prepay Borrowings in an aggregate amount equal to the
aggregate amount of all cash dividends, stock repurchases and other Restricted
Payments made in any fiscal year if the total of such cash dividends, stock
repurchases and other Restricted Payments made in such fiscal year exceeds
$25,000,000, as required pursuant to the second proviso contained in Section
6.10(a)(vi), commencing with the fiscal year ending June 30, 2004. Prepayments
of Borrowings required by this paragraph (d) shall be reduced by any prepayments
of Borrowings made during such fiscal year as provided in Section 6.10(a)(vi),
but shall not be reduced by any prepayments of Borrowings required during such
fiscal year pursuant to Section 2.12(b) or (c). Each prepayment pursuant to this
paragraph shall be made no later than the last day of the fiscal year in which
the applicable Restricted Payments shall have been made pursuant to Section
6.10(a)(vi).
(e) Prior to any optional or mandatory prepayment of Borrowings hereunder,
the Borrower shall select the Borrowing or Borrowings to be prepaid and shall
specify such selection in the notice of such prepayment pursuant to paragraph
(f) of this Section. In the event of any optional or mandatory prepayment of
Borrowings made at a time when Borrowings of both Classes remain outstanding,
the Borrower shall select Borrowings to be prepaid so that the aggregate amount
of such prepayment is allocated between the Tranche A Term Loan Borrowings and
Tranche B Term Loan Borrowings ratably based on the aggregate principal amount
of outstanding Borrowings of each such Class; provided that any Tranche B Lender
may elect, by notice to the Administrative Agent by telephone (confirmed by
telecopy) at least one Business Day prior to the prepayment date, to decline all
or any portion of any prepayment of its Tranche B Term Loans pursuant to this
Section (other than an optional prepayment pursuant to paragraph (a) of this
Section, which may not be declined), in which case the aggregate amount of the
prepayment that was so declined shall be applied to prepay on a ratable basis
Tranche A Term Loan Borrowings; provided that Tranche B Lenders shall be
permitted to decline any prepayment only to the extent the aggregate amount of
the prepayment declined shall not exceed the aggregate outstanding Tranche A
Term Loan Borrowings (and any reduction of the amounts declined shall be
distributed ratably among the declining Lenders).
(f) The Borrower shall notify the Administrative Agent by telephone
(confirmed by telecopy) of any prepayment hereunder (i) in the case of
prepayment of a Eurodollar Borrowing, not later than 11:00 a.m., New York City
time, three Business Days before the date of prepayment (or, in the case of a
prepayment under paragraph (b) above, as soon after such time as practicable) or
(ii) in the case of prepayment of an ABR
36
Borrowing, not later than 10:00 a.m., New York City time, one Business Day
before the date of prepayment (or, in the case of a prepayment under paragraph
(b) above, as soon after such time as practicable). Each such notice shall be
irrevocable and shall specify the prepayment date, the principal amount of each
Borrowing or portion thereof to be prepaid and, in the case of a mandatory
prepayment, a reasonably detailed calculation of the amount of such prepayment.
Promptly following receipt of any such notice, the Administrative Agent shall
advise the Lenders of the contents thereof. Each partial prepayment of any
Borrowing shall be in an amount that is at least $10,000,000 (or, if smaller,
the amount of such Borrowing) and an integral multiple of $1,000,000 (or, if
smaller, the amount of such Borrowing), except as necessary to apply fully the
required amount of a mandatory prepayment. Each prepayment of a Borrowing shall
be applied ratably to the Loans included in the prepaid Borrowing. Prepayments
shall be accompanied by accrued interest to the extent required by Section 2.07.
All prepayments under this Section 2.12 shall be subject to Section 2.15 but
otherwise without premium or penalty.
SECTION 2.13. Reserve Requirements; Change in Circumstances. (a)
Notwithstanding any other provision herein but subject to paragraph (d) below
and to Section 2.20, if any Change in Law shall result in the imposition,
modification or applicability of any reserve, special deposit or similar
requirement against assets of, deposits with or for the account of or credit
extended by any Lender, or shall result in the imposition on any Lender or the
London interbank market or any other market in which the funding operations of
any Lender shall be conducted of any other condition, in any such case,
affecting this Agreement, such Lender's Tranche A Commitment or any Eurodollar
Loan made by such Lender, and the result of any of the foregoing shall be to
increase the cost to such Lender of making or maintaining any Eurodollar Loan or
to reduce the amount of any sum received or receivable by such Lender hereunder
(whether of principal, interest or otherwise) by an amount deemed by such Lender
to be material, then the Company and the applicable Borrower agree to pay such
additional amount or amounts as will compensate such Lender for such additional
costs or reduction.
(b) If any Lender shall have determined that any Change in Law regarding
capital adequacy has or would have the effect of reducing the rate of return on
such Lender's capital or on the capital of such Lender's holding company, if
any, as a consequence of this Agreement, such Lender's Tranche A Commitment or
the Loans made by such Lender pursuant hereto to a level below that which such
Lender or such Lender's holding company could have achieved but for such Change
in Law (taking into consideration such Lender's policies and the policies of
such Lender's holding company with respect to capital adequacy) by an amount
deemed by such Lender to be material, then the Company and the applicable
Borrower agree to pay to such Lender from time to time such additional amount or
amounts as will compensate such Lender for such reduction.
(c) A certificate of each Lender setting forth such amount or amounts as
shall be necessary to compensate such Lender or its holding company as specified
in paragraph (a) or (b) above, as the case may be, and setting forth in
reasonable detail the manner in which such amount or amounts shall have been
determined, shall be delivered
37
to the Company with a copy to the Administrative Agent and shall be conclusive
absent manifest error. The Company or the applicable Borrower, as the case may
be, shall pay each Lender the amount shown as due on any such certificate
delivered by it within 10 Business Days after its receipt of the same.
(d) Failure or delay on the part of any Lender to demand compensation for
any increased costs or reduction in amounts received or receivable or reduction
in return on capital shall not constitute a waiver of such Lender's right to
demand such compensation with respect to such period or any other period, except
that no Lender shall be entitled to any compensation under this Section 2.13 for
any costs incurred or reduction suffered with respect to any date unless such
Lender shall have notified the Company that it will demand compensation for such
costs or reductions under paragraph (c) above not more than 60 days after the
later of (i) such date and (ii) the date on which such Lender shall have become
aware of such costs or reductions. The protection of this Section shall be
available to each Lender regardless of any possible contention of the invalidity
or inapplicability of any law, rule, regulation or guideline or any Change in
Law. Notwithstanding any other provision in this Section 2.13, no Lender shall
demand compensation for any increased cost or reduction referred to above if it
shall not at the time be the general policy or practice of such Lender to demand
such compensation in similar circumstances under comparable provisions of other
credit agreements, if any. If any Lender shall receive as a refund any moneys
from any source in respect of any increased cost or reduction that it has
identified on any certificate provided pursuant to paragraph (c) above, to the
extent that the Company or any Borrower has previously paid the Lender any
compensation in respect thereof, the Lender shall promptly forward such refund
to the Company or such Borrower, as the case may be, without interest.
SECTION 2.14. Change in Legality. (a) Notwithstanding any other provision
herein, if any Change in Law shall make it unlawful for any Lender or its
Applicable Lending Office to make or maintain any Eurodollar Loan or to give
effect to its obligations as contemplated hereby with respect to any Eurodollar
Loan, then, such Lender shall give written notice thereof to the Company and to
the Administrative Agent and as long as such illegality, limitation or
impracticality continues to exist, such Lender:
(i) may declare that Eurodollar Loans will not thereafter be made by such
Lender hereunder, and any request by any Borrower for Eurodollar Loans
shall, as to such Lender only, be deemed a request for an ABR Loan
unless such declaration shall be subsequently withdrawn; and
(ii) shall promptly enter into negotiations with the Company and negotiate
in good faith to agree to a solution to such illegality, limitation or
impracticability; provided, however, that if such an agreement has not
been reached by the date at which the applicable notice becomes
effective as provided in paragraph (b) below, the affected Eurodollar
Loans shall be automatically converted on such date into ABR Loans.
38
(b) For purposes of this Section 2.14, a notice by any Lender shall be
effective as to each Eurodollar Loan, if lawful, on the last day of the
Interest Period currently applicable to such Eurodollar Loan; in all
other cases such notice shall be effective on the date of receipt.
(c) Each Lender that has delivered a notice pursuant to paragraph (a)
above, if the circumstances giving rise to such notice cease to exist,
shall notify each applicable Borrower thereof as soon as practicable.
SECTION 2.15. Indemnity. Each Borrower agrees to indemnify each Lender
making any Loan to it against any loss or expense which such Lender may sustain
or incur as a consequence of (a) any failure by any Borrower to borrow or to
refinance, convert or continue any Loan hereunder after irrevocable notice of
such borrowing, refinancing, conversion or continuation has been given pursuant
to Section 2.03, (b) any payment, prepayment or conversion of a Loan to such
Borrower required by any other provision of this Agreement or otherwise made or
deemed made, or any purchase required pursuant to the provisions of Section
2.20(b) (except pursuant to Sections 2.20 (b)(iii) or (iv)), on a date other
than the last day of the Interest Period, if any, applicable thereto or (c) any
default by such Borrower in payment or prepayment of the principal amount of any
Loan or any part thereof or interest accrued thereon, as and when due and
payable (at the due date thereof, whether by scheduled maturity, acceleration,
irrevocable notice of prepayment or otherwise), including, in each such case,
any loss or reasonable expense sustained or incurred or to be sustained or
incurred in liquidating or employing deposits from third parties acquired to
effect or maintain such Loan or any part thereof. Such loss or reasonable
expense shall include an amount equal to the excess, if any, as reasonably
determined by such Lender, of (i) its cost of obtaining the funds for the Loan
being paid, prepaid, refinanced or not borrowed (which in the case of a
Eurodollar Loan will be assumed to be the LIBO Rate applicable thereto) for the
period from the date of such payment, prepayment, refinancing or failure to
borrow or refinance to the last day of the Interest Period for such Loan (or, in
the case of a failure to borrow or refinance the Interest Period for such Loan
which would have commenced on the date of such failure) over (ii) the amount of
interest (as reasonably determined by such Lender) that would be realized by
such Lender in reemploying the funds so paid, prepaid or not borrowed or
refinanced for such period or Interest Period, as the case may be. A certificate
of any Lender setting forth any amount or amounts which such Lender is entitled
to receive pursuant to this Section and setting forth in reasonable detail the
manner in which such amount or amounts shall have been determined shall be
delivered to such Borrower with a copy to the Administrative Agent and shall be
conclusive absent manifest error.
SECTION 2.16. Pro Rata Treatment. Each Borrowing, each payment of principal
of any Borrowing (other than any prepayment to the extent otherwise provided in
Section 2.12(e)), each payment of interest on the Loans comprising any Borrowing
and each conversion or continuation of any Borrowing shall be allocated pro rata
among the Lenders in accordance with the respective principal amounts of their
outstanding Loans included in such Borrowing. Each Lender agrees that in
computing such Lender's portion of any Borrowing to be made hereunder, the
Administrative Agent may, in its
39
discretion, round each Lender's percentage of such Borrowing to the next higher
or lower whole dollar amount.
SECTION 2.17. Sharing of Setoffs. Each Lender agrees that if it shall,
through the exercise of a right of banker's lien, setoff or counterclaim, or
pursuant to a secured claim under Section 506 of Title 11 of the United States
Code or other security or interest arising from, or in lieu of, such secured
claim, received by such Lender under any applicable bankruptcy, insolvency or
other similar law or otherwise, or by any other means (other than as provided in
Section 2.14 or pursuant to an assignment under Section 2.20 or Section 10.04),
obtain payment (voluntary or involuntary) in respect of any Loan or Loans as a
result of which the unpaid principal portion of its Loans shall be
proportionately less than the unpaid principal portion of the Loans of any other
Lender, it shall be deemed simultaneously to have purchased from such other
Lender at face value, and shall promptly pay to such other Lender the purchase
price for, a participation in the Loans of such other Lender, so that the
aggregate unpaid principal amount of the Loans and participations in the Loans
held by each Lender shall be in the same proportion to the aggregate unpaid
principal amount of all Loans then outstanding as the principal amount of its
Loans prior to such exercise of banker's lien, setoff or counterclaim or other
event was to the principal amount of all Loans outstanding prior to such
exercise of banker's lien, setoff or counterclaim or other event; provided,
however, that, if any such purchase or purchases or adjustments shall be made
pursuant to this Section 2.17 and the payment giving rise thereto shall
thereafter be recovered, such purchase or purchases or adjustments shall be
rescinded to the extent of such recovery and the purchase price or prices or
adjustment restored without interest. Any Lender holding a participation in a
Loan deemed to have been so purchased may exercise any and all rights of
banker's lien, setoff or counterclaim with respect to any and all moneys owing
to such Lender by reason thereof as fully as if such Lender had made a Loan in
the amount of such participation.
SECTION 2.18. Payments. (a) Each Borrower shall make each payment
(including the principal of or interest on any Borrowing made by it or any other
amounts payable by it) hereunder from a Payment Location in the United States
not later than 12:00 noon, New York City time, on the date when due in Dollars
to the Administrative Agent at its offices at 270 Park Avenue, New York, New
York, in immediately available funds. The Administrative Agent shall distribute
any such payments received by it for the account of any other Person to the
appropriate recipient promptly following receipt thereof.
(b) Whenever any payment (including the principal of or interest on any
Borrowing or any other amount) hereunder shall become due, or otherwise would
occur, on a day that is not a Business Day, such payment may be made on the next
succeeding Business Day, and such extension of time shall in such case be
included in the computation of interest, if applicable.
SECTION 2.19. Taxes. (a) Any and all payments by or on account of any
obligation of the Borrowers hereunder or under any other Loan Document shall be
made free and clear of and without deduction for any Indemnified Taxes or Other
Taxes;
40
provided that if any Borrower shall be required to deduct any Indemnified
Taxes or Other Taxes from such payments, then (i) the sum payable shall be
increased as determined in good faith by the Administrative Agent or the
applicable Lender to be necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this Section)
the Administrative Agent or Lender (as the case may be) receives an amount equal
to the sum it would have received had no such deductions been made, (ii) such
Borrower shall make such deductions and (iii) such Borrower shall pay the full
amount deducted to the relevant Governmental Authority in accordance with
applicable law.
(b) In addition, the Borrowers shall pay any Other Taxes to the relevant
Governmental Authority in accordance with applicable law.
(c) The Borrowers shall indemnify the Administrative Agent and each Lender
within 20 days after written demand therefor, for the full amount of any
Indemnified Taxes or Other Taxes paid by the Administrative Agent, or such
Lender, as the case may be, on or with respect to any payment by or on account
of any obligation of the Borrowers hereunder or under any other Loan Document
(including Indemnified Taxes or Other Taxes imposed or asserted on or
attributable to amounts payable under this Section) and any penalties, interest
and reasonable expenses arising therefrom or with respect thereto, whether or
not such Indemnified Taxes or Other Taxes were correctly or legally imposed or
asserted by the relevant Governmental Authority. A certificate as to the amount
of such payment or liability delivered to the Company by a Lender, or by the
Administrative Agent on its own behalf or on behalf of a Lender, shall be
conclusive absent manifest error.
(d) As soon as practicable after any payment of Indemnified Taxes or Other
Taxes by a Borrower to a Governmental Authority, the Company shall deliver to
the Administrative Agent the original or a certified copy of a receipt issued by
such Governmental Authority evidencing such payment, a copy of the return
reporting such payment or other evidence of such payment reasonably satisfactory
to the Administrative Agent.
(e) Any Foreign Lender that is entitled to an exemption from or reduction
of withholding tax under the law of the jurisdiction in which a Borrower is
located, or any treaty to which such jurisdiction is a party, with respect to
payments under this Agreement shall deliver to the Company (with a copy to the
Administrative Agent), at the time or times prescribed by applicable law, such
properly completed and executed documentation prescribed by applicable law or
reasonably requested by the Company as will permit such payments to be made
without withholding or at a reduced rate.
(f) If the Administrative Agent or a Lender determines, in its sole
discretion, that it has received a refund of any Taxes or Other Taxes as to
which it has been indemnified by a Borrower or with respect to which a Borrower
has paid additional amounts pursuant to this Section 2.19, it shall pay over
such refund to the Company (but only to the extent of indemnity payments made,
or additional amounts paid, by the Borrowers under this Section 2.19 with
respect to the Taxes or Other Taxes giving rise to such refund), net of all
out-of-pocket expenses of the Administrative Agent or such Lender and without
interest (other than any interest paid by the relevant Governmental Authority
with respect to
41
such refund); provided, that the Borrowers, upon the request of the
Administrative Agent or such Lender, agree to repay the amount paid over to such
Borrower (plus any penalties, interest or other charges imposed by the relevant
Governmental Authority) to the Administrative Agent or such Lender in the event
the Administrative Agent or such Lender is required to repay such refund to such
Governmental Authority. This section shall not be construed to require the
Administrative Agent or any Lender to make available its tax returns (or any
other information relating to its taxes which it deems confidential) to any
Borrower or any other Person.
SECTION 2.20. Duty to Mitigate; Assignment of Rights Under Certain
Circumstances. (a) Any Lender claiming any additional amounts payable pursuant
to Section 2.13, or 2.19, or exercising its rights under Section 2.14, shall use
reasonable efforts (consistent with legal and regulatory restrictions) to file
any certificate or document requested by the Company or to change the
jurisdiction of its Applicable Lending Office or to take such other actions as
may reasonably be requested by the Company if the making of such a filing or
change would avoid the need for or reduce the amount of any such additional
amounts which may thereafter accrue or avoid the circumstances giving rise to
such exercise and would not, in the reasonable determination of such Lender, be
otherwise disadvantageous to such Lender.
(b) In the event that (i) any Lender shall have delivered a notice or
certificate pursuant to Section 2.13 or 2.14, (ii) any Borrower shall be
required or reasonably believes it will be required, to make additional payments
to any Lender under Section 2.19, (iii) any Lender shall become, or a
substantial part of the property of any Lender shall become, the subject of any
receivership or similar proceeding or (iv) any Lender shall default on its
commitment to lend hereunder, the Company shall have the right, at its own
expense, upon notice to such Lender and the Administrative Agent, to require
such Lender to transfer and assign without recourse, free and clear of all
deductions and withholding (in accordance with, upon the terms of and subject to
the restrictions contained in Section 10.04), all interests, rights and
obligations contained hereunder to another financial institution or to another
Lender which shall assume such obligations; provided that (A) no such assignment
shall conflict with any law, rule or regulation or order of any Governmental
Authority and (B) the assignee or the Company, as the case may be, shall pay to
the affected Lender in immediately available funds on the date of such
assignment the principal of and the interest accrued to the date of payment on
the Loans made by it hereunder and all other amounts accrued for its account or
owed to it hereunder.
42
ARTICLE III
Conditions
SECTION 3.01. Effectiveness. This Agreement shall become effective on the
date on which each of the conditions set forth in Section 7 of the Amendment
Agreement shall have been satisfied.
ARTICLE IV
Representations and Warranties
The Company, as to itself and each of its Subsidiaries, represents and
warrants to the Agents and each of the Lenders, as of the Effective Date, as
follows:
SECTION 4.01. Organization; Powers. Each of the Company and its
Subsidiaries is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization (except, in the case of
Subsidiaries that are not Material Subsidiaries, where the failure to do so,
individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Effect), has all requisite power and authority to carry on
its business as now conducted and, except where the failure to do so,
individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Effect, is qualified to do business in, and is in good
standing in, every jurisdiction where such qualification is required.
SECTION 4.02. Authorization; Enforceability. Except as set forth in
Schedule 4.02, the Transactions are within the corporate powers of each Borrower
and each Subsidiary Guarantor and have been duly authorized by all necessary
corporate and, if required, stockholder action. This Agreement has been duly
executed and delivered by the Company and each Borrowing Subsidiary and
constitutes (assuming due execution by the Lenders and the Agents), and each
other Loan Document to which any Loan Party is a party, when executed and
delivered by such Loan Party, will constitute (assuming due execution by the
Lenders and the Agents), a legal, valid and binding obligation of such Loan
Party, enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other laws affecting
creditors' rights generally and to general principles of equity, regardless of
whether considered in a proceeding in equity or at law.
SECTION 4.03. Governmental Approvals; No Conflicts. Except as set forth in
Schedule 4.03, the Transactions (a) do not require any consent or approval of,
registration or filing with or other action by any Governmental Authority, (b)
will not violate any applicable material law or regulation or the charter,
by-laws or other organizational documents of the Company or any of its
Subsidiaries or any order of any Governmental Authority, (c) will not violate or
result in a default under any indenture or other material agreement or
instrument binding upon the Company or any of its Subsidiaries or any assets of
any of them, or give rise to a right thereunder to require any payment to be
made by the Company or any of its Subsidiaries, and (d) will not result in
43
the creation or imposition of any Lien (other than the Liens created by the
Security Documents) on any asset of the Company or any of its Subsidiaries.
SECTION 4.04. Financial Condition; No Material Adverse Change. (a) The
Company has heretofore furnished to the Lenders its consolidated balance sheet
and statements of income, stockholders equity and cash flows (i) as of and for
the fiscal year ended June 30, 2003, reported on by KPMG LLP, independent public
accountants, and (ii) as of and for the fiscal quarter and the portion of the
fiscal year ended March 31, 2004, certified by its chief financial officer. Such
financial statements present fairly, in all material respects, the financial
position and results of operations and cash flows of the Company and its
consolidated Subsidiaries as of such dates and for such periods in accordance
with GAAP.
(b) Since June 30, 2003, there has been no change that would constitute a
material adverse change in the business, assets, operations or condition,
financial or otherwise, of the Company and its Subsidiaries taken as a whole.
SECTION 4.05. Properties. (a) Each of the Company and its Subsidiaries has
good title to all its real and personal property purportedly owned by it and
material to its business, except for defects or lack of title that could not
reasonably be expected to result in a Material Adverse Effect. All such real and
personal property is free and clear of all Liens other than Liens permitted
under Section 6.02.
(b) Each of the Company and its Subsidiaries owns, or is licensed to use,
all trademarks, tradenames, copyrights, patents and other intellectual property
material to its business, except where lack of ownership or of any license could
not reasonably be expected to result in a Material Adverse Effect, and the use
thereof by the Company and its Subsidiaries does not infringe upon the rights of
any other Person, except for any such infringements that, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect. All such owned trademarks, tradenames, copyrights, patents and other
intellectual property are free and clear of all Liens other than Liens permitted
under Section 6.02.
(c) Schedule 4.05 sets forth the address and county of each real property
with a fair market value of $1,000,000 or greater that is owned by the Company
or any of its Domestic Subsidiaries as of the Effective Date after giving effect
to the Transactions.
SECTION 4.06. Litigation and Environmental Matters. (a) Except for the
Disclosed Matters, there are no actions, suits or proceedings by or before any
arbitrator or Governmental Authority pending against or, to the knowledge of the
Company, threatened against or affecting the Company or any of its Subsidiaries
(i) as to which there is a reasonable possibility of an adverse determination
and that, if adversely determined, could reasonably be expected, individually or
in the aggregate, to have a Material Adverse Effect or (ii) that assert the
invalidity or unenforceability of or otherwise challenge this Agreement or the
Transactions.
44
(b) Except for the Disclosed Matters and except with respect to any other
matters that, individually or in the aggregate, could not reasonably be expected
to have a Material Adverse Effect, neither the Company nor any of its
Subsidiaries (i) is in material violation of any Environmental Law or has failed
to obtain, maintain or comply with any material permit, license or other
approval required under any Environmental Law, (ii) has become subject to any
Environmental Liability, (iii) has received written notice of any claim with
respect to any Environmental Liability or (iv) knows of any basis reasonably
likely to result in any Environmental Liability.
SECTION 4.07. Compliance with Laws and Agreements. Neither the Company nor
any of its Subsidiaries is in violation of any law, regulation or order of any
Governmental Authority applicable to it or its property or any indenture,
agreement or other instrument binding upon it or its property, where such
violation, individually or in the aggregate with other violations, could
reasonably be expected to have a Material Adverse Effect.
SECTION 4.08. Not an Investment Company or Holding Company. Neither the
Company nor any of its Subsidiaries is (a) an "investment company" as defined
in, or subject to regulation under, the Investment Company Act of 1940 or (b) a
"holding company" as defined in, or subject to regulation under, the Public
Utility Holding Company Act of 1935.
SECTION 4.09. Taxes. Each of the Company and its Subsidiaries has timely
filed or caused to be timely filed all returns and reports required to have been
filed and has paid or caused to be paid all Taxes required to have been paid by
it, except (a) Taxes that are being contested in good faith by appropriate
proceedings and for which the Company or such Subsidiary, as applicable, has set
aside on its books adequate reserves or (b) to the extent that the failure to do
so could not reasonably be expected to result in a Material Adverse Effect.
SECTION 4.10. ERISA. No ERISA Event has occurred or is reasonably expected
to occur that, when taken together with all other such ERISA Events for which
liability is reasonably expected to occur, could reasonably be expected to
result in a Material Adverse Effect.
SECTION 4.11. Disclosure. None of the reports, financial statements,
certificates or other information furnished by or on behalf of the Company to
the Administrative Agent or any Lender in connection with the negotiation of
this Agreement or delivered hereunder (as modified or supplemented by other
information so furnished), 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
misleading; provided that, with respect to projected financial information, the
Company represents only that such information was prepared in good faith based
upon assumptions believed to be reasonable at the time (it being understood that
various of such assumptions by the Company's management concerning anticipated
results of the Company are based in part on statements, estimates and
projections of Reiman that have been reviewed by the Company and that the
Company has no reason to
45
believe should not be relied on, but that themselves reflect various assumptions
by Reiman's management concerning such anticipated results).
SECTION 4.12. Federal Reserve Regulations. (a) Neither the Company nor any
of the Subsidiaries is engaged principally, or as one of its important
activities, in the business of extending credit for the purpose of buying or
carrying margin stock (as defined in Regulation U).
(b) No part of the proceeds of any Loan will be used, whether directly or
indirectly, and whether immediately, incidentally or ultimately, for any purpose
that entails a violation of the provisions of the Regulations of the Board,
including Regulation U or X. Not more than 25% of the assets of the Company or
the Company and the Subsidiaries taken as a whole that are subject to the
restrictions of Sections 6.02, 6.04 and 6.05 will at any time constitute margin
stock.
SECTION 4.13. Subsidiaries. At the Effective Date, except as set forth in
Schedule 4.13, all the issued and outstanding Equity Interests of each of the
Subsidiaries have been validly issued and are fully paid and nonassessable and
are owned directly or indirectly by it free and clear of all Liens, and there
are no options, warrants, calls, conversions or exchange rights, commitments or
agreements of any character obligating any of the Subsidiaries to issue, deliver
or sell additional shares of capital stock of any class or any securities
convertible into or exchangeable for any such capital stock or any additional
partnership or other Equity Interests. Schedule 4.13 sets forth the name of, and
the ownership interest of the Company in, each Subsidiary of the Company and
identifies each Subsidiary that is a Loan Party, in each case as of the
Effective Date.
SECTION 4.14. Security Documents. (a) The Guarantee and Collateral
Agreement creates in favor of the Collateral Agent, for the ratable benefit of
the Secured Parties, a legal, valid and enforceable security interest in the
Collateral (as defined in the Guarantee and Collateral Agreement) securing the
Obligations, subject to Liens permitted under Section 6.02, and constitutes a
fully perfected Lien on all right, title and interest of the Loan Parties in the
Collateral (other than Intellectual Property, as defined in the Guarantee and
Collateral Agreement) prior and superior to the rights of any other Person,
subject only to Liens permitted under Section 6.02.
(b) Each Mortgage creates in favor of the Collateral Agent, for the ratable
benefit of the Secured Parties, a legal, valid and enforceable Lien securing the
Obligations on all the applicable mortgagor's right, title and interest in and
to the Mortgaged Properties subject thereto and the proceeds thereof, and when
the Mortgages have been filed in the counties specified on Schedule 4.05, the
Mortgages will constitute a fully perfected Lien on all right, title and
interest of the mortgagors in the Mortgaged Properties and the proceeds thereof,
prior and superior in right to any other Person (but subject to Liens or other
encumbrances for which exceptions are taken in the policies of title insurance
delivered in respect of the Mortgaged Properties and subject to Liens permitted
under Section 6.02).
46
(c) The Lien created under the Guarantee and Collateral Agreement
constitutes a fully perfected Lien on all right, title and interest of the Loan
Parties in the material Intellectual Property (as defined in the Guarantee and
Collateral Agreement) in which a security interest may be perfected by filing in
the United States and its territories and possessions, in each case prior and
superior in right to any other Person, subject to Liens permitted under Section
6.02 and other than Liens that may exist on immaterial Intellectual Property (it
being understood that subsequent recordings in the United States Patent and
Trademark Office or the United States Copyright Office may be necessary to
perfect a Lien on registered trademarks and trademark applications or
copyrights, respectively, acquired by the Grantors after the Effective Date).
ARTICLE V
Affirmative Covenants
Until the Tranche A Commitments have expired or been terminated and the
principal of and interest on each Loan shall have been paid in full, the Company
covenants and agrees with the Lenders that:
SECTION 5.01. Financial Statements and Other Information. The Company will
furnish to the Agents and each Lender:
(a) within 90 days after the end of each fiscal year of the Company, its
audited consolidated balance sheet and related statements of
operations, stockholders' equity and cash flows as of the end of and
for such year, setting forth in each case in comparative form the
figures for the previous fiscal year, all reported on by KPMG LLP or
other independent public accountants of recognized national standing
(without a "going concern" or like qualification or exception and
without any qualification or exception as to the scope of such audit)
to the effect that such consolidated financial statements present
fairly in all material respects the financial condition and results of
operations of the Company and its consolidated Subsidiaries on a
consolidated basis in accordance with GAAP consistently applied;
(b) within 45 days after the end of each of the first three fiscal
quarters of each fiscal year of the Company, its consolidated balance
sheet and related statements of operations, stockholders' equity and
cash flows as of the end of and for such fiscal quarter and the then
elapsed portion of the fiscal year, setting forth in each case in
comparative form the figures for the corresponding period of the
previous fiscal year, or such other financial statements required to
be included in Securities and Exchange Commission Form 10-Q, all
certified by one of its Financial Officers as presenting fairly in all
material respects the financial condition and results of operations of
the Company and its consolidated Subsidiaries on a consolidated basis
in accordance with GAAP consistently applied, subject to normal
year-end audit adjustments and the absence of footnotes;
47
(c) concurrently with any delivery of financial statements under clause
(a) or (b) above, a certificate of a Financial Officer of the Company
(i) certifying as to whether a Default has occurred and, if a Default
has occurred, specifying the details thereof and any action taken or
proposed to be taken with respect thereto, (ii) setting forth
calculations demonstrating that the Company is in compliance with
Sections 6.12, 6.13, 6.14 and 6.15, (iii) in the case of each delivery
of financial statements under clause (a) above, setting forth in
reasonable detail the calculation of the Company's Excess Cash Flow
for the applicable fiscal year and (iv) if any change in GAAP has
occurred since the last date of delivery of financial statements and
has had a material effect on the financial statements of the Company,
specifying such effect, unless such effect is noted in such financial
statements;
(d) promptly after the same become publicly available, copies of all
periodic and other reports, proxy statements and other materials filed
by the Company or any Subsidiary with the Securities and Exchange
Commission, or any Governmental Authority succeeding to any or all of
the functions of said Commission, or with any national securities
exchange, or distributed by the Company to its shareholders generally,
as the case may be; and
(e) promptly following any request therefor, such other information
regarding the operations, business affairs and financial condition of
the Company or any Subsidiary, or compliance with the terms of this
Agreement, as the Administrative Agent or any Lender may reasonably
request.
SECTION 5.02. Notices of Material Events. Upon becoming aware of any of the
following, the Company will furnish to the Agents and each Lender prompt written
notice thereof:
(a) the occurrence of any Default;
(b) the filing or commencement of any action, suit or proceeding by or
before any arbitrator or Governmental Authority against or affecting
the Company or any Affiliate thereof that could reasonably be expected
to result in a Material Adverse Effect;
(c) the occurrence of any ERISA Event or event that would be an ERISA Event
if the Administrative Agent or the Required Lenders made the
determination referred to in the definition of ERISA Event, in each
case, that, alone or together with any other ERISA Events that have
occurred, could reasonably be expected to result in liability of the
Company and its Subsidiaries in an aggregate amount exceeding
$5,000,000; and
(d) any other development that results in, or, in the judgment of the
Company, could reasonably be expected to result in, a Material Adverse
Effect.
Each notice delivered under this Section shall be accompanied by a statement of
a Financial Officer or other executive officer of the Company setting forth the
details of the
48
event or development requiring such notice and any action taken or proposed to
be taken with respect thereto.
SECTION 5.03. Existence; Conduct of Business. The Company will, and will
cause each of its Subsidiaries to, do or cause to be done all things necessary
to preserve, renew and keep in full force and effect its legal existence and the
rights, licenses, permits, privileges, patents, copyrights, trademarks,
tradenames and franchises material to the conduct of its business except where
the failure to do so could not reasonably be expected to have a Material Adverse
Effect; provided that the foregoing shall not prohibit any merger,
consolidation, liquidation or dissolution permitted under Section 6.04.
SECTION 5.04. Payment of Obligations. The Company will, and will cause each
of its Subsidiaries to, pay its Debt (and other obligations, including Tax
liabilities) before the same shall become delinquent or in default, except where
(a) the validity or amount thereof is being contested in good faith by
appropriate proceedings and the Company or such Subsidiary has set aside on its
books adequate reserves with respect thereto in accordance with GAAP or (b) the
failure to make payment could not reasonably be expected to result in a Material
Adverse Effect.
SECTION 5.05. Maintenance of Properties; Insurance. The Company will, and
will cause each of its Subsidiaries to, (a) keep and maintain all property
material to the conduct of its business in good working order and condition,
ordinary wear and tear excepted, except where the failure to do so could not
reasonably be expected to have a Material Adverse Effect and (b) maintain, with
financially sound and reputable insurance companies, insurance in such amounts
and against such risks as are customarily maintained by similar companies
engaged in the same or similar businesses operating in the same or similar
locations; provided that the Company and its Subsidiaries may (i) self-insure
against such risks and in such amounts as are usually self-insured by similar
companies engaged in the same or similar businesses operating in the same or
similar locations and (ii) elect not to carry publisher's liability insurance or
terrorism insurance.
SECTION 5.06. Books and Records; Inspection Rights. The Company will, and
will cause each of its Subsidiaries to, keep proper books of record and account
in which true and correct entries are made of all material dealings and
transactions in relation to its business and activities. The Company will, and
will cause each of its Subsidiaries to, permit any representatives designated by
the Administrative Agent or any Lender, upon reasonable prior notice, to visit
and inspect its properties, to examine and make extracts from its books and
records, and to discuss its affairs, finances and condition with its officers
and independent accountants, all at such reasonable times during normal business
hours as reasonably requested.
SECTION 5.07. Compliance with Laws. The Company will, and will cause each
of its Subsidiaries to, comply with all laws, rules, regulations and orders of
any Governmental Authority applicable to it or its property, except where the
failure to
49
do so, individually or in the aggregate, could not reasonably be expected to
result in a Material Adverse Effect.
SECTION 5.08. Use of Proceeds. The proceeds of the Loans will be used only
for the purposes set forth in the preamble to this Agreement. No part of the
proceeds of any Loan will be used, whether directly or indirectly, for any
purpose that entails a violation of any of the Regulations of the Board,
including Regulations U and X.
SECTION 5.09. Information Regarding Collateral. (a) The Company will
furnish to the Administrative Agent and to Cravath, Swaine & Moore LLP, Attn:
James Cooper or such other Person as the Administrative Agent shall specify,
prompt written notice of any change (i) in any Loan Party's corporate name or in
any trade name used to identify it in the conduct of its business or in the
ownership of its properties, (ii) in the location of any Loan Party's chief
executive office, principal place of business or jurisdiction of organization
(including any such change resulting from any merger or consolidation involving
such Loan Party), (iii) in any Loan Party's identity or corporate structure,
(iv) in any Loan Party's Federal Taxpayer Identification Number or
organizational identification number and (v) in the ownership of any Equity
Interests pledged under the Guarantee and Collateral Agreement. The Company
agrees not to effect or permit any change referred to in the preceding sentence
until the Company has notified the Collateral Agent in writing of such change,
and that prior to or promptly after any such change the Company will take all
such actions as may be required in order that the Collateral Agent shall
continue at all times following such change to have a valid, legal and perfected
security interest in all the Collateral. The Company also agrees promptly to
notify the Collateral Agent if any material portion of the Collateral is damaged
or destroyed.
(b) Each year (commencing with the fiscal year ending June 30, 2003), at
the time of delivery of annual financial statements pursuant to clause (a) of
Section 5.01, the Company shall deliver to the Administrative Agent, for
distribution to the Lenders, and to Cravath, Swaine & Moore LLP, Attn: James
Cooper or such other Person as the Administrative Agent shall specify, a
certificate of a Financial Officer and the chief legal officer of the Company
dated as of a recent date and (i) setting forth information of the type set
forth in the Perfection Certificate but as of the date of such certificate (or
confirming that there has been no change in such information since the date of
the Perfection Certificate delivered on the Effective Date or the date of the
most recent certificate delivered pursuant to this Section), (ii) certifying
that 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 have been filed of record in each
governmental, municipal or other appropriate office in each jurisdiction
identified pursuant to clause (i) above to the extent necessary to protect and
perfect the security interests under the Guarantee and Collateral Agreement 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) and (iii) certifying that the Collateral and Guarantee Requirement
continues to be satisfied.
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SECTION 5.10. Casualty and Condemnation. The Company (a) will furnish to
the Collateral Agent and the Lenders prompt written notice of any casualty or
other insured damage to any material Collateral or the commencement of any
action or proceeding for the taking of any material Collateral or any material
part thereof or material interest therein under power of eminent domain or by
condemnation or similar proceeding and (b) will ensure that the Net Proceeds of
any such event (whether in the form of insurance proceeds, condemnation awards
or otherwise) are collected and applied in accordance with the applicable
provisions of the Guarantee and Collateral Agreement and this Agreement.
SECTION 5.11. Additional Subsidiaries. If any additional Domestic
Subsidiary, or Foreign Subsidiary owned in whole or in part by any Domestic
Subsidiary, is formed or acquired after the Effective Date, the Company will,
within ten Business Days after such Subsidiary is formed or acquired, notify the
Administrative Agent and the Lenders thereof and cause the Collateral and
Guarantee Requirement to be satisfied insofar as they apply to such Subsidiary
and its assets.
SECTION 5.12. Further Assurances. The Company will, and will cause each
Grantor to, execute any and all further documents, financing statements,
agreements and instruments, and take all further reasonable actions (including
the filing and recording of financing statements, fixture filings, mortgages,
deeds of trust and other documents), that may be required under any applicable
law, or that the Collateral Agent or the Required Lenders may reasonably
request, to cause the Collateral and Guarantee Requirement to be and remain
satisfied, all at the expense of the Grantors. The Company also agrees to
provide to the Collateral Agent, from time to time upon request, evidence
reasonably satisfactory to the Collateral Agent as to the perfection and
priority of the Liens created or intended to be created by the Guarantee and
Collateral Agreement.
SECTION 5.13. Interest Rate Protection. As promptly as practicable, and in
any event within 90 days after the Original Effective Date, the Borrower will
enter into, and thereafter for a period of not less than three years will
maintain in effect, one or more interest rate protection agreements on such
terms and with such parties as shall be reasonably satisfactory to the Agents,
the effect of which shall be to fix or limit the interest cost to the Borrower
with respect to at least 33.33% of the aggregate principal amount of the
outstanding Loans.
SECTION 5.14. Compliance with Federal Reserve Regulations. The Company and
its Subsidiaries will comply with all rules, regulations and restrictions of the
Regulations of the Board, including Regulation U and X.
ARTICLE VI
Negative Covenants
Until the Tranche A Commitments have expired or terminated and the
principal of and interest on each Loan have been paid in full, the Company
covenants and agrees with the Lenders that:
51
SECTION 6.01. Debt and Preferred Stock of Subsidiaries. (a) The Company
will not permit any Subsidiary to create, incur, assume or permit to exist any
Debt, except:
(i) Debt outstanding on the Original Effective Date and set forth on
Schedule 6.01;
(ii) Debt created under the Loan Documents;
(iii) Debt created under the Five-Year Credit Agreement or the "Loan
Documents" referred to therein;
(iv) Debt of any Subsidiary to the Company or any other Subsidiary that in
either case shall not have been transferred or pledged to any third
party (other than under the Security Documents);
(v) Debt of any Subsidiary incurred to finance the acquisition,
construction or improvement of any fixed or capital assets, including
Capital Lease Obligations, and any Debt assumed in connection with the
acquisition of any such assets or secured by a Lien on any such assets
prior to the acquisition thereof, and extensions, renewals and
replacements of any such Debt that do not increase the outstanding
principal amount thereof; provided that (A) such Debt is incurred
prior to or within 180 days after such acquisition or the
completion of such construction or improvement and (B) the aggregate
principal amount of Debt permitted by this clause (v) shall not exceed
$10,000,000 at any time outstanding;
(vi) Debt of any Person that shall have become a Subsidiary after the
Original Effective Date; provided that (A) such Debt shall have existed
at the time such Person becomes a Subsidiary and shall not have been
created in contemplation of or in connection with such Person becoming
a Subsidiary and (B) the aggregate principal amount of Debt permitted
by this clause (vi) shall not exceed $10,000,000 at any time
outstanding;
(vii) Debt refinancing or replacing any of the Debt referred to in the
preceding clauses (i) through (vi); provided that (A) the principal
amount of such refinancing or replacement Debt shall not exceed that of
the Debt refinanced or replaced, (B) the maturity and weighted average
life to maturity of such refinancing or replacement Debt shall not be
less than that of the Debt refinanced or replaced and (C) the obligors
on such refinancing or replacement Debt shall not include Subsidiaries
that were not obligors in respect of the Debt refinanced or replaced;
(viii) Debt of any Subsidiary as an account party in respect of trade letters
of credit employed in the ordinary course of business; and
(ix) other Debt that, when aggregated with the aggregate outstanding Debt of
the Company secured by Liens permitted pursuant to Section 6.02(o) and
the
52
aggregate sale price of the assets sold in sale and leaseback
transactions permitted pursuant to Section 6.03(b), shall at no time
exceed 5.0% of Consolidated Assets.
(b) The Company will not permit any Subsidiary to issue any preferred stock
or other preferred Equity Interest, other than any preferred stock or
other preferred Equity Interest held by the Company or another
Subsidiary.
SECTION 6.02. Liens. The Company will not, and will not permit any
Subsidiary to, create, incur, assume or permit to exist any Lien on any property
or asset now owned or hereafter acquired by it, or assign or sell any income or
revenues (including accounts receivable) or rights in respect of any thereof,
except:
(a) Permitted Encumbrances;
(b) any Lien on any property or asset of the Company or any Subsidiary
existing on the Original Effective Date and set forth in Schedule 6.02;
provided that (i) such Lien shall not apply to any other property or
asset of the Company or any Subsidiary and (ii) such Lien shall secure
only those obligations which it secures on the date hereof and
extensions, renewals and replacements thereof that do not increase the
outstanding principal amount thereof as of the date hereof;
(c) any Lien existing on any property or asset prior to the acquisition
thereof by the Company or any Subsidiary or existing on any property
or asset of any Person that becomes a Subsidiary after the date hereof
prior to the time such Person becomes a Subsidiary; provided that
such Lien is not created in contemplation of or in connection with
such acquisition or such Person becoming a Subsidiary, as the case may
be, (ii) such Lien shall not apply to any other property or assets of
the Company or any Subsidiary and (iii) such Lien shall secure only
those obligations which it secures on the date of such acquisition or
the date such Person becomes a Subsidiary, as the case may be, and
extensions, renewals and replacements thereof that do not increase the
outstanding principal amount thereof as of such date;
(d) any Lien on fixed or capital assets acquired, constructed or improved
by the Company or any Subsidiary, and extensions, renewals and
replacements thereof that do not increase the outstanding principal
amount thereof; provided that (i) such Lien and the Debt secured
thereby are incurred prior to or within 180 days after such acquisition
or the completion of such construction or improvement, (ii) the Debt
secured thereby does not exceed the cost of acquiring, constructing or
improving such fixed or capital assets and (iii) such Lien shall not
apply to any other property or assets of the Company or any Subsidiary;
(e) any Lien on the property or assets of any Subsidiary of the Company in
favor of the Company or any wholly owned Subsidiary;
(f) any Lien on equipment (including printing presses and data-processing
equipment) owned by the Company or any Subsidiary and located on the
premises
53
of any supplier and used in the ordinary course of the
Company's or such Subsidiary's business;
(g) any judgment or judicial attachment Lien with respect to any judgment
that does not constitute an Event of Default;
(h) any Lien securing any reimbursement, indemnification or similar
obligation or liability incurred in connection with any letter of
credit, letter of guaranty, banker's acceptance, bill of exchange or
similar instrument to backstop trade obligations (but not Debt) of the
Company or a Subsidiary;
(i) any Lien imposed by law where (x) the validity or amount thereof is
being contested in good faith by appropriate proceedings and the
Company or any Subsidiary has set aside on its books adequate reserves
with respect thereto in accordance with GAAP or (y) the failure to
remove such Lien could not reasonably be expected to result in a
Material Adverse Effect;
(j) any Lien deemed to exist by virtue of any Capital Lease Obligation not
otherwise prohibited hereunder;
(k) any Lien arising under any Loan Document;
(l) any Lien on assets of a Subsidiary that is not a Material Subsidiary
securing obligations that do not constitute Debt;
(m) Liens or other encumbrances for which exceptions are taken in the
policies of title insurance delivered in respect of the Mortgaged
Properties;
(n) other Liens arising in the ordinary course of business that do not
secure Debt and do not interfere with the material operations of the
Company and the Subsidiaries and do not individually or in the
aggregate materially impair the value of the assets of the Company and
the Subsidiaries; and
(o) other Liens securing Debt that, when aggregated with the Debt of
Subsidiaries permitted under Section 6.01(a)(ix) and the aggregate sale
price of the assets sold in sale and leaseback transactions permitted
under Section 6.03(b), does not exceed 5.0% of Consolidated Assets at
any time.
SECTION 6.03. Sale and Leaseback Transactions. The Company will not, and
will not permit any Subsidiary to, enter into any arrangement, directly or
indirectly, with any Person whereby it shall sell or transfer any property, real
or personal, used or useful in its business, whether now owned or hereafter
acquired, and thereafter rent or lease property which it intends to use for
substantially the same purpose or purposes as the property being sold or
transferred; provided, however, that, notwithstanding the above, (a) the Company
may consummate the Headquarters Sale and Leaseback and (b) the Company or any
Subsidiary may engage in any other sale and leaseback transactions if the
aggregate sale price of the assets sold in such other transactions, when
54
aggregated with the Debt of Subsidiaries permitted under Section 6.01(a)(ix) and
the Debt secured by Liens permitted pursuant to Section 6.02(o), does not exceed
5.0% of Consolidated Assets at any time.
SECTION 6.04. Fundamental Changes. (a) The Company will not, and will not
permit any Material Subsidiary to, merge into or consolidate with any other
Person, or permit any other Person to merge into or consolidate with it, or
sell, transfer, lease or otherwise dispose of (in one transaction or in a series
of transactions) assets (including capital stock of Subsidiaries) constituting
all or substantially all the assets of the Company and the Subsidiaries on a
consolidated basis (whether now owned or hereafter acquired), or liquidate or
dissolve, except that, if at the time thereof and immediately after giving
effect thereto no Default shall have occurred and be continuing (i) the Company
or any Subsidiary may merge or consolidate with any Person; provided that (A) in
the case of any merger or consolidation involving the Company, the Company shall
be the continuing or surviving corporation and (B) in the case of any merger or
consolidation involving a Subsidiary (other than a merger or consolidation with
the Company), the surviving entity shall be a Subsidiary, (ii) any Subsidiary
may sell, transfer, lease or otherwise dispose of its assets to the Company or
to another Subsidiary, (iii) any Subsidiary may liquidate or dissolve if the
Company determines in good faith that such liquidation or dissolution is in the
best interests of the Company and is not materially disadvantageous to the
Lenders, (iv) the Company may effect the Recapitalization and (v) the Company
may effect asset transfers permitted under Section 6.05 by causing Subsidiaries
(other than Borrowing Subsidiaries) to be merged with or into other Persons.
(b) The Company will not, and will not permit any Subsidiary to, engage to
any material extent in any business other than businesses of the type, or
involving similar themes, content and customer orientation, as the business
conducted by the Company and its Subsidiaries on the date hereof, businesses
reasonably related thereto and extensions thereof consisting of the licensing of
Intellectual Property.
SECTION 6.05. Asset Sales. The Company will not, and will not permit any
Subsidiary to, sell, transfer, lease or otherwise dispose of (including pursuant
to any merger or consolidation) any asset, including any Equity Interest owned
by it, nor will the Company permit any of the Subsidiaries to issue any
additional Equity Interests in such Subsidiary, except:
(a) sales of inventory, used or surplus equipment and Permitted Investments
in the ordinary course of business;
(b) sales, transfers and dispositions to the Company or a Subsidiary;
provided that any such sales, transfers or dispositions involving a
Subsidiary that is not a Subsidiary Guarantor shall be made in
compliance with Section 6.07;
(c) sales of Equity Interests in LookSmart, Ltd. and WebMD Corporation;
(d) the sale of the Company's headquarters in connection with the
Headquarters Sale and Leaseback and (ii) sales, transfers and
dispositions of other
55
assets for consideration not greater than $5,000,000 for any such
transaction or series of related transactions;
(e) other sales, transfers and dispositions of assets for consideration in
an aggregate amount not greater than $50,000,000 during any fiscal year
of the Company (or, if the Ratings are at least BBB- and Baa3, in each
case with stable outlook, $100,000,000);
(f) issuances by Subsidiaries of directors', officers' or nominees'
qualifying shares; and
(g) issuances of Equity Interests by Subsidiaries to the Company or other
Subsidiaries.
SECTION 6.06. Investments, Loans, Advances, Guarantees and Acquisitions.
The Company will not, and will not permit any Subsidiary to, purchase, hold or
acquire any Equity Interests in or evidences of indebtedness or other securities
(including any option, warrant or other right to acquire any of the foregoing)
of, make or permit to exist any loans or advances to, Guarantee any obligations
of or make or permit to exist any investment or any other interest in, any other
Person, or purchase or otherwise acquire (in one transaction or a series of
transactions) any assets of any other Person that are substantial in relation to
the Company and the Subsidiaries taken as a whole (other than inventory acquired
in the ordinary course of business) or that constitute a business unit, except:
(a) Permitted Investments;
(b) investments existing on the date hereof;
(c) investments made with consideration consisting solely of common stock
of Company; provided that, if the value of such common stock exceeds
$50,000,000 during any fiscal year of the Company, such investments may
be made only if (i) no Default shall have occurred and be continuing at
the time of any such investment, (ii) the Company shall have delivered
to the Agents a certificate of a Financial Officer demonstrating pro
forma compliance with the covenant set forth in Section 6.13 and (iii)
the Ratings shall be at least BBB- and Baa3, in each case with stable
outlook;
(d) investments by the Company and its Subsidiaries in Equity Interests
of, and, to the extent permitted by Section 6.01, Guarantees by the
Company and its Subsidiaries of Debt of, persons that are direct or
indirect Subsidiaries of Company prior to the making of such
investments; provided that (i) any such Equity Interests held by a
Loan Party shall be pledged pursuant to the Collateral and
Guarantee Agreement to the extent required by this Agreement and (ii)
the aggregate amount of investments by Loan Parties in, loans and
advances by Loan Parties to, and Guarantees by Loan Parties of Debt
of, Subsidiaries that are not Subsidiary Guarantors (other than any
such investments, loans, advances and
56
Guarantees existing on the Original Effective Date) shall not
exceed $15,000,000 at any time outstanding;
(e) loans or advances made by the Company to any Subsidiary or made by any
Subsidiary to the Company or any other Subsidiary; provided that (i)
any such loans and advances made by a Grantor shall be pledged pursuant
to the Collateral and Guarantee Agreement to the extent required by
this Agreement and (ii) the amount of such loans and advances made by
Subsidiary Guarantors to Subsidiaries that are not Subsidiary
Guarantors shall be subject to the limitation set forth in clause (d)
above;
(f) investments received in connection with the bankruptcy or
reorganization of, or settlement of delinquent accounts and disputes
with, customers and suppliers, in each case in the ordinary course of
business; and
(g) the Acquisition and the Recapitalization;
(h) Restricted Payments permitted by Section 6.10(a)(iii), (v) or (vi);
(i) acquisitions of Equity Interests or assets for consideration with a
value not greater than $50,000,000 during any fiscal year; provided
that after June 30, 2004, any acquisition of Equity Interests or assets
may be completed without regard to such limitation so long as (i) no
Default shall have occurred and be continuing at the time of such
acquisition, (ii) the Company shall have delivered to the Agents a
certificate of a Financial Officer demonstrating pro forma compliance
with the covenant set forth in Section 6.13 and (iii) the Company shall
have Ratings of at least BBB- and Baa3, in each case with stable
outlook; and
(j) other investments, which would not be permitted but for this clause
(j), in an aggregate amount not to exceed $10,000,000 at any time
outstanding.
SECTION 6.07. Transactions with Affiliates. The Company will not, and will
not permit any Subsidiary to, sell, lease or otherwise transfer any material
property or assets to, or purchase, lease or otherwise acquire any material
property or assets from, or otherwise engage in any other material transactions
with, any of its Affiliates, except (a) in the ordinary course of business at
prices and on terms and conditions not less favorable to the Company or such
Subsidiary than could be obtained on an arm's-length basis from unrelated third
parties, (b) transactions between or among any wholly owned Subsidiary and the
Company or any other wholly owned Subsidiary not involving any Affiliate that is
not a wholly owned Subsidiary, (c) the Class B Repurchase, the Recapitalization
and the other transactions provided for in the Recapitalization Agreement, and
any Restricted Payment permitted by Section 6.10, (d) payments made and other
transactions entered into in the ordinary course of business with officers and
directors of the Company or any Subsidiary, and consulting fees and expenses
incurred in the ordinary course of business payable to former officers or
directors of the Company or any Subsidiary, (e) reclassifications or changes in
the terms of or other transactions relating to Equity Interests in the Company
held by Affiliates that do not involve the
57
payment of any consideration (other than Equity Interests of the Company) or any
other transfer of value by the Company or any Subsidiary to any such Affiliate,
(f) other transactions involving the purchase or redemption, or other
monetization of, Equity Interests of the Company held by members of the Current
Control Group, to the extent such transactions are not otherwise prohibited
under Section 6.10 or any other provision of this Agreement, and (g) any
payments by the Company or any Subsidiary to or on behalf of any Affiliate of
the Company or any Subsidiary in connection with out-of-pocket expenses incurred
in connection with any public or private offering, other issuance or sale of
stock by the Company or an Affiliate of the Company or other transaction for the
benefit of the Company or any Subsidiary; provided, however, that this Section
shall not limit the operation or effect of, or any payments under, (i) any
license, lease, service contract, purchasing agreement, disposition agreement or
similar arrangement entered into in the ordinary course of business between any
Subsidiary and the Company or any other Subsidiary or (ii) any joint venture to
which the Company or any Subsidiary is a party entered into in connection with,
or reasonably related to, its lines of business.
SECTION 6.08. Restrictive Agreements. The Company will not, and will not
permit any Subsidiary to, directly or indirectly, enter into, incur or permit to
exist any agreement or other arrangement that prohibits, restricts or imposes
any condition upon the ability of any Subsidiary to pay dividends or other
distributions with respect to its Equity Interests or to make or repay loans or
advances to the Company or any other Subsidiary or to guarantee Debt of the
Company or any other Subsidiary; provided that the foregoing shall not apply to
(a) restrictions and conditions imposed by law or by this Agreement, (b)
restrictions and conditions with respect to a Person that is not a Subsidiary on
the date hereof, which restrictions and conditions are in existence at the time
such Person becomes a Subsidiary and are not incurred in connection with, or in
contemplation of, such Person becoming a Subsidiary and (c) provisions limiting
loans, advances, guarantees or other investments or Restricted Payments by
Subsidiaries that are not more restrictive than the provisions related to loans,
advances, guarantees or other investments or Restricted Payments by Subsidiaries
set forth in Section 6.06 or Section 6.10(a).
SECTION 6.09. Swap Agreements. The Company will not, and will not permit
any of its Subsidiaries to, enter into any Swap Agreement, other than (a) Swap
Agreements required by Section 5.13 and (b) Swap Agreements entered into in the
ordinary course of business to hedge or mitigate risks to which the Company or
any Subsidiary is exposed in the conduct of its business or the management of
its liabilities or to take advantage of reduced interest rates by converting
fixed rate obligations to floating rate obligations.
SECTION 6.10. Restricted Payments; Certain Payments of Indebtedness. (a)
The Company will not, nor will it permit any Subsidiary to, declare or make, or
agree to pay or make, directly or indirectly, any Restricted Payment, or incur
any obligation (contingent or otherwise) to do so, except (i) the Company may
declare and pay dividends with respect to its capital stock payable solely in
Equity Interests, (ii) Subsidiaries may declare and pay dividends ratably with
58
respect to their capital stock, (iii) the Company may make payments to holders
of not more than $5,000,000 in stated value of preferred stock of the Company
that are required to be made as a result of the exercise of appraisal rights to
which they may be entitled in connection with the Recapitalization, (iv) the
Company or its Subsidiaries may make Restricted Payments, not exceeding
$5,000,000 during any fiscal year, pursuant to and in accordance with stock
option plans or other benefit plans for management or employees of the Company
and its Subsidiaries, (v) the Company may carry out the Class B Repurchase and
the Recapitalization; provided that such transactions are completed on or prior
to December 31, 2002 and (vi) the Company may pay cash dividends and repurchase
stock and make other Restricted Payments during any fiscal year in an aggregate
amount not exceeding $50,000,000; provided that for any fiscal year during which
the Company shall pay cash dividends, repurchase stock and make other Restricted
Payments in an aggregate amount greater than $25,000,000, the Company shall make
prepayments of Borrowings pursuant to Section 2.12(d) in an aggregate amount
equal to (I) the aggregate amount paid during such fiscal year in respect of
cash dividends, stock repurchases and other Restricted Payments minus (II) the
aggregate amount of all prepayments of Borrowings made pursuant to Section
2.12(a) during such fiscal year; provided further that so long as (x) no Default
shall have occurred and be continuing, (y) the Company shall demonstrate pro
forma compliance with the covenant set forth in Section 6.13 and (z) the Company
shall have Ratings of at least BBB- and Baa3, in each case with stable outlook,
the second proviso above shall not apply, and the Company may pay cash dividends
and repurchase stock and make other Restricted Payments during any fiscal year
in an aggregate amount equal to Excess Cash Flow for the prior year.
(b) The Company will not, nor will it permit any Subsidiary to, make or
agree to pay or make, directly or indirectly, any payment or other
distribution (whether in cash, securities or other property) of or in
respect of principal of or interest on any Debt, or any payment or
other distribution (whether in cash, securities or other property),
including any sinking fund or similar deposit, on account of the
purchase, redemption, retirement, acquisition, cancellation or
termination of any Debt, except:
(i) payments in respect of Debt created under the Loan Documents or the
Five-Year Credit Agreement;
(ii) payments in respect of Debt owed to the Company or any Subsidiary;
(iii) required interest and principal payments as and when due in respect of
other Debt, other than payments in respect of any Debt subordinated to
the Obligations that is prohibited by the applicable subordination
provisions; and
(iv) prepayments of Debt with the net proceeds of new Debt permitted
hereunder to the extent such net proceeds are not required to be
applied to prepay Borrowings under Section 2.12; provided that (A) the
obligors in respect of such new Debt do not include Subsidiaries that
are not obligors in respect of the Debt so prepaid, (B) the maturity of
such new Debt shall not be earlier, and the weighted average life of
such new Debt shall not be shorter, than that of the Debt so prepaid
and (C) if the Debt so prepaid shall have been subordinated to the
59
Obligations, then such new Debt shall likewise be so subordinated on
terms not less favorable to the Lenders.
(c) Neither the Company nor any Subsidiary shall enter into or be party to,
or make any payment under, any Synthetic Purchase Agreement, except
that the Company may enter into any Synthetic Purchase Agreement
related to any Equity Interest of the Company so long as the payments
required to be made thereunder, if they constituted payments in respect
of the purchase of Equity Interests of the Company, would be permitted
under clause (vii) of paragraph (a) above.
SECTION 6.11. Amendment of Material Documents. The Company will not, nor
will it permit any Subsidiary to, amend, modify or waive any of its rights under
any instrument or agreement evidencing or governing Material Debt or any other
material instrument or agreement if such amendment, modification or waiver would
shorten the maturity or reduce the weighted average life of any Material Debt or
be adverse in any material respect to the rights or interests of the Lenders.
SECTION 6.12. Consolidated Interest Coverage Ratio. The Company will not
permit the Consolidated Interest Coverage Ratio for any period of four
consecutive fiscal quarters ending after the date hereof to be less than 4.00 to
1.00.
SECTION 6.13. Consolidated Leverage Ratio. The Company will not permit the
Consolidated Leverage Ratio as of any date during any period set forth below to
be greater than the ratio set forth opposite such period:
Period Ratio
------ -----
Through 6/30/04 3.75:1.00
7/1/04 through 9/30/04 4.00:1.00
10/1/04 through 12/31/04 3.25:1.00
1/1/05 through 3/31/05 3.00:1.00
4/1/05 through 9/30/05 2.75:1.00
10/1/05 and thereafter 2.50:1.00
SECTION 6.14. Consolidated Fixed Charge Coverage Ratio. The Company will
not permit the Consolidated Fixed Charge Coverage Ratio for any period of four
consecutive fiscal quarters to be less than 1.75 to 1.00.
SECTION 6.15. Capital Expenditures. The Company will not permit
Consolidated Capital Expenditures to exceed (i) $30,000,000 during the fiscal
year of the Company ending on June 30, 2004, or (ii) $40,000,000 during any
fiscal year of the Company thereafter; provided that, notwithstanding the
foregoing, an amount not greater than 50% of the scheduled amount available for
capital expenditures in any given year
60
but not used in such year may be used for capital expenditures in the next
subsequent year only (it being agreed that the scheduled amount for any year
will be deemed used before any amount carried over from a prior year).
ARTICLE VII
Events Of Default
If any of the following events ("Events of Default") shall occur:
(a) any representation or warranty made or deemed made by or on behalf of
the Company or any Subsidiary in or in connection with any Loan
Document, or in any report, certificate, financial statement or other
document furnished pursuant to or in connection with any Loan Document,
shall prove to have been incorrect in any material respect when made or
deemed made;
(b) any Borrower shall fail to pay any principal of any Loan when and as
the same shall become due and payable, whether at the due date thereof
or at a date fixed for prepayment thereof or otherwise;
(c) any Borrower shall fail to pay any interest on any Loan or any other
amount (other than an amount referred to in clause (b) above) payable
under any Loan Document, when and as the same shall become due and
payable, and such failure shall continue unremedied for a period of
three Business Days;
(d) the Company or any Subsidiary shall fail to observe or perform any
covenant, condition or agreement contained in Section 5.02, Section
5.03 (with respect to any Borrower's existence) or Section 5.08 or in
Article VI;
(e) the Company or any Subsidiary shall fail to observe or perform any
covenant, condition or agreement contained in any Loan Document (other
than those specified in clause (b), (c) or (d) above), and such failure
shall continue unremedied for a period of 30 days after notice thereof
from the Administrative Agent or any Lender to the Company;
(f) (i) the Company or any Material Subsidiary shall fail to make any
payment of principal, interest or other amounts in respect of any
Material Debt, when and as the same shall become due and payable (or,
in the case of payments other than principal payments, within any
applicable grace period), or (ii) any other event or condition occurs
that results in any Material Debt becoming due prior to its scheduled
maturity or that enables or permits the holder or holders of any
Material Debt or any trustee or agent on its or their behalf to cause
any Material Debt to become due, or to require the prepayment,
repurchase, redemption or defeasance thereof, prior to its scheduled
maturity; provided that this clause (ii) shall not apply to
secured Debt that becomes due as a result of the voluntary sale or
transfer of the property or assets securing such Debt, or (iii)
61
there shall occur any Event of Default under and as defined in the
Five-Year Credit Agreement;
(g) an involuntary proceeding shall be commenced or an involuntary
petition shall be filed seeking (i) liquidation, reorganization or
other relief in respect of the Company or any Material Subsidiary or
its debts, or of a substantial part of its assets, under any Federal,
state or foreign bankruptcy, insolvency, receivership or similar law
now or hereafter in effect or (ii) the appointment of a receiver,
trustee, custodian, sequestrator, conservator or similar official for
the Company or any Material Subsidiary or for a substantial part of
its assets; and, in each case, such proceeding or petition shall
continue undismissed for 60 days or an order or decree approving or
ordering any of the foregoing shall be entered;
(h) the Company or any Material Subsidiary shall (i) voluntarily commence
any proceeding or file any petition seeking liquidation,
reorganization or other relief under any Federal, state or foreign
bankruptcy, insolvency, receivership or similar law now or hereafter
in effect, (ii) consent to the institution of, or fail to contest in a
timely and appropriate manner, any proceeding or petition described in
clause (h)(i) above, (iii) apply for or consent to the appointment of
a receiver, trustee, custodian, sequestrator, conservator or similar
official for the Company or any Material Subsidiary or for a
substantial part of its assets, (iv) file an answer admitting the
material allegations of a petition filed against it in any such
proceeding, (v) make a general assignment for the benefit of creditors
or (vi) take any action for the purpose of effecting any of the
foregoing;
(i) the Company or any Material Subsidiary shall become unable, admit in
writing or fail generally to pay its debts as they become due;
(j) one or more judgments (other than pursuant to the exercise of appraisal
rights in connection with the Recapitalization) for the payment of
money in an aggregate amount (to the extent not covered by insurance)
in excess of $20,000,000 shall be rendered against the Company, any
Material Subsidiary or any combination thereof and the same shall
remain undischarged for a period of 30 consecutive days during which
execution shall not be effectively stayed, or any action shall be
legally taken by a judgment creditor to attach or levy upon any assets
of the Company or any Material Subsidiary to enforce any such judgment;
(k) an ERISA Event shall have occurred that, when taken together with all
other ERISA Events that have occurred, could reasonably be expected to
result in any liability of the Company and its Subsidiaries in an
aggregate amount not exceeding $10,000,000 or could reasonably be
expected to result in a Material Adverse Effect;
(l) a Change in Control shall occur;
(m) any material provision of the Guarantee or Guarantee and Collateral
Agreement, or of any other Security Document relating to any material
portion of
62
the Collateral, shall, for any reason, not be, or shall be asserted in
writing by the Company or any Subsidiary not to be, in full force and
effect, or otherwise valid, binding and enforceable against any person
purported to be bound by it; or
(n) any Lien purported to be created under the Guarantee and Collateral
Agreement or any other Security Document, in each case, with respect to
any material portion of the Collateral shall cease to be, or shall be
asserted by any Loan Party not to be, a valid, perfected first priority
Lien (subject only to Liens permitted under Section 6.02) on such
Collateral, except as a result of the release of such Collateral
pursuant to the provisions of this Agreement or the Security Documents
then, and in every such event (other than an event with respect to any Borrower
described in clause (g), (h) or (i) above), and at any time thereafter during
the continuance of such event, the Administrative Agent may with the consent of
the Required Lenders, and at the request of the Required Lenders shall, by
notice to the Company, take either or both of the following actions, at the same
or different times: (i) terminate the Tranche A Commitments, and thereupon the
Tranche A Commitments shall terminate immediately, and (ii) declare the Loans
then outstanding to be due and payable in whole (or in part, in which case any
principal not so declared to be due and payable may thereafter be declared to be
due and payable), and thereupon the principal of the Loans so declared to be due
and payable, together with accrued interest thereon and all other liabilities of
the Borrowers accrued hereunder, shall become due and payable immediately,
without presentment, demand, protest or other notice of any kind, all of which
are hereby waived by the Borrowers; and in case of any event with respect to any
Borrower described in clause (g), (h) or (i) above, the Tranche A Commitments
shall automatically terminate and the principal of the Loans then outstanding,
together with accrued interest thereon and all other liabilities of the
Borrowers accrued hereunder, shall automatically become due and payable, without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by the Borrowers.
Upon the occurrence and during the continuance of any Event of Default the
Administrative Agent may, with the consent of the Required Lenders, and shall,
at the request of the Required Lenders, instruct the Collateral Agent to
exercise any remedies available to it under any Security Document.
ARTICLE VIII
The Agents
Each of the Lenders hereby irrevocably appoints the Agents as its agents
and authorizes the Agents to take such actions on its behalf and to exercise
such powers as are delegated to the Agents by the terms hereof and of the other
Loan Documents, together with such actions and powers as are reasonably
incidental thereto.
The bank or banks serving as the Agents hereunder shall have the same
rights and powers in their capacity as Lenders as any other Lender and may
exercise the
63
same as though they were not Agents, and such bank or banks and their Affiliates
may accept deposits from, lend money to and generally engage in any kind of
business with the Company or any Subsidiary or other Affiliate thereof as if
they were not Agents hereunder.
The Agents shall not have any duties or obligations except those expressly
set forth herein. Without limiting the generality of the foregoing (a) the
Agents shall not be subject to any fiduciary or other implied duties, regardless
of whether a Default has occurred and is continuing, (b) the Agents shall not
have any duty to take any discretionary action or exercise any discretionary
powers, except discretionary rights and powers expressly contemplated hereby
that the Agents are required to exercise in writing by the Required Lenders, and
(c) except as expressly set forth herein, the Agents shall not have any duty to
disclose, and shall not be liable for the failure to disclose, any information
communicated to the Agents by or relating to the Company or any of its
Subsidiaries. The Agents shall not be liable for any action taken or not taken
by them with the consent or at the request of the Required Lenders or the
Lenders, as the case may be, or in the absence of their own gross negligence or
wilful misconduct. In addition, the Agents shall be deemed not to have knowledge
of any Default unless and until written notice thereof is given to the Agents by
the Company or a Lender, and the Agents shall not be responsible for or have any
duty to ascertain or inquire into (i) any statement, warranty or representation
made in or in connection with this Agreement, (ii) the contents of any
certificate, report or other document delivered hereunder or in connection
herewith, (iii) the performance or observance of any of the covenants,
agreements or other terms or conditions set forth herein, (iv) the validity,
enforceability, effectiveness or genuineness of this Agreement or any other
agreement, instrument or document, or (v) the satisfaction of any condition set
forth in Article III or elsewhere herein, other than to confirm receipt of items
expressly required to be delivered to the Agents.
The Agents shall be entitled to rely upon, and shall not incur any
liability for relying upon, any notice, request, certificate, consent,
statement, instrument, document or other writing believed by them to be genuine
and to have been signed or sent by the proper Person. The Agents also may rely
upon any statement made to them orally or by telephone and believed by them to
be made by the proper Person, and shall not incur any liability for relying
thereon. The Agents may consult with legal counsel (who may be counsel for the
Company), independent accountants and other experts selected by them, and shall
not be liable for any action taken or not taken by them in accordance with the
advice of any such counsel, accountants or experts.
The Agents may perform any and all their duties and exercise their rights
and powers by or through any one or more sub-agents appointed by the Agents. The
Agents and any such sub-agent may perform any and all their duties and exercise
their rights and powers through their respective Affiliates. The exculpatory
provisions of the preceding paragraphs shall apply to any such sub-agent and to
the Affiliates of the Agents and any such sub-agent.
Subject to the appointment and acceptance of a successor Agent as provided
below, either Agent may resign at any time by notifying the Lenders and the
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Company. Upon any such resignation, the Required Lenders shall have the right to
appoint a successor with the Company's written consent (which shall not be
unreasonably withheld or delayed and shall not be required from the Company if
an Event of Default has occurred and is continuing). If no successor shall have
been so appointed by the Required Lenders and shall have accepted such
appointment within 30 days after the retiring Agent gives notice of its
resignation, then the retiring Agent may, on behalf of the Lenders, with the
Company's written consent (which shall not be unreasonably withheld or delayed
and shall not be required if an Event of Default has occurred and is
continuing), appoint a successor Agent which shall be a bank or an Affiliate
thereof, in each case with a net worth of at least $1,000,000,000 and an office
in New York, New York. Upon the acceptance of its appointment as Agent hereunder
by a successor, such successor shall succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent, and the retiring
Agent shall be discharged from its duties and obligations hereunder. After an
Agent's resignation hereunder, the provisions of this Article and Section 10.03
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 Agent.
Each Lender acknowledges that it has, independently and without reliance
upon the Agents or any other Lender and based on such documents and information
as it has deemed appropriate, made its own credit analysis and decision to enter
into this Agreement. Each Lender also acknowledges that it will, independently
and without reliance upon the Agents or any other Lender and based on such
documents and information as it shall from time to time deem appropriate,
continue to make its own decisions in taking or not taking action under or based
upon this Agreement, any related agreement or any document furnished hereunder
or thereunder.
None of the Joint Lead Arrangers, the Co-Arrangers, the Syndication Agent
or the Co-Documentation Agents named on the cover page of this Agreement shall,
in their capacity as such, have any duties or responsibilities under this
Agreement.
ARTICLE IX
Joint And Several Liability Of Borrowers; Guarantee
SECTION 9.01. Joint and Several Liability of Borrowers. Notwithstanding any
other provision of this Agreement, it is agreed that each Borrower shall be
fully liable, both severally and jointly with the other Borrowers, for the full
amount of the Obligations, whether incurred by such Borrower or by any other
Borrower.
SECTION 9.02. Guarantee. In order to induce the Lenders to extend credit to
the Borrowing Subsidiaries hereunder, and without limiting the provisions of
Section 9.01, the Guarantor hereby unconditionally and irrevocably guarantees,
as a primary obligor and not merely as a surety, the Obligations of the
Borrowing Subsidiaries. The Guarantor also agrees that the Obligations of the
Borrowing Subsidiaries may be extended or renewed, in whole or in part, without
notice to or further assent from it, and that it will remain bound upon its
Guarantee hereunder notwithstanding any such extension or renewal of any such
Obligation.
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The Guarantor waives presentment to, demand of payment from and protest to
any Borrower of any of the Obligations of the Borrowing Subsidiaries, and also
waives notice of acceptance of its obligations and notice of protest for
nonpayment. The obligations of the Guarantor hereunder shall not be affected by
the failure of any Lender or the Agents to assert any claim or demand or to
enforce any right or remedy under the provisions of this Agreement or any of the
other Loan Documents or otherwise, or, except as specifically provided therein,
by any rescission, waiver, amendment or modification of any of the terms or
provisions of this Agreement, any of the other Loan Documents or any other
agreement.
The Guarantor further agrees that its Guarantee hereunder constitutes a
promise of payment when due and not merely of collection, and waives any right
to require that any resort be had by any Lender to any balance of any deposit
account or credit on the books of any Lender in favor of any Borrowing
Subsidiary or any other person.
The obligations of the Guarantor hereunder shall not be subject to any
reduction, limitation, impairment or termination for any reason, and shall not
be subject to any defense or setoff, counterclaim, recoupment or termination
whatsoever by reason of the invalidity, illegality or unenforceability of the
Obligations of the Borrowing Subsidiaries, any impossibility in the performance
of such Obligations or otherwise and regardless of any law, regulation or order
of any jurisdiction, or any other event, affecting any term of any such
Obligation or any Lender's rights with respect thereto. Without limiting the
generality of the foregoing, the obligations of the Guarantor hereunder shall
not be discharged or impaired or otherwise affected by the failure of the Agents
or any Lender to assert any claim or demand or to enforce any remedy under this
Agreement or under any other Loan Document or any other agreement, by any waiver
or modification in respect of any thereof, by any default, failure or delay,
wilful or otherwise, except as specifically provided therein, in the performance
of the Obligations of the Borrowing Subsidiaries, by any release of any other
guarantor, or by any other act or omission which may or might in any manner or
to any extent vary the risk of the Guarantor or otherwise operate as a discharge
of the Guarantor as a matter of law or equity.
The Guarantor further agrees that its obligations hereunder shall continue
to be effective or be reinstated, as the case may be, if at any time payment, or
any part thereof, of principal of or interest on any Obligation of the Borrowing
Subsidiaries is rescinded or must otherwise be restored by the Agents or any
Lender upon the bankruptcy or reorganization of any Borrower or otherwise.
In furtherance of the foregoing and not in limitation of any other right
which the Agents or any Lender may have at law or in equity against the
Guarantor by virtue hereof, upon the failure of any Borrowing Subsidiary to pay
any Obligation when and as the same shall become due, whether at maturity, by
acceleration, after notice of prepayment or otherwise, the Guarantor hereby
promises to and will, upon receipt of written demand by the Agents, forthwith
pay, or cause to be paid, in cash the amount of such unpaid Obligation.
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Upon payment by the Guarantor of any sums as provided above, all rights of
the Guarantor against any Borrowing Subsidiary arising as a result thereof by
way of right of subrogation or otherwise shall in all respects be subordinated
and junior in right of payment to the prior indefeasible payment in full of all
the Obligations, the Guarantor hereby agreeing that it will not assert any claim
in respect of such rights until all the Obligations shall have been indefeasibly
paid in full.
ARTICLE X
Miscellaneous
SECTION 10.01. Notices. Except in the case of notices and other
communications expressly permitted to be given by telephone, all notices and
other communications provided for herein shall be in writing and shall be
delivered by hand or overnight courier service, mailed by certified or
registered mail or sent by telecopy, as follows:
(a) if to the Company, to it at Reader's Digest Road, Pleasantville, New
York 10570-7000, Attention of Treasurer (Telecopy No. (914) 244-5904);
(b) if to the Administrative Agent or Collateral Agent, to JPMorgan Chase
Bank, One Chase Plaza, 8th Floor, New York, New York 10081, Attention
of Margaret Swales (Telecopy No. (212) 552-5662), with a copy to
JPMorgan Chase Bank, 270 Park Avenue, New York, New York 10017,
Attention of Tina Ruyter (Telecopy No. (212) 270-5120). Each notice
required to be given by the Administrative Agent or by the Required
Lenders under this Agreement, other than any notice under Article 2 or
Section 10.04, shall simultaneously be given to the Collateral Agent;
and
(c) if to a Lender, to it at its address (or telecopy number) set forth in
its Administrative Questionnaire;
provided, however, that any notice or other communication provided for herein to
be given to or by the Company or any Borrowing Subsidiary shall be deemed
effective as to the Company and as to all Borrowing Subsidiaries when given to
or by the Company, as the case may be.
Any party hereto may change its address or telecopy number for notices and
other communications hereunder by notice to the other parties hereto. All
notices and other communications given to any party hereto in accordance with
the provisions of this Agreement shall be deemed to have been given on the date
of receipt.
SECTION 10.02. Waivers; Amendments. (a) No failure or delay by the
Administrative Agent or any Lender in exercising any right or power hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such right or power, or any abandonment or discontinuance of steps to
enforce such a right or power, preclude any other or further exercise thereof or
the exercise of any other right or power.
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The rights and remedies of the Administrative Agent and the Lenders hereunder
are cumulative and are not exclusive of any rights or remedies that they would
otherwise have. No waiver of any provision of this Agreement or consent to any
departure by any Borrower therefrom shall in any event be effective unless the
same shall be permitted by paragraph (b) below, and then such waiver or consent
shall be effective only in the specific instance and for the purpose for which
given.
(b) None of this Agreement, any other Loan Document or any provision hereof
or thereof may be waived, amended or modified except pursuant to an agreement or
agreements in writing entered into by the Borrowers and the Required Lenders or
by the Borrowers and the Administrative Agent or the Collateral Agent, as the
case may be, with the consent of the Required Lenders; provided that no such
agreement shall (i) increase or extend the expiration date of the Tranche A
Commitment of any Lender without the written consent of such Lender, (ii) reduce
or forgive all or part of the principal amount of any Loan or reduce the rate of
interest thereon, or reduce any other amounts payable hereunder, without the
written consent of each Lender affected thereby, (iii) postpone the date of any
payment due under Section 2.11(a), (b) or (c) of the principal amount of any
Loan or the date of any payment of any interest payable hereunder, or reduce the
amount of, waive or excuse any such payment, without the written consent of each
Lender affected thereby, (iv) change Section 2.16 in a manner that would alter
the pro rata sharing of any payment without the written consent of each Lender
adversely affected thereby, or change any provision of the Guarantee and
Collateral Agreement or any other Security Document to alter the pro rata
distribution of amounts payable to the Secured Parties, in each case without the
written consent of each Lender adversely affected thereby, (v) reduce or
terminate the obligations of the Guarantor or any Borrower under Article IX,
without the written consent of each Lender, (vi) change any of the provisions of
this Section or the definition of "Required Lenders" or any other provision
hereof specifying the number or percentage of Lenders required in order to
waive, amend or modify any rights hereunder or make any determination or grant
any consent hereunder, without the written consent of each Lender, (vii) release
all or substantially all the Subsidiary Guarantors from their Guarantees under
the Guarantee and Collateral Agreement, or release all or substantially all the
Collateral from the Liens of the Guarantee and Collateral Agreement and the
Mortgages, without the written consent of each Lender, (viii) change the
allocation of prepayments under Section 2.12 as between the Tranche A Term Loans
and the Tranche B Term Loans without the written consent of Tranche A Lenders
holding a majority of the Tranche A Term Loans and Tranche B Lenders holding a
majority of the Tranche B Term Loans, (ix) change the rights of the Tranche B
Lenders to decline mandatory prepayments as provided in Section 2.12(d) without
the written consent of Tranche B Lenders holding a majority of the outstanding
Tranche B Term Loans, or (x) effect any other amendment that by its terms
adversely affects the Lenders holding Loans of one Class without a corresponding
effect on the Lenders holding Loans of the other Class without the written
consent of Lenders holding a majority of the outstanding Loans of the Class
adversely affected; provided further that no such agreement shall amend, modify
or otherwise affect the respective rights or duties of either Agent without the
prior written consent of such Agent.
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SECTION 10.03. Expenses; Indemnity; Damage Waiver. (a) The Company agrees
to pay (i) all reasonable out-of-pocket expenses incurred by each Agent and its
Affiliates, including the reasonable fees, charges and disbursements of Cravath,
Swaine & Moore LLP, counsel for the Agents, in connection with the syndication
of the credit facilities provided for herein, the preparation and administration
of this Agreement and the other Loan Documents or any amendments, modifications
or waivers of the provisions hereof or thereof (whether or not the transactions
contemplated hereby or thereby shall be consummated) and evaluations of the
Collateral (limited, in the absence of a continuing Default, to one such
evaluation in any fiscal year) or other due diligence conducted by the Agents
and (ii) all reasonable out-of-pocket expenses incurred by either Agent or any
Lender, including the reasonable fees, charges and disbursements of any counsel
for such Agent or Lender, in connection with the enforcement or protection of
its rights in connection with this Agreement or the Loans made hereunder. The
Lenders shall endeavor in good faith to limit the number of counsel retained by
them to avoid duplication of expenses.
(b) The Company agrees to indemnify each Agent and each Lender, each
Affiliate of any of the foregoing Persons and each of their respective
directors, officers, employees, trustee, advisors and agents (each such Person
being called an "Indemnitee") against, and to hold each Indemnitee harmless
from, any and all losses, claims, damages, liabilities and related expenses,
including the fees, charges and disbursements of any counsel for any Indemnitee,
incurred by or asserted against any Indemnitee relating to the execution or
delivery of this Agreement or any agreement or instrument contemplated thereby,
the performance of its obligations thereunder, the Borrowings hereunder, the
consummation of the Transactions or any other transactions contemplated hereby,
the enforcement of its rights under any Loan Document or any actual or alleged
presence or release of Hazardous Materials on or from any property currently or
formerly owned, operated or leased by the Company or any of its Subsidiaries or
Environmental Liability related in any way to the Company or any of its
Subsidiaries, including any of the foregoing arising out of, in connection with,
or as a result of any claim, litigation, investigation or proceeding (whether or
not any Indemnitee is a party thereto); provided that such indemnity shall not,
as to any Indemnitee, be available to the extent that such losses, claims,
damages, liabilities or related expenses are determined by a court of competent
jurisdiction to have resulted from the gross negligence, wilful misconduct or
bad faith of such Indemnitee. The Lenders shall endeavor in good faith to limit
the number of counsel retained by them to avoid duplication of expenses.
(c) To the extent that the Company, any Borrower or the Company in its
capacity as Guarantor fails to pay any amount required to be paid by it to
either Agent under paragraph (a) or (b) of this Section, each Lender severally
agrees to pay to such Agent such Lender's Participation Percentage (determined
as of the time that the applicable unreimbursed expense or indemnity payment is
sought) of such unpaid amount; provided that the unreimbursed expense or
indemnified loss, claim, damage, liability or related expense, as the case may
be, was incurred by or asserted against such Agent in its capacity as such and
are not determined by a court of competent jurisdiction to have resulted from
the gross negligence, wilful misconduct or bad faith of such Agent.
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(d) All amounts due under this Section shall be payable promptly after written
demand therefor.
(e) To the extent permitted by applicable law, the Company, any Borrower or the
Company as Guarantor shall not assert, and hereby waives, any claim against any
Indemnitee, on any theory of liability, for special, indirect, consequential or
punitive damages (as opposed to direct or actual damages) arising out of, in
connection with, or as a result of, this Agreement or any agreement or
instrument contemplated hereby, any Loan or the use of the proceeds thereof or
the Transactions.
(f) Notwithstanding anything above to the contrary, no indemnified person shall
be liable for any damages arising from the use by others of information or other
materials obtained through electronic telecommunications or other information
transmission systems.
SECTION 10.04. 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 (i) no Borrower
may assign or otherwise transfer any of its rights or obligations hereunder
without the prior written consent of each Lender (and any attempted assignment
or transfer by any Borrower without such consent shall be null and void) and
(ii) no Lender may assign or otherwise transfer its rights or obligations
hereunder except in accordance with this Section. 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 paragraph (c) of this Section) and, to
the extent expressly contemplated hereby, the Related Parties of each of the
Administrative Agent and the Lenders) 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 all or a portion of its
rights and obligations under this Agreement (including all or a portion
of the 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 (as defined below) or, if an Event of Default has
occurred and is continuing, any other assignee; and
(B) the Administrative Agent, provided that no consent of the
Administrative Agent shall be required for an assignment to a Lender,
an Affiliate of a Lender or an Approved Fund.
(ii) Assignments shall be subject to the following additional
conditions:
(A) except in the case of an assignment to a Lender or an
Affiliate of a Lender, the amount of the Loans of the assigning Lender
subject to each such
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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 $1,000,000 or, if smaller, the entire
remaining amount of the assigning Lender's Loans, unless the Company
and the Administrative Agent shall otherwise consent, provided that
(i) in the event of concurrent assignments to two or more assignees
that are Affiliates of one another, or to two or more Approved Funds
managed by the same investment advisor or by affiliated investment
advisors, all such concurrent assignments shall be aggregated in
determining compliance with this subsection and (ii) no such consent
of the Company shall be required if an Event of Default has occurred
and is continuing;
(B) each partial assignment shall be made as an assignment of
a proportionate part of all the assigning Lender's rights and
obligations under this Agreement. Notwithstanding anything above to the
contrary, Section 10.04(b)(ii)(B) shall not be construed to prohibit
assignment of a proportionate part of all the assigning Lender's rights
and obligations in respect of one Class of Loans.
(C) 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; provided that in the event
of concurrent assignments to two or more assignees that are Affiliates
of one another, or to two or more Approved Funds managed by the same
investment advisor or by affiliated investment advisors, only one such
fee shall be payable;
(D) the assignee, if it shall not be a Lender, shall deliver
to the Administrative Agent an Administrative Questionnaire; and
(E) in the case of an assignment by a Lender to a CLO (as
defined below) managed by such Lender or by an Affiliate of such
Lender, unless such assignment (or an assignment to a CLO managed by
the same manager or an Affiliate of such manager) shall have been
approved by the Company (the Company hereby agreeing that such
approval, if requested, will not be unreasonably withheld or delayed),
the assigning Lender shall retain the sole right to approve any
amendment, modification or waiver of any provision of this Agreement,
except that the Assignment and Assumption between such Lender and such
CLO may provide that such Lender will not, without the consent of such
CLO, agree to any amendment, modification or waiver described in the
first proviso to Section 10.02(b) that affects such CLO.
For the purposes of this Section 10.04(b), the terms "Approved Fund" and
"CLO" have the following meanings:
"Approved Fund" means (a) with respect to any Lender, a CLO
managed by such Lender or by an Affiliate of such Lender and (b) with respect to
any Lender that is a fund which invests in bank loans and similar extensions of
credit, any other fund that
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invests in bank loans and similar extensions of credit and is managed by the
same investment advisor as such Lender or by an Affiliate of such investment
advisor.
"CLO" means any entity (whether a corporation, partnership,
trust or otherwise) that is engaged in making, purchasing, holding or otherwise
investing in bank loans and similar extensions of credit in the ordinary course
of its business and is administered or managed by a Lender or an Affiliate of
such Lender.
(iii) Subject to acceptance and recording thereof pursuant to paragraph
(b)(iv) of this Section, from and after the effective date specified in each
Assignment and Assumption the assignee thereunder shall be a party hereto 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
2.13, 2.15, 2.19 and 10.03). Any assignment or transfer by a Lender of rights or
obligations under this Agreement that does not comply with this Section 10.04
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 paragraph (c) of
this Section.
(iv) The Administrative Agent, acting for this purpose as an agent of the
Borrowers, shall maintain at one of its offices 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 principal amount of the Loans owing to, each
Lender pursuant to the terms hereof from time to time (the "Register"). The
entries in the Register shall be conclusive, and the Borrowers, the
Administrative Agent and the Lenders may treat each Person whose name is
recorded in the 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 and any Lender, at any
reasonable time and from time to time upon reasonable prior notice.
(v) Upon its receipt of a duly completed Assignment and Assumption executed
by an assigning Lender and an assignee, the assignee's completed Administrative
Questionnaire (unless the assignee shall already be a Lender hereunder), the
processing and recordation fee referred to in paragraph (b) of this Section and
any written consent to such assignment required by paragraph (b) of this
Section, the Administrative Agent shall accept such Assignment and Assumption
and record the information contained therein in the Register. No assignment
shall be effective for purposes of this Agreement unless it has been recorded in
the Register as provided in this paragraph.
(c) (i) Any Lender may, without notice to or the consent of the Company or
the Administrative Agent, sell participations to one or more banks or other
entities (a "Participant") in all or a portion of such Lender's rights and
obligations under this Agreement (including all or a portion of the Loans owing
to it); provided that (A) such
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Lender's obligations under this Agreement shall remain unchanged, (B) such
Lender shall remain solely responsible to the other parties hereto for the
performance of such obligations and (C) the Borrowers, the Administrative Agent
and the 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 to approve any amendment, modification or waiver of any provision
of this Agreement; provided that such agreement or instrument may provide that
such Lender will not, without the consent of the Participant, agree to any
amendment, modification or waiver described in the first proviso to Section
10.02(b) that affects such Participant. Subject to paragraph (c)(ii) of this
Section, the Borrowers agree that each Participant shall be entitled to the
benefits of Sections 2.13, 2.15 and 2.19 to the same extent as if it were a
Lender and had acquired its interest by assignment pursuant to paragraph (b) of
this Section. To the extent permitted by law, each Participant also shall be
entitled to the benefits of Section 10.08 as though it were a Lender, provided
such Participant agrees to be subject to Section 2.17 as though it were a
Lender.
(ii) A Participant shall not be entitled to receive any greater payment
under Section 2.13 or 2.19 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 Company's
prior written consent. A Participant that would be a Foreign Lender if it were a
Lender shall not be entitled to the benefits of Section 2.19 unless the Company
is notified of the participation sold to such Participant and such Participant
agrees, for the benefit of the Borrowers, to comply with Section 2.19(e) as
though it were a Lender.
(d) Any Lender, without notice to or the consent of any Borrower or the
Administrative Agent, may at any time pledge or assign a security interest in
all or any portion of its rights under this Agreement to secure obligations of
such Lender, including any pledge or assignment to secure obligations to a
Federal Reserve Bank, and this Section shall not apply to any such pledge or
assignment of a security interest; provided that no such pledge or assignment of
a security interest shall release a Lender from any of its obligations hereunder
or substitute any such pledgee or assignee for such Lender as a party hereto.
(e) By executing and delivering an Assignment and Assumption, the assigning
Lender thereunder and the assignee thereunder shall be deemed to confirm to and
agree with each other and the other parties hereto as follows: (i) such
assigning Lender warrants that it is the legal and beneficial owner of the
interest being assigned thereby free and clear of any adverse claim and that the
outstanding balances of its Term Loans, in each case without giving effect to
assignments thereof that have not become effective, are as set forth in such
Assignment and Assumption; (ii) except as set forth in clause (i) above, such
assigning Lender makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with this Agreement or any other Loan Document or any
other instrument or document furnished pursuant hereto or thereto, or the
execution, legality, validity,
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enforceability, genuineness, sufficiency or value of any of the foregoing, or
the financial condition of the Loan Parties or the performance or observance by
the Loan Parties of any of their obligations under this Agreement or under any
other Loan Document or any other instrument or document furnished pursuant
hereto or thereto; (iii) each of the assignee and the assignor represents and
warrants that it is legally authorized to enter into such Assignment and
Assumption; (iv) such assignee confirms that it has received a copy of this
Agreement, together with copies of any amendments or consents entered into prior
to the date of such Assignment and Assumption and copies of the most recent
financial statements delivered pursuant to Section 5.01 and such other documents
and information as it has deemed appropriate to make its own credit analysis and
decision to enter into such Assignment and Assumption; (v) such assignee will
independently and without reliance upon the Agents, such assigning Lender or any
other Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Agreement; (vi) such assignee appoints and
authorizes the Agents to take such action as agents on its behalf and to
exercise such powers under this Agreement and the other Loan Documents as are
delegated to them by the terms hereof and thereof, together with such powers as
are reasonably incidental thereto; and (vii) such assignee agrees that it will
perform in accordance with their terms all the obligations that by the terms of
this Agreement are required to be performed by it as a Lender.
SECTION 10.05. Survival. All covenants, agreements, representations and
warranties made by the Borrowers herein and in the certificates or other
instruments prepared or delivered in connection with or pursuant to this
Agreement shall be considered to have been relied upon by the other parties
hereto and shall survive the execution and delivery of this Agreement and the
making of any Loans, regardless of any investigation made by any such other
party or on its behalf and notwithstanding that the Administrative Agent or any
Lender may have had notice or knowledge of any Default or incorrect
representation or warranty at the time any credit is extended hereunder, and
shall continue in full force and effect as long as the principal of or any
accrued interest on any Loan or any other amount payable under this Agreement is
outstanding and unpaid. The provisions of Sections 2.13, 2.15, 2.19 and 10.03
and Article VIII shall survive and remain in full force and effect regardless of
the consummation of the transactions contemplated hereby, the repayment of the
Loans or the termination of this Agreement or any other provision hereof.
SECTION 10.06. Counterparts; Integration; Effectiveness. This Agreement may
be executed in counterparts (and by different parties hereto on different
counterparts), each of which shall constitute an original, but all of which when
taken together shall constitute a single contract. This Agreement and any
separate letter agreements with respect to fees payable to the Administrative
Agent constitute the entire contract among the parties relating to the subject
matter hereof and supersede any and all previous agreements and understandings,
oral or written, relating to the subject matter hereof. Except as provided in
Section 3.01, this Agreement shall become effective when it shall have been
executed by the Administrative Agent and when the Administrative Agent shall
have received counterparts hereof which, when taken together, bear the
signatures of each of the other parties hereto, and thereafter shall be binding
upon and
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inure to the benefit of the parties hereto and their respective
permitted successors and assigns. Delivery of an executed counterpart of a
signature page of this Agreement by telecopy shall be effective as delivery of a
manually executed counterpart of this Agreement.
SECTION 10.07. Severability. Any provision of this Agreement held to be
invalid, illegal or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity, illegality or
unenforceability without affecting the validity, legality and enforceability of
the remaining provisions hereof; and the invalidity of a particular provision in
a particular jurisdiction shall not invalidate such provision in any other
jurisdiction.
SECTION 10.08. Right of Setoff. (a) If an Event of Default shall have
occurred and be continuing, each Lender is hereby authorized at any time and
from time to time, to the fullest extent permitted by law, to set off and apply
any and all deposits (general or special, time or demand, provisional or final)
at any time held and other indebtedness at any time owing by such Lender to or
for the credit or the account of the Company or any Borrower against any of and
all the Obligations held by such Lender, irrespective of whether or not such
Lender shall have made any demand under this Agreement and although such
Obligations may be unmatured. The rights of each Lender under this Section are
in addition to other rights and remedies (including other rights of setoff)
which such Lender may have.
(b) Each Lender agrees promptly to notify the Administrative Agent and the
Company or the applicable Borrower after any such setoff and application;
provided, however, that the failure to give any such notice shall not affect the
validity of such setoff and application.
SECTION 10.09. Governing Law; Jurisdiction; Consent to Service of Process.
(a) THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE
LAWS OF THE STATE OF NEW YORK.
(b) Each Borrower hereby irrevocably and unconditionally submits, for
itself and its property, to the nonexclusive jurisdiction of the Supreme Court
of the State of New York sitting in New York County and of the United States
District Court of the Southern District of New York, and any appellate court
from any thereof, in any action or proceeding arising out of or relating to this
Agreement, or for recognition or enforcement of any judgment, and each of the
parties hereto hereby irrevocably and unconditionally agrees that all claims in
respect of any such action or proceeding may be heard and determined in such New
York State or, to the extent permitted by law, in such Federal court. Each of
the parties hereto agrees that a final judgment in any such action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law. Nothing in this Agreement shall
affect any right that the Administrative Agent or any Lender may otherwise have
to bring any action or proceeding relating to this Agreement against any
Borrower or its properties in the courts of any jurisdiction.
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(c) Each Borrower hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection which it may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Agreement in any court referred to in
paragraph (b) of this Section. Each of the parties hereto hereby irrevocably
waives, to the fullest extent permitted by law, the defense of an inconvenient
forum to the maintenance of such action or proceeding in any such court.
(d) Each party to this Agreement irrevocably consents to service of process
in the manner provided for notices in Section 10.01. Nothing in this Agreement
will affect the right of any party to this Agreement to serve process in any
other manner permitted by law.
SECTION 10.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL
BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY
HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER
PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT,
IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION.
SECTION 10.11. Headings. Article and Section headings and the Table of
Contents used herein are for convenience of reference only, are not part of this
Agreement and shall not affect the construction of, or be taken into
consideration in interpreting, this Agreement.
SECTION 10.12. Confidentiality. Each of the Administrative Agent and the
Lenders agrees to maintain and cause its Affiliates to maintain the
confidentiality of the Information (as defined below), except that Information
may be disclosed (a) to its and its Affiliates' directors, officers, employees
and agents, including accountants, legal counsel and other advisors or to any
other Lender or Participant (it being understood that such disclosure will be
made only to such Persons who have, and only to the extent of, the need to know
such Information and only if the Persons to whom such disclosure is made are
informed of the confidential nature of such Information and instructed to keep
such Information confidential and use such information only as necessary in
connection with (i) their evaluation of the ability of the Company or any
Borrowing Subsidiary to repay the Loans and perform their other obligations
under the Loan Documents, (ii) administering the Obligations under this
Agreement, (iii) servicing the Borrowings hereunder, (iv) protecting their
interests under this Agreement or (v) performing any similar function in
connection with any other extension of credit by the Lenders to the Company or a
Subsidiary), (b) to the extent requested by any regulatory authority to
76
which the Lender is subject or in connection with an examination of the Lender
by any such authority, (c) to the extent otherwise required by applicable laws
and regulations or by any subpoena or similar legal process, (d) in connection
with the exercise of any remedies hereunder or any suit, action or proceeding
relating to this Agreement or the enforcement of rights hereunder, (e) subject
to an agreement containing provisions substantially the same as those of this
Section, to any assignee of or Participant in, or any prospective assignee of or
Participant in, any of its rights or obligations under this Agreement, or, in
the case of any Approved Fund, to any rating agency, commercial paper dealer or
provider of a surety, guarantee or credit or liquidity enhancement to such
Approved Fund, (f) with the prior written consent of the Company, (g) to any
direct or indirect contractual counterparty in any swap, hedge or similar
agreement (or to any professional advisor of such contractual counterparty), so
long as such contractual counterparty (or such professional advisor) agrees in
writing to be bound by the provisions of this Section, or (h) to the extent such
Information (i) becomes publicly available other than as a result of a
disclosure by an Agent or Lender or (ii) becomes available to the Administrative
Agent or any Lender on a nonconfidential basis from a source other than any
Borrower that is not known to the Administrative Agent or such Lender to be
bound by any duty of confidentiality with respect thereto. For the purposes of
this Section, "Information" means all information received from the Borrowers
relating to any Borrower, Reiman, and Subsidiaries of the Company or Reiman or
their respective businesses, other than any such information that is available
to the Administrative Agent or any Lender on a nonconfidential basis prior to
disclosure by any Borrower; provided that, in the case of information received
from the Borrowers after the date hereof, such information is clearly identified
at the time of delivery as confidential. Any Person required to maintain the
confidentiality of Information as provided in this Section shall be considered
to have complied with its obligation to do so if such Person has exercised the
same degree of care to maintain the confidentiality of such Information as such
Person would accord to its own confidential information.
SECTION 10.13. Conversion of Currencies. (a) If, for the purpose of
obtaining judgment in any court, it is necessary to convert a sum owing
hereunder in one currency into another currency, each party hereto agrees, to
the fullest extent that it may effectively do so, that the rate of exchange used
shall be that at which in accordance with normal banking procedures in the
relevant jurisdiction the first currency could be purchased with such other
currency on the Business Day immediately preceding the day on which final
judgment is given.
(b) The obligations of each Borrower in respect of any sum due to any party
hereto or any holder of the obligations owing hereunder (the "Applicable
Creditor") shall, notwithstanding any judgment in a currency (the "Judgment
Currency") other than the currency in which such sum is stated to be due
hereunder (the "Agreement Currency"), be discharged only to the extent that, on
the Business Day following receipt by the Applicable Creditor of any sum
adjudged to be so due in the Judgment Currency, the Applicable Creditor may in
accordance with normal banking procedures in the relevant jurisdiction 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
Applicable Creditor in the Agreement Currency, such Borrower agrees, as a
77
separate obligation and notwithstanding any such judgment, to indemnify the
Applicable Creditor against such loss. The obligations of the Borrowers
contained in this Section 10.13 shall survive the termination of this Agreement
and the payment of all other amounts owing hereunder.
SECTION 10.14. Release of Grantors and Collateral. (a) Notwithstanding any
contrary provision herein or in any other Loan Document, if the Company shall
request the release under the Guarantee and Collateral Agreement or any other
Security Document of any Subsidiary or any Collateral to be sold or otherwise
disposed of (including through the sale or disposition of any Subsidiary owning
any such Subsidiary or Collateral) to a Person other than the Company or a
Subsidiary in a transaction permitted under the terms of this Agreement and
shall deliver to the Collateral Agent a certificate to the effect that such sale
or other disposition and the application of the proceeds thereof will comply
with the terms of this Agreement, the Collateral Agent, if satisfied that the
applicable certificate is correct, shall, without the consent of any Lender,
execute and deliver all such instruments, releases, financing statements or
other agreements, and take all such further actions, as shall be necessary to
effectuate the release of such Subsidiary or such Collateral substantially
simultaneously with or at any time after the completion of such sale or other
disposition. Any such release shall be without recourse to, or representation or
warranty by, the Collateral Agent and shall not require the consent of any
Lender. Notwithstanding the foregoing, in the event the Company or any
Subsidiary shall dispose of Equity Interests in gifts.com, Inc., LookSmart, Ltd.
or WebMD Corporation in a transaction permitted under the terms of this
Agreement, such Equity Interests shall be automatically released from the
Guarantee and Collateral Agreement without any action on the part of the
Collateral Agent or any other Person.
(b) Without limiting the provisions of Section 10.03, the Company shall
reimburse the Collateral Agent for all costs and expenses, including attorneys'
fees and disbursements, incurred by it in connection with any action
contemplated by this Section.
(c) Each of the Lenders hereby consents to the Headquarters Sale and
Leaseback and hereby authorizes the Collateral Agent, pursuant to (i) Section
3.04 of the Mortgage encumbering the Company's headquarters, to execute and
deliver any documents and take all actions reasonably requested by the Company
to release such Mortgage and (ii) Section 10.14(a) hereof, to execute and
deliver any documents and take all actions reasonably requested by the Company
to release any Liens on the Company's headquarters.
SECTION 10.15. Incorporation of Amendments to Five-Year Credit Agreement.
Notwithstanding any other provision contained herein, in the event that the
Five-Year Credit Agreement shall be amended to add thereto any affirmative or
negative covenant or event of default that is either more restrictive than the
corresponding provision contained herein or not comparable to any provision
contained herein, this Agreement shall be deemed to have been amended to
incorporate such affirmative or negative covenant or event of default, mutatis
mutandis, into the appropriate Article herein. The Company covenants and agrees
that it will (a) provide the Lenders with
78
complete and accurate copies of each amendment to the Five-Year Credit Agreement
of the sort referred to in this Section promptly after the execution thereof,
and (b) execute any and all further documents and agreements, including
amendments hereto, and take all such further actions, as shall be reasonably
requested by the Agents to give effect to this Section.
SECTION 10.16. Security Documents. Each Agent and Lender hereby authorizes
and directs the Collateral Agent to execute and deliver the Guarantee and
Collateral Agreement and each other Security Document. Each Agent and Lender, by
executing and delivering this Agreement, acknowledges and approves, and agrees
to be bound by and act in accordance with the terms and conditions of the
Guarantee and Collateral Agreement and each other Security Document (to the
extent, in the case of each other Security Document, that either (a) such
Security Document shall have been made available to the Lenders prior to the
effectiveness of this Agreement or (b) such terms and conditions are comparable
to those contained in the Guarantee and Collateral Agreement), specifically
including the provisions of Articles VII, VIII, IX and X of the Guarantee and
Collateral Agreement governing the exercise of remedies under such Agreement and
limiting the responsibilities of, and providing for the indemnification of and
the reimbursement of expenses incurred by, the Collateral Agent. Each party
hereto further agrees that the provisions of Articles VII, VIII, IX and X of the
Guarantee and Collateral Agreement shall be deemed to be incorporated by
reference into each other Security Document, mutatis mutandis, and as so
incorporated shall govern the exercise of remedies under each such Security
Document and limit the responsibilities of, and provide for the indemnification
of and the reimbursement of expenses incurred by, the Collateral Agent
thereunder.
SECTION 10.17. Power of Attorney. Each Lender hereby (i) authorizes the
Collateral Agent to execute and deliver, on behalf of and in the name of such
Lender, the Share Pledge Agreement with Reader's Digest Association, Inc. in
connection with the pledge to the Lenders of shares in Verlag DAS BESTE GmbH, a
company organized under the laws of Germany and registered in the Commercial
Register of the Lower District Court of Stuttgart under no. HR B 1453, (ii)
authorizes the Collateral Agent to appoint any further agents or attorneys to
execute and deliver, or otherwise to act, on behalf of and in the name of the
Collateral Agent for any such purpose, (iii) authorizes the Collateral Agent to
do any and all acts and to make all declarations which are deemed necessary or
appropriate to the Collateral Agent and (iv) approves, pursuant to Section 185
of the German Civil Code, the acts performed and declarations made by the
Collateral or its representatives or attorneys-in-fact before Notary Dr. Armin
Hauschild in Dusseldorf, Germany in connection with the pledge to the Lenders of
shares in Verlag Das Beste GmbH. The Lenders hereby relieve the Collateral Agent
from the self-dealing restrictions imposed by Section 181 of the German Civil
Code.
SECTION 10.18. Appointment. Each Agent and Lender hereby appoints the
Collateral Agent to act as its agent and trustee under and in connection with
the Charge over Shares to the Agents and Lenders of shares in The Reader's
Digest Association Limited, a company incorporated under the laws of England and
Wales (registered number 340452) and to hold the assets charged under the Charge
over Shares
79
as trustee for the Agents and Lenders on the trusts and other terms contained
herein and in the Charge over Shares and each Agent and Lender irrevocably
authorizes the Collateral Agent to exercise such rights, powers, authorities and
discretions as are specifically delegated to the Collateral Agent by the terms
of the Charge over Shares together with all such rights, powers, authorities and
discretion as are reasonably incidental thereto.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
THE READER'S DIGEST ASSOCIATION, INC.,
by
-----------------------------------------------
Name:
Title:
BOOKS ARE FUN, LTD.,
by
-----------------------------------------------
Name:
Title:
QSP, INC.,
by
-----------------------------------------------
Name:
Title:
REIMAN MEDIA GROUP, INC.,
by
-----------------------------------------------
Name:
Title:
Guarantor
THE READER'S DIGEST ASSOCIATION, INC.,
by
------------------------------------------------
Name:
Title:
81
JPMORGAN CHASE BANK, INDIVIDUALLY AND AS
ADMINISTRATIVE AGENT AND COLLATERAL AGENT,
BY
-----------------------------------------------
Name:
Title:
NATIONAL AUSTRALIA BANK LIMITED, AS
CO-DOCUMENTATION AGENT,
by
-----------------------------------------------
Name:
Title:
THE ROYAL BANK OF SCOTLAND PLC, INDIVIDUALLY
AND AS CO-DOCUMENTATION AGENT,
by
-----------------------------------------------
Name:
Title:
ABN AMRO BANK N.V., INDIVIDUALLY AND AS
CO-DOCUMENTATION AGENT,
by
-----------------------------------------------
Name:
Title:
82