EXECUTION COPY
LETTER AMENDMENT
Dated as of May 1, 1996
To the banks, financial institutions
and other institutional lenders
(collectively, the "Banks") parties
to the Loan Agreement referred to
below and to Citibank, N.A., as agent
(the "Agent") for the Banks
Ladies and Gentlemen:
We refer to the Amended and Restated Loan Agreement dated as of
April 11, 1995 (as amended, supplemented or otherwise modified through the date
hereof, the "Loan Agreement") among the undersigned and you. Capitalized terms
not otherwise defined in this Letter Amendment have the same meanings as
specified in the Loan Agreement.
The Loan Agreement is, effective as of the date of this Letter
Amendment, hereby amended as follows:
(a) Section 1.01 is amended as follows:
(i) Section 1.01 is amended by deleting the table
beginning on the sixth line of the definition "Applicable LIBO
Margin Rate" and substituting therefor the following table:
"
- - ------------------------------------------------------------------------------
Rating Applicable LIBO Applicable Commitment
S&P/Moody's Margin Rate Fee Rate
- - ------------------------------------------------------------------------------
A-1/P-1 0.325% 0.10%
- - ------------------------------------------------------------------------------
A-2/P-2 0.375% 0.15%
- - ------------------------------------------------------------------------------
A-3/P-3 0.55% 0.2125%
- - ------------------------------------------------------------------------------
B/NP 0.80% 0.3125%
- - ------------------------------------------------------------------------------
lower than B/NP 0.90% 0.3625%
or not rated
- - ------------------------------------------------------------------------------
".
(ii) Section 1.01. is further amended by deleting the
defined term "Robinson Family" and substituting therefor the
following:
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"Robinson Family" shall mean: Richard Robinson,
Barbara Robinson Buckland, Florence R. Ford, Mary Sue
Robinson Morrill and William W. Robinson, the spouses and
descendants of any of them, and any trust or estate whose
legal representatives (or in the case of a Person with
more than one legal representative, at least half of whose
legal representatives) consist of one or more of the
foregoing individuals, spouses and descendants; and the
trusts respectively created under the will of Maurice R.
Robinson and the will of Florence L. Robinson so long as
at least half of their respective trustees continue to
consist of one or more of the foregoing individuals,
spouses and descendants."
(b) Section 2.04(g) is amended in full to read as follows:
"(g) After notice from the Agent during the continuance of
an Event of Default under Section 7.01(c) prior to maturity, and
at all times after the Maturity Date, the Loans shall bear
additional interest (computed on the basis of actual number of
days elapsed and a year of 365 days) on the unpaid principal
balance of the Loans outstanding from time to time during such
period(s) at a rate equal to two percent (2.00%) per annum, which
amounts shall be payable by the Borrowers in addition to, and at
the same times as, the regular interest payments on the Loans
required pursuant to the preceding subsections of this Section,
subject, however, to the maximum rate permitted by applicable law
as provided in Section 2.10 hereof."
(c) Section 2.06(a) is amended in full to read as follows:
"Section 2.06. Commitment Fee; Agency Fee; Etc. (a) The
Borrowers shall pay to the Agent (for the benefit of all of the
Banks sharing in the Revolving Credit Loans) on the last Business
Day of February, May, August and November of each year during the
Revolving Credit Period, and on the last day of the Revolving
Credit Period, in arrears, commencing on the first such date
following the Effective Date, a fee respecting the availability
of the Commitment (the "Commitment Fee") equal to the Applicable
Commitment Fee Rate (computed on the basis of the actual number
of days elapsed and a year of 365 days) of the average daily
unadvanced portion of the Commitment during the three calendar
month period then ending or portion thereof (with the Letters of
Credit Amount being considered an advance under the Commitment)."
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(d) Section 3.04(a)(ii) is amended in full to read as follows:
"(ii) any Material Document or any Corporate Document that
would be reasonably likely to have a Material Adverse Effect".
(e) Section 6.01 is amended as follows:
(i) Section 6.01(a) is amended in full to read as follows:
"(a) The Borrowers shall maintain at all times a
Consolidated Debt Ratio of not more than 0.60:1; provided
that during the first and second fiscal quarters of each
fiscal year, the Borrowers shall maintain a Consolidated
Debt Ratio of not more than 0.65:1."
(ii) Section 6.01(b) is amended in full to read as
follows:
"(b) The Borrowers shall maintain as at the last
day of each of their fiscal quarters a Consolidated
Interest Coverage Ratio of not less than 4.00:1."
(f) Section 6.02 is amended in full to read as follows:
"Section 6.02. Liens and Encumbrances. Neither Borrower
shall, and the Borrowers shall not cause, suffer or permit any of
the Subsidiaries, directly or indirectly: (a) to make, create,
incur, assume or permit to exist any assignment, pledge,
mortgage, security interest or other lien or encumbrance of any
nature in, to or against any part of the assets or properties of
either Borrower or any of the Subsidiaries; (b) to purchase or
otherwise acquire any asset or property of any character subject
to any of the foregoing encumbrances (including any conditional
sale contract or other title retention agreement); (c) to assign,
pledge or in any way transfer, restrict or encumber its right to
receive any income or other distribution or proceeds from any
part of the assets or properties of either Borrower or any of the
Subsidiaries; (d) to enter into any sale-leaseback financing
respecting any part of the assets or properties of either
Borrower or any of the Subsidiaries; or (e) to offer or agree to
or cause or assist the inception or continuation of any of the
foregoing; provided, however, that the foregoing restrictions
shall not prohibit the following to the extent otherwise not
prohibited by this Agreement:
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(i) liens for taxes, assessments or other governmental charges,
levies or claims not then required to be paid under Section 5.06 so long
as any reserve has been established as required by that Section;
(ii) liens of carriers, warehousemen, mechanics, laborers and
materialmen incurred in the ordinary course of business for sums not
then required to be paid under Section 5.06 so long as any reserve has
been established as required by that Section;
(iii) liens incurred in the ordinary course of business in
connection with worker's compensation, unemployment insurance, statutory
obligations, social security legislation or rental or other security
deposits, or for any purpose at the time required by law as a condition
precedent to the transaction of business or the exercise of any of the
privileges or licenses of either Borrower or any of the Subsidiaries, so
long as the underlying obligations are not then required to be paid
under Section 5.06 hereof and any reserve has been established as
required by that Section;
(iv) liens incurred in respect of judgments and awards discharged
within 30 days from the making thereof or under review in an appropriate
forum so long as enforcement thereof is effectively stayed;
(v) security interests (including leases treated as security
interests) in equipment or property purchased or leased so long as they
respectively secure only the corresponding purchase money indebtedness
or capitalized lease obligations;
(vi) security interests (including leases treated as security
interests) existing in assets or properties at the time of acquisition
of such assets or properties, or the acquisition of the Person owning
such assets or properties, so long as such security interests continue
to encumber only such assets or properties;
(vii) any security interests or liens on the ownership interest
of the Borrowers or any Subsidiaries in the COLI Policies;
(viii) any security interests and other liens and encumbrances
granted from time to time to the Agent (for the benefit of all of the
Banks);
(ix) liens on accounts receivable and proceeds thereof arising
solely in connection with the sale or other disposition of such accounts
receivable pursuant to Section 6.03; and
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(x) currently existing liens and negative pledges that are
disclosed in Schedule 3.10(a) hereto (other than those securing
indebtedness being retired with the proceeds of the Loans or otherwise
replaced by this Agreement), but those liens or pledges shall not be
increased or extended to other indebtedness (but may be renewed or
extended) unless otherwise permitted by the terms and provisions of this
Agreement."
(g) Section 6.03 is amended in full to read as follows:
"Section 6.03. Sale or Disposition of Assets, Etc. Neither
Borrower shall, and shall not cause, suffer or permit any of the
Subsidiaries to, directly or indirectly, sell, lease, sublease,
transfer, exchange or otherwise dispose of any part of the assets or
properties of either Borrower or any of the Subsidiaries (individually
or in a series of related transactions) (a) for less than the fair
market value of such assets and properties or (b) involving assets and
properties with an aggregate fair market value of more than $35,000,000,
or offer or agree to do so, without the approval of Majority Banks;
provided, however, that the Borrowers and the Subsidiaries may (i) sell
inventory and equipment in the ordinary course of business without
regard to this Section and (ii) sell or otherwise dispose of any
accounts receivable of the Borrowers from time to time, for cash and at
least equal to the fair value of such accounts receivable in the
ordinary course of business of the Borrowers and their Subsidiaries."
(h) Section 6.04 is amended in full to read as follows:
"Section 6.04. Certain Fundamental Changes. Neither
Borrower shall, and shall not cause, suffer or permit any of the
Significant Subsidiaries (as applicable), directly or indirectly,
to effect, enter into or offer or agree to: (a) any issuance,
sale, transfer, pledge or other disposition or encumbrance of any
equity securities issued by the Operating Company or any of the
Significant Subsidiaries, or the issuance of any option, warrant
or other right to acquire any such securities; (b) any capital
reorganization or reclassification of the capital stock or other
equity interests of either Borrower; (c) any transaction in which
the equity interests of either Borrower prior to the transaction
would be changed into or exchanged for different securities,
whether of that or any other Person, or for any other assets or
properties; (d) except as otherwise permitted
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by Section 6.03 hereof, any sale, lease, assignment, conveyance,
spin-off or other transfer or disposition of all or any material
part of the business or assets and properties of either Borrower
or any Significant Subsidiary; (e) any merger, consolidation,
dissolution, liquidation or winding up, provided, however, (i)
any wholly-owned Subsidiary may merge into or consolidate with
any other wholly-owned Subsidiary or either Borrower (so long as
such Borrower is the survivor), and (ii) either Borrower may
merge with any Person so long as such Borrower is the surviving
corporation, no Default or Event of Default is then continuing or
would result therefrom, with the various financial measurements
and covenants set forth in Section 6.01 of this Agreement being
recalculated on a pro forma basis (from the then most recent
quarterly or subsequent pro forma calculations) to include the
effect of such merger, and any resulting acquisition is permitted
under subsection (f) of this Section; (f) the acquisition or
establishment of any new subsidiary or joint venture, or the
acquisition of all or substantially all of the assets and
properties of any other Person or any discrete division or other
business unit thereof, provided, however, that, so long as no
Default or Event of Default is then continuing or would result
therefrom, with the various financial measurements and covenants
set forth in Section 6.01 of this Agreement being recalculated on
a pro forma basis (from the then most recent quarterly or
subsequent pro forma calculations) to include the effect of such
acquisition, the Borrowers and the Subsidiaries may acquire all
or substantially all of the assets and properties of, acquire an
equity interest in, or enter into any new joint venture that is
or will be (A) any Person whose assets and business are (or are
to be) substantially similar to the assets and business of the
Borrowers or the Subsidiaries on the date hereof and (B) any
other Person so long as the aggregate fair market value of all
such assets and properties acquired from such other Person
(directly or indirectly through the acquisition of equity) does
not (or will not) exceed $35,000,000; or (g) any material change
in the character of the business of either Borrower or of the
Borrowers and the subsidiaries taken as a whole, in each case as
conducted on the date of this Agreement."
(i) Section 6.05 is amended in full to read as follows:
"Section 6.05. Distributions to Shareholders. Neither
Borrower shall, and the Borrowers shall not cause, suffer or
permit any of the Subsidiaries to, directly or indirectly: (a)
declare or make any dividend, payment or other distribution of
cash, assets or property with respect to any common or preferred
stock issued by the Holding Company, whether now or hereafter
outstanding; (b) redeem, purchase or otherwise acquire any common
or
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preferred stock issued by the Holding Company or any option or
other right to acquire any such securities (other than any
redemption or repurchase of the Holding Company's outstanding 5%
convertible subordinated debentures due August 15, 2005, as in
effect on the date hereof, pursuant to the application of the
change of control provision contained therein, or any
substantially identical provision contained in any subsequent
issuance of convertible debt); (c) covenant or otherwise arrange
with any Person (other than the Banks in any Loan Instrument) to
directly or indirectly limit or otherwise restrict any dividend,
advance or other payment or distribution (whether of cash or
otherwise); or (d) offer or agree to do any of the foregoing;
provided, however, that the Holding Company may make any such
dividend, payment or other distribution with respect to any
equity securities issued by it, or redeem, purchase or otherwise
acquire any equity securities issued by the Holding Company, so
long as no Default or Event of Default is then continuing or
would result therefrom, with the various financial measurements
and covenants set forth in Section 6.01 of this Agreement being
recalculated on a pro forma basis (from the then most recent
quarterly or subsequent pro forma calculations) to include the
effect of the proposed dividend or other action, and the
aggregate amount of such dividends or other actions in any fiscal
year does not exceed 50% of the consolidated Net Income (adjusted
to exclude any nonrecurring gains and losses) of the Borrowers
and the Subsidiaries for the immediately preceding fiscal year."
(j) Section 7.01(f) is amended in full to read as follows:
"(f) any payment default of $2,000,000 or more shall occur
under any instrument or agreement (other than a Loan Instrument)
respecting any Debt of either Borrower or any of the
Subsidiaries, or any such Debt of $5,000,000 or more in principal
or notional amount shall be accelerated or otherwise become due
or be required to be prepaid, repurchased or redeemed (other than
pursuant to a regularly scheduled mandatory prepayment,
repurchase or redemption or the application of the change of
control provision contained in the Holding Company's outstanding
5% convertible subordinated debentures due August 15, 2005, as in
effect on the date hereof, or any substantially identical
provision contained in any subsequent issuance of debt) prior to
its scheduled maturity, unless payment shall be made or action
shall be taken within five (5) Business Days after such default
in an amount or manner sufficient to cure it, provided that such
payment or action will not result in a breach of any term or
provision of this Agreement and the other Loan Instruments, with
the various financial measurements and covenants set forth in
Section 6.01 of this Agreement being recalculated on a pro forma
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basis (from the then most recent quarterly or subsequent pro
forma calculations) to include the effect of any such payment;"
(k) Section 9.14(f) is amended in full to read as follows:
"(f) Subject to the terms and provisions of this
Agreement, each Bank from time to time may sell to one or more
other financial institutions or institutional investors (other
than the Borrowers or any of their Affiliates) a participation
interest in all or an undivided portion of its rights, powers,
privileges, remedies and interests under this Agreement and the
other Loan Instruments, in any case with the consent of the
Borrowers (such consent not to be unreasonably withheld or
delayed); provided that no Bank shall permit its direct or
indirect participant to further assign or participate its
interests hereunder. However, the sale or other transfer of a
participation shall not reduce, shift or otherwise affect any of
the agreements, duties, obligations or liabilities of the selling
Bank under this Agreement or any other Loan Instrument, which
shall continue in full force and effect and remain the sole
responsibility of the selling Bank, and each such selling Bank
agrees that it will not raise (and hereby expressly waives) any
defense relating to any such participation. Furthermore, no Bank
shall grant to any participant the right to approve any
supplement to, modification, amendment, restatement or waiver of
or departure from this Agreement or any other Loan Instrument
other than with respect to any reduction in the principal of the
Loans or in the calculation of interest or fees thereon, or any
postponement of any date fixed for any payment of principal or
interest or fees on the Loans, to the extent the participant has
an interest in such Loans. The Agent and other Banks and the
Borrowers may continue to deal directly and exclusively with any
such selling Bank."
This Letter Amendment shall become effective as of the date first
above written when, and only when, on or before May 31, 1996, the Agent shall
have received counterparts of this Letter Amendment executed by the undersigned
and all of the Banks or, as to any of the Banks, advice satisfactory to the
Agent that such Bank has executed this Letter Amendment. This Letter Amendment
is subject to the provisions of Section 8.11 of the Loan Agreement.
On and after the effectiveness of this Letter Amendment, each
reference in the Loan Agreement to "this Agreement", "hereunder", "hereof" or
words of like import referring to the Loan Agreement, and each reference in the
Notes and each of the other Loan Instruments to "the Loan Agreement",
"thereunder", "thereof" or words of like import
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referring to the Loan Agreement, shall mean and be a reference to the Loan
Agreement, as amended by this Letter Amendment.
The Loan Agreement, the Notes and each of the other Loan
Instruments, as specifically amended by this Letter Amendment, are and shall
continue to be in full force and effect and are hereby in all respects ratified
and confirmed. The execution, delivery and effectiveness of this Letter
Amendment shall not, except as expressly provided herein, operate as a waiver of
any right, power or remedy of any Bank or the Agent under any of the Loan
Instruments, nor constitute a waiver of any provision of any of the Loan
Instruments.
If you agree to the terms and provisions hereof, please evidence
such agreement by executing and returning at least three counterparts of this
Letter Amendment to Citibank, N.A., 399 Park Avenue, New York, NY 10043, Attn:
Heidi McKibben.
This Letter Amendment may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement. Delivery of an executed
counterpart of a signature page to this Letter Amendment by telecopier shall be
effective as delivery of a manually executed counterpart of this Letter
Amendment.
This Letter Amendment shall be governed by, and construed in
accordance with, the laws of the State of New York.
Very truly yours,
SCHOLASTIC CORPORATION
By: KEVIN McENERY
______________________________________
Name: Kevin McEnery
Title: Executive Vice President and
Chief Financial Officer
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SCHOLASTIC INC.
By: KEVIN McENERY
______________________________________
Name: Kevin McEnery
Title: Executive Vice President and
Chief Financial Officer
Agreed as of the date first above written:
CITIBANK, N.A., as Agent
By: THOMAS D. STOTT
______________________________
Name: Thomas D. Stott
Title: Vice President
BANKS
- - -----
CITIBANK, N.A.
By: THOMAS D. STOTT
______________________________
Name: Thomas D. Stott
Title: Vice President
THE CHASE MANHATTAN BANK, N.A.
By: GASPARE GALANTE Jr.
______________________________
Name: Gaspare Galante Jr.
Title: Second Vice President
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THE FIRST NATIONAL BANK OF BOSTON
By: JULIE V. JALELIAN
______________________________
Name: Julie V. Jalelian
Title: Assistant Vice President
MARINE MIDLAND BANK
By: WILLIAM M. HOLLAND
______________________________
Name: William M. Holland
Title: Vice President
UNITED JERSEY BANK
By: LAWRENCE F. ZEMA
______________________________
Name: Lawrence F. Zema
Title: Vice President & Regional Manager