Exhibit 10.1


 


EXECUTION COPY


 




 





CREDIT AGREEMENT


 


Dated as of March 2, 2007


 


among


 


DOCTOR ACQUISITION CO.,


 


RDA HOLDING CO.,


 


THE READER’S DIGEST ASSOCIATION, INC.,


 


THE OVERSEAS BORROWERS PARTY HERETO,


 


The Lenders Party Hereto


 


JPMORGAN CHASE BANK, N.A.,

as Administrative Agent


 


CITICORP NORTH AMERICA, INC. and

MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED,

as Co-Syndication Agents,


 


and


 


THE ROYAL BANK OF SCOTLAND PLC,

as Documentation Agent


 


 




 


 





J.P. MORGAN SECURITIES INC.,

CITIGROUP GLOBAL MARKETS INC.,

MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED

and RBS SECURITIES CORPORATION,

as Co-Lead Arrangers and Joint Bookrunners


 

















 


TABLE OF CONTENTS


 


	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE I DEFINITIONS AND ACCOUNTING TERMS

  	
  2

  
	
   

  	
   

  
	
  SECTION 1.01.

  	
  Defined Terms

  	
  2

  
	
  SECTION 1.02.

  	
  Other Interpretive Provisions

  	
  48

  
	
  SECTION 1.03.

  	
  Accounting Terms

  	
  48

  
	
  SECTION 1.04.

  	
  Rounding

  	
  48

  
	
  SECTION 1.05.

  	
  References to Agreements, Laws, Etc

  	
  49

  
	
  SECTION 1.06.

  	
  Times of Day

  	
  49

  
	
  SECTION 1.07.

  	
  Timing of Payment of Performance

  	
  49

  
	
  SECTION 1.08.

  	
  Currency Equivalents Generally

  	
  49

  
	
  SECTION 1.09.

  	
  Change of Currency

  	
  50

  
	
   

  	
   

  	
   

  
	
  ARTICLE II THE COMMITMENTS AND CREDIT EXTENSIONS

  	
  50

  
	
   

  	
   

  
	
  SECTION 2.01.

  	
  The Loans

  	
  50

  
	
  SECTION 2.02.

  	
  Borrowings, Conversions and Continuations of Loans

  	
  51

  
	
  SECTION 2.03.

  	
  Letters of Credit

  	
  52

  
	
  SECTION 2.04.

  	
  Swing Line Loans

  	
  59

  
	
  SECTION 2.05.

  	
  Prepayments

  	
  61

  
	
  SECTION 2.06.

  	
  Termination or Reduction of Commitments

  	
  64

  
	
  SECTION 2.07.

  	
  Repayment of Loans

  	
  65

  
	
  SECTION 2.08.

  	
  Interest

  	
  65

  
	
  SECTION 2.09.

  	
  Fees

  	
  66

  
	
  SECTION 2.10.

  	
  Computation of Interest and Fees

  	
  66

  
	
  SECTION 2.11.

  	
  Evidence of Indebtedness

  	
  66

  
	
  SECTION 2.12.

  	
  Payments Generally

  	
  67

  
	
  SECTION 2.13.

  	
  Sharing of Payments

  	
  69

  
	
  SECTION 2.14.

  	
  Incremental Credit Extensions

  	
  70

  
	
  SECTION 2.15.

  	
  Overseas Borrower Costs

  	
  73

  
	
   

  	
   

  	
   

  
	
  ARTICLE III TAXES, INCREASED COSTS PROTECTION AND ILLEGALITY

  	
  73

  
	
   

  	
   

  
	
  SECTION 3.01.

  	
  Taxes

  	
  73

  
	
  SECTION 3.02.

  	
  Illegality

  	
  76

  
	
  SECTION 3.03.

  	
  Inability to Determine Rates

  	
  76

  
	
  SECTION 3.04.

  	
  Increased Cost and Reduced
  Return; Capital Adequacy; Reserves on Eurocurrency Rate Loans

  	
  76

  
	
  SECTION 3.05.

  	
  Funding Losses

  	
  78

  
	
  SECTION 3.06.

  	
  Matters Applicable to All Requests for Compensation

  	
  78

  
	
  SECTION 3.07.

  	
  Replacement of Lenders under Certain Circumstances

  	
  79

  
	
  SECTION 3.08.

  	
  Survival

  	
  80

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV CONDITIONS PRECEDENT TO CREDIT EXTENSIONS

  	
  80

  
	
   

  	
   

  
	
  SECTION 4.01.

  	
  Conditions of Initial Credit Extension

  	
  80

  
	
  SECTION 4.02.

  	
  Conditions to All Credit Extensions

  	
  83

  
	
  SECTION 4.03.

  	
  Conditions of Initial Credit Extension to Overseas Borrower

  	
  84

  
				



 


i

















 


	
  ARTICLE V REPRESENTATIONS AND WARRANTIES

  	
  85

  
	
   

  	
   

  
	
  SECTION 5.01.

  	
  Existence, Qualification and Power; Compliance with Laws

  	
  85

  
	
  SECTION 5.02.

  	
  Authorization; No Contravention

  	
  85

  
	
  SECTION 5.03.

  	
  Governmental Authorization; Other Consents

  	
  85

  
	
  SECTION 5.04.

  	
  Binding Effect

  	
  86

  
	
  SECTION 5.05.

  	
  Financial Statements; No Material Adverse Effect

  	
  86

  
	
  SECTION 5.06.

  	
  Litigation

  	
  87

  
	
  SECTION 5.07.

  	
  No Default

  	
  87

  
	
  SECTION 5.08.

  	
  Ownership of Property; Liens

  	
  87

  
	
  SECTION 5.09.

  	
  Environmental Compliance

  	
  87

  
	
  SECTION 5.10.

  	
  Taxes

  	
  88

  
	
  SECTION 5.11.

  	
  ERISA Compliance

  	
  88

  
	
  SECTION 5.12.

  	
  Subsidiaries; Equity Interests

  	
  89

  
	
  SECTION 5.13.

  	
  Margin Regulations; Investment Company Act

  	
  89

  
	
  SECTION 5.14.

  	
  Disclosure

  	
  89

  
	
  SECTION 5.15.

  	
  Intellectual Property; Licenses, Etc

  	
  89

  
	
  SECTION 5.16.

  	
  Solvency

  	
  90

  
	
  SECTION 5.17.

  	
  Labor Matters

  	
  90

  
	
  SECTION 5.18.

  	
  Collateral

  	
  90

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI AFFIRMATIVE COVENANTS

  	
  91

  
	
   

  	
   

  
	
  SECTION 6.01.

  	
  Financial Statements

  	
  91

  
	
  SECTION 6.02.

  	
  Certificates; Other Information

  	
  92

  
	
  SECTION 6.03.

  	
  Notices

  	
  94

  
	
  SECTION 6.04.

  	
  Payment of Obligations

  	
  94

  
	
  SECTION 6.05.

  	
  Preservation of Existence, Etc

  	
  94

  
	
  SECTION 6.06.

  	
  Maintenance of Properties

  	
  94

  
	
  SECTION 6.07.

  	
  Maintenance of Insurance

  	
  95

  
	
  SECTION 6.08.

  	
  Compliance with Laws

  	
  95

  
	
  SECTION 6.09.

  	
  Inspection Rights

  	
  95

  
	
  SECTION 6.10.

  	
  Covenant to Guarantee Obligations and Give Security

  	
  95

  
	
  SECTION 6.11.

  	
  Compliance with Environmental Laws

  	
  97

  
	
  SECTION 6.12.

  	
  Further Assurances

  	
  98

  
	
  SECTION 6.13.

  	
  Use of Proceeds

  	
  99

  
	
  SECTION 6.14.

  	
  Interest Rate Protection

  	
  99

  
	
  SECTION 6.15.

  	
  Designation of Subsidiaries

  	
  99

  
	
  SECTION 6.16.

  	
  Ownership of Overseas Borrowers

  	
  99

  
	
  SECTION 6.17.

  	
  Post-Closing Covenants

  	
  99

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII NEGATIVE COVENANTS

  	
  100

  
	
   

  	
   

  
	
  SECTION 7.01.

  	
  Liens

  	
  100

  
	
  SECTION 7.02.

  	
  Investments

  	
  103

  
	
  SECTION 7.03.

  	
  Indebtedness

  	
  107

  
	
  SECTION 7.04.

  	
  Fundamental Changes

  	
  110

  
	
  SECTION 7.05.

  	
  Dispositions

  	
  112

  
	
  SECTION 7.06.

  	
  Restricted Payments

  	
  113

  
	
  SECTION 7.07.

  	
  Change in Nature of Business

  	
  115

  
	
  SECTION 7.08.

  	
  Transactions with Affiliates

  	
  115

  



 


ii

















 


	
  SECTION 7.09.

  	
  Burdensome Agreements

  	
  116

  
	
  SECTION 7.10.

  	
  Financial Covenant

  	
  116

  
	
  SECTION 7.11.

  	
  Accounting Changes

  	
  117

  
	
  SECTION 7.12.

  	
  Prepayments, Etc. of Indebtedness

  	
  117

  
	
  SECTION 7.13.

  	
  Holding Company

  	
  117

  
	
  SECTION 7.14.

  	
  Capital Expenditures

  	
  118

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES

  	
  119

  
	
   

  	
   

  
	
  SECTION 8.01.

  	
  Events of Default

  	
  119

  
	
  SECTION 8.02.

  	
  Remedies Upon Event of Default

  	
  121

  
	
  SECTION 8.03.

  	
  Exclusion of Immaterial Subsidiaries

  	
  121

  
	
  SECTION 8.04.

  	
  Application of Funds

  	
  122

  
	
  SECTION 8.05.

  	
  Company’s Right to Cure

  	
  123

  
	
  SECTION 8.06.

  	
  CAM Exchange

  	
  123

  
	
   

  	
   

  	
   

  
	
  ARTICLE IX ADMINISTRATIVE AGENT AND OTHER AGENTS

  	
  124

  
	
   

  	
   

  
	
  SECTION 9.01.

  	
  Appointment and Authorization of Agents

  	
  124

  
	
  SECTION 9.02.

  	
  Delegation of Duties

  	
  125

  
	
  SECTION 9.03.

  	
  Liability of Agents

  	
  125

  
	
  SECTION 9.04.

  	
  Reliance by Agents

  	
  126

  
	
  SECTION 9.05.

  	
  Notice of Default

  	
  126

  
	
  SECTION 9.06.

  	
  Credit Decision; Disclosure of Information by Agents

  	
  126

  
	
  SECTION 9.07.

  	
  Indemnification of Agents

  	
  127

  
	
  SECTION 9.08.

  	
  Agents in their Individual Capacities

  	
  127

  
	
  SECTION 9.09.

  	
  Successor Agents

  	
  128

  
	
  SECTION 9.10.

  	
  Administrative Agent May File Proofs of Claim

  	
  128

  
	
  SECTION 9.11.

  	
  Collateral and Guarantee Matters

  	
  129

  
	
  SECTION 9.12.

  	
  Other Agents; Arrangers and Managers

  	
  130

  
	
  SECTION 9.13.

  	
  Appointment of Supplemental Administrative Agents

  	
  130

  
	
   

  	
   

  	
   

  
	
  ARTICLE X MISCELLANEOUS

  	
  131

  
	
   

  	
   

  
	
  SECTION 10.01.

  	
  Amendments, Etc

  	
  131

  
	
  SECTION 10.02.

  	
  Notices and Other Communications; Facsimile Copies

  	
  133

  
	
  SECTION 10.03.

  	
  No Waiver; Cumulative Remedies

  	
  135

  
	
  SECTION 10.04.

  	
  Attorney Costs, Expenses and Taxes

  	
  135

  
	
  SECTION 10.05.

  	
  Indemnification by the Company

  	
  135

  
	
  SECTION 10.06.

  	
  Payments Set Aside

  	
  136

  
	
  SECTION 10.07.

  	
  Successors and Assigns

  	
  137

  
	
  SECTION 10.08.

  	
  Confidentiality

  	
  140

  
	
  SECTION 10.09.

  	
  Setoff

  	
  142

  
	
  SECTION 10.10.

  	
  Interest Rate Limitation

  	
  142

  
	
  SECTION 10.11.

  	
  Counterparts

  	
  142

  
	
  SECTION 10.12.

  	
  Integration

  	
  143

  
	
  SECTION 10.13.

  	
  Survival of Representations and Warranties

  	
  143

  
	
  SECTION 10.14.

  	
  Severability

  	
  143

  
	
  SECTION 10.15.

  	
  Tax Forms

  	
  143

  
	
  SECTION 10.16.

  	
  GOVERNING LAW

  	
  145

  
	
  SECTION 10.17.

  	
  WAIVER OF RIGHT TO TRIAL BY JURY

  	
  146

  



 


iii

















 


	
  SECTION 10.18.

  	
  Binding Effect

  	
  146

  
	
  SECTION 10.19.

  	
  Lender Action

  	
  146

  
	
  SECTION 10.20.

  	
  USA PATRIOT Act

  	
  146

  
	
  SECTION 10.21.

  	
  Agent for Service of Process

  	
  146

  
	
  SECTION 10.22.

  	
  Effectiveness of the
  Merger; Assignment and Delegation to and Assumption by Reader’s Digest

  	
  147

  
	
  SECTION 10.23.

  	
  Judgment Currency

  	
  147

  
	
  SECTION 10.24.

  	
  German Tax Confirmation

  	
  147

  



 


iv

















 


	
  SCHEDULES

  
	
   

  
	
   

  	
  1.01A

  	
   

  	
  Certain
  Security Interests and Guarantees

  	
   

  
	
   

  	
  1.01B

  	
   

  	
  Mortgaged
  Properties

  	
   

  
	
   

  	
  1.01C

  	
   

  	
  Management
  Adjustments

  	
   

  
	
   

  	
  1.01D

  	
   

  	
  Excluded
  Subsidiaries

  	
   

  
	
   

  	
  1.01E

  	
   

  	
  Foreign
  Subsidiaries

  	
   

  
	
   

  	
  1.01F

  	
   

  	
  Holdings
  Contractual Obligations

  	
   

  
	
   

  	
  1.01G

  	
   

  	
  Unrestricted
  Subsidiaries

  	
   

  
	
   

  	
  1.01H

  	
   

  	
  Mandatory
  Cost Formulae

  	
   

  
	
   

  	
  1.01I

  	
   

  	
  Existing
  Letters of Credit

  	
   

  
	
   

  	
  2.01

  	
   

  	
  Commitments

  	
   

  
	
   

  	
  5.05

  	
   

  	
  Certain Liabilities

  	
   

  
	
   

  	
  5.09

  	
   

  	
  Environmental Matters

  	
   

  
	
   

  	
  5.10

  	
   

  	
  Taxes

  	
   

  
	
   

  	
  5.11

  	
   

  	
  ERISA Compliance

  	
   

  
	
   

  	
  5.12

  	
   

  	
  Subsidiaries
  and Other Equity Investments

  	
   

  
	
   

  	
  5.18

  	
   

  	
  Collateral
  Matters

  	
   

  
	
   

  	
  7.01(b)

  	
   

  	
  Existing
  Liens

  	
   

  
	
   

  	
  7.02(f)

  	
   

  	
  Existing
  Investments

  	
   

  
	
   

  	
  7.03(b)

  	
   

  	
  Existing
  Indebtedness

  	
   

  
	
   

  	
  7.05(k)

  	
   

  	
  Dispositions

  	
   

  
	
   

  	
  7.08

  	
   

  	
  Transactions
  with Affiliates

  	
   

  
	
   

  	
  7.09

  	
   

  	
  Existing
  Restrictions

  	
   

  
	
   

  	
  10.02

  	
   

  	
  Administrative
  Agent’s Office, Certain Addresses for Notices

  	
   

  



 


	
  EXHIBITS

  



 


	
              Form of

  



 


	
   

  	
  A

  	
   

  	
  Committed
  Loan Notice

  	
   

  
	
   

  	
  B

  	
   

  	
  Swing
  Line Loan Notice

  	
   

  
	
   

  	
  C-1

  	
   

  	
  U.S.
  Term Note

  	
   

  
	
   

  	
  C-2

  	
   

  	
  Revolving
  Credit Note

  	
   

  
	
   

  	
  C-3

  	
   

  	
  Euro
  Term Note

  	
   

  
	
   

  	
  D

  	
   

  	
  Compliance
  Certificate

  	
   

  
	
   

  	
  E

  	
   

  	
  Assignment
  and Assumption

  	
   

  
	
   

  	
  F

  	
   

  	
  Guarantee
  and Security Agreement

  	
   

  
	
   

  	
  G

  	
   

  	
  Mortgage

  	
   

  
	
   

  	
  H-1

  	
   

  	
  Opinion
  of Cravath, Swaine & Moore LLP

  	
   

  
	
   

  	
  H-2

  	
   

  	
  Opinion
  of Richards, Layton & Finger

  	
   

  
	
   

  	
  H-3

  	
   

  	
  Opinion
  of General Counsel (Company)

  	
   

  
	
   

  	
  H-4

  	
   

  	
  Opinion
  of General Counsel (WRC Media)

  	
   

  
	
   

  	
  H-5

  	
   

  	
  Opinion
  of General Counsel (Direct Holdings)

  	
   

  
	
   

  	
  I

  	
   

  	
  Letter
  of Credit Application (commercial)

  	
   

  
	
   

  	
  J

  	
   

  	
  Letter
  of Credit Application (standby)

  	
   

  
	
   

  	
  K

  	
   

  	
  Continuing
  Agreement

  	
   

  
	
   

  	
  L

  	
   

  	
  German
  Tax Confirmation

  	
   

  



 


v

















 


CREDIT AGREEMENT


 


This
CREDIT AGREEMENT (“Agreement”) is
entered into as of March 2, 2007, among DOCTOR ACQUISITION CO., a Delaware
corporation (“Acquisition Co”) (to
be merged with and into Reader’s Digest (as defined herein), the “Company”), RDA HOLDING CO., a Delaware
corporation (“Holdings”), THE
READER’S DIGEST ASSOCIATION, INC., a Delaware corporation (“Reader’s Digest”), the Overseas Borrowers
from time to time party hereto, JPMORGAN CHASE BANK, N.A., as Administrative
Agent, each lender from time to time party hereto (collectively, the “Lenders” and individually, a “Lender”), CITICORP NORTH AMERICA, INC. and
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED, as Co-Syndication
Agents, and THE ROYAL BANK OF SCOTLAND PLC, as Documentation Agent.


 


PRELIMINARY
STATEMENTS


 


Pursuant
to the Purchase Agreement (as this and other capitalized terms used in these
preliminary statements are defined in Section 1.01 below), Holdings agreed
to acquire Reader’s Digest (the “Acquisition”)
through the merger of Acquisition Co with and into Reader’s Digest (the “Merger”), with Reader’s Digest being the
surviving corporation.  Immediately
following and as a result of the Merger, Reader’s Digest will assume all rights
and obligations of Acquisition Co as the Company hereunder.


 


Pursuant
to the WRC Acquisition Agreement, Holdings agreed to acquire WRC Media, Inc.,
a Delaware corporation (“WRC Media”
and such acquisition, the “WRC Acquisition”).  Substantially concurrently with the
Acquisition, Holdings will contribute all of the capital stock of WRC Media to
the Company.  In addition, pursuant to
the DH Acquisition Agreement, Holdings agreed to acquire Direct Holdings U.S.
Corp., a Delaware corporation (“Direct
Holdings” and, such acquisition, the “DH Acquisition” together with the Acquisition and the WRC
Acquisition, the “Acquisitions”).  Substantially concurrently with the
Acquisition, Holdings will contribute all of the capital stock of Direct
Holdings to the Company.


 


Acquisition
Co has requested that concurrently with the consummation of the Acquisitions,
the Lenders extend credit to Acquisition Co and the German Borrower in the form
of Term Loans in an initial aggregate Dollar Amount of $1,310,000,000 and in
the form a Revolving Credit Facility in an initial aggregate amount of
$300,000,000.  The Revolving Credit
Facility may include one or more Swing Line Loans and one or more Letters of
Credit from time to time.


 


The
proceeds of the Term Loans and any Revolving Credit Loans made on the Closing
Date, together with the proceeds of (i) the issuance of the Senior
Subordinated Notes, (ii) the issuance of the Holdings Senior PIK
Preferred, (iii) the issuance of the Holdings Common Equity, (iv) the
Sponsor Equity Contributions, and (v) cash on hand at Reader’s Digest of
up to $70,000,000 will be used to pay the cash portion of the Purchase Price
and the Transaction Expenses and to refinance certain outstanding Indebtedness
of Reader’s Digest, WRC Media and Direct Holdings.  The proceeds of Revolving Credit Loans and
Swing Line Loans and the Letters of Credit made on or after the Closing Date
will be used for working capital and other general corporate purposes of
Holdings and its Subsidiaries, including the financing of Permitted
Acquisitions.


 


1

















 


The
applicable Lenders have indicated their willingness to lend, and the L/C
Issuers have indicated their willingness to issue Letters of Credit, in each
case, on the terms and subject to the conditions set forth herein.


 


In
consideration of the mutual covenants and agreements herein contained, the
parties hereto covenant and agree as follows:


 


ARTICLE I


 


DEFINITIONS AND ACCOUNTING TERMS


 


SECTION 1.01.  Defined
Terms .  As used in this Agreement, the
following terms shall have the meanings set forth below:


 


“Acquired EBITDA” means, with respect to any
Acquired Entity or Business for any period, the amount for such period of
Consolidated EBITDA of such Acquired Entity or Business (determined as if
references to the Company and the Restricted Subsidiaries in the definition of
Consolidated EBITDA were references to such Acquired Entity or Business and its
Subsidiaries), all as determined on a consolidated basis for such Acquired
Entity or Business.


 


“Acquired Entity or Business” has the
meaning set forth in the definition of the term “Consolidated EBITDA”.


 


“Acquisition” has the meaning set forth in
the preliminary statements to this Agreement.


 


“Acquisition Co” has the meaning specified
in the introductory paragraph to this Agreement.


 


“Acquisitions” has the meaning set forth in
the preliminary statements to this Agreement.


 


“Additional Lender” has the meaning set
forth in Section 2.14(a).


 


“Additional Overseas Lender” has the meaning
set forth in Section 2.14(b).


 


“Administrative Agent” means JPMorgan Chase
Bank, in its capacity as administrative agent under any of the Loan Documents,
or any permitted successor administrative agent.


 


“Administrative Agent’s Office” means, with
respect to any currency, the Administrative Agent’s address and, as
appropriate, account as set forth on Schedule 10.02 with respect to such
currency, or such other address or account with respect to such currency as the
Administrative Agent may from time to time notify the Company and the Lenders
in writing (including by electronic mail or by posting to Intralinks or other
similar information transmission systems).


 


“Administrative Questionnaire” means an
Administrative Questionnaire in a form supplied by the Administrative Agent.


 


2

















 


“Affiliate” means, with respect to a
specified Person, another Person that directly, or indirectly through one or
more intermediaries, Controls or is Controlled by or is under common Control
with the Person specified.  “Control”
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management or policies of a Person, whether through the
ability to exercise voting power, by contract or otherwise.  “Controlling” and “Controlled” have meanings
correlative thereto.


 


“Agent-Related Persons” means the Agents,
together with their respective Affiliates, and the officers, directors,
employees, agents and attorneys-in-fact of such Persons and Affiliates.


 


“Agents” means, collectively, the
Administrative Agent, the Co-Syndication Agents, the Documentation Agent and
the Supplemental Administrative Agents (if any).


 


“Aggregate Commitments” means the
Commitments of all the Lenders.


 


“Aggregate Credit Exposures” means, at any
time, the sum of (a) the unused portion of each Revolving Credit
Commitment then in effect, (b) the unused portion of each U.S. Term
Commitment then in effect, (c) the unused portion of each Euro Term
Commitment then in effect and (c) the Total Outstandings at such time.


 


“Agreement” means this Credit Agreement.


 


“Agreement Currency” has the meaning
specified in Section 10.23.


 


“Alternative Currency” means Sterling,
Euros, Canadian Dollars or Australian Dollars.


 


“Alternative Currency Loan” means a Loan
that is a Eurocurrency Rate Loan and that is made in an Alternative Currency
pursuant to the applicable Committed Loan Notice.


 


“Applicable Rate” means a percentage per
annum equal to:


 


(a) with
respect to Term Loans, (i) for Eurocurrency Rate Loans, 2.00% and (ii) for
Base Rate Loans, 1.00%; and


 


(b) 
with respect to Revolving Credit Loans, unused Revolving Credit Commitments and
Letter of Credit fees, until delivery of financial statements for the first
full fiscal quarter commencing on or after the Closing Date pursuant to Section 6.01,
(A) for Eurocurrency Rate Loans, 2.25%, (B) for Base Rate Loans,
1.25%, (C) for Letter of Credit fees, 2.25% and (D) for commitment
fees, 0.375% and (ii) thereafter, the following percentages per annum,
based upon the Total Leverage Ratio as set forth in the most recent Compliance
Certificate received by the Administrative Agent pursuant to Section 6.02(b):


 


	
  Applicable Rate

  
	
  Pricing

  Level

  	
   

  	
  Total Leverage Ratio

  	
   

  	
  Eurocurrency

  Rate and

  Letter of

  Credit Fees

  	
   

  	
  Base Rate

  	
   

  	
  Commitment

  Fee Rate

  	
   

  
	
  1

  	
   

  	
  >6.0:1

  	
   

  	
  2.25%

  	
   

  	
  1.25%

  	
   

  	
  0.375%

  	
   

  
	
  2

  	
   

  	
  <6.0:1 but
  >5.0:1

  	
   

  	
  2.00%

  	
   

  	
  1.00%

  	
   

  	
  0.375%

  	
   

  



 


3

















 


	
  Applicable Rate

  
	
  Pricing

  Level

  	
   

  	
  Total Leverage Ratio

  	
   

  	
  Eurocurrency

  Rate and

  Letter of

  Credit Fees

  	
   

  	
  Base Rate

  	
   

  	
  Commitment

  Fee Rate

  	
   

  
	
  3

  	
   

  	
  <5.0:1 but
  >4.0:1

  	
   

  	
  1.75%

  	
   

  	
  0.75%

  	
   

  	
  0.375%

  	
   

  
	
  4

  	
   

  	
  <4.0:1

  	
   

  	
  1.50%

  	
   

  	
  0.50%

  	
   

  	
  0.250%

  	
   

  



 


Any
increase or decrease in the Applicable Rate resulting from a change in the Total
Leverage Ratio shall become effective as of the first Business Day immediately
following the date a Compliance Certificate (together with the related
financial statements) is delivered pursuant to Section 6.02(b); provided that, at the option of the Administrative
Agent or the Required Lenders, (x) the highest Pricing Level shall apply
as of the third Business Day after the date on which a Compliance Certificate
(together with the related financial statements) was required to have been
delivered but was not delivered, and shall continue to so apply to and
including the date on which such Compliance Certificate (together with the
related financial statements) is so delivered (and thereafter the Pricing Level
otherwise determined in accordance with this definition shall apply) and (y) the
next-higher Pricing Level to the Pricing Level then in effect shall apply as of
the first Business Day after an Event of Default under Section 8.01(a) shall
have occurred and be continuing, and shall continue to so apply to but
excluding the date on which such Event of Default is cured or waived (and
thereafter the Pricing Level otherwise determined in accordance with this
definition shall apply).


 


“Appropriate Lender” means, at any time, (a) with
respect to Loans of any Class, the Lenders of such Class, (b) with respect
to Letters of Credit, the relevant L/C Issuers and the Revolving Credit Lenders
and (c) with respect to the Swing Line Facility, the Swing Line Lender and
the Revolving Credit Lenders.


 


“Approved Bank” has the meaning specified in
clause (c) of the definition of “Cash Equivalents”.


 


“Approved Fund” means any Fund that is
administered, advised or managed by (a) a Lender, (b) an Affiliate of
a Lender or (c) an entity or an Affiliate of an entity that administers,
advises or manages a Lender.


 


“Arrangers” means J.P. Morgan Securities
Inc., Citigroup Global Markets Inc., Merrill Lynch, Pierce, Fenner &
Smith Incorporated and RBS Securities Corporation, each in its capacity as a
Joint Bookrunner and a Co-Lead Arranger under this Agreement.


 


“Assignees” has the meaning specified in Section 10.07(b).


 


“Assignment and Assumption” means an
Assignment and Assumption substantially in the form of Exhibit E.


 


“Attorney Costs” means and includes all
reasonable fees, expenses and disbursements of any law firm or other external
legal counsel.


 


“Attributable Indebtedness” means, on any
date, in respect of any Capitalized Lease of any Person, the capitalized amount
thereof that would appear on a balance sheet of such Person prepared as of such
date in accordance with GAAP.


 


4
















 


“Audited Financial Statements” means (a) the
audited consolidated balance sheets of Reader’s Digest and its Subsidiaries as
of each of June 30, 2004, June 30, 2005 and June 30, 2006, and
the related audited consolidated statements of income, stockholders’ equity and
cash flows for Reader’s Digest and its Subsidiaries for the periods ended on
such dates, (b) the audited consolidated balance sheets of WRC Media and
its Subsidiaries as of each of December 31, 2004, December 31, 2005
and December 31, 2006, and the related audited consolidated statements of
income, stockholders’ equity and cash flows for WRC Media and its Subsidiaries
for the periods ended on such dates, and (c) the audited consolidated
balance sheets of Direct Holdings and its Subsidiaries as of each of June 26,
2004, June 25, 2005 and June 24, 2006, and the related audited
consolidated statements of income, stockholders’ equity and cash flows for
Direct Holdings and its Subsidiaries for the periods ended on such dates.


 


“Australian Dollars” means the lawful
currency of Australia.


 


“Auto-Renewal Letter of Credit” has the
meaning specified in Section 2.03(b)(iii).


 


“Base Rate” means for any day a fluctuating
rate per annum equal to the higher of (a) the Federal Funds Rate plus 1/2
of 1% and (b) the rate of interest in effect for such day as publicly
announced from time to time by JPMorgan Chase Bank as its “prime rate.”  The “prime rate” is a rate set by JPMorgan
Chase Bank based upon various factors including JPMorgan Chase Bank costs and
desired return, general economic conditions and other factors, and is used as a
reference point for pricing some loans, which may be priced at, above, or below
such announced rate.  Any change in such
rate announced by JPMorgan Chase Bank shall take effect at the opening of
business on the day specified in the public announcement of such change.


 


“Base Rate Loan” means a Loan that bears
interest based on the Base Rate.


 


“Board” means the Board of Governors of the
Federal Reserve System of the United States (or any successor).


 


“Borrowers” means the Company, the German
Borrower and the other Overseas Borrowers.


 


“Borrowing” means a Revolving Credit
Borrowing, a Swing Line Borrowing, or a Term Borrowing, as the context may
require.


 


“Business Day” means any day other than a
Saturday, Sunday or other day on which commercial banks are authorized to close
under the Laws of, or are in fact closed in, the state where the Administrative
Agent’s Office is located or in The City of New York; provided, that (a) when used in connection
with a Eurocurrency Rate Loan denominated in a currency other than Euro, the
term “Business Day” shall also exclude any day on which banks are not open for
dealings in deposits in the applicable currency in the London interbank market,
(b) when used in connection with a Eurocurrency Rate Loan denominated in
Euro, the term “Business Day” shall also exclude any day which is not a TARGET
Day, (c) when used in connection with any Loan denominated in Canadian
Dollars, the term “Business Day” shall also exclude any day on which banks are
not open for dealings in deposits in Toronto but shall include any day on which
banks are open for dealings in deposits in Toronto, (d) when used in
connection with any Loan denominated in Sterling, the term “Business Day” shall
also exclude any day on which banks are not open for dealings in deposits in
Sterling in London but shall include any day on which banks are open for
dealings in deposits in Sterling in London, and (e) when used in
connection with any 


 


5

















 


Loan denominated in Australian Dollars, the
term “Business Day” shall also exclude any day on which banks are not open for
dealings in deposits in Sydney but shall include any day on which banks are
open for dealings in deposits in Sydney.


 


“CAM” means the mechanism for the allocation
and exchange of interests in Loans and other Credit Extensions under this
Agreement and collections thereunder established in Section 8.06.


 


“CAM Exchange” means the exchange of the Lenders’
interests provided for in Section 8.06.


 


“CAM Exchange Date” means the date on which
any Event of Default referred to in Section 8.01(f) shall occur or
the date on which the Company receives written notice from the Administrative
Agent that any Event of Default referred to in Section 8.01(g) has
occurred.


 


“CAM Percentage” means, as to each Lender, a
fraction, expressed as a decimal, of which (a) the numerator shall be the
aggregate Dollar Amount of the Designated Obligations owed to such Lender (whether
or not at the time due and payable) immediately prior to the CAM Exchange Date
and (b) the denominator shall be the aggregate Dollar Amount of the
Designated Obligations owed to all the Lenders (whether or not at the time due
and payable) immediately prior to the CAM Exchange Date.


 


“Canadian Dollars” means the lawful currency
of Canada.


 


“Capital Expenditures” means, for any
period, the additions to property, plant and equipment and other capital
expenditures of the Company and its consolidated Subsidiaries that are (or are
required to be) set forth in a consolidated statement of cash flows of the
Company for such period prepared in accordance with GAAP; provided that the term “Capital
Expenditures” shall not include, without duplication, (i) subject to the
terms of Section 2.05(b)(ii)(B), expenditures of Net Cash Proceeds arising
from any Casualty Event or any Disposition of any property or asset of the
Company or any Restricted Subsidiary (other than any Disposition permitted by Section 7.05(b) (to
the extent constituting a Disposition of inventory in the ordinary course of
business), (d), (e), (f), (g) or (h)), (ii) the purchase price of
equipment that is purchased during such period to the extent the consideration
therefore consists of (x) existing equipment traded in at the time of such
purchase or (y) the proceeds of a concurrent sale of existing equipment,
in each case in the ordinary course of business, (iii) expenditures that
are accounted for as capital expenditures by the Company or any Restricted
Subsidiary and that actually are paid for by a Person other than the Company or
any Restricted Subsidiary and for which neither the Company nor any Restricted
Subsidiary has provided or is required to provide or incur, directly or
indirectly, any consideration or obligation to such Person or any other Person
(whether before, during or after such period), (iv) interest capitalized
during such period, (v) additions resulting from Permitted Acquisitions, (vi) the
book value of any asset owned by the Company or any Restricted Subsidiary prior
to or during such period to the extent that such book value is included as a
capital expenditure during such period as a result of such Person reusing or
beginning to reuse such asset during such period without a corresponding
expenditure actually having been made in such period; provided that (x) any expenditure
necessary in order to permit such asset to be reused shall be included as a
Capital Expenditure during the period that such expenditure actually is made
and (y) such book value shall have been included in Capital Expenditures
when such asset was originally acquired, or (vii) expenditures required to
comply with special legal requirements, including, but not limited to, changes
in Environmental Laws.


 


6

















 


“Capitalized Leases” means all leases that
are required to be, in accordance with GAAP, recorded as capitalized leases; provided that for all purposes hereunder
the amount of obligations under any Capitalized Lease shall be the Attributable
Indebtedness in respect thereof.


 


“Cash Collateral” has the meaning specified
in Section 2.03(g).


 


“Cash Collateral Account” means a blocked
account at JPMorgan Chase Bank (or another commercial bank selected in
compliance with Section 9.09) in the name of the Administrative Agent and
under the sole dominion and control of the Administrative Agent, and otherwise
established in a manner satisfactory to the Administrative Agent.


 


“Cash Collateralize” has the meaning
specified in Section 2.03(g).


 


“Cash Equivalents” means any of the
following types of Investments, to the extent owned by the Company or any
Restricted Subsidiary:


 


(a)  Dollars, Euros or other Alternative Currency or, in the case
of any Foreign Subsidiary, such local currencies held by it from time to time
in the ordinary course of business;


 


(b)  marketable obligations issued or directly and fully
guaranteed or insured by the government or any agency or instrumentality of (i) the
United States or (ii) any member nation of the European Union, having
average maturities of not more than 12 months from the date of acquisition
thereof; provided that the full
faith and credit of the United States or a member nation of the European Union
is pledged in support thereof;


 


(c)  time deposits with, or certificates of deposit, overnight
bank deposits or bankers’ acceptances issued or guaranteed by, or money market
deposit accounts issued or offered by, any commercial bank that (i) is a
Lender or (ii) (A) is organized under the Laws of the United States,
any state thereof, the District of Columbia or any member nation of the
Organization for Economic Cooperation and Development or is the principal
banking Subsidiary of a bank holding company organized under the Laws of the
United States, any state thereof, the District of Columbia or any member nation
of the Organization for Economic Cooperation and Development, and is a member
of the Federal Reserve System, and (B) has combined capital and surplus of
at least $250,000,000 (any such bank in the foregoing clauses (i) or (ii) being
an “Approved Bank”), in each case
with average maturities of not more than 12 months from the date of acquisition
thereof;


 


(d)  commercial paper and variable or fixed rate notes issued by
an Approved Bank (or by the parent company thereof) or any commercial paper or
any variable or fixed rate note issued by, or guaranteed by, a corporation
rated A-2 (or the equivalent thereof) or better by S&P or P-2 (or the
equivalent thereof) or better by Moody’s, in each case with average maturities
of not more than 12 months from the date of acquisition thereof;


 


(e)  fully collateralized repurchase agreements entered into by
any Person with a bank or trust company (including any of the Lenders) or
recognized securities dealer, in each case, having capital and surplus in
excess of $250,000,000 for direct obligations issued by or fully guaranteed or
insured by the government or any agency or instrumentality of (i) the
United States or (ii) any member nation of the European Union;


 


7

















 


(f)  securities with average maturities of 12 months or less from
the date of acquisition issued or fully guaranteed by any state, commonwealth
or territory of the United States, by any political subdivision or taxing
authority of any such state, commonwealth or territory or by any foreign
government having an investment grade rating from either S&P or Moody’s (or
the equivalent thereof);


 


(g)  Investments with average maturities of 12 months or less from
the date of acquisition in money market funds rated AAA- (or the equivalent
thereof) or better by S&P or Aaa3 (or the equivalent thereof) or better by
Moody’s;


 


(h)  instruments equivalent to those referred to in clauses (a) through
(g) above denominated in Euros or other Alternative Currency or any other
foreign currency comparable in credit quality and tenor to those referred to
above and customarily used by corporations for cash management purposes in any
jurisdiction outside the United States to the extent reasonably required in
connection with any business conducted by any Restricted Subsidiary organized
in such jurisdiction; and


 


(i)  Investments in money market investment or similar programs
which are registered under the Investment Company Act of 1940 or which are
administered by financial institutions having capital of at least $250,000,000,
and, in either case, the portfolios of which are limited such that
substantially all of such investments are of the character, quality and
maturity described in clauses (a) through (h) of this
definition.


 


“Cash Management Obligations” means
obligations owed by Holdings, the Company or any Restricted Subsidiary to any
Lender or any Affiliate of a Lender in respect of any overdraft and related
liabilities arising from treasury, depository and cash management services or
any automated clearing house transfers of funds.


 


“Casualty Event” means any event that gives
rise to the receipt by Holdings, the Company or any Restricted Subsidiary of
any insurance proceeds or condemnation awards in respect of any equipment,
fixed assets or real property (including any improvements thereon) to replace
or repair such equipment, fixed assets or real property.


 


“CERCLA” means the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as
subsequently amended.


 


“CERCLIS” means the Comprehensive
Environmental Response, Compensation, and Liability Information System
maintained by the U.S. Environmental Protection Agency.


 


“Change of Control” means the earliest to
occur of (a) the Permitted Holders ceasing to have the power, directly or
indirectly, to vote or direct the voting of securities having a majority of the
ordinary voting power for the election of directors of Holdings; provided that the occurrence of the foregoing
event shall not be deemed a Change of Control if,


 


(i)  at any time prior to the consummation of a
Qualifying IPO, and for any reason whatsoever, (A) the Permitted Holders
otherwise have the right, directly or indirectly, to designate (and do so designate)
a majority of the board of directors of Holdings or (B) the Permitted
Holders own, directly or indirectly, of record and beneficially an amount of
common stock of Holdings equal to an amount more than fifty percent (50%) of
the amount of common stock of


 


8

















 


Holdings
owned, directly or indirectly, by the Permitted Holders of record and
beneficially as of the Closing Date and such ownership by the Permitted Holders
represents the largest single block of voting securities of Holdings held by
any Person or related group for purposes of Section 13(d) of the
Exchange Act; or


 


(ii)  at any time after the consummation of a
Qualifying IPO, and for any reason whatsoever, (A) no “person” or “group”
(as such terms are used in Sections 13(d) and 14(d) of the
Exchange Act, but excluding any employee benefit plan of such person and its
Subsidiaries, and any person or entity acting in its capacity as trustee, agent
or other fiduciary or administrator of any such plan), excluding the Permitted
Holders, shall become the “beneficial owner” (as defined in Rules 13(d)-3
and 13(d)-5 under such Act), directly or indirectly, of more than the greater
of (x) thirty-five percent (35%) of the then outstanding voting stock of
Holdings (or voting power related thereto) and (y) the percentage of the
then outstanding voting stock of Holdings owned, directly or indirectly,
beneficially by the Permitted Holders, and (B) during each period of
twelve (12) consecutive months, the board of directors of Holdings shall
consist of a majority of the Continuing Directors; or


 


(b)  any “Change of Control” (or any comparable term) in the
Senior Subordinated Note Indenture or in any document pertaining to the
Holdings PIK Preferred; or


 


(c)  Holdings ceasing to own, directly or indirectly, all of the
outstanding Equity Interests in the Company other than the Company Preferred
Stock.


 


“Charges” has the meaning
specified in Section 10.10.


 


“Class” (a) when used with respect to
Lenders, refers to whether such Lenders are Revolving Credit Lenders, U.S. Term
Lenders or Euro Term Lenders, (b) when used with respect to Commitments,
refers to whether such Commitments are Revolving Credit Commitments, U.S. Term
Commitments or Euro Term Commitments and (c) when used with respect to
Loans or a Borrowing, refers to whether such Loans, or the Loans comprising
such Borrowing, are Revolving Credit Loans, U.S. Term Loans or Euro Term Loans.


 


“Closing Date” means the first date all the
conditions precedent in Section 4.01 are satisfied or waived in accordance
with Section 4.01.


 


“Code” means the U.S. Internal Revenue Code
of 1986 and rules and regulations related thereto.


 


“Collateral” means all the “Collateral” as
defined in any Collateral Document and shall include the Mortgaged Properties.


 


“Collateral and Guarantee Requirement”
means, at any time, the requirement that:


 


(a)  the Administrative Agent shall have received each Collateral
Document required to be delivered on the Closing Date pursuant to Section 4.01(a)(iii) or
pursuant to Section 6.10 at such time, duly executed by each Loan Party
thereto;


 


9

















 


(b)  all Obligations shall have been unconditionally guaranteed
(the “U.S.  Guarantees”) by Holdings, the Company (in
the case of Obligations of the Overseas Borrowers) and each Restricted
Subsidiary that is a Domestic Subsidiary and not an Excluded Subsidiary and
each other Restricted Subsidiary that executes a Security Agreement Supplement
(each, a “U.S.  Guarantor”);


 


(c)  except as set forth in Section 6.17, all Obligations, if
any, of each Overseas Borrower (the “Overseas
Obligations”) shall have been unconditionally guaranteed (the “Overseas Guarantees” and, together with the
U.S. Guarantees, the “Guarantees”)
by each Restricted Subsidiary of such Overseas Borrower, in each case that is
not an Excluded Subsidiary (other than pursuant to clause (d) of the
definition thereof) (each, an “Overseas
Guarantor” and, together with the U.S. Guarantors, the “Guarantors”) prior to, or concurrently
with, the funding of any Loans to any Overseas Borrower, except in each case to
the extent such Overseas Guarantee (A) is prohibited or limited by
applicable Law, including financial assistance rules, (B) would result in
material adverse tax consequences to Holdings and its Subsidiaries, (C) would
conflict with the fiduciary duties of directors of any Subsidiary or (D) could
reasonably be expected to result in personal or criminal liability of any
director of any Subsidiary;


 


(d)  except as set forth in Section 6.17, the Obligations and
the U.S. Guarantees shall have been secured by a security interest in (i) all
the Equity Interests of the Company (other than the Company Preferred Stock)
and (ii) all Equity Interests (other than Equity Interests of Unrestricted
Subsidiaries, any Equity Interest of any Restricted Subsidiary pledged to
secure Indebtedness permitted under Section 7.03(g) and any Equity
Interest constituting Excluded Property (as defined in the Guarantee and
Security Agreement)) of each Subsidiary of the Company directly owned by the
Company or any U.S. Guarantor, in each case having the priority required by the
Collateral Documents; provided
that pledges of voting Equity Interests of each Foreign Subsidiary, and of each
Domestic Subsidiary substantially all of whose assets consist of voting Equity
Interests of one or more Foreign Subsidiaries, shall be limited to 65% of the
issued and outstanding voting Equity Interests of such Subsidiary at any time;


 


(e)  except as set forth in Section 6.17, all Overseas
Obligations and the related Overseas Guarantees shall have been secured by a
security interest in all Equity Interests of the relevant Overseas Borrower and
each applicable Overseas Guarantor (to the extent not so pledged pursuant to
the preceding clause (d)) in each case having the priority required by the
Collateral Documents;


 


(f)  except to the extent otherwise permitted hereunder or under
any Collateral Document, (i) to the extent governed by the Uniform
Commercial Code, the execution of the Collateral Documents shall be effective
to create a security interest in all Collateral described therein and proceeds
thereof, in each case, to the extent constituting Collateral and with the
priority required by the Collateral Documents, (ii) except as set forth in
Section 6.17, all Overseas Obligations and the related Overseas Guarantees
shall have been secured by a security interest, and mortgages on, substantially
all material owned tangible and intangible assets of the relevant Overseas
Borrower and each applicable Overseas Guarantor, in each case (x) with the
priority required by the Collateral Documents, (y) except to the extent
the granting of such security interests or mortgages (A) is prohibited or
limited by applicable Law, including financial assistance rules, (B) would
result in material adverse tax consequences to Holdings and its Subsidiaries, (C) would
conflict with the fiduciary duties of directors of any Subsidiary or (D) could


 


10

















 


reasonably
be expected to result in personal or criminal liability of any director of any
Subsidiary, and (z) subject to exceptions and limitations consistent with
those set forth in the Collateral Documents as in effect on the Closing Date
(to the extent appropriate in the applicable jurisdiction), and (iii) except
as set forth in Section 6.17, all documents and instruments, including
Uniform Commercial Code financing statements and filings made in respect of
Intellectual Property constituting Collateral in the United States Patent and
Trademark Office and the United States Copyright Office, reasonably requested
by the Administrative Agent to be filed, registered or recorded to create the
Liens intended to be created by the Collateral Documents and to perfect such
Liens to the extent required by, and with the priority required by, the
Collateral Documents, shall have been filed, registered or recorded or
delivered to the Administrative Agent for filing, registration or recording;


 


(g)  none of the Collateral shall be subject to any Liens other
than Liens permitted by Section 7.01; and


 


(h)  the Administrative Agent shall have received (i) counterparts
of a Mortgage with respect to any Material Real Property described on Schedule
1.01B hereto or required to be delivered pursuant to Section 6.10 or 6.12
(the “Mortgaged Properties”) duly
executed and delivered by the record owner of such property, (ii) a policy
or policies of title insurance issued by a nationally recognized title
insurance company insuring the Lien of each such Mortgage as a valid Lien on
the property described therein, free of any other Liens except as expressly
permitted by Section 7.01, together with such endorsements, coinsurance
and reinsurance as the Administrative Agent may reasonably request, and (iii) such
surveys, abstracts, appraisals, legal opinions and other documents (which, in
the case of surveys, abstracts and appraisals, shall be limited to those
existing as of the Closing Date or the date of the relevant acquisition) as the
Administrative Agent may reasonably request with respect to any such Mortgaged
Property.


 


The
foregoing definition shall not require the creation or perfection of pledges of
or security interests in, or the obtaining of title insurance or surveys with
respect to, particular assets if and for so long as, in the reasonable judgment
of the Administrative Agent and the Company, the economic detriment to the Loan
Parties of granting or perfecting such pledges or security interests or the
cost of creating or perfecting such pledges or security interests in such
assets or obtaining title insurance or surveys in respect of such assets shall
be excessive in view of the benefits to be obtained by the Lenders
therefrom.  The Administrative Agent may
grant extensions of time for the perfection of security interests in or the
obtaining of title insurance with respect to particular assets (including
extensions beyond the Closing Date for the perfection of security interests in
the assets of the Loan Parties on such date) where it reasonably determines, in
consultation with the Company, that perfection cannot be accomplished without
undue effort or expense by the time or times at which it would otherwise be
required by this Agreement or the Collateral Documents.


 


Notwithstanding
the foregoing provisions of this definition or anything in this Agreement or
any other Loan Document to the contrary, Liens required to be granted from time
to time pursuant to the Collateral and Guarantee Requirement shall be subject
to exceptions and limitations set forth in the Collateral Documents as in
effect on the Closing Date and, to the extent appropriate in the applicable
jurisdiction, as agreed between the Administrative Agent and the Company.


 


11

















 


“Collateral Documents” means, collectively,
the Guarantee and Security Agreement, the Mortgages, Security Agreement
Supplements, security agreements, pledge agreements or other similar agreements
delivered to the Administrative Agent and the Lenders pursuant to Section 6.10
or Section 6.12 and each of the other agreements, instruments or documents
that creates or purports to create a Lien or Guarantee in favor of the
Administrative Agent for the benefit of the Secured Parties.


 


“Commitment” means a U.S. Term Commitment, a
Euro Term Commitment or a Revolving Credit Commitment, as the context may
require.


 


“Committed Loan Notice” means a notice of (a) a
Term Borrowing, (b) a Revolving Credit Borrowing, (c) a conversion of
Loans from one Type to the other, or (d) a continuation of Eurocurrency
Rate Loans, pursuant to Section 2.02(a), which, if in writing, shall be
substantially in the form of Exhibit A.


 


“Company” has the meaning specified in the
introductory paragraph to this Agreement and includes the surviving company of
the merger between Acquisition Co and Reader’s Digest to be consummated on the
Closing Date.


 


“Company Preferred Stock”
means the existing series of Preferred Stock, Second Preferred Stock and Third
Subordinated Preferred Stock of Reader’s Digest; provided that the aggregate liquidation preference thereof
shall not exceed $29,000,000.


 


“Compensation Period” has the meaning
specified in Section 2.12(c)(ii).


 


“Compliance Certificate” means a certificate
substantially in the form of Exhibit D.


 


“Confidential Information Memorandum” means
the Confidential Information Memorandum dated February 2007, as modified
or supplemented prior to the Closing Date.


 


“Consent Solicitation” means a consent
solicitation with respect to the Existing Notes.


 


“Consolidated EBITDA” means, for any period,
the Consolidated Net Income for such period, plus:


 


(a)  without duplication and to the extent already deducted (and
not added back) in arriving at such Consolidated Net Income, the sum of the
following amounts for such period:


 


(i)  total interest expense and, to the extent
not reflected in such total interest expense, any losses on hedging obligations
or other derivative instruments entered into for the purpose of hedging
interest rate risk, net of interest income and gains on such hedging
obligations, and costs of surety bonds in connection with financing activities,


 


(ii)  taxes and provision for taxes, including
taxes based on income, profits or capital of the Company and the Restricted
Subsidiaries and state, franchise and similar taxes and foreign withholding
taxes paid or accrued during such period,


 


12

















 


(iii)  depreciation and amortization,


 


(iv)  Non-Cash Charges,


 


(v)  extraordinary losses and unusual or non-recurring
charges,


 


(vi)  the amount of any restructuring,
transition and management charges accrued during such period, including any
charges to establish accruals and reserves or to make payments associated with
the reassessment or realignment of the business and operations of the Company
and its Subsidiaries, including, without limitation, the sale or closing of
facilities, severance, stay bonuses and curtailments or modifications to
pension and post-retirement employee benefit plans, asset writedowns or asset
disposals (including leased facilities), writedowns for purchase and lease
commitments, start up costs for new facilities, writedowns of excess, obsolete
or unbalanced inventories, relocation costs, including costs of moving and
relocating personnel, equipment, facilities, personal property and inventory,
which are not otherwise capitalized and any related promotional costs of
exiting products or product lines,


 


(vii) any deductions consisting of subsidiary
income attributable to minority interests in a Subsidiary, except to the extent
actually paid to a holder of Equity Interests in such Subsidiary (or any
designee of such Person) other than the Company and its Subsidiaries (with such
payments to be deducted in the period made),


 


(viii)  the amount of management, consulting
and advisory fees and related expenses paid by Holdings, the Company or any
Restricted Subsidiary to the Sponsors to the extent permitted hereunder,


 


(ix)  any costs or expenses incurred by the
Company or a Restricted Subsidiary pursuant to any management equity plan or
stock option plan or any other management or employee benefit plan or agreement
or any stock subscription or shareholder agreement, to the extent that such
costs or expenses are funded with cash proceeds contributed to the capital of
Holdings or net cash proceeds of an issuance of Equity Interests of Holdings
(other than Disqualified Equity Interests) Not Otherwise Applied,


 


(x)  to the extent actually reimbursed,
expenses incurred to the extent covered by indemnification provisions in any
agreement in connection with a Permitted Acquisition,


 


(xi)  expenses
resulting from liability or casualty events,


 


(xii)  the
amount of net cost savings projected by the Company in good faith to be
realized as a result of specified actions taken during such period (calculated
on a pro forma basis as though such cost savings had been realized on the first
day of such period), net of the amount of actual benefits realized during such
period from such actions; provided
that (A) such cost savings are reasonably identifiable and factually
supportable (in the reasonable good faith determination of the Company), (B) such
actions are taken within 36 months after the Closing Date or within 24
months after the closing date of a Permitted Acquisition, as the


 


13

















 


case
may be, (C) no cost savings shall be added pursuant to this
clause (xii) to the extent duplicative of any expenses or charges relating
to such cost savings that are included in clause (vi) above with
respect to such period and (D) the aggregate amount of cost savings added
pursuant to this clause (xii) shall not exceed $105,000,000 (for any such cost
savings related to the Acquisitions in the aggregate) or $75,000,000 (for any
such cost savings related to other specified actions in the aggregate) for any
period consisting of four consecutive quarters,


 


(xiii) 
Permitted Holdings Distributions not to exceed $12,500,000 in any fiscal
year plus any reasonable indemnification claims made by directors or officers
of Holdings (or any parent thereof) attributable to the ownership or operations
of the Company and its Subsidiaries,


 


(xiv)  with
regard to any period ending prior to July 1, 2008, the nonrecurring
management adjustments during the four-quarter period ending on the last day of
such period described in Schedule 1.01C to the extent occurring during such
period, and


 


(xv)  non-cash
charges pursuant to SFAS 158, less


 


(b)  without duplication and to the extent included in arriving at
such Consolidated Net Income, the sum of the following amounts for such period:


 


(i)  extraordinary gains and unusual or
non-recurring gains,


 


(ii)  non-cash gains (excluding any non-cash
gain to the extent it represents the reversal of an accrual or reserve for a
potential cash item that reduced Consolidated EBITDA in any prior period),


 


(iii)  gains on asset sales (other than asset
sales in the ordinary course of business),


 


(iv)  any net after-tax income from the early
extinguishment of Indebtedness or hedging obligations or other derivative
instruments, and


 


(v)  all gains from sales of investments
recorded using the equity method,


 


in
each case, as determined on a consolidated basis for the Company and the
Restricted Subsidiaries in accordance with GAAP; provided that, to the extent included in Consolidated Net
Income,


 


(i)  there shall be excluded in determining
Consolidated EBITDA currency translation gains and losses related to currency
remeasurements of Indebtedness (including the net loss or gain resulting from
Swap Contracts for currency exchange risk),


 


(ii)  there shall be excluded in determining
Consolidated EBITDA for any period any adjustments resulting from the
application of Statement of Financial Accounting Standards No. 133, and


 


14

















 


(iii)  for purposes of determining the Total
Leverage Ratio only, (A) there shall be included in determining
Consolidated EBITDA for any period, without duplication, the Acquired EBITDA of
any Person, property, business or asset acquired by the Company or any
Restricted Subsidiary during such period (but not the Acquired EBITDA of any
related Person, property, business or assets to the extent not so acquired), to
the extent not subsequently sold, transferred or otherwise disposed by the
Company or such Restricted Subsidiary (each such Person, property, business or
asset acquired and not subsequently so disposed of, an “Acquired Entity or Business”), based on the
actual Acquired EBITDA of such Acquired Entity or Business for such period
(including the portion thereof occurring prior to such acquisition), (B) there
shall be included in determining Consolidated EBITDA for any period, without
duplication, an adjustment in respect of each Acquired Entity or Business equal
to the amount of the Pro Forma Adjustment with respect to such Acquired Entity
or Business for such period (including the portion thereof occurring prior to
such acquisition) as reasonably determined by the Company in good faith and
specified in a certificate executed by a Responsible Officer and delivered to
the Administrative Agent, and (C) there shall be excluded in determining
Consolidated EBITDA for any period the Disposed EBITDA of any Person, property,
business or asset sold, transferred or otherwise disposed of, closed or
classified as discontinued operations by the Company or any Restricted
Subsidiary during such period (each such Person, property, business or asset so
sold or disposed of, a “Sold Entity or
Business”), based on the actual Disposed EBITDA of such Sold Entity
or Business for such period (including the portion thereof occurring prior to
such sale, transfer or disposition).


 


For
the purpose of the definition of Consolidated EBITDA, “Non-Cash Charges” means (a) non-cash
losses on asset sales, disposals or abandonments (other than of current
assets), (b) any impairment charge or asset write-off related to
intangible assets, long-lived assets, and investments in debt and equity
securities pursuant to GAAP, (c) all losses from investments recorded
using the equity method, (d) stock-based awards compensation expense, and (e) other
non-cash charges (provided that
if any non-cash charges referred to in this clause (e) represent an
accrual or reserve for potential cash items in any future period, the cash
payment in respect thereof in such future period shall be subtracted from
Consolidated EBITDA in such future period to such extent, and excluding
non-cash charges consisting of amortization of a prepaid cash item that was
paid in a prior period).  Notwithstanding
the foregoing, Consolidated EBITDA for the fiscal quarters ending March 31,
2006, June 30, 2006, September 30, 2006, December 31, 2006 and March 31,
2007 shall be deemed to be $38,000,000, $78,000,000, $0, $154,000,000 and
$50,000,000, respectively.


 


“Consolidated Net Income” means, for any
period, the net income (loss) of the Company and the Restricted Subsidiaries
for such period determined on a consolidated basis in accordance with GAAP,
excluding, without duplication, (a) extraordinary items for such period, (b) the
cumulative effect of a change in accounting principles during such period to
the extent included in Consolidated Net Income, (c) any Transaction
Expenses, (d) any fees and expenses incurred during such period, or any
amortization thereof for such period, in connection with the consummation of
any Permitted Acquisition, investment, asset disposition, issuance or repayment
of debt, issuance of equity securities, refinancing transaction or amendment or
other modification of any debt instrument (in each case, including any such
transaction consummated prior to the Closing Date and any such transaction
undertaken but not completed) and any charges or non-recurring merger costs
incurred during such period as a result of any such transaction, (e) any


 


15

















 


income (loss) for such period attributable to
the early extinguishment of Indebtedness, (f) accruals and reserves that
are established within twelve months after the Closing Date that are so
required to be established as a result of the Transaction in accordance with
GAAP, (g) the income (loss) of any Unrestricted Subsidiary, provided that
Consolidated Net Income shall be increased by the amount of dividends or other
distributions actually paid or made to the Company or one of the Restricted
Subsidiaries by such Unrestricted Subsidiary during such period in respect of
the income earned by such Unrestricted Subsidiary in such period or in any
prior period (to the extent not previously included in Consolidated Net
Income), (h) the income (or deficit) of any Person accrued prior to the
date it becomes a Subsidiary of Holdings or is merged into or consolidated with
Holdings or any of its Subsidiaries and (i) the income (or deficit) of any
Person (other than a Subsidiary of the Company) in which the Company or any of
its Subsidiaries has an ownership interest, except to the extent that any such
income is actually received by (or such deficit is actually distributed to) the
Company or such Subsidiary in the form of dividends or similar
distributions.  There shall be excluded
from Consolidated Net Income (i) for any period, at the option of the
Company or the Required Lenders (without prejudice to the application of the
proviso set forth in the definition of “GAAP”), the effects of any change by
the Company in its accounting policies, accounting treatment for any matter or
application of GAAP, (ii) for any period, the purchase accounting effects
of adjustments to property, inventory and equipment, pension and
post-retirement employee benefit plan (including health plan) assets and
liabilities, software and other intangible assets and deferred revenue and
deferred expenses in component amounts required or permitted by GAAP and
related authoritative  pronouncements (including the effects of such
adjustments pushed down to Holdings, the Company and the Restricted
Subsidiaries), as a result of the Transaction, any acquisition consummated
prior to the Closing Date, any Permitted Acquisitions, or the amortization or
write-off of any amounts thereof, (iii) for any period, any gains or
losses resulting from any reappraisal, revaluation or write-up or write-down of
assets acquired pursuant to the Acquisitions to the extent such reappraisal,
revaluation, write-up or write-down is made during the period beginning on the
Closing Date and ending on the date 18 months after the Closing Date, and (iv) for
any period, any gains or losses resulting from any reappraisal, revaluation or
write-up or write-down of assets acquired pursuant to a Permitted Acquisition
to the extent such reappraisal, revaluation, write-up or write-down is made
during the period beginning on the date that such Permitted Acquisition is
consummated and ending on the date six months after such date.


 


“Consolidated Total Debt” means, as of any
date of determination, the aggregate principal amount of Indebtedness of the
Company and the Restricted Subsidiaries outstanding on such date, determined on
a consolidated basis in accordance with GAAP (but excluding the effects of any
discounting of Indebtedness resulting from the application of purchase
accounting in connection with the Transaction or any Permitted Acquisition),
required to be reflected as “indebtedness” (or the equivalent thereof) on a
consolidated balance sheet of the Company in accordance with GAAP (other than
Indebtedness described in clause (b) (other than in respect of drawings
thereunder to the extent not reimbursed within two Business Days after the date
of such drawing) or (c) of the definition of Indebtedness).


 


“Consolidated Working Capital” means, at any
date, the excess of (a) the sum of all amounts (other than cash and Cash
Equivalents) that would, in conformity with GAAP, be set forth opposite the
caption “total current assets” (or any like caption) on a consolidated balance
sheet of the Company and the Restricted Subsidiaries at such date, but
excluding the current portion of current and deferred income tax assets, over (b) the
sum of all amounts that would, in conformity with GAAP, be set forth opposite
the caption “total current liabilities” (or any like caption) on a consolidated
balance sheet of the Company and the Restricted Subsidiaries on such date,
excluding, without duplication, (i) the current portion of any Funded
Debt, (ii) all


 


16
















 


Indebtedness
consisting of Loans and L/C Obligations to the extent otherwise included
therein, (iii) the current portion of interest, (iv) the current
portion of current and deferred income taxes and (v) the current portion
of deferred revenue.  There shall also be
excluded from Consolidated Working Capital to the extent otherwise included
therein (i) at the option of the Company or the Required Lenders (without
prejudice to the application of the proviso set forth in the definition of
“GAAP”), the effects of any change by the Company in its accounting policies,
accounting treatment for any matter or application of GAAP, (ii) the
purchase accounting effects of adjustments to property, inventory and
equipment, pension and post-retirement employee benefit plan (including health
plan) assets and liabilities, software and other intangible assets and deferred
revenue and deferred expenses in component amounts required or permitted by
GAAP and related authoritative pronouncements (including the effects of such adjustments
pushed down to Holdings, the Company and the Restricted Subsidiaries), as a
result of the Transaction, any acquisition consummated prior to the Closing
Date, any Permitted Acquisitions, or the amortization or write-off of any
amounts thereof, (iii) for any period, any gains or losses resulting from
any reappraisal, revaluation or write-up or write-down of assets acquired
pursuant to the Acquisitions to the extent such reappraisal, revaluation,
write-up or write-down is made during the period beginning on the Closing Date
and ending on the date 18 months after the Closing Date, and (iv) for any
period, any gains or losses resulting from any reappraisal, revaluation or
write-up or write-down of assets acquired pursuant to a Permitted Acquisition
to the extent such reappraisal, revaluation, write-up or write-down is made
during the period beginning on the date that such Permitted Acquisition is
consummated and ending on the date six months after such date.


 


“Continuing Agreement” means the Continuing
Agreement substantially in the form of Exhibit K.


 


“Continuing Directors” means the directors
of Holdings on the Closing Date, as elected or appointed after giving effect to
the Acquisitions and the other transactions contemplated hereby, and each other
director, if, in each case, such other directors’ nomination for election to
the board of directors of Holdings is recommended by a majority of the then
Continuing Directors or such other director receives the vote of the Permitted
Holders in his or her election by the stockholders of Holdings.


 


“Contract Consideration” has the meaning set
forth in the definition of “Excess Cash Flow”.


 


“Contractual Obligation” means, as to any
Person, any provision of any security issued by such Person or of any
agreement, instrument or other undertaking to which such Person is a party or
by which it or any of its property is bound.


 


“Control” has the meaning specified in the
definition of “Affiliate.”


 


“Co-Syndication Agents” means Citicorp North
America, Inc. and Merrill Lynch, Pierce, Fenner & Smith
Incorporated, as Co-Syndication Agents under this Agreement.


 


“Credit Extension” means each of the
following:  (a) a Borrowing and (b) an
L/C Credit Extension.


 


“Cumulative Excess Cash Flow” means the sum
of Excess Cash Flow (but not less than zero in any period) for the fiscal year
ending on June 30, 2008 and Excess Cash Flow for each succeeding and
completed fiscal year.


 


17

















 


“Cure Amount” has the meaning specified in Section 8.05.


 


“Cure Period” has the meaning specified in Section 8.05.


 


“Debt Issuance” means the issuance by any
Person and its Subsidiaries of any Indebtedness for borrowed money.


 


“Debtor Relief Laws” means the Bankruptcy
Code of the United States, and all other liquidation, conservatorship,
bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement,
receivership, insolvency, reorganization, or similar debtor relief Laws of the
United States or other applicable jurisdictions from time to time in effect and
affecting the rights of creditors generally (including, in the case of Loan
Parties incorporated or organized in England or Wales, administration,
administrative receivership, voluntary arrangement and schemes of arrangement).


 


“Decrees” has the meaning specified in Section 10.24.


 


“Default” means any event or condition that
constitutes an Event of Default or that, with the giving of any notice, the
passage of time, or both, would be an Event of Default.


 


“Default Rate” means an interest rate equal
to (a) the Base Rate plus (b) the Applicable Rate applicable to Base
Rate Loans plus (c) 2.0% per annum; provided
that with respect to the principal amount of any Eurocurrency Rate Loan, the
Default Rate shall be an interest rate equal to the interest rate (including
the Applicable Rate and any Mandatory Cost) otherwise applicable to such Loan
plus 2.0% per annum, in each case, to the fullest extent permitted by
applicable Laws.


 


“Defaulting Lender” means any Lender that (a) has
failed to fund any portion of the U.S. Term Loans, Euro Term Loans, Revolving
Credit Loans, participations in L/C Obligations or participations in Swing Line
Loans required to be funded by it hereunder within one (1) Business Day of
the date required to be funded by it hereunder, unless subsequently cured, (b) has
otherwise failed to pay over to the Administrative Agent or any other Lender
any other amount required to be paid by it hereunder within one (1) Business
Day of the date when due, unless subsequently cured, or (c) has been
deemed insolvent or become the subject of a bankruptcy or insolvency
proceeding.


 


“Defeasance” means a covenant defeasance in
respect of the Existing Notes pursuant to Article VIII of the Existing
Note Indenture, including the placement of sufficient funds in escrow with the
trustee under the Existing Note Indenture and consummation of all other actions
necessary to satisfy the provisions of such Article.


 


“Designated Obligations” means all
obligations of the Borrowers with respect to (a) principal of and interest
on the Loans, (b) Unreimbursed Amounts and interest thereon and (c) accrued
and unpaid fees under the Loan Documents.


 


“DH Acquisition” has the meaning set forth
in the preliminary statements to this Agreement.


 


“DH Acquisition Agreement” means the Stock
Acquisition Agreement, dated as of January 23, 2007, among Direct Holdings
U.S. Corp., RDA Holding Co. and each of the members of Direct Holdings
Worldwide L.L.C.


 


18

















 


“Direct Holdings” has the meaning set forth
in the preliminary statements to this Agreement.


 


“Disposed EBITDA” means, with respect to any
Sold Entity or Business for any period, the amount for such period of
Consolidated EBITDA of such Sold Entity or Business (determined as if references
to the Company and the Restricted Subsidiaries in the definition of
Consolidated EBITDA were references to such Sold Entity or Business and its
Subsidiaries), all as determined on a consolidated basis for such Sold Entity
or Business.


 


“Disposition” or “Dispose” means the sale, transfer, license, lease or other
disposition (including any sale and leaseback transaction and any sale of
Equity Interests held in another Person) of any property by any Person,
including any sale, assignment, transfer or other disposal, with or without
recourse, of any notes or accounts receivable or any rights and claims
associated therewith; provided
that “Disposition” and “Dispose” shall not be deemed to include any issuance by
a Person of any of its Equity Interests to another Person.


 


“Disqualified Equity Interests” means any
Equity Interest (other than the Company Preferred Stock) which, by its terms
(or by the terms of any security or other Equity Interests into which it is
convertible or for which it is exchangeable), or upon the happening of any
event or condition (a) matures or is mandatorily redeemable (other than
solely for Qualified Equity Interests), pursuant to a sinking fund obligation
or otherwise (except as a result of a change of control, public equity offering
or asset sale so long as any rights of the holders thereof upon the occurrence
of a change of control, public equity offering or asset sale event shall be
subject to the prior repayment in full of the Loans and all other Obligations
that are accrued and payable and the termination of the Commitments and the
expiration, cancellation, termination or cash collateralization of any Letters
of Credit in accordance with the terms hereof), (b) is redeemable at the
option of the holder thereof (other than solely for Qualified Equity
Interests), in whole or in part, (c) requires the scheduled payments of
dividends in cash, or (d) is or becomes convertible into or exchangeable
for Indebtedness or any other Equity Interests that would constitute
Disqualified Equity Interests, in each case, prior to the date that is 91 days
after the Maturity Date of the Term Loans.


 


“Documentation Agent” means The Royal Bank
of Scotland plc, as Documentation Agent under this Agreement.


 


“Dollar” and “$” mean lawful money of the United States.


 


“Dollar Amount” means, at any time:


 


(a) 
with respect to any Loan denominated in Dollars (including, with respect to any
Swing Line Loan, any funded participation therein), the principal amount
thereof then outstanding (or in which such participation is held);


 


(b) 
with respect to any Alternative Currency Loan, the principal amount thereof
then outstanding in the relevant Alternative Currency, converted to Dollars in
accordance with Section 1.08.


 


“Domestic Subsidiary” means any Subsidiary
that is organized under the Laws of the United States, any state thereof or the
District of Columbia.


 


19

















 


“ECF Percentage” means 50%; provided
that with respect to each fiscal year of the Company, the ECF Percentage shall
be 25% in respect of such fiscal year if the Total Leverage Ratio as of the
last day of such fiscal year is less than or equal to 6.00:1.00 but greater
than 5.00:1.00; and provided  further that the ECF Percentage
shall be 0% in respect of such fiscal year if the Total Leverage Ratio as of
the last day of such fiscal year is less than or equal to 5.00:1.00.


 


“Eligible Assignee” means any Assignee
permitted by and consented to in accordance with Section 10.07(b).


 


“EMU” means the economic and monetary union
in accordance with the Treaty of Rome 1957, as amended by the Single European
Act 1986, the Maastricht Treaty of 1992 and the Amsterdam Treaty of 1998.


 


“EMU Legislation” means the legislative
measures of the European Council for the introduction of, changeover to or
operation of a single or unified European currency.


 


“Environmental Laws” means any and all Laws
relating to pollution, the protection of the environment, natural resources,
or, to the extent relating to exposure to Hazardous Materials, human health or
to the release of any Hazardous Materials into the environment, including those
related to air emissions and discharges to public water or waste treatment
systems.


 


“Environmental Liability” means any
liability, contingent or otherwise (including any liability for damages, costs
of environmental remediation, fines, penalties or indemnities), of the Company,
any other Loan Party or any of their respective Subsidiaries directly or
indirectly resulting from or based upon (a) violation of any Environmental
Law, (b) the generation, use, handling, transportation, storage, treatment
or disposal of any Hazardous Materials, (c) exposure to any Hazardous
Materials, (d) the release or threatened release of any Hazardous
Materials into the environment or (e) any contract, agreement or other
consensual arrangement pursuant to which liability is assumed or imposed with
respect to any of the foregoing.


 


“Environmental Permit” means any permit,
approval, identification number, license or other authorization required under
any Environmental Law.


 


“Equity Contribution” shall mean the sum of (a) the
Sponsor Equity Contributions, (b) the gross proceeds of the issuance on or
prior to the Closing Date of the Holdings Senior PIK Preferred and (c) the
gross proceeds of the issuance on or prior to the Closing Date of the Holdings
Common Equity.


 


“Equity Interests” means, with respect to
any Person, all of the shares, interests, rights, participations or other
equivalents (however designated) of capital stock of (or other ownership or
profit interests or units in) such Person and all of the warrants, options or
other rights for the purchase, acquisition or exchange from such Person of any
of the foregoing (including through convertible securities).


 


“Equity Investors” means the Sponsors, J.
Rothschild Group Ltd., Goldentree Asset Management, LP, GSO Capital Partners
LP, Merrill Lynch Capital Corporation, Magnetar Financial LLC and the
Management Stockholders.


 


20

















 


“ERISA” means the Employee Retirement Income
Security Act of 1974, as amended from time to time.


 


“ERISA Affiliate” means any trade or
business (whether or not incorporated) that is under common control with any
Loan Party within the meaning of Section 414 of the Code or Section 4001
of ERISA.


 


“ERISA Event” means (a) a Reportable
Event with respect to a Pension Plan; (b) a withdrawal by any Loan Party
or any ERISA Affiliate from a Pension Plan subject to Section 4063 of
ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2) of
ERISA) or a cessation of operations that is treated as such a withdrawal under Section 4062(e) of
ERISA; (c) a complete or partial withdrawal by any Loan Party or any ERISA
Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan
is in reorganization or is in endangered or critical status; (d) the
filing of a notice of intent to terminate, the treatment of a Plan amendment as
a termination under Sections 4041 or 4041A of ERISA, or the commencement of
proceedings by the PBGC to terminate a Pension Plan or Multiemployer Plan; (e) an
event or condition which constitutes grounds under Section 4042 of ERISA
for the termination of, or the appointment of a trustee to administer, any
Pension Plan or Multiemployer Plan; (f) the imposition of any liability
under Title IV of ERISA, other than for PBGC premiums due but not delinquent
under Section 4007 of ERISA, upon any Loan Party or any ERISA Affiliate; (g) on
and after the effectiveness of the Pension Act, a determination that any
Pension Plan is, or is expected to be, in “at risk” status (within the meaning
of Title IV of ERISA); or (h) the existence with respect to any Pension
Plan of an “accumulated funding deficiency” (as defined in Section 412 of
the Code or Section 302 of ERISA), and, on and after the effectiveness of
the Pension Act, any failure by any Pension Plan to satisfy the minimum funding
standards (within the meaning of Section 412 of the Code or Section 302
of ERISA) applicable to such Pension Plan, whether or not waived.


 


“Euro” and “€”means the lawful currency of the Participating Member States
introduced in accordance with EMU Legislation.


 


“Eurocurrency Rate” means, for any Interest
Period with respect to any Eurocurrency Rate Loan:


 


(a) 
the rate per annum equal to the rate determined by the Administrative Agent to
be the offered rate that appears on the page of the Dow Jones Market
screen (or any successor thereto) that displays an average British Bankers
Association Interest Settlement Rate for deposits in Dollars or the relevant Alternative
Currency (for delivery on the first day of such Interest Period) with a term
equivalent to such Interest Period, determined as of approximately 11:00 a.m.
(London time) two (2) Business Days prior to the first day of such
Interest Period, or, if different, the date on which quotations would
customarily be provided by leading banks in the London Interbank Market for
deposits of amounts in the relevant currency for delivery on the first day of
such Interest Period, or


 


(b) 
if the rate referenced in the preceding clause (a) does not appear on such
page or service or such page or service shall not be available, the
rate per annum equal to the rate determined by the Administrative Agent to be
the offered rate on such other page or other service that displays an
average British Bankers Association Interest Settlement Rate for deposits in
Dollars or the relevant Alternative Currency (for delivery on the first day of
such Interest Period) with a term equivalent to such Interest Period,
determined as of approximately 11:00 a.m. (London time) two (2) Business
Days prior to the first day


 


21

















 


of
such Interest Period, or, if different, the date on which quotations would
customarily be provided by leading banks in the London Interbank Market for
deposits of amounts in the relevant currency for delivery on the first day of
such Interest Period, or


 


(c) 
if the rates referenced in the preceding clauses (a) and (b) are not
available, the rate per annum determined by the Administrative Agent as the
rate of interest at which deposits in Dollars or the relevant Alternative
Currency for delivery on the first day of such Interest Period in Same Day
Funds in the approximate amount of the Eurocurrency Rate Loan being made, continued
or converted by JPMorgan Chase Bank and with a term equivalent to such Interest
Period would be offered by JPMorgan Chase Bank’s London Branch to major banks
in the London interbank eurodollar market at their request at approximately
11:00 a.m. (London time) two (2) Business Days prior to the first day
of such Interest Period or, if different, the date on which quotations would
customarily be provided by leading banks in the London Interbank Market for
deposits of amounts in the relevant currency for delivery on the first day of
such Interest Period.


 


“Eurocurrency Rate Loan” means a Loan,
whether denominated in Dollars or in an Alternative Currency, that bears
interest at a rate based on the Eurocurrency Rate.


 


“Euro Refinanced Term Loans” has the meaning
specified in Section 10.01.


 


“Euro Replacement Term Loans” has the
meaning specified in Section 10.01.


 


“Euro Term Commitment” means, as to each
Euro Term Lender, its obligation to make a Euro Term Loan to the German
Borrower pursuant to Section 2.01(c) in an aggregate Dollar Amount
not to exceed the amount set forth opposite such Lender’s name on Schedule 2.01
under the caption “Euro Term Commitment” or in the Assignment and Assumption
pursuant to which such Euro Term Lender becomes a party hereto, as applicable,
as such amount may be adjusted from time to time in accordance with this
Agreement.  The initial aggregate amount
of the Euro Term Commitments is $100,000,000.


 


“Euro Term Lender” means, at any time, any
Lender that has a Euro Term Commitment or a Euro Term Loan at such time.


 


“Euro Term Loan” means a Loan made pursuant
to Section 2.01(c).


 


“Euro  Term
Note” means a promissory note of the German Borrower payable to any
Euro Term Lender, in substantially the form of Exhibit C-3 hereto, evidencing
the aggregate Indebtedness of the German Borrower to such Euro Term Lender
resulting from the Euro Term Loans made by such Euro Term Lender.


 


“Event of Default” has the meaning specified
in Section 8.01.


 


“Excess Cash Flow” means, for any period, an
amount equal to:


 


(a) the
sum, without duplication, of:


 


(i) Consolidated Net Income for such period,


 


22

















 


(ii) an amount equal to the amount of all
non-cash charges (including depreciation and amortization) to the extent
deducted in arriving at such Consolidated Net Income,


 


(iii) an amount equal to the aggregate net
non-cash loss on Dispositions by the Company and the Restricted Subsidiaries
during such period to the extent deducted in arriving at such Consolidated Net
Income, and


 


(iv) decreases in Consolidated Working Capital
for such period, and; minus


 


(b) the
sum, without duplication among the clauses below and without duplication of any
amounts otherwise deducted in arriving at Consolidated Net Income for such
period, of:


 


(i) an amount equal to the amount of all
non-cash credits included in arriving at such Consolidated Net Income and cash
charges included in clauses (a) through (e) of the definition of
Consolidated Net Income,


 


(ii) an amount equal to the aggregate net
non-cash gain on Dispositions by the Company and the Restricted Subsidiaries
during such period to the extent included in arriving at such Consolidated Net
Income,


 


(iii) without duplication of amounts deducted
pursuant to clause (xi) below in prior fiscal years, the amount of Capital
Expenditures made in cash or accrued during such period pursuant to Section 7.14,
except to the extent that such Capital Expenditures were financed with the
proceeds of any issuance or sale of Equity Interests of Holdings, with the
proceeds of any Indebtedness (other than Revolving Credit Loans) of Holdings,
the Company or the Restricted Subsidiaries, or, to the extent not otherwise
included in Consolidated Net Income, with the proceeds of any Disposition of property
of or any Casualty Event with respect to property of Holdings, the Company or
the Restricted Subsidiaries,


 


(iv) the aggregate amount of all principal
payments or prepayments of Indebtedness of the Company and the Restricted
Subsidiaries (including (A) the principal component of payments in respect
of Capitalized Leases, (B) the amount of any mandatory prepayment of Term
Loans pursuant to Section 2.05(b)(ii) to the extent required due to a
Disposition that resulted in an increase to Consolidated Net Income and not in
excess of the amount of such increase and (C) the amount of any repayment
of Term Loans pursuant to Section 2.07(a), but excluding (X) all
other prepayments of Term Loans and (Y) all prepayments of Revolving
Credit Loans and Swing Line Loans) made during such period (other than in
respect of any revolving credit facility to the extent there is not an
equivalent permanent reduction in commitments thereunder), except to the extent
that such payments or prepayments were financed with the proceeds of any
issuance or sale of Equity Interests of Holdings, with the proceeds of any
other Indebtedness of Holdings, the Company or the Restricted Subsidiaries, or,
to the extent not otherwise included in Consolidated Net Income, with the
proceeds of any Disposition of property of or any Casualty Event with respect
to property of Holdings, the Company or the Restricted Subsidiaries,


 


23

















 


(v) increases in Consolidated Working Capital
for such period,


 


(vi) cash payments by the Company and the
Restricted Subsidiaries during such period in respect of long-term liabilities
of the Company and the Restricted Subsidiaries other than Indebtedness,


 


(vii) without duplication of amounts deducted
pursuant to clause (xi) below in prior fiscal years, the amount of Investments
and Permitted Acquisitions made during such period pursuant to Section 7.02
(other than Section 7.02(a)), except to the extent that such Investments
and Permitted Acquisitions were financed with the proceeds of any issuance or
sale of Equity Interests of Holdings, with the proceeds of any Indebtedness of
Holdings, the Company or the Restricted Subsidiaries, or, to the extent not
otherwise included in Consolidated Net Income, with the proceeds of any Disposition
of property of or any Casualty Event with respect to property of Holdings, the
Company or the Restricted Subsidiaries,


 


(viii) the amount (without duplication) of
Restricted Payments paid by Holdings during such period pursuant to Section 7.06(g),
(h)(i) or (i), except to the extent such Restricted Payments were financed
with the proceeds of any issuance or sale of Equity Interests of Holdings, with
the proceeds of any Indebtedness of Holdings, the Company or the Restricted
Subsidiaries, or, to the extent not otherwise included in Consolidated Net
Income, with the proceeds of any Disposition of property of or any Casualty
Event with respect to property of Holdings, the Company or the Restricted
Subsidiaries,


 


(ix) the aggregate amount of expenditures
actually made by the Company and the Restricted Subsidiaries in cash during
such period (including expenditures for the payment of financing fees) to the
extent that such expenditures are not expensed during such period,


 


(x) the aggregate amount of any premium,
make-whole or penalty payments actually paid in cash by the Company and the
Restricted Subsidiaries during such period that are required to be made in
connection with any prepayment of Indebtedness, and


 


(xi) without duplication of amounts deducted from
Excess Cash Flow in prior periods, the aggregate consideration required to be
paid in cash by the Company or any of the Restricted Subsidiaries pursuant to
binding contracts (the “Contract
Consideration”) entered into prior to or during such period relating
to Permitted Acquisitions or Capital Expenditures to be consummated or made
during the fiscal year of the Company following the end of such period, provided that to the extent the aggregate
cash consideration paid for such Permitted Acquisitions or Capital Expenditures
during such fiscal year (other than amounts financed with the proceeds of any
issuance or sale of Equity Interests of Holdings, with the proceeds of any
Indebtedness of Holdings, the Company or the Restricted Subsidiaries, or, to the
extent not otherwise included in Consolidated Net Income, with the proceeds of
any Disposition of property of or any Casualty Event with respect to property
of Holdings, the Company or the Restricted Subsidiaries) is less than the
Contract Consideration, the amount of


 


24

















 


such
shortfall shall be added to the calculation of Excess Cash Flow at the end of
such period of four consecutive fiscal quarters.


 


“Exchange Act” means the Securities Exchange
Act of 1934.


 


“Exchange Rate” means on any day with
respect to any currency other than Dollars, the rate at which such currency may
be exchanged into Dollars, as set forth at approximately 11:00 a.m.
(London time) on such day on the Reuters World Currency Page for such
currency; in the event that such rate does not appear on any Reuters World
Currency Page, the Exchange Rate shall be determined by reference to such other
publicly available service for displaying exchange rates as may be agreed upon
by the Administrative Agent and the Company, or, in the absence of such
agreement, such Exchange Rate shall instead be the arithmetic average of the
spot rates of exchange of the Administrative Agent in the market where its
foreign currency exchange operations in respect of such currency are then being
conducted, at or about 10:00 a.m. (New York City time) on such date for
the purchase of Dollars for delivery two Business Days later.


 


“Excluded Subsidiary” means (a) any
Subsidiary that is not a wholly-owned Subsidiary unless such Subsidiary
executes a Security Agreement Supplement, (b) each Subsidiary listed on
Schedule 1.01D hereto, (c) any Foreign Subsidiary, or any other Subsidiary
created or acquired after the date hereof, that is prohibited by applicable Law
from guaranteeing the Obligations (in each case unless such Subsidiary
subsequently executes a Security Agreement Supplement), (d) other than
with respect to the Overseas Obligations to the extent required by the
definition of “Collateral and Guarantee Requirement”, any Foreign Subsidiary,
any Domestic Subsidiary that is a Subsidiary of a Foreign Subsidiary and any
Domestic Subsidiary substantially all of whose assets consist of voting Equity
Interests of one or more Foreign Subsidiaries (in each case unless such Subsidiary
executes a Security Agreement Supplement), (e) any Restricted Subsidiary
acquired pursuant to a Permitted Acquisition financed with secured Indebtedness
incurred pursuant to Section 7.03(g) and each Restricted Subsidiary
thereof that guarantees such Indebtedness; provided
that each such Restricted Subsidiary shall cease to be an Excluded Subsidiary
under this clause (e) if such secured Indebtedness is repaid or becomes
unsecured or if such Restricted Subsidiary ceases to guarantee such secured
Indebtedness, as applicable, (f) any Immaterial Subsidiary and (g) any
other Subsidiary with respect to which, in the reasonable judgment of the
Administrative Agent (confirmed in writing by notice to the Company), the cost
or other consequences (including any adverse tax consequences) of providing a
Guarantee shall be excessive in view of the benefits to be obtained by the
Lenders therefrom.


 


“Existing Credit Agreement” means the
Five-Year Revolving Credit Agreement, dated as of April 14, 2005, among
Reader’s Digest, Books Are Fun, Ltd., QSP, Inc., Reiman Media Group, Inc.,
the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative
agent.


 


“Existing DH/WRC Debt Agreements” means (a) the
Credit and Guaranty Agreement dated as of July 22, 2005, among Weekly
Reader Corporation, CompassLearning, Inc., WRC Media, Inc., the
subsidiary guarantors party thereto, Goldman Sachs Specialty Lending Group,
L.P., as administrative agent and collateral agent, and the lenders from time
to time party thereto, (b) the Term Loan and Guaranty Agreement dated as
of July 22, 2005, among Weekly Reader Corporation, CompassLearning, Inc.,
WRC Media, Inc., the subsidiary guarantors party thereto, The Bank of New
York, as collateral agent, and the lenders from time to time party thereto, (c) the
Amended and Restated Financing Agreement dated as of May 31, 2005, by and
among Direct Holdings Americas Inc., Direct Holdings Custom Publishing Inc.,
Direct Holdings


 


25

















 


Education Inc., Alex Inc., Direct
Holdings.com, Inc., Direct Holdings Customer Service, Inc., Direct
Holdings Libraries, Inc., Direct Holdings U.S. Corp., Direct Holdings Worldwide
L.L.C. and The CIT Group/Business Credit, Inc. and (d) the Term Loan
B Financing Agreement dated as of May 31, 2005, by and among Direct
Holdings Americas Inc., Direct Holdings Custom Publishing Inc., Direct Holdings
Education Inc., Alex Inc., Direct Holdings.com, Inc., Direct Holdings
Customer Service, Inc., Direct Holdings Libraries, Inc., Direct
Holdings U.S. Corp., Direct Holdings Worldwide L.L.C. and The CIT
Group/Business Credit, Inc.


 


“Existing Letters of Credit” means the
letters of credit set forth on Schedule 1.01I.


 


“Existing Notes” means Reader’s Digest’s
existing 61⁄2% senior unsecured notes due 2011.


 


“Existing Note Indenture” means the
Indenture entered into by Reader’s Digest in connection with the issuance of
the Existing Notes, together with all instruments and other agreements entered
into by Reader’s Digest in connection therewith.


 


“Facility” means the U.S. Term Loans, the
Euro Term Loans, the Revolving Credit Facility, the Swing Line Sublimit or the
Letter of Credit Sublimit, as the context may require.


 


“Federal Funds Rate” means, for any day, the
rate per annum equal to the weighted average of the rates on overnight Federal
funds transactions with members of the Federal Reserve System arranged by
Federal funds brokers on such day, as published by the Federal Reserve Bank on
the Business Day next succeeding such day; provided
that (a) if such day is not a Business Day, the Federal Funds Rate for
such day shall be such rate on such transactions on the next preceding Business
Day as so published on the next succeeding Business Day, and (b) if no
such rate is so published on such next succeeding Business Day, the Federal
Funds Rate for such day shall be the average rate (rounded upward, if
necessary, to a whole multiple of 1/100 of 1%) charged to JPMorgan Chase Bank
on such day on such transactions as determined by the Administrative Agent.


 


“Foreign Immaterial Subsidiary” means any
Foreign Subsidiary that is an Immaterial Subsidiary.  For the avoidance of doubt, as of the Closing
Date, none of Caribe Condor S.A. de C.V., Reader’s Digest Deutschland Holding
GmbH, The Reader’s Digest Assoc. Pty. Limited or 1302791 Alberta ULC shall
constitute a Foreign Immaterial Subsidiary.


 


“Foreign Jurisdiction Deposit” means a
deposit or Guarantee incurred in the ordinary course of business and required
by any Governmental Authority in a foreign jurisdiction as a condition of doing
business in such jurisdiction.


 


“Foreign
Lender” has the meaning specified in Section 10.15(a)(i).


 


“Foreign Subsidiary” means any direct or
indirect Restricted Subsidiary of the Company which (a) is not a Domestic
Subsidiary or (b) is set forth on Schedule 1.01E.


 


“Fund” means any Person (other than a
natural person) that is engaged in making, purchasing, holding or otherwise
investing in commercial loans and similar extensions of credit in the ordinary
course.


 


26
















 


“Funded Debt” means all Indebtedness of the
Company and the Restricted Subsidiaries for borrowed money that matures more
than one year from the date of its creation or matures within one year from
such date that is renewable or extendable, at the option of such Person, to a
date more than one year from such date or arises under a revolving credit or
similar agreement that obligates the lender or lenders to extend credit during
a period of more than one year from such date, including Indebtedness in respect
of the Loans.


 


“GAAP” means generally accepted accounting
principles in the United States of America, as in effect from time to time; provided, however, that if the Company
notifies the Administrative Agent that the Company requests an amendment to any
provision hereof to eliminate the effect of any change occurring after the
Closing Date in GAAP or in the application thereof on the operation of such
provision (or if the Administrative Agent notifies the Company that the
Required Lenders request an amendment to any provision hereof for such
purpose), regardless of whether any such notice is given before or after such
change in GAAP or in the application thereof, then such provision shall be
interpreted on the basis of GAAP as in effect and applied immediately before
such change shall have become effective until such notice shall have been
withdrawn or such provision amended in accordance herewith.


 


“German Borrower” means RD German Holdings
GmbH.


 


“Governmental Authority” means any nation or
government, any state or other political subdivision thereof, any agency,
authority, instrumentality, regulatory body, court, administrative tribunal,
central bank or other entity exercising executive, legislative, judicial,
taxing, regulatory or administrative powers or functions of or pertaining to
government.


 


“Granting Lender” has the meaning specified
in Section 10.07(h).


 


“Group Member” means Holdings, the Company
and the Restricted Subsidiaries.


 


“Guarantee” means, as to any Person, without
duplication, (a) any obligation, contingent or otherwise, of such Person
guaranteeing or having the economic effect of guaranteeing any Indebtedness or
other monetary obligation payable or performable by another Person (the
“primary obligor”) in any manner, whether directly or indirectly, and including
any obligation of such Person, direct or indirect, (i) to purchase or pay
(or advance or supply funds for the purchase or payment of) such Indebtedness
or other monetary obligation, (ii) to purchase or lease property,
securities or services for the purpose of assuring the obligee in respect of
such Indebtedness or monetary other obligation of the payment or performance of
such Indebtedness or other monetary obligation, (iii) to maintain working
capital, equity capital or any other financial statement condition or liquidity
or level of income or cash flow of the primary obligor so as to enable the
primary obligor to pay such Indebtedness or other monetary obligation, or (iv) entered
into for the purpose of assuring in any other manner the obligee in respect of
such Indebtedness or other monetary obligation of the payment or performance
thereof or to protect such obligee against loss in respect thereof (in whole or
in part), or (b) any Lien on any assets of such Person securing any Indebtedness
or other monetary obligation of any other Person, whether or not such
Indebtedness or monetary other obligation is assumed by such Person (or any
right, contingent or otherwise, of any holder of such Indebtedness to obtain
any such Lien); provided that the
term “Guarantee” shall not include endorsements for collection or deposit, in
either case in the ordinary course of business. 
The amount of any Guarantee shall be deemed to be an amount equal to the
stated or determinable amount of the related primary obligation, or portion
thereof, in respect of which such Guarantee is made or, if not stated or
determinable, the


 


27

















 


maximum reasonably anticipated liability in
respect thereof as determined by the guaranteeing Person in good faith.  The term “Guarantee” as a verb has a
corresponding meaning.


 


“Guarantee and  Security Agreement” means, collectively, the Guarantee and
Collateral Agreement executed by the Loan Parties, substantially in the form of
Exhibit F, together with each other security agreement supplement executed
and delivered pursuant to Section 6.10.


 


“Guarantors” has the meaning set forth in
the definition of “Collateral and Guarantee Requirement”.


 


“Hazardous Materials” means all explosive or
radioactive substances or wastes and all hazardous or toxic substances, wastes
or pollutants, including petroleum or petroleum distillates, asbestos or
asbestos-containing materials, polychlorinated biphenyls, radon gas, infectious
or medical wastes and all other substances or wastes of any nature regulated
pursuant to any Environmental Law.


 


“Hedge Bank” means any Person that is a
Lender or an Affiliate of a Lender at the time it enters into a Secured Hedge
Agreement, in its capacity as a party thereto.


 


“Holdings” has the meaning set forth in the
introductory paragraph to this Agreement.


 


“Holdings Common Equity” means common stock
of Holdings to be issued on or prior to the Closing Date to the holders of the
Holdings Senior PIK Preferred.


 


“Holdings Junior PIK Preferred” means the
Junior PIK Preferred Stock of Holdings issued on the Closing Date (and any
additional Junior PIK Preferred Stock issued in connection with (i) the
surrender of any such Junior PIK Preferred Stock pursuant to a transfer or
exchange thereof or (ii) the issuance of any replacement certificate).


 


“Holdings Operating Expenses” means
operating costs and expenses incurred by Holdings, which will include, in any
event, without limitation, costs and expenses incurred in connection with (in
each case to the extent not prohibited by the Loan Documents and in each case
other than interest or dividend payments or expenses related to activities not
permitted to be undertaken by Holdings pursuant to Section 7.13) (i) the
maintenance of its existence and the ownership of an investment in the Company
or the Subsidiaries of the Company, and the exercise of rights and performance
of obligations in connection therewith, (ii) the entry into, and exercise
of rights and performance of obligations in respect of (A) contracts and
agreements with or for the benefit of officers, directors and employees of
Holdings, the Company or any Subsidiary relating to their employment or
directorships, (B) insurance policies and related contracts and
agreements, (C) any equity subscription agreements, registration rights
agreements, voting and other stockholder agreements, engagement letters,
underwriting agreements and other agreements in respect of Equity Interests of
Holdings or any offering, issuance or sale thereof, (D) the Loan Documents
and (E) the Senior Subordinated Note Indenture, the Holdings PIK Preferred
and related agreements, (iii) the offering, issuance and sale of Equity
Interests of Holdings, (iv) the filing of registration statements, and
compliance with applicable reporting and other obligations, under federal,
state or other securities laws, (v) the performance of obligations under
and compliance by Holdings with its certificate of incorporation and by-laws or
any applicable law, ordinance, regulation rule, order, judgment, decree or
permit, including, without limitation, as a result of or in connection with the
activities of the Company or the Subsidiaries of the Company,


 


28

















 


(vi) the performance of contractual
obligations in existence on the date hereof and set forth on Schedule 1.01F, (vii) payment
of taxes for the benefit of or relating to Holdings, the Company and its
Subsidiaries and (viii) other activities incidental or related to the
foregoing.


 


“Holdings PIK Preferred” means (a) the
Holdings Senior PIK Preferred and (b) the Holdings Junior PIK Preferred.


 


“Holdings Senior PIK Preferred” means the Series A
PIK Preferred Stock of Holdings issued on the Closing Date (and any additional Series A
PIK Preferred Stock issued in connection with (i) the surrender of any
such Series A PIK Preferred Stock pursuant to a transfer or exchange
thereof or (ii) the issuance of any replacement certificate).


 


“Honor Date” has the meaning specified in Section 2.03(c)(i).


 


“Immaterial Subsidiary” means any Subsidiary
that, together with its consolidated Subsidiaries, does not, as of the day of
the most recent completed fiscal quarter of the Company, have assets with a
value in excess of 1% of the consolidated total assets of the Company and the
Subsidiaries and did not, as of the four quarter period ending on the last day
of such fiscal quarter, have revenues exceeding 1% of the total revenues of the
Company and the Subsidiaries; provided that if (i) the aggregate
assets then owned by all Subsidiaries of the Company that would otherwise
constitute Immaterial Subsidiaries shall have a value in excess of 5% of the
consolidated total assets of the Company and the Subsidiaries or (ii) the
combined revenues of all Subsidiaries of the Company that would otherwise
constitute Immaterial Subsidiaries shall exceed 5% of the total revenues of the
Company and the Subsidiaries, only those such Subsidiaries as shall then have
aggregate assets of less than 5% of the consolidated total assets of the
Company and the Subsidiaries and combined revenues of less than 5% of the total
revenues of the Company and the Subsidiaries and as shall be designated in
writing by the Company to the Administrative Agent as Immaterial Subsidiaries
shall be deemed to constitute Immaterial Subsidiaries.


 


“Incremental Amendment” has the meaning set
forth in Section 2.14(a).


 


“Incremental Facility Closing Date” has the
meaning set forth in Section 2.14(a).


 


“Incremental Overseas Amendment” has the
meaning set forth in Section 2.14(b).


 


“Incremental Overseas Facility Closing Date”
has the meaning set forth in Section 2.14(b).


 


“Incremental Overseas Term Loans” has the
meaning set forth in Section 2.14(b).


 


“Incremental U.S. Term Loans” has the
meaning set forth in Section 2.14(a).


 


“Indebtedness” means, as to any Person at a
particular time, without duplication, all of the following, whether or not
included as indebtedness or liabilities in accordance with GAAP:


 


29

















 


(a)  all obligations of such Person for borrowed money and all
obligations of such Person evidenced by bonds, debentures, notes, loan
agreements or other similar instruments;


 


(b)  the maximum amount (after giving effect to any prior drawings
or reductions which may have been reimbursed) of all letters of credit
(including standby and commercial), bankers’ acceptances, bank guaranties,
surety bonds, performance bonds and similar instruments issued or created by or
for the account of such Person;


 


(c)  net obligations of such Person under any Swap Contract;


 


(d)  all obligations of such Person to pay the deferred purchase
price of property or services (other than (i) trade accounts payable in
the ordinary course of business, (ii) any earn-out obligation until such
obligation becomes a liability on the balance sheet of such Person in
accordance with GAAP, (iii) deferred or equity compensation arrangements
payable to directors, officers or employees and (iv) any such obligation
to pay royalties or commissions to authors);


 


(e)  indebtedness (excluding prepaid interest thereon) secured by
a Lien on property owned or being purchased by such Person (including
indebtedness arising under conditional sales or other title retention
agreements and mortgage, industrial revenue bond, industrial development bond
and similar financings), whether or not such indebtedness shall have been
assumed by such Person or is limited in recourse;


 


(f)  all Attributable Indebtedness;


 


(g)  all obligations of such Person to purchase, redeem, retire or
otherwise acquire for value any Disqualified Equity Interests; and


 


(h)  all Guarantees of such Person in respect of any of the
foregoing.


 


For
all purposes hereof, the Indebtedness of any Person shall (A) include the
Indebtedness of any partnership or joint venture (other than a joint venture
that is itself a corporation or limited liability company) in which such Person
is a general partner or a joint venturer, except to the extent such Person’s
liability for such Indebtedness is otherwise limited and only to the extent
such Indebtedness would be included in the calculation of Consolidated Total
Debt and (B) in the case of Holdings and its Subsidiaries, exclude (i) all
intercompany Indebtedness having a term not exceeding 364 days (inclusive
of any roll over or extensions of terms) and made in the ordinary of business
consistent with past practice in connection with the cash management activities
of Holdings and its Subsidiaries, (ii) customer deposits and advances and
interest payable thereon in the ordinary course of business in accordance with
customary trade terms and other obligations incurred in the ordinary course of
business through credit on an open account basis customarily extended to such
Person, (iii) statutory or other legal requirements to make deposits in
connection with sweepstakes or similar contests, or surety bonds or letters of
credit posted pursuant to such requirements and (iv) obligations under
overdraft arrangements with banks outside the United States incurred in the
ordinary course of business to cover working capital needs.  The amount of any net obligation under any
Swap Contract on any date shall be deemed to be the Swap Termination Value
thereof as of such date.  The amount of
Indebtedness of any Person for purposes of clause (e) shall be deemed to
be equal to the lesser of (i) the aggregate unpaid amount of such
Indebtedness and (ii) the fair market value of the property encumbered
thereby as determined by such Person in good faith.


 


30

















 


“Indemnified Liabilities” has the meaning
set forth in Section 10.05.


 


“Indemnitees” has the meaning set forth in Section 10.05.


 


“Information” has the meaning specified in Section 10.08.


 


“Intellectual Property” has the meaning set
forth in the Guarantee and Security Agreement.


 


“Interest Payment Date” means, (a) as
to any Eurocurrency Rate Loan, the last day of each Interest Period applicable
to such Loan and the Maturity Date of the Facility under which such Loan was
made; provided that if any
Interest Period for a Eurocurrency Rate Loan exceeds three months, the
respective dates that fall every three months after the beginning of such
Interest Period shall also be Interest Payment Dates; and (b) as to any
Base Rate Loan (including a Swing Line Loan), the last Business Day of each
March, June, September and December and the Maturity Date of the
Facility under which such Loan was made.


 


“Interest Period” means, as to each
Eurocurrency Rate Loan, the period commencing on the date such Eurocurrency
Rate Loan is disbursed or converted to or continued as a Eurocurrency Rate Loan
and ending on the date one or two weeks (with respect to the initial Interest
Period applicable to the Euro Term Loans) or one, two, three or six months
thereafter, or to the extent available to each Lender of such Eurocurrency Rate
Loan (as reasonably determined by each such Lender in good faith), nine or
twelve months, as selected by the relevant Borrower in its Committed Loan
Notice; provided that:


 


(a)  any Interest Period that would otherwise end on a day that is
not a Business Day shall be extended to the next succeeding Business Day unless
such Business Day falls in another calendar month, in which case such Interest
Period shall end on the next preceding Business Day;


 


(b)  any Interest Period that begins on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding day
in the calendar month at the end of such Interest Period) shall end on the last
Business Day of the calendar month at the end of such Interest Period; and


 


(c)  no Interest Period shall extend beyond the Maturity Date of
the Facility under which such Loan was made.


 


“Investment” means, as to any Person, any
direct or indirect acquisition or investment by such Person, whether by means
of (a) the purchase or other acquisition of Equity Interests or debt or
other securities of another Person or (b) a loan, advance or capital
contribution to, Guarantee or assumption of Indebtedness of, or purchase or
other acquisition of any other debt or equity participation or interest in,
another Person, including any partnership or joint venture interest in such
other Person (excluding, in the case of Holdings and its Subsidiaries,
intercompany loans, advances, or Indebtedness having a term not exceeding
364 days (inclusive of any roll over or extensions of terms) and made in
the ordinary course of business consistent with past practice in connection
with the cash management activities of Holdings and its Subsidiaries) or (c) the
purchase or other acquisition (in one transaction or a series of transactions)
of all or substantially all of the property and assets or business of another
Person or assets constituting a business unit, line of business or division of
such Person.  For purposes of


 


31

















 


covenant compliance, the amount of any
Investment shall be the amount actually invested, without adjustment for
subsequent increases or decreases in the value of such Investment.


 


“IP Rights” has the meaning set forth in Section 5.15.


 


“IRS” means the United States Internal
Revenue Service.


 


“JPMorgan Chase Bank” means JPMorgan Chase
Bank, N.A. and its successors.


 


“Judgment Currency” has the meaning
specified in Section 10.23.


 


“Junior Financing” has the meaning specified
in Section 7.12.


 


“Junior Financing Documentation” means any
documentation governing any Junior Financing.


 


“Laws” means, collectively, all
international, foreign, Federal, state and local statutes, treaties, rules,
guidelines, regulations, ordinances, codes and administrative or judicial
precedents or authorities.


 


“L/C Advance” means, with respect to each
Revolving Credit Lender, such Lender’s funding of its participation in any L/C
Borrowing in accordance with its Pro Rata Share.


 


“L/C Borrowing” means an extension of credit
resulting from a drawing under any Letter of Credit which has not been
reimbursed or refinanced as a Refunding Loan in accordance with Section 2.03(c).


 


“L/C Credit Extension” means, with respect
to any Letter of Credit, the issuance thereof or extension of the expiry date
thereof, or the renewal or increase of the amount thereof.


 


“L/C Issuer” means JPMorgan Chase Bank and
any other Lender that becomes an L/C Issuer in accordance with Section 2.03(k) or
10.07(j), in each case, in its capacity as an issuer of Letters of Credit
hereunder, or any successor issuer of Letters of Credit permitted hereunder.


 


“L/C Obligations” means, as at any date of
determination, the aggregate undrawn amount of all outstanding Letters of
Credit plus the aggregate of all Unreimbursed Amounts, including all L/C
Borrowings.


 


“Lender” has the meaning specified in the
introductory paragraph to this Agreement and, as the context requires, includes
an L/C Issuer and the Swing Line Lender, and their respective successors and
assigns as permitted hereunder, each of which is referred to herein as a
“Lender,” together with, in each case, any Affiliate of any such financial
institution through which such financial institution elects, by notice to the
Administrative Agent and the Company, to make any Loans available to any
Overseas Borrower; provided that,
for all purposes of voting or consenting with respect to (a) any
amendment, supplementation or modification of any Loan Document, (b) any
waiver of any requirements of any Loan Document or any Default or Event of
Default and its consequences, or (c) any other matter as to which a Lender
may vote or consent pursuant to Section 10.01 of this Agreement, the
financial institution making such election shall


 


32

















 


be deemed the “Lender” rather than such
Affiliate, which shall not be entitled to vote or consent (it being agreed that
failure of any such Affiliate to fund an obligation under this Agreement shall
not relieve its affiliated financial institution from funding).


 


“Lending Office” means, as to any Lender,
the office or offices of such Lender described as such in such Lender’s
Administrative Questionnaire, or such other office or offices as a Lender may
from time to time notify the Company and the Administrative Agent.


 


“Letter of Credit” means any letter of
credit issued hereunder.  A Letter of
Credit may be a commercial letter of credit or a standby letter of credit.


 


“Letter of Credit Application” means an
application and agreement for the issuance or amendment of a Letter of Credit
in the form from time to time in use by the relevant L/C Issuer, provided that any such application or
agreement shall not be inconsistent with the terms hereof or impose any
additional obligations or liabilities on any Loan Party.  Any Letter of Credit Application delivered to
JPMorgan Chase Bank as L/C Issuer for a commercial letter of credit shall be
substantially in the form of Exhibit I or such other form as may be
reasonably acceptable to JPMorgan Chase Bank. 
Any Letter of Credit Application delivered to JPMorgan Chase Bank as L/C
Issuer for a standby letter of credit shall be substantially in the form of Exhibit J
or such other form as may be reasonably acceptable to JPMorgan Chase Bank.


 


“Letter of Credit Expiration Date” means the
day that is five (5) Business Days prior to the scheduled Maturity Date
then in effect for the Revolving Credit Facility (or, if such day is not a
Business Day, the next preceding Business Day).


 


“Letter of Credit Sublimit” means an amount
equal to the lesser of (a) $50,000,000 and (b) the aggregate amount
of the Revolving Credit Commitments.  The
Letter of Credit Sublimit is part of, and not in addition to, the Revolving
Credit Facility.


 


“Lien” means any mortgage, pledge,
hypothecation, collateral assignment, deposit arrangement, encumbrance, lien
(statutory or other), charge or other security interest or preferential
arrangement intended to create a security interest of any kind or nature
whatsoever (including any conditional sale or other title retention agreement,
any easement, right of way or other encumbrance on title to real property, and
any Capitalized Lease having substantially the same economic effect as any of
the foregoing).


 


“Loan” means an extension of credit by a
Lender to a Borrower under Article II in the form of a U.S. Term Loan, a
Euro Term Loan, a Revolving Credit Loan or a Swing Line Loan.


 


“Loan Documents” means, collectively, (i) this
Agreement, (ii) the Notes, (iii) the Collateral Documents, (iv) each
Letter of Credit Application and (v) the Continuing Agreement (if
applicable).


 


“Loan Parties” means, collectively, each
Borrower and each Guarantor; provided
that for purposes of Article VII, unless such Person is or becomes a U.S.
Guarantor, each Overseas Borrower and each Overseas Guarantor shall not be
treated as a Loan Party and shall be treated as a Subsidiary that is not a Loan
Party.


 


“Management Stockholders” means the members
of management of Holdings or its Subsidiaries who are investors in Holdings or
any direct or indirect parent thereof.


 


33

















 


“Mandatory Cost” means, with respect to any
period, the percentage rate per annum determined in accordance with Schedule
1.01H.


 


“Master Agreement” has the meaning specified
in the definition of “Swap Contract.”


 


“Material Adverse Change” means a material
adverse effect on (a) the business, financial condition or results of
operations of Reader’s Digest and its subsidiaries, taken as a whole, (b) the
ability of Reader’s Digest to perform its obligations under the Purchase
Agreement or (c) the ability of Reader’s Digest to consummate the
Acquisition and the other Transactions (as defined in the Purchase Agreement)
to be performed or consummated by Reader’s Digest, other than any event,
change, effect, development, condition or occurrence to the extent arising out
of or relating to:  (i) general
economic conditions, (ii) conditions generally affecting industries in
which any of Reader’s Digest or its subsidiaries operate (except, in the case
of clauses (i) and (ii) above, if the event, change, effect,
development, condition or occurrence disproportionately impacts the business,
financial condition or results of operations of Reader’s Digest and its
subsidiaries, taken as a whole, relative to companies operating in the
industries in which Reader’s Digest or its subsidiaries operate), (iii) the
public announcement of the Purchase Agreement and the Acquisition, (iv) any
changes in law or interpretation thereof or (v) any changes in GAAP or
interpretation thereof.


 


“Material Adverse Effect” means an event,
change or occurrence that, individually or in the aggregate, has had or could
reasonably be expected to have a material adverse effect on (a) the
business, assets, results of operation or financial condition of the Company
and its Subsidiaries, taken as a whole, or (b) the rights and remedies of
the Administrative Agent and the Lenders under any Loan Document.


 


“Material Real Property” means, on any
date, any real property owned by any Loan Party with a fair market value as of
such date in excess of $2,500,000.


 


“Maturity Date” means (a) with respect
to the Revolving Credit Facility, March 2, 2013 and (b) with respect
to the Term Loans, March 2, 2014.


 


“Maximum Rate” has the meaning specified in Section 10.10.


 


“Merger” has the meaning set forth in
the preliminary statements to this Agreement.


 


“Moody’s” means Moody’s Investors Service, Inc.
and any successor thereto.


 


“Mortgage” means, collectively, the deeds of
trust, trust deeds, hypothecs and mortgages made by the Loan Parties in favor
or for the benefit of the Administrative Agent on behalf of the Lenders
substantially in the form of Exhibit G (with such changes as may be customary
to account for local Law matters or as otherwise may be reasonably satisfactory
to the Administrative Agent), and any other mortgages executed and delivered
pursuant to Section 6.10.


 


“Mortgage Policies” has the meaning
specified in Section 6.12(b)(ii).


 


“Mortgaged Properties” has the meaning
specified in paragraph (g) of the definition of Collateral and Guarantee
Requirement.


 


34
















 


“Multiemployer Plan” means any employee
benefit plan of the type described in Section 4001(a)(3) of ERISA, to
which any Loan Party or any ERISA Affiliate makes or is obligated to make
contributions, or during the preceding five plan years, has made or been
obligated to make contributions.


 


“Net Cash Proceeds” means:


 


(a)  with respect to the Disposition of any asset by Holdings, the
Company or any Restricted Subsidiary or any Casualty Event, an amount equal to (i) the
sum of cash and Cash Equivalents received in connection with such Disposition
or Casualty Event (including any cash or Cash Equivalents received by way of
deferred payment pursuant to, or by monetization of, a note receivable or
otherwise, but only as and when so received and, with respect to any Casualty
Event, any insurance proceeds or condemnation awards in respect of such
Casualty Event actually received by or paid to or for the account of Holdings,
the Company or any Restricted Subsidiary) less (ii) the sum of (A) the
principal amount, premium or penalty, if any, interest and other amounts on any
Indebtedness that is secured by the asset subject to such Disposition or
Casualty Event and that is required to be repaid (and is repaid) in connection
with such Disposition or Casualty Event (other than Indebtedness under the Loan
Documents), (B) the out-of-pocket expenses (including attorneys’ fees,
investment banking fees, accounting fees and other professional and
transactional fees, survey costs, title insurance premiums, and related search
and recording charges, transfer taxes, deed or mortgage recording taxes, other
customary expenses and brokerage, consultant and other customary commissions
and fees) actually incurred by Holdings, the Company or such Restricted
Subsidiary in connection with such Disposition or Casualty Event, (C) taxes
paid or reasonably estimated to be actually payable in connection therewith, (D) any
reserve for adjustment in accordance with GAAP in respect of (x) the sale
price of such asset or assets and (y) any liabilities associated with such
asset or assets and retained by Holdings, the Company or any Restricted
Subsidiary after such sale or other disposition thereof, including pension and
other post-employment benefit liabilities and liabilities related to
environmental matters or against any indemnification obligations associated
with such transaction and (E) the Company’s reasonable estimate of
payments required to be made with respect to unassumed liabilities relating to
the assets involved within one year of such Disposition or Casualty Event, and
it being understood that “Net Cash Proceeds” shall include (i) any cash or
Cash Equivalents received upon the Disposition of any non-cash consideration
received by Holdings, the Company or any Restricted Subsidiary in any such
Disposition, (ii) an amount equal to any reversal (without the
satisfaction of any applicable liabilities in cash in a corresponding amount)
of any reserve described in clause (C) or (D) above at the time of
such reversal and (iii) an amount equal to any estimated liabilities
described in clause (E) above that have not been satisfied in cash within
three hundred and sixty-five (365) days after such Disposition or Casualty
Event; provided that (x) no
net cash proceeds calculated in accordance with the foregoing realized in a
single transaction or series of related transactions shall constitute Net Cash
Proceeds unless such net cash proceeds shall exceed $5,000,000 and (y) no
such net cash proceeds shall constitute Net Cash Proceeds under this clause (a) in
any fiscal year until the aggregate amount of all such net cash proceeds in
such fiscal year shall exceed $10,000,000 (and thereafter only net cash
proceeds in excess of such amount shall constitute Net Cash Proceeds under this
clause (a)); and


 


(b)  with respect to the incurrence or issuance of any
Indebtedness or Equity Interests by Holdings, the Company or any Restricted
Subsidiary, an amount equal to (i)


 


35

















 


the
sum of the cash received in connection with such incurrence or issuance less (ii) the
attorneys’ fees, investment banking fees, accountants’ fees, underwriting or
other discounts, commissions, costs and other out-of-pocket fees, transfer and
similar taxes and other customary out-of-pocket expenses actually incurred by
Holdings, the Company or such Restricted Subsidiary in connection with such
incurrence or issuance.


 


“Non-Cash Charges” has the meaning set forth
in the definition of the term “Consolidated EBITDA”.


 


“Non-Consenting Lenders” has the meaning
specified in Section 3.07(d).


 


“Nonrenewal Notice Date” has the meaning
specified in Section 2.03(b)(iii).


 


“Note” means a U.S. Term Note, a Euro Term
Note or a Revolving Credit Note, as the context may require.


 


“Notice of Intent to Cure” has the meaning
specified in Section 6.02(b).


 


“Not Otherwise Applied” means, with
reference to any amount of Net Cash Proceeds of any transaction or event or of
Excess Cash Flow, that such amount (a) was not required to be applied to
prepay the Loans pursuant to Section 2.05(b), and (b) was not
previously applied as a Cure Amount or in determining the permissibility of a
transaction under the Loan Documents where such permissibility was contingent
on receipt of such amount or utilization of such amount for a specified
purpose.  The Company shall promptly
notify the Administrative Agent of any application of such amount as
contemplated by (b) above.


 


“NPL” means the National Priorities List
under CERCLA.


 


“Obligations” means all (a) monetary
obligations of any Loan Party and its Subsidiaries arising under any Loan
Document, whether direct or indirect (including those acquired by assumption),
absolute or contingent, due or to become due, now existing or hereafter arising
and including interest and fees that accrue after the commencement by or
against any Loan Party or Subsidiary of any proceeding under any Debtor Relief
Laws naming such Person as the debtor in such proceeding, regardless of whether
such interest and fees are allowed claims in such proceeding, (b) monetary
obligations of any Loan Party and its Subsidiaries arising under any Secured
Hedge Agreement and (c) monetary Cash Management Obligations.  Without limiting the generality of the
foregoing, the Obligations of the Loan Parties under the Loan Documents (and of
their Subsidiaries to the extent they have obligations under the Loan
Documents) include (x) the obligation (including guarantee obligations) to
pay principal, interest, Letter of Credit commissions, reimbursement
obligations, charges, expenses, fees, Attorney Costs, indemnities, and other
amounts payable by any Loan Party or its Subsidiaries under any Loan Document
and (y) the obligation of any Loan Party or any of its Subsidiaries to
reimburse any amount in respect of any of the foregoing that any Lender, in its
sole discretion, may elect to pay or advance on behalf of such Loan Party or
such Subsidiary.


 


“Organization Documents” means, (a) with
respect to any corporation, the certificate or articles of incorporation and
the bylaws (or equivalent or comparable constitutive documents with respect to
any non-U.S. jurisdiction); (b) with respect to any limited liability
company, the certificate or articles of formation or organization and operating
agreement; and (c) with respect to any partnership, joint venture, trust
or other form of business entity, the partnership, joint venture or other
applicable agreement of formation or organization and any


 


36

















 


agreement,
instrument, filing or notice with respect thereto filed in connection with its
formation or organization with the applicable Governmental Authority in the
jurisdiction of its formation or organization and, if applicable, any
certificate or articles of formation or organization of such entity.


 


“Other Taxes” has the meaning specified in Section 3.01(b).


 


“Outstanding Amount” means (a) with
respect to the U.S. Term Loans, Euro Term Loans, Revolving Credit Loans and
Swing Line Loans on any date, the Dollar Amount thereof after giving effect to
any borrowings and prepayments or repayments of U.S. Term Loans, Euro Term
Loans, Revolving Credit Loans (including any refinancing of outstanding unpaid
drawings under Letters of Credit or L/C Credit Extensions as a Revolving Credit
Borrowing) and Swing Line Loans, as the case may be, occurring on such date;
and (b) with respect to any L/C Obligations on any date, the amount
thereof on such date after giving effect to any L/C Credit Extension occurring
on such date and any other changes thereto as of such date, including as a
result of any reimbursements of outstanding unpaid drawings under any Letters
of Credit (including any refinancing of outstanding unpaid drawings under
Letters of Credit or L/C Credit Extensions as a Revolving Credit Borrowing) or
any reductions in the maximum amount available for drawing under Letters of
Credit taking effect on such date.


 


“Overnight Rate” means, for any day, (a) with
respect to any amount denominated in Dollars, the Federal Funds Rate, and (b) with
respect to any amount denominated in an Alternative Currency, the rate of
interest per annum at which overnight deposits in the applicable Alternative
Currency, in an amount approximately equal to the amount with respect to which
such rate is being determined, would be offered for such day by a branch or
Affiliate of JPMorgan Chase Bank in the applicable offshore interbank market
for such currency to major banks in such interbank market.


 


“Overseas Borrowers” means, collectively, (a) the
German Borrower and (b) any other Foreign Subsidiary which has borrowed
Incremental Overseas Term Loans in accordance with Section 2.14(b).


 


“Overseas Guarantees” has the meaning set
forth in the definition of “Collateral and Guarantee Requirement”.


 


“Overseas Guarantors” has the meaning set
forth in the definition of “Collateral and Guarantee Requirement”.


 


“Overseas Obligations” has the meaning set
forth in the definition of “Collateral and Guarantee Requirement”.


 


“Participant” has the meaning specified in Section 10.07(e).


 


“Participating Member State” means each
state so described in any EMU Legislation.


 


“Patriot Act” means the USA Patriot Act
(Title III of Pub. L. 107-56 (signed into law October 26, 2001)).


 


“PBGC” means the Pension Benefit Guaranty
Corporation.


 


37

















 


“Pension Act” shall mean the Pension
Protection Act of 2006, as it presently exists or as it may be amended from
time to time.


 


“Pension Plan” means any “employee pension
benefit plan” (as such term is defined in Section 3(2) of ERISA),
other than a Multiemployer Plan, that is subject to Title IV of ERISA or Section 412
of the Code or Section 302 of ERISA and is sponsored or maintained by any
Loan Party or any ERISA Affiliate or to which any Loan Party or any ERISA
Affiliate contributes or has an obligation to contribute, or in the case of a
multiple employer or other plan described in Section 4064(a) of
ERISA, has made contributions at any time during the immediately preceding five
(5) plan years.


 


“Perfection Certificate” means a certificate
in the form of Annex 2 to the Guarantee and Security Agreement or any
other form approved by the Administrative Agent.


 


“Permitted Acquisition” has the meaning
specified in Section 7.02(i).


 


“Permitted Equity Issuance” means any sale
or issuance of any Qualified Equity Interests of Holdings to the extent
permitted hereunder or any capital contribution made to Holdings in respect of
its Qualified Equity Interests.


 


“Permitted Holders” means the Equity
Investors other than (i) the Management Stockholders to the extent that
the amount of the outstanding voting stock of Holdings owned beneficially or of
record by such Management Stockholders in the aggregate at any time exceeds ten
percent (10%) of the total amount of the outstanding voting stock of Holdings
at such time and (ii) Goldentree Asset Management, LP, GSO Capital
Partners LP and Magnetar Financial LLC.


 


“Permitted Holdings Distributions” means
payments, dividends or distributions by the Company to Holdings in order to pay
Holdings Operating Expenses.


 


“Permitted Refinancing” means, with respect
to any Person, any modification, refinancing, refunding, renewal or extension
of any Indebtedness of such Person; provided
that (a) the principal amount (or accreted value, if applicable) thereof
does not exceed the principal amount (or accreted value, if applicable) of the
Indebtedness so modified, refinanced, refunded, renewed or extended except by
an amount equal to unpaid accrued interest and premium thereon plus other
reasonable amount paid, and fees and expenses reasonably incurred, in
connection with such modification, refinancing, refunding, renewal or extension
and by an amount equal to any existing commitments unutilized thereunder, (b) other
than with respect to a Permitted Refinancing in respect of Indebtedness
permitted pursuant to Section 7.03(e), such modification, refinancing,
refunding, renewal or extension has a final maturity date equal to or later
than the earlier of (x) the final maturity date of the Indebtedness so
modified, refinanced, refunded, renewed or extended and (y) the date which
is 91 days after the Maturity Date with respect to the Term Loans, (c) other
than with respect to a Permitted Refinancing in respect of Indebtedness
permitted pursuant to Section 7.03(e), such modification, refinancing,
refunding, renewal or extension has a Weighted Average Life to Maturity equal
to or greater than the remaining Weighted Average Life to Maturity of, the
Indebtedness being modified, refinanced, refunded, renewed or extended, (d) to
the extent such Indebtedness being modified, refinanced, refunded, renewed or
extended is subordinated in right of payment to the Obligations, such
modification, refinancing, refunding, renewal or extension is subordinated in
right of payment to the Obligations on terms at least as favorable to the
Lenders (in the reasonable good faith determination of the Company) as those
contained in the documentation governing the 


 


38

















 


Indebtedness
being modified, refinanced, refunded, renewed or extended, and (e) the
terms and conditions (including, if applicable, as to collateral but excluding
as to subordination, interest rate or other pricing terms and redemption or
prepayment premium) of any such modified, refinanced, refunded, renewed or
extended Indebtedness, taken as a whole, are not materially less favorable to
the Lenders (in the reasonable good faith determination of the Company) than
the terms and conditions of the Indebtedness being modified, refinanced,
refunded, renewed or extended.


 


“Person” means any natural person,
corporation, limited liability company, trust, joint venture, association,
company, partnership, Governmental Authority or other entity.


 


“Plan” means any “employee benefit plan” (as
such term is defined in Section 3(3) of ERISA) established by any
Loan Party or, with respect to any such plan that is subject to Section 412
of the Code or Section 302 or Title IV of ERISA, any ERISA Affiliate.


 


“Pledged Debt” has the meaning specified in
the Guarantee and Security Agreement.


 


“Pledged Equity” has the meaning specified
in the Guarantee and Security Agreement.


 


“Post-Acquisition Period” means, with
respect to any Permitted Acquisition, the period beginning on the date such
Permitted Acquisition is consummated and ending on the last day of the sixth
full consecutive fiscal quarter immediately following the date on which such
Permitted Acquisition is consummated.


 


“Pro Forma Adjustment” means, for any Test
Period that includes all or any part of a fiscal quarter included in any
Post-Acquisition Period, with respect to the Acquired EBITDA of the applicable
Acquired Entity or Business or the Consolidated EBITDA of the Company, the pro
forma increase or decrease in such Acquired EBITDA or such Consolidated EBITDA,
as the case may be, projected by the Company in good faith as a result of (a) actions
taken during such Post-Acquisition Period for the purposes of realizing
reasonably identifiable and factually supportable cost savings or (b) any
additional costs incurred during such Post-Acquisition Period, in each case in
connection with the combination of the operations of such Acquired Entity or
Business with the operations of the Company and the Restricted Subsidiaries; provided that, so long as such actions are
taken during such Post-Acquisition Period or such costs are incurred during
such Post-Acquisition Period, as applicable, with respect to the cost savings
related to such actions or such additional costs, as applicable, it may be
reasonably assumed, for purposes of projecting such pro forma increase or
decrease to such Acquired EBITDA or such Consolidated EBITDA, as the case may
be, that such cost savings will be realizable during the entirety of such Test
Period, or such additional costs, as applicable, will be incurred during the
entirety of such Test Period; provided
further that any such pro forma increase or decrease to such
Acquired EBITDA or such Consolidated EBITDA, as the case may be, shall be
without duplication for cost savings or additional costs already included in
such Acquired EBITDA or such Consolidated EBITDA, as the case may be, for such
Test Period.


 


“Pro Forma Balance Sheet” has the meaning
set forth in Section 5.05(a)(ii).


 


“Pro Forma Basis”, “Pro Forma Compliance” and “Pro Forma Effect” mean, with respect to
compliance with any test or covenant hereunder, that (A) to the extent
applicable, the Pro Forma Adjustment shall have been made and (B) all
Specified Transactions and the following transactions in connection therewith
shall be deemed to have occurred as of the first


 


39

















 


day
of the applicable period of measurement in such test or covenant:  (a) income statement items (whether
positive or negative) attributable to the property or Person subject to such
Specified Transaction, (i) in the case of a Disposition of all or
substantially all Equity Interests in any Subsidiary of the Company owned by
the Company or any of its Subsidiaries or any division, product line, or
facility used for operations of the Company or any of its Subsidiaries, shall
be excluded, and (ii) in the case of a Permitted Acquisition or Investment
described in the definition of “Specified Transaction”, shall be included, (b) any
retirement of Indebtedness and (c) any Indebtedness incurred or assumed by
the Company or any of the Restricted Subsidiaries in connection therewith and
if such Indebtedness has a floating or formula rate, shall have an implied rate
of interest for the applicable period for purposes of this definition determined
by utilizing the rate which is or would be in effect with respect to such
Indebtedness as at the relevant date of determination; provided that, without limiting the
application of the Pro Forma Adjustment pursuant to clause (A) above (but
without duplication thereof), the foregoing pro forma adjustments may be
applied to any such test or covenant solely to the extent that such adjustments
are consistent with the definition of Consolidated EBITDA and give effect to
events (including operating expense reductions) that are (i) in the
reasonable good faith determination of the Company (x) directly
attributable to such transaction and (y) factually supportable or (ii) otherwise
consistent with the definition of Pro Forma Adjustment.


 


“Pro Rata Share” means, with respect to each
Lender at any time a fraction (expressed as a percentage, carried out to the
ninth decimal place), the numerator of which is the amount of the Commitments
(or, in the case of the Term Facility, outstanding Term Loans) of such Lender
under the applicable Facility or Facilities at such time and the denominator of
which is the amount of the Aggregate Commitments (or, in the case of the Term
Facility, aggregate outstanding Term Loans) under the applicable Facility or
Facilities at such time; provided
that (if applicable) if such Commitments have been terminated, then the Pro
Rata Share of each Lender shall be determined based on the Pro Rata Share of
such Lender immediately prior to such termination and after giving effect to
any subsequent assignments made pursuant to the terms hereof.


 


“Projections” shall have the meaning set
forth in Section 6.01(c).


 


“Purchase Agreement” means the Agreement and
Plan of Merger, dated as of November 16, 2006, among Holdings, Acquisition
Co and Reader’s Digest.


 


“Purchase Price” means the total funds
required to consummate the Acquisitions.


 


“Qualified Equity Interests” means any
Equity Interests that are not Disqualified Equity Interests.


 


“Qualifying IPO” means the issuance by
Holdings or any direct or indirect parent of Holdings of its common Equity
Interests in an underwritten primary public offering for cash (other than a
public offering pursuant to a registration statement on Form S-8) pursuant
to an effective registration statement filed with the SEC in accordance with
the Securities Act (whether alone or in connection with a secondary public
offering).


 


“Reader’s Digest” has the meaning specified
in the introductory paragraph to this Agreement.


 


“Refunding Loans” has the meaning set forth
in Section 2.03(c)(i).


 


40

















 


“Register” has the meaning set forth in Section 10.07(d).


 


“Reportable Event” means any of the events
set forth in Section 4043(c) of ERISA or the regulations issued
thereunder, other than events for which the thirty (30) day notice period has
been waived.


 


“Request for Credit Extension” means (a) with
respect to a Borrowing, conversion or continuation of U.S. Term Loans, Euro
Term Loans or Revolving Credit Loans, a Committed Loan Notice, (b) with
respect to an L/C Credit Extension, a Letter of Credit Application, and (c) with
respect to a Swing Line Loan, a Swing Line Loan Notice.


 


“Required Lenders” means, as of any date of
determination, Lenders having more than 50% of the sum of the (a) Total
Outstandings (with the aggregate Dollar Amount of each Lender’s risk
participation and funded participation in L/C Obligations and Swing Line Loans
being deemed “held” by such Lender for purposes of this definition), (b) aggregate
unused U.S. Term Commitments, (c) aggregate unused Euro Term Commitments
and (d) aggregate unused Revolving Credit Commitments.


 


“Responsible Officer” means the chief
executive officer, president, chief financial officer, treasurer or controller
or other similar officer of a Loan Party and, as to any document delivered on
the Closing Date, any secretary or assistant secretary of a Loan Party.  Any document delivered hereunder that is
signed by a Responsible Officer of a Loan Party shall be conclusively presumed
to have been authorized by all necessary corporate, partnership and/or other
action on the part of such Loan Party and such Responsible Officer shall be
conclusively presumed to have acted on behalf of such Loan Party.


 


“Restricted Payment” means any dividend or
other distribution (whether in cash, securities or other property) with respect
to any Equity Interest of Holdings, the Company or any Restricted Subsidiary,
or any payment (whether in cash, securities or other property), including any
sinking fund or similar deposit, on account of the purchase, redemption,
retirement, defeasance, acquisition, cancellation or termination of any such
Equity Interest, or on account of any return of capital to Holdings or the
Company’s stockholders, partners or members (or the equivalent Persons
thereof).


 


“Restricted Subsidiary” means any Subsidiary
of the Company other than an Unrestricted Subsidiary.


 


“Revolving Commitment Increase” has the
meaning set forth in Section 2.14(a).


 


“Revolving Commitment Increase Lender” has
the meaning set forth in Section 2.14(a).


 


“Revolving Credit Borrowing” means a
borrowing consisting of simultaneous Revolving Credit Loans of the same Type
and, in the case of Eurocurrency Rate Loans, having the same Interest Period
made by each of the Revolving Credit Lenders pursuant to Section 2.01(b).


 


“Revolving Credit Commitments” means, as to
each Revolving Credit Lender, its obligation to (a) make Revolving Credit
Loans to the Company pursuant to Section 2.01(b), (b) purchase
participations in L/C Obligations and (c) purchase participations in Swing
Line


 


41

















 


Loans,
in an aggregate principal amount at any one time outstanding not to exceed the
amount set forth, opposite such Lender’s name on Schedule 2.01 under the
caption “Revolving Credit Commitment” or in the Assignment and Assumption
pursuant to which such Lender becomes a party hereto, as applicable, as such
amount may be adjusted from time to time in accordance with this Agreement.  The aggregate Revolving Credit Commitments of
all Revolving Credit Lenders shall be $300,000,000 on the Closing Date, as such
amount may be adjusted from time to time in accordance with this Agreement.


 


“Revolving Credit Exposure” means, as to
each Revolving Credit Lender, the sum of the outstanding principal amount of
such Revolving Credit Lender’s Revolving Credit Loans and its Pro Rata Share of
the L/C Obligations and outstanding Swing Line Loans at such time.


 


“Revolving Credit Facility” means, at any
time, the aggregate amount of the Revolving Credit Lenders’ Revolving Credit
Commitments at such time.


 


“Revolving Credit Lenders” means, at any
time, any Lender that has a Revolving Credit Commitment at such time.


 


“Revolving Credit Loans” has the meaning
specified in Section 2.01(b).


 


“Revolving Credit Note” means a promissory
note of the Company payable to any Revolving Credit Lender, in substantially
the form of Exhibit C-2 hereto, evidencing the aggregate Indebtedness of
the Company to such Revolving Credit Lender resulting from the Revolving Credit
Loans made by such Revolving Credit Lender.


 


“Rollover Amount” has the meaning set forth
in Section 7.14(b).


 


“S&P” means Standard & Poor’s
Ratings Services, a division of The McGraw-Hill Companies, Inc., and any
successor thereto.


 


“Same Day Funds” means (a) with respect
to disbursements and payments in Dollars, immediately available funds, and (b) with
respect to disbursements and payments in an Alternative Currency, same day or
other funds as may be determined by the Administrative Agent to be customary in
the place of disbursement or payment for the settlement of international
banking transactions in the relevant Alternative Currency.


 


“SEC” means the Securities and Exchange
Commission, or any Governmental Authority succeeding to any of its principal
functions.


 


“Secured Hedge Agreement” means any Swap
Contract permitted under Article VII that is entered into by and between
any Loan Party or any Restricted Subsidiary and any Hedge Bank.


 


“Secured Obligations” has the meaning
specified in the Guarantee and Security Agreement.


 


“Secured Parties” means, collectively, the
Administrative Agent, the other Agents, the Lenders, the Hedge Banks, any
Affiliate of a Lender to which Obligations are owed, the Supplemental
Administrative Agent and each co-agent or sub-agent appointed by the
Administrative Agent from time to time pursuant to Section 9.01(c).


 


42

















 


“Securities Act” means the Securities Act of
1933.


 


“Security Agreement Supplement” has the
meaning specified in the Guarantee and Security Agreement.


 


“Senior Subordinated Note Indenture” means
the Indenture entered into by the Company and certain of its Subsidiaries in
connection with the issuance of the Senior Subordinated Notes, together with
all instruments and other agreements entered into by the Company or such
Subsidiaries in connection therewith.


 


“Senior Subordinated Notes” means the
$600,000,000 aggregate principal amount of senior subordinated notes of the
Company issued on the Closing Date pursuant to the Senior Subordinated Note
Indenture.


 


“Sold Entity or Business” has the meaning
set forth in the definition of the term “Consolidated EBITDA”.


 


“Solvent” and “Solvency” mean, with respect to any Person on any date of
determination, that on such date (a) the fair value of the property of
such Person is greater than the total amount of liabilities, including
contingent liabilities, of such Person, (b) the present fair salable value
of the assets of such Person is not less than the amount that will be required
to pay the probable liability of such Person on its debts as they become
absolute and matured, (c) such Person does not intend to, and does not
believe that it will, incur debts or liabilities beyond such Person’s ability
to pay such debts and liabilities as they become absolute and matured and (d) such
Person is not engaged in any business, as conducted on such date and as
proposed to be conducted following such date, for which such Person’s property
would constitute an unreasonably small capital. 
The amount of contingent liabilities at any time shall be computed as
the amount that, in the light of all the facts and circumstances existing at
such time, represents the amount that can reasonably be expected to become an
actual or matured liability.


 


“SPC” has the meaning specified in Section 10.07(h).


 


“Specified Transaction” means, with respect
to any period, any Investment, Disposition, incurrence or repayment of
Indebtedness, Restricted Payment, Subsidiary designation, Incremental U.S. Term
Loan, Incremental Overseas Term Loan or Revolving Commitment Increase that by
the terms of this Agreement requires “Pro Forma Compliance” with a test or
covenant hereunder or requires such test or covenant to be calculated on a “Pro
Forma Basis”.


 


“Sponsors” means Ripplewood Holdings L.L.C.
and its Affiliates, but not including, however, any portfolio companies of any
of the foregoing.


 


“Sponsor Equity Contributions” means,
collectively, (a) the contribution by the Equity Investors of an aggregate
amount of cash of not less than $374,992,909.09 to Holdings, and (b) the
further contribution by Holdings to the Company of any portion of such cash
contribution proceeds not used by Holdings to pay Transaction Expenses.


 


“Statutory Reserve Rate” means a fraction
(expressed as a decimal), the numerator of which is the number one and the
denominator of which is the number one minus the aggregate of the maximum
reserve percentages (including any marginal, special, emergency or supplemental
reserves) expressed as a decimal established by the Board to which the relevant


 


43

















 


Lender
is subject for eurocurrency funding (currently referred to as “Eurocurrency
Liabilities” in Regulation D of the Board).  Such reserve percentages shall include those
imposed pursuant to such Regulation D. 
Eurocurrency Rate Loans shall be deemed to constitute eurocurrency
funding and to be subject to such reserve requirements without benefit of or
credit for proration, exemptions or offsets that may be available from time to
time to any Lender under such Regulation D or any comparable
regulation.  The Statutory Reserve Rate
shall be adjusted automatically on and as of the effective date of any change
in any reserve percentage.


 


“Sterling” means the lawful currency of the
United Kingdom.


 


“Subsidiary” of a Person means a
corporation, partnership, joint venture, limited liability company or other
business entity of which a majority of the shares of securities or other
interests having ordinary voting power for the election of directors or other
governing body (other than securities or interests having such power only by
reason of the happening of a contingency) are at the time beneficially owned
directly, or indirectly through one or more intermediaries, or both, by such
Person.  Unless otherwise specified, all
references herein to a “Subsidiary” or to “Subsidiaries” shall refer to a
Subsidiary or Subsidiaries of the Company, as well as any other entity that,
following the consummation of the Acquisitions, will become a Subsidiary of the
Company.


 


“Successful Consent Solicitation” means a
Consent Solicitation that results in the receipt of consents in respect of an
aggregate amount of Existing Notes necessary to modify the Existing Note
Indenture to remove any provisions thereof that would restrict or prohibit the
Transactions or the entering into of the Loan Documents or the Senior
Subordinated Note Indenture.


 


“Supplemental Administrative Agent” has the
meaning specified in Section 9.13 and “Supplemental Administrative Agents”
shall have the corresponding meaning.


 


“Swap Contract” means (a) any and all
rate swap transactions, basis swaps, credit derivative transactions, forward
rate transactions, commodity swaps, commodity options, forward commodity
contracts, equity or equity index swaps or options, bond or bond price or bond
index swaps or options or forward bond or forward bond price or forward bond
index transactions, interest rate options, forward foreign exchange
transactions, cap transactions, floor transactions, collar transactions,
currency swap transactions, cross-currency rate swap transactions, currency
options, spot contracts, or any other similar transactions or any combination
of any of the foregoing (including any options to enter into any of the
foregoing), whether or not any such transaction is governed by or subject to
any master agreement, and (b) any and all transactions of any kind, and
the related confirmations, which are subject to the terms and conditions of, or
governed by, any form of master agreement published by the International Swaps
and Derivatives Association, Inc., any International Foreign Exchange
Master Agreement, or any other master agreement (any such master agreement,
together with any related schedules, a “Master
Agreement”), including any such obligations or liabilities under any
Master Agreement.


 


“Swap Termination Value” means, in respect
of any one or more Swap Contracts, after taking into account the effect of any
legally enforceable netting agreement relating to such Swap Contracts, (a) for
any date on or after the date such Swap Contracts have been closed out and
termination value(s) determined in accordance therewith, such termination
value(s), and (b) for any date prior to the date referenced in clause (a),
the amount(s) determined as the mark-to-market value(s) for such Swap
Contracts, as determined based upon one or more


 


44
















 


mid-market
or other readily available quotations provided by any recognized dealer in such
Swap Contracts (which may include a Lender or any Affiliate of a Lender).


 


“Swing Line Borrowing” means a borrowing of
a Swing Line Loan pursuant to Section 2.04.


 


“Swing Line Facility” means the revolving
credit facility made available by the Swing Line Lender pursuant to Section 2.04.


 


“Swing Line Lender” means JPMorgan Chase
Bank, in its capacity as provider of Swing Line Loans, or any successor swing
line lender hereunder.


 


“Swing Line Loan” has the meaning specified
in Section 2.04(a).


 


“Swing Line Loan Notice” means a notice of a
Swing Line Borrowing pursuant to Section 2.04(b), which, if in writing,
shall be substantially in the form of Exhibit B.


 


“Swing Line Obligations” means, as at any
date of determination, the aggregate principal amount of all Swing Line Loans
outstanding.


 


“Swing Line Sublimit” means an amount equal
to the lesser of (a) $30,000,000 and (b) the aggregate amount of the
Revolving Credit Commitments.  The Swing
Line Sublimit is part of, and not in addition to, the Revolving Credit
Commitments.


 


“TARGET Day” means any day on which the
Trans-European Automated Real-time Gross Settlement Express Transfer (TARGET)
payment system (or, if such payment system ceases to be operative, such other
payment system (if any) determined by the Administrative Agent to be a suitable
replacement) is open for the settlement of payments in Euro.


 


“Tax Confirmation” has the meaning specified
in Section 10.24.


 


“Taxes” has the meaning specified in Section 3.01(a).


 


“Term Borrowing” means a borrowing
consisting of simultaneous Term Loans of the same Type and currency and, in the
case of Eurocurrency Rate Loans, having the same Interest Period made by each
of the Term Lenders pursuant to Section 2.01.


 


“Term Commitment” means a U.S. Term
Commitment or a Euro Term Commitment, as the context may require.


 


“Term Lender” means a U.S. Term Lender or a
Euro Term Lender, as the context may require.


 


“Term Loan” means a U.S. Term Loan or a Euro
Term Loan, as the context may require.


 


“Term Note” means a U.S. Term Note or Euro
Term Note, as the context may require.


 


“Test Period” means, for any determination
under this Agreement, the four consecutive fiscal quarters of the Company then
last ended.


 


45

















 


“Threshold Amount” means $20,000,000.


 


“Total Leverage Ratio” means, with respect
to any Test Period, the ratio as of the last day of such Test Period of (a) Consolidated
Total Debt as of the last day of such Test Period to (b) Consolidated
EBITDA for such Test Period.


 


“Total Outstandings” means the aggregate
Outstanding Amount of all Loans and all L/C Obligations.


 


“Tranche” means a category of Commitments or
Credit Extensions thereunder.  For
purposes hereof, each of the following comprises a separate Tranche:  (a) the unused Revolving Commitments, (b) the
outstanding Revolving Credit Loans and L/C Obligations in respect of Letters of
Credit, (c) the outstanding U.S. Term Loans and (d) the outstanding
Euro Term Loans.


 


“Transaction” means, collectively, (a) the
Sponsor Equity Contributions, (b) the Acquisition, (c) the Merger, (d) the
DH Acquisition, (e) the WRC Acquisition, (f) the issuance of the
Senior Subordinated Notes, (g) the issuance of the Holdings PIK Preferred,
(h) the issuance of the Holdings Common Equity, (i) the funding of
the Term Loans, (j) the consummation of a Successful Consent Solicitation
or a Defeasance, (k) the repayment, repurchase or redemption of certain outstanding
Indebtedness of Reader’s Digest, WRC Media and Direct Holdings, (l) the
consummation of any other transactions in connection with the foregoing and (m) the
payment of fees and expenses incurred in connection with any of the foregoing.


 


“Transaction Expenses” means any fees or
expenses incurred or paid by Holdings, the Company or any Restricted Subsidiary
in connection with the Transaction, this Agreement and the other Loan Documents
and the transactions contemplated hereby and thereby.


 


“Type” means, with respect to a Loan
denominated in Dollars, its character as a Base Rate Loan or a Eurocurrency
Rate Loan.


 


“Unaudited Financial Statements” means (i) the
unaudited consolidated balance sheets and related statements of income,
stockholders’ equity and cash flows of Reader’s Digest and Direct Holdings and
their respective Subsidiaries for each subsequent fiscal quarter ended after
the fiscal year ended June 30, 2006 and June 24, 2006, respectively,
for which such financial statements are available (and which are publicly
available, in the case of Reader’s Digest) prior to the Closing Date, and (ii) the
unaudited consolidated balance sheets and related statements of income,
stockholders’ equity and cash flows of WRC Media and its Subsidiaries for each
subsequent fiscal quarter ended after the fiscal year ended December 31,
2006, for which such financial statements are available prior to the Closing
Date.


 


“Uniform Commercial Code” means the Uniform
Commercial Code as the same may from time to time be in effect in the State of
New York or the Uniform Commercial Code (or similar code or statute) of another
jurisdiction, to the extent it may be required to apply to any item or items of
Collateral.


 


“United States” and “U.S.” mean the United
States of America.


 


“Unreimbursed Amount” has the meaning set
forth in Section 2.03(c)(i).


 


46

















 


“Unrestricted Subsidiary” means (i) each
Subsidiary of the Company listed on Schedule 1.01G and (ii) any Subsidiary
of the Company designated by the board of directors of Holdings as an
Unrestricted Subsidiary pursuant to Section 6.15 subsequent to the date
hereof.


 


“U.S. Guarantees” has the meaning set forth
in the definition of “Collateral and Guarantee Requirement”.


 


“U.S. Guarantor” has the meaning set forth
in the definition of “Collateral and Guarantee Requirement”.


 


“U.S. Lender” has the meaning set forth in Section 10.15(b).


 


“U.S.  Refinanced
Term Loans” has the meaning specified in Section 10.01.


 


“U.S.  Replacement
Term Loans” has the meaning specified in Section 10.01.


 


“U.S.  Term
Commitment” means, as to each U.S. Term Lender, its obligation to
make a U.S. Term Loan to the Company pursuant to Section 2.01(a) in
an aggregate Dollar Amount not to exceed the amount set forth opposite such
Lender’s name on Schedule 2.01 under the caption “U.S. Term Commitment” or
in the Assignment and Assumption pursuant to which such U.S. Term Lender
becomes a party hereto, as applicable, as such amount may be adjusted from time
to time in accordance with this Agreement. 
The initial aggregate amount of the Term Commitments is $1,210,000,000.


 


“U.S. Term Lender” means, at any time, any
Lender that has a U.S. Term Commitment or a U.S. Term Loan at such time.


 


“U.S.  Term
Loan” means a Loan made pursuant to Section 2.01(a).


 


“U.S.  Term
Note” means a promissory note of the Company payable to any U.S.
Term Lender, in substantially the form of Exhibit C-1 hereto, evidencing
the aggregate Indebtedness of the Company to such U.S. Term Lender resulting from
the U.S. Term Loans made by such U.S. Term Lender.


 


“Weighted Average Life to Maturity” means,
when applied to any Indebtedness at any date, the number of years obtained by
dividing:  (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment; by (ii) the then
outstanding principal amount of such Indebtedness.


 


“wholly owned” means, with respect to a
Subsidiary of a Person, a Subsidiary of such Person all of the outstanding
Equity Interests of which (other than (x) director’s qualifying shares and
(y) shares issued to foreign nationals to the extent required by
applicable Law) are owned by such Person and/or by one or more wholly owned
Subsidiaries of such Person.


 


“WRC Acquisition” has the meaning set forth
in the preliminary statements to this Agreement.


 


47
















 


“WRC Acquisition Agreement” means the
Agreement and Plan of Merger, dated as of January 23, 2007, among RDA
Holding Co., WRC Acquisition Co. and WRC Media Inc.


 


“WRC Media” has the meaning set forth in the
preliminary statements to this Agreement.


 


SECTION 1.02.  Other Interpretive Provisions.  With
reference to this Agreement and each other Loan Document, unless otherwise
specified herein or in such other Loan Document:


 


(a)  The
meanings of defined terms are equally applicable to the singular and plural forms
of the defined terms.


 


(b)  (i)  The
words “herein,” “hereto,” “hereof” and “hereunder” and words of similar import
when used in any Loan Document shall refer to such Loan Document as a whole and
not to any particular provision thereof.


 


(ii)  Article, Section, Exhibit and
Schedule references are to the Loan Document in which such reference appears.


 


(iii)  The term “including” is by way of
example and not limitation.


 


(iv)  The term “documents” includes any
and all instruments, documents, agreements, certificates, notices, reports,
financial statements and other writings, however evidenced, whether in physical
or electronic form.


 


(c)  In
the computation of periods of time from a specified date to a later specified
date, the word “from” means “from and including;” the words “to” and “until”
each mean “to but excluding;” and the word “through” means “to and including.”


 


(d)  Section headings
herein and in the other Loan Documents are included for convenience of
reference only and shall not affect the interpretation of this Agreement or any
other Loan Document.


 


SECTION 1.03.  Accounting Terms.  (a)  All
accounting terms not specifically or completely defined herein shall be
construed in conformity with, and all financial data (including financial
ratios and other financial calculations) required to be submitted pursuant to
this Agreement shall be prepared in conformity with, GAAP, applied in a manner
consistent with that used in preparing the Audited Financial Statements, except
as otherwise specifically prescribed herein.


 


(b)  Notwithstanding
anything to the contrary herein, for purposes of determining compliance with
any test or covenant contained in this Agreement with respect to any period
during which any Specified Transaction occurs, the Total Leverage Ratio shall
be calculated with respect to such period and such Specified Transaction on a
Pro Forma Basis.  To the extent that any
provision of any Loan Document requires or tests for Pro Forma Compliance with Section 7.10
prior to the first test date set forth in Section 7.10, such provision
shall be deemed to refer to the first covenant level set forth therein.


 


SECTION 1.04.  Rounding.  Any financial ratios required
to be maintained by the Company pursuant to this Agreement (or required to be
satisfied in order for a specific action to


 


48

















 


be
permitted under this Agreement) shall be calculated by dividing the appropriate
component by the other component, carrying the result to one place more than the
number of places by which such ratio is expressed herein and rounding the
result up or down to the nearest number (with a rounding-up if there is no
nearest number).


 


SECTION 1.05.  References to Agreements, Laws, Etc.  Unless otherwise expressly
provided herein, (a) references to Organization Documents, agreements
(including the Loan Documents) and other contractual instruments shall be
deemed to include all subsequent amendments, restatements, extensions,
supplements and other modifications thereto, but only to the extent that such
amendments, restatements, extensions, supplements and other modifications are
permitted by any Loan Document; and (b) references to any Law shall
include all statutory and regulatory provisions consolidating, amending,
replacing, supplementing or interpreting such Law.


 


SECTION 1.06.  Times of Day.  Unless otherwise specified, all
references herein to times of day shall be references to Eastern time (daylight
or standard, as applicable).


 


SECTION 1.07.  Timing of Payment of Performance.  When the payment of any
obligation or the performance of any covenant, duty or obligation is stated to
be due or performance required on a day which is not a Business Day, the date
of such payment (other than as described in the definition of Interest Period)
or performance shall extend to the immediately succeeding Business Day.


 


SECTION 1.08.  Currency Equivalents Generally.  (a)  Any
amount specified in this Agreement (other than in Articles II, IX and X or as
set forth in paragraph (b) of this Section) or any of the other Loan
Documents to be in Dollars shall also include the equivalent of such amount in
any currency other than Dollars, such equivalent amount to be determined at the
rate of exchange quoted by the Reuters World Currency Page for the
applicable currency at 11:00 a.m. (London time) on such day (or, in the
event such rate does not appear on any Reuters World Currency Page, by
reference to such other publicly available service for displaying exchange
rates as may be agreed upon by the Administrative Agent and the Company, or, in
the absence of such agreement, such rate shall instead be the arithmetic
average of the spot rates of exchange of the Administrative Agent in the market
where its foreign currency exchange operations in respect of such currency are
then being conducted, at or about 10:00 a.m. (New York City time) on such
date for the purchase of Dollars for delivery two Business Days
later).  Notwithstanding the foregoing,
for purposes of determining compliance with Sections 7.01, 7.02 and 7.03 with
respect to any amount of Indebtedness or Investment in a currency other than
Dollars, no Default shall be deemed to have occurred solely as a result of
changes in rates of exchange occurring after the time such Indebtedness or Investment
is incurred; provided that, for
the avoidance of doubt, the foregoing provisions of this Section 1.08
shall otherwise apply to such Sections, including with respect to determining
whether any Indebtedness or Investment may be incurred at any time under such
Sections.


 


(b)  For
purposes of determining compliance under Sections 7.02, 7.05, 7.06, 7.10 and
7.14, any amount in a currency other than Dollars will be converted to Dollars
based on the average Exchange Rate for such currency for the most recent
twelve-month period immediately prior to the date of determination determined
in a manner consistent with that used in calculating EBITDA for the applicable
period, provided, however, that
the foregoing shall not be deemed to apply to the determination of any amount
of Indebtedness.  For purposes of
determining compliance with Section 7.10, (i) the Dollar Amount of
the Euro Term Loans will be determined based on the Exchange Rate in effect on
the Closing Date, (ii) the Dollar Amount of any 


 


49

















 


Incremental Overseas Term
Loans will be determined based on the Exchange Rate in effect on the applicable
Incremental Overseas Facility Closing Date and (iii) the equivalent in
Dollars of any other Indebtedness denominated in a currency other than Dollars
will reflect the currency translation effects, determined in accordance with
GAAP, of Swap Contracts for currency exchange risks with respect to the
applicable currency in effect on the date of determination of the Dollar
equivalent of such other Indebtedness.


 


(c)  For
all purposes under this Agreement, the Administrative Agent shall determine the
Dollar Amount of each Alternative Currency Loan as of the Closing Date, in the
case of any Euro Term Loan, and as of the relevant Incremental Overseas Closing
Date, in the case of any other Alternative Currency Loan.  Each such determination shall be based on the
Exchange Rate on or about the date of the related initial Committed Loan Notice.  Notwithstanding the foregoing, the Exchange
Rate applicable to the Euro Term Loans on the Closing Date shall be deemed to
be 1.3206.


 


SECTION 1.09.  Change of Currency.  Each
provision of this Agreement shall be subject to such reasonable changes of
construction as the Administrative Agent may from time to time specify with the
Company’s consent to appropriately reflect a change in currency of any country
and any relevant market conventions or practices relating to such change in
currency.


 


ARTICLE II


 


THE COMMITMENTS AND CREDIT EXTENSIONS


 


SECTION 2.01.  The Loans.  (a)  The U.S. Term Borrowings.  Subject to the terms and conditions set forth
herein, each U.S. Term Lender severally agrees to make to the Company a single
loan denominated in Dollars in a Dollar Amount equal to such U.S. Term Lender’s
U.S. Term Commitment on the Closing Date. 
Amounts borrowed under this Section 2.01(a) and repaid or
prepaid may not be reborrowed.  U.S. Term
Loans may be Base Rate Loans or Eurocurrency Rate Loans, as further provided
herein.


 


(b)  The Revolving Credit Borrowings.  Subject to the terms and conditions set forth
herein, each Revolving Credit Lender severally agrees to make loans denominated
in Dollars to the Company as elected by the Company pursuant to Section 2.02
(each such loan, a “Revolving Credit Loan”)
from time to time, on any Business Day until the Maturity Date, in an aggregate
principal amount not to exceed at any time outstanding the amount of such
Lender’s Revolving Credit Commitment; provided
that (i) after giving effect to any Revolving Credit Borrowing, the amount
of the Revolving Credit Exposure of any Lender shall not exceed such Lender’s
Revolving Credit Commitment, and (ii) the aggregate principal amount of
Revolving Credit Loans made on the Closing Date shall not exceed $10,000,000.  Within the limits of each Lender’s Revolving
Credit Commitment, and subject to the other terms and conditions hereof, the
Company may borrow under this Section 2.01(b), prepay under Section 2.05,
and reborrow under this Section 2.01(b). 
Revolving Credit Loans may be Base Rate Loans or Eurocurrency Rate
Loans, as further provided herein.


 


(c)  The Euro Term Borrowings.  Subject to the terms and conditions set forth
herein, each Euro Term Lender severally agrees to make to the German Borrower a
single loan denominated in Euros in a Dollar Amount equal to such Euro Term
Lender’s Euro Term Commitment on the Closing Date.  Amounts borrowed under this Section 2.01(c) and
repaid or prepaid may not be reborrowed. 
Euro Term Loans must be Eurocurrency Rate Loans, as further provided
herein.


 


50

















 


SECTION 2.02.  Borrowings, Conversions and
Continuations of Loans.  (a)  Each Term
Borrowing, each Revolving Credit Borrowing, each conversion of Term Loans or
Revolving Credit Loans from one Type to the other, and each continuation of
Eurocurrency Rate Loans shall be made upon the relevant Borrower’s notice to
the Administrative Agent, which may be given by telephone.  Each such notice must be received by the
Administrative Agent not later than (i) 12:30 p.m. (New York time or
London time in the case of any Borrowing denominated in an Alternative
Currency) three (3) Business Days prior to the requested date of any
Borrowing or continuation of Eurocurrency Rate Loans or any conversion of Base
Rate Loans to Eurocurrency Rate Loans, and (ii) 11:00 a.m. (New York
time) on the requested date of any Borrowing of Base Rate Loans.  Each telephonic notice by the relevant
Borrower pursuant to this Section 2.02(a) must be confirmed promptly
by delivery to the Administrative Agent of a written Committed Loan Notice,
appropriately completed and signed by a Responsible Officer of such
Borrower.  Each Borrowing of, conversion
to or continuation of Eurocurrency Rate Loans shall be in a principal amount of
$5,000,000 or a whole multiple of $1,000,000 in excess thereof (or comparable
amounts determined by the Administrative Agent in the case of Alternative
Currency Loans).  Except as provided in
Sections 2.03(c) and 2.04(c), each Borrowing of or conversion to Base Rate
Loans shall be in a principal amount of $1,000,000 or a whole multiple of
$500,000 in excess thereof.  Each
Committed Loan Notice (whether telephonic or written) shall specify (i) whether
the relevant Borrower is requesting a Term Borrowing, a Revolving Credit
Borrowing, a conversion of U.S. Term Loans or Revolving Credit Loans from one
Type to the other, or a continuation of Eurocurrency Rate Loans, (ii) the
requested date of the Borrowing, conversion or continuation, as the case may be
(which shall be a Business Day), (iii) the principal amount of Loans to be
borrowed, converted or continued, (iv) the currency in which the Loans to
be borrowed are to be denominated, (v) the Type of Loans to be borrowed or
to which existing Term Loans or Revolving Credit Loans are to be converted, and
(vi) if applicable, the duration of the Interest Period with respect
thereto.  If with respect to Loans
denominated in Dollars the Company fails to specify a Type of Loan in a
Committed Loan Notice or fails to give a timely notice requesting a conversion
or continuation, then the applicable Term Loans or Revolving Credit Loans shall
be made as, or converted to, Base Rate Loans. 
Any such automatic conversion to Base Rate Loans shall be effective as
of the last day of the Interest Period then in effect with respect to the
applicable Eurocurrency Rate Loans.  If
the relevant Borrower requests a Borrowing of, conversion to, or continuation
of Eurocurrency Rate Loans in any such Committed Loan Notice, but fails to
specify an Interest Period (or fails to give a timely notice requesting a
continuation of Eurocurrency Rate Loans denominated in an Alternative
Currency), it will be deemed to have specified an Interest Period of one (1) month.


 


(b)  Following
receipt of a Committed Loan Notice, the Administrative Agent shall promptly
notify each Lender of the amount of its Pro Rata Share of the applicable Class of
Loans, and if no timely notice of a conversion or continuation is provided by
the Company, the Administrative Agent shall notify each Lender of the details
of any automatic conversion to Base Rate Loans or continuation described in Section 2.02(a).  In the case of each Borrowing, each
Appropriate Lender shall make the amount of its Loan available to the Administrative
Agent in Same Day Funds at the Administrative Agent’s Office for the applicable
currency not later than 1:00 p.m. (New York time) on the Business Day
specified in the applicable Committed Loan Notice.  Upon satisfaction of the applicable conditions
set forth in Section 4.02 (and, if such Borrowing is the initial Credit
Extension, Section 4.01, and, if such Borrowing is made by an Overseas
Borrower, Section 4.03), the Administrative Agent shall make all funds so
received available to the relevant Borrower in like funds as received by the
Administrative Agent either by (i) crediting the account of such Borrower
on the books of JPMorgan Chase Bank with the amount of such funds or (ii) wire
transfer of such funds, in each case in accordance with instructions provided
to (and reasonably acceptable to) the Administrative Agent by such 


 


51

















 


Borrower; provided that if, on the date the
Committed Loan Notice with respect to such Borrowing is given by the relevant
Borrower, there are Swing Line Loans or L/C Borrowings outstanding, then the
proceeds of such Borrowing shall be applied, first, to the payment in full of
any such L/C Borrowings, second, to the payment in full of any such Swing Line
Loans, and third, to the relevant Borrower as provided above.


 


(c)  Except
as otherwise provided herein, a Eurocurrency Rate Loan may be continued or
converted only on the last day of an Interest Period for such Eurocurrency Rate
Loan unless the Company pays the amount due, if any, under Section 3.05 in
connection therewith.


 


(d)  The
Administrative Agent shall promptly notify the Company and the Lenders of the
interest rate applicable to any Interest Period for Eurocurrency Rate Loans
upon determination of such interest rate. 
The determination of the Eurocurrency Rate by the Administrative Agent
shall be conclusive in the absence of manifest error.  At any time that Base Rate Loans are
outstanding, the Administrative Agent shall notify the Company and the Lenders
of any change in JPMorgan Chase Bank prime rate used in determining the Base
Rate promptly following the public announcement of such change.


 


(e)  After
giving effect to all Term Borrowings, all Revolving Credit Borrowings, all
conversions of Term Loans or Revolving Credit Loans from one Type to the other,
and all continuations of Term Loans or Revolving Credit Loans as the same Type,
there shall not be more than twenty (20) Interest Periods in effect.


 


(f)  The
failure of any Lender to make the Loan to be made by it as part of any
Borrowing shall not relieve any other Lender of its obligation, if any,
hereunder to make its Loan on the date of such Borrowing, but no Lender shall
be responsible for the failure of any other Lender to make the Loan to be made
by such other Lender on the date of any Borrowing.


 


SECTION 2.03.  Letters of Credit.  (a)  The Letter of Credit Commitment.  (i)    On and after the Closing Date, each Existing
Letter of Credit will constitute a Letter of Credit under this Agreement and
for purposes hereof will be deemed to have been issued on the Closing
Date.  Subject to the terms and
conditions set forth herein, (A) each L/C Issuer agrees, in reliance upon
the agreements of the other Revolving Credit Lenders set forth in this Section 2.03,
(1) from time to time on any Business Day during the period from the
Closing Date until the Letter of Credit Expiration Date, to issue Letters of
Credit denominated in Dollars for the account of the Company (provided that any Letter of Credit may be
for the benefit of Holdings or any Subsidiary of the Company) and to amend or
renew Letters of Credit previously issued by it, in accordance with Section 2.03(b),
and (2) to honor drafts under the Letters of Credit and (B) the
Revolving Credit Lenders severally agree to participate in Letters of Credit
issued pursuant to this Section 2.03; provided
that no L/C Issuer shall be obligated to make any L/C Credit Extension with
respect to any Letter of Credit, and no Lender shall be obligated to
participate in any Letter of Credit to the extent that, as of the date of such
L/C Credit Extension, (x) the amount of the Revolving Credit Exposure of
any Lender would exceed such Lender’s Revolving Credit Commitment or (y) the
Outstanding Amount of the L/C Obligations would exceed the Letter of Credit
Sublimit.  Within the foregoing limits,
and subject to the terms and conditions hereof, the Company’s ability to obtain
Letters of Credit shall be fully revolving, and accordingly the Company may,
during the foregoing period, obtain Letters of Credit to replace Letters of
Credit that have expired or that have been drawn upon and reimbursed.


 


(ii)  An
L/C Issuer shall be under no obligation to issue any Letter of Credit if:


 


52

















 


(A)  any
order, judgment or decree of any Governmental Authority or arbitrator shall by
its terms purport to enjoin or restrain such L/C Issuer from issuing such
Letter of Credit, or any Law applicable to such L/C Issuer or any directive
(whether or not having the force of law) from any Governmental Authority with
jurisdiction over such L/C Issuer shall prohibit, or direct that such L/C
Issuer refrain from, the issuance of letters of credit generally or such Letter
of Credit in particular; or


 


(B)  the
issuance of such Letter of Credit would violate any Laws binding upon such L/C
Issuer.


 


(iii)  Each
Letter of Credit shall, unless otherwise agreed by the applicable L/C Issuer
and subject to Section 2.03(b)(iii), expire no later than the earlier of (x) twelve
months after the date of issuance or last renewal and (y) unless Cash
Collateralized prior to the Letter of Credit Expiration Date, the Letter of
Credit Expiration Date.  An L/C Issuer
shall be under no obligation to amend any Letter of Credit if (A) such L/C
Issuer would have no obligation at such time to issue such Letter of Credit in
its amended form under the terms hereof, or (B) the beneficiary of such
Letter of Credit does not accept the proposed amendment to such Letter of
Credit.


 


(b)  Procedures for Issuance and Amendment of Letters of
Credit; Auto-Renewal Letters of
Credit.  (i)  Each
Letter of Credit shall be issued or amended, as the case may be, upon the
request of the Company delivered to an L/C Issuer (with a copy to the
Administrative Agent) in the form of a Letter of Credit Application,
appropriately completed and signed by a Responsible Officer of the
Company.  Such Letter of Credit
Application must be received by the relevant L/C Issuer and the Administrative
Agent not later than 12:30 p.m. at least three (3) Business Days
prior to the proposed issuance date or date of amendment, as the case may be;
or, in each case, such later date and time as the relevant L/C Issuer may
agree in a particular instance in its sole discretion.  In the case of a request for an initial
issuance of a Letter of Credit, such Letter of Credit Application shall specify
in form and detail reasonably satisfactory to the relevant L/C Issuer:  (a) the proposed issuance date of the
requested Letter of Credit (which shall be a Business Day); (b) the amount
thereof; (c) the expiry date thereof; (d) the name and address of the
beneficiary thereof; (e) the documents to be presented by such beneficiary
in case of any drawing thereunder; (f) the full text of any certificate to
be presented by such beneficiary in case of any drawing thereunder; and (g) such
other matters as the relevant L/C Issuer may reasonably request.  In the case of a request for an amendment of
any outstanding Letter of Credit, such Letter of Credit Application shall specify
in form and detail reasonably satisfactory to the relevant L/C Issuer (1) the
Letter of Credit to be amended; (2) the proposed date of amendment thereof
(which shall be a Business Day); (3) the nature of the proposed amendment;
and (4) such other matters as the relevant L/C Issuer may reasonably
request.


 


(ii)  Promptly
after receipt of any Letter of Credit Application, the relevant L/C Issuer
will confirm with the Administrative Agent (by telephone or in writing) that
the Administrative Agent has received a copy of such Letter of Credit
Application from the Company and, if not, such L/C Issuer will provide the
Administrative Agent with a copy thereof. 
Upon receipt by the relevant L/C Issuer of confirmation from the
Administrative Agent that the requested issuance or amendment is permitted in
accordance with the terms hereof, then, subject to the terms and conditions
hereof, such L/C Issuer shall, on the requested date, issue a Letter of Credit
for the account of the Company or enter into the applicable amendment, as the
case may be.  Immediately upon the
issuance of each Letter of Credit, each Revolving Credit Lender shall be deemed
to, and hereby irrevocably and unconditionally agrees to, purchase from the
relevant L/C Issuer a risk participation in such Letter of Credit in an amount
equal to the product of such Lender’s Pro Rata Share times the amount of such
Letter of Credit.


 


53
















 


(iii)  If
the Company so requests in any applicable Letter of Credit Application, the
relevant L/C Issuer shall agree to issue a Letter of Credit that has automatic
renewal provisions (each, an “Auto-Renewal
Letter of Credit”); provided that
any such Auto-Renewal Letter of Credit must permit the relevant L/C Issuer to
prevent any such renewal at least once in each twelve month period (commencing
with the date of issuance of such Letter of Credit) by giving prior notice to
the beneficiary thereof not later than a day (the “Nonrenewal Notice Date”) in each such twelve month period to
be agreed upon at the time such Letter of Credit is issued.  Unless otherwise directed by the relevant L/C
Issuer, the Company shall not be required to make a specific request to the
relevant L/C Issuer for any such renewal. 
Once an Auto-Renewal Letter of Credit has been issued, the Lenders shall
be deemed to have authorized (but may not require) the relevant L/C Issuer to
permit the renewal of such Letter of Credit at any time to an expiry date not
later than the Letter of Credit Expiration Date; provided that the relevant L/C Issuer shall not permit any
such renewal if (A) the relevant L/C Issuer has determined that it would
have no obligation at such time to issue such Letter of Credit in its renewed
form under the terms hereof (by reason of the provisions of Section 2.03(a)(ii) or
Section 2.03(a)(iii) or otherwise), or (B) it has received
notice (which may be by telephone or in writing) on or before the day that is
five (5) Business Days before the Nonrenewal Notice Date from the
Administrative Agent, any Revolving Credit Lender or the Company that one or
more of the applicable conditions specified in Section 4.02 is not then
satisfied.


 


(iv)  Promptly
after its delivery of any Letter of Credit or any amendment to a Letter of
Credit to an advising bank with respect thereto or to the beneficiary thereof,
the relevant L/C Issuer will also deliver to the Company and the Administrative
Agent a true and complete copy of such Letter of Credit or amendment.


 


(c)  Drawings and Reimbursements; Funding of Participations.  (i)  Upon receipt from the
beneficiary of any Letter of Credit of any notice of a drawing under such
Letter of Credit, the relevant L/C Issuer shall notify promptly the Company and
the Administrative Agent thereof.  Not
later than 1:00 p.m. on (x) if notice that a payment is made on any
date by an L/C Issuer under a Letter of Credit is received by the Company on or
before 11:00 a.m. (New York time), the Business Day immediately following
such date or (y) if notice that a payment is made on any date by an L/C
Issuer under a Letter of Credit is received by the Company later than 11:00 a.m.
(New York time), the second Business Day immediately following such date (each
such date, an “Honor Date”), the
Company shall reimburse such L/C Issuer through the Administrative Agent in an
amount equal to the amount of such drawing. 
In order to reimburse any such drawing, the Company shall have the
option to request in accordance with Section 2.02 a Revolving Credit
Borrowing of Base Rate Loans (“Refunding
Loans”), without regard to the minimum and multiples specified in Section 2.02
for the principal amount of Base Rate Loans but subject to the amount of the
unutilized portion of the Revolving Credit Commitments of the Revolving Credit
Lenders and the conditions set forth in Section 4.02.  If the Company fails to so reimburse such L/C
Issuer by such time, the Administrative Agent shall promptly notify each
Revolving Credit Lender of the Honor Date, the amount of the unreimbursed
drawing (the “Unreimbursed Amount”),
and the amount of such Revolving Credit Lender’s Pro Rata Share thereof.  Any notice given by an L/C Issuer or the
Administrative Agent pursuant to this Section 2.03(c)(i) may be given
by telephone if immediately confirmed in writing; provided that the lack of such an immediate confirmation
shall not affect the conclusiveness or binding effect of such notice.


 


(ii)  Each
Revolving Credit Lender (including any Lender acting as an L/C Issuer) shall,
upon any notice pursuant to Section 2.03(c)(i) to make a Refunding
Loan to the Company, make such funds available to the Administrative Agent for
the account of the relevant L/C Issuer, in Dollars, at the Administrative
Agent’s Office for payments not later than 1:00 p.m. on the


 


54

















 


Business Day specified in
such notice by the Company.  The
Administrative Agent shall remit the funds so received to the relevant L/C
Issuer.


 


(iii)  With
respect to any Unreimbursed Amount, the Company shall be deemed to have
incurred from the relevant L/C Issuer an L/C Borrowing in the amount of the
Unreimbursed Amount that is not so refinanced, which L/C Borrowing shall
be due and payable on demand (together with interest) and shall bear interest
at the Default Rate.  In such event, upon
demand by the relevant L/C Issuer (through the Administrative Agent), each
Revolving Credit Lender shall make funds available to the Administrative Agent
for the account of the relevant L/C Issuer, in Dollars, at the Administrative
Agent’s Office for payments in an amount equal to its Pro Rata Share of the
Unreimbursed Amount not later than 1:00 p.m. on the Business Day following
the date of such demand, and such payment to the Administrative Agent for the
account of the relevant L/C Issuer shall be deemed payment in respect of its
participation in such L/C Borrowing and shall constitute an L/C Advance from
such Lender in satisfaction of its participation obligation under this Section 2.03.


 


(iv)  Until
each Revolving Credit Lender funds its L/C Advance pursuant to this Section 2.03(c) to
reimburse the relevant L/C Issuer for any amount drawn under any Letter of
Credit, interest in respect of such Lender’s Pro Rata Share of such amount
shall be solely for the account of the relevant L/C Issuer.


 


(v)  Each
Revolving Credit Lender’s obligation to make Refunding Loans or L/C Advances to
reimburse an L/C Issuer for amounts drawn under Letters of Credit, as
contemplated by this Section 2.03(c), shall be absolute and unconditional
and shall not be affected by any circumstance, including (A) any setoff,
counterclaim, recoupment, defense or other right which such Lender may have
against the relevant L/C Issuer, the Company or any other Person for any reason
whatsoever; (B) the occurrence or continuance of a Default, or (C) any
other occurrence, event or condition, whether or not similar to any of the
foregoing; provided that each
Revolving Credit Lender’s obligation to make Refunding Loans pursuant to this Section 2.03(c) is
subject to the conditions set forth in Section 4.02.  No such making of an L/C Advance shall
relieve or otherwise impair the obligation of the Company to reimburse the
relevant L/C Issuer for the amount of any payment made by such L/C Issuer under
any Letter of Credit, together with interest as provided herein.


 


(vi)  If
any Revolving Credit Lender fails to make available to the Administrative Agent
for the account of the relevant L/C Issuer any amount required to be paid by
such Lender pursuant to the foregoing provisions of this Section 2.03(c) by
the time specified in Section 2.03(c)(iii), such L/C Issuer shall be
entitled to recover from such Lender (acting through the Administrative Agent),
on demand, such amount with interest thereon for the period from the date such
payment is required to the date on which such payment is immediately available
to such L/C Issuer at a rate per annum equal to the Federal Funds Rate
from time to time in effect.  A
certificate of the relevant L/C Issuer submitted to any Revolving Credit Lender
(through the Administrative Agent) with respect to any amounts owing under this
Section 2.03(c)(vi) shall be conclusive absent manifest error.


 


(d)  Repayment of Participations.  (i)  If at any time after an L/C
Issuer has made a payment under any Letter of Credit and has received from any
Revolving Credit Lender such Lender’s L/C Advance in respect of such payment in
accordance with Section 2.03(c), the Administrative Agent receives for the
account of such L/C Issuer any payment in respect of the related Unreimbursed
Amount or interest thereon (whether directly from the Company or otherwise,
including proceeds of Cash Collateral applied thereto by the Administrative
Agent),


 


55

















 


the Administrative Agent
will distribute to such Lender its Pro Rata Share thereof (appropriately
adjusted, in the case of interest payments, to reflect the period of time
during which such Lender’s L/C Advance was outstanding) in the same funds as
those received by the Administrative Agent.


 


(ii)  If
any payment received by the Administrative Agent for the account of an L/C
Issuer pursuant to Section 2.03(c) is required to be returned under
any of the circumstances described in Section 10.06 (including pursuant to
any settlement entered into by such L/C Issuer in its discretion), each
Revolving Credit Lender shall pay to the Administrative Agent for the account
of such L/C Issuer its Pro Rata Share thereof on demand of the Administrative
Agent, plus interest thereon from the date of such demand to the date such
amount is returned by such Lender, at a rate per annum equal to the Federal
Funds Rate from time to time in effect.


 


(e)  Obligations Absolute.  The obligation of the Company to reimburse
the relevant L/C Issuer for each drawing under each Letter of Credit issued by
it and to repay each L/C Borrowing shall be absolute, unconditional and
irrevocable, and shall be paid strictly in accordance with the terms of this
Agreement under all circumstances, including the following:


 


(i)  any
lack of validity or enforceability of such Letter of Credit, this Agreement, or
any other agreement or instrument relating thereto;


 


(ii)  the
existence of any claim, counterclaim, setoff, defense or other right that any
Loan Party may have at any time against any beneficiary or any transferee of
such Letter of Credit (or any Person for whom any such beneficiary or any such
transferee may be acting), the relevant L/C Issuer or any other Person, whether
in connection with this Agreement, the transactions contemplated hereby or by
such Letter of Credit or any agreement or instrument relating thereto, or any
unrelated transaction;


 


(iii)  any
draft, demand, certificate or other document presented under such Letter of
Credit proving to be forged, fraudulent, invalid or insufficient in any respect
or any statement therein being untrue or inaccurate in any respect; or any loss
or delay in the transmission or otherwise of any document required in order to
make a drawing under such Letter of Credit;


 


(iv)  any
payment by the relevant L/C Issuer under such Letter of Credit against
presentation of a draft or certificate that does not strictly comply with the
terms of such Letter of Credit; or any payment made by the relevant L/C Issuer
under such Letter of Credit to any Person purporting to be a trustee in
bankruptcy, debtor-in-possession, assignee for the benefit of creditors,
liquidator, receiver or other representative of or successor to any beneficiary
or any transferee of such Letter of Credit, including any arising in connection
with any proceeding under any Debtor Relief Law;


 


(v)  any
exchange, release or nonperfection of any Collateral, or any release or
amendment or waiver of or consent to departure from the Guarantee under the
Guarantee and Security Agreement or any other guarantee, for all or any of the
Obligations any Loan Party in respect of such Letter of Credit; or


 


(vi)  any
other circumstance or happening whatsoever, whether or not similar to any of
the foregoing, including any other circumstance that might otherwise constitute
a defense available to, or a discharge of, any Loan Party;


 


56

















 


provided that the foregoing shall not excuse any L/C Issuer from liability to
the Company to the extent of any direct damages (as opposed to consequential
damages, claims in respect of which are waived by the Company to the extent
permitted by applicable Law) suffered by the Company that are caused by such
L/C Issuer’s gross negligence or willful misconduct when determining whether
drafts and other documents presented under a Letter of Credit comply with the
terms thereof.


 


(f)  Role of L/C Issuers.  Each Lender and the Company agree that, in
paying any drawing under a Letter of Credit, the relevant L/C Issuer shall not
have any responsibility to obtain any document (other than any sight draft,
certificates and documents expressly required by the Letter of Credit) or to
ascertain or inquire as to the validity or accuracy of any such document or the
authority of the Person executing or delivering any such document.  None of the L/C Issuers, any Agent-Related
Person nor any of the respective correspondents, participants or assignees of
any L/C Issuer shall be liable to any Lender for (i) any action taken or
omitted in connection herewith at the request or with the approval of the
Lenders or the Required Lenders, as applicable; (ii) any action taken or
omitted in the absence of gross negligence or willful misconduct; or (iii) the
due execution, effectiveness, validity or enforceability of any document or
instrument related to any Letter of Credit or Letter of Credit
Application.  The Company hereby assumes
all risks of the acts or omissions of any beneficiary or transferee with
respect to its use of any Letter of Credit; provided
that this assumption is not intended to, and shall not, preclude the Company’s
pursuing such rights and remedies as it may have against the beneficiary or
transferee at law or under any other agreement. 
None of the L/C Issuers, any Agent-Related Person, nor any of the
respective correspondents, participants or assignees of any L/C Issuer, shall
be liable or responsible for any of the matters described in clauses (i) through
(vi) of Section 2.03(e); provided
that anything in such clauses to the contrary notwithstanding, the Company may
have a claim against an L/C Issuer, and such L/C Issuer may be liable to the
Company, to the extent, but only to the extent, of any direct, as opposed to
consequential or exemplary, damages suffered by the Company which the Company
proves were caused by such L/C Issuer’s willful misconduct or gross negligence
or such L/C Issuer’s willful or grossly negligent failure to pay under any
Letter of Credit after the presentation to it by the beneficiary of a sight
draft and certificate(s) strictly complying with the terms and conditions
of a Letter of Credit.  In furtherance
and not in limitation of the foregoing, each L/C Issuer may accept documents
that appear on their face to be in order, without responsibility for further
investigation, regardless of any notice or information to the contrary, and no
L/C Issuer shall be responsible for the validity or sufficiency of any
instrument transferring or assigning or purporting to transfer or assign a
Letter of Credit or the rights or benefits thereunder or proceeds thereof, in
whole or in part, which may prove to be invalid or ineffective for any reason.


 


(g)  Cash Collateral.  (i) If as of the Letter of Credit
Expiration Date, any Letter of Credit may for any reason remain outstanding and
partially or wholly undrawn, (ii) if any Event of Default occurs and is
continuing and the Administrative Agent or the Required Lenders, as applicable,
require the Company to Cash Collateralize the L/C Obligations pursuant to Section 8.02(c) or
(iii) an Event of Default set forth under Section 8.01(f) occurs
and is continuing, then the Company shall Cash Collateralize the then
Outstanding Amount of such Letter of Credit (in the case of clause (i) above)
or of all L/C Obligations (in the case of clauses (ii) and (iii) above)
(in each case, in an amount equal to 102% of such Outstanding Amount), and
shall do so not later than 2:00 p.m., New York City time, on (x) in
the case of the immediately preceding clauses (i) and (ii), (1) the
Business Day that the Company receives notice thereof, if such notice is
received on such day prior to 12:00 Noon, New York City time (which notice, in
the case of clause (i) above, shall not be given prior to the Letter of
Credit Expiration Date), or (2) if clause (1) above does not apply,
the Business Day immediately following the day that the Company receives such


 


57

















 


notice and (y) in the
case of the immediately preceding clause (iii), the Business Day on which an
Event of Default set forth under Section 8.01(f) occurs or, if such
day is not a Business Day, the Business Day immediately succeeding such
day.  For purposes hereof, “Cash Collateralize” means to pledge and
deposit with or deliver to the Administrative Agent, for the benefit of the
relevant L/C Issuer and the Lenders, as collateral for the L/C Obligations,
cash or deposit account balances (“Cash
Collateral”) pursuant to documentation in form and substance
reasonably satisfactory to the Administrative Agent and the relevant L/C Issuer
(which documents are hereby consented to by the Lenders).  Derivatives of such term have corresponding
meanings.  The Company hereby grants to
the Administrative Agent, for the benefit of the L/C Issuers and the Lenders, a
security interest in all such cash, deposit accounts and all balances therein
and all proceeds of the foregoing.  Cash
Collateral shall be maintained in blocked accounts at JPMorgan Chase Bank and
may be invested in readily available Cash Equivalents.  If at any time the Administrative Agent
determines that any funds held as Cash Collateral are subject to any right or
claim of any Person other than the Administrative Agent (on behalf of the
Secured Parties) or that the total amount of such funds is less than 102% of
the aggregate Outstanding Amount of all L/C Obligations, the Company will,
forthwith upon demand by the Administrative Agent, pay to the Administrative
Agent, as additional funds to be deposited and held in the deposit accounts at
JPMorgan Chase Bank as aforesaid, an amount equal to the excess of (a) 102%
of such aggregate Outstanding Amount over (b) the total amount of funds,
if any, then held as Cash Collateral that the Administrative Agent reasonably
determines to be free and clear of any such right and claim.  Upon the drawing of any Letter of Credit for
which funds are on deposit as Cash Collateral, such funds shall be applied, to
the extent permitted under applicable Law, to reimburse the relevant L/C Issuer.  To the extent the amount of any Cash
Collateral exceeds 102% of the then Outstanding Amount of such L/C Obligations
and so long as no Event of Default has occurred and is continuing, the excess
shall be refunded to the Company.  If the
Company is required to provide an amount of Cash Collateral hereunder as a
result of the occurrence of an Event of Default, such amount plus any accrued interest or realized
profits with respect to such amount (to the extent not applied as aforesaid)
shall be returned to the Company within two Business Days after all Events of
Default have been cured or waived. 
Notwithstanding the occurrence of the Letter of Credit Expiration Date,
any full or partial failure by the Company to Cash Collateralize the
Outstanding Amount of any Letter of Credit in the case of clause (i) above
shall operate to continue the several obligations of the Revolving Credit
Lenders to participate in such Letter of Credit (x) to the extent so not
Cash Collateralized and (y) to the extent any such Cash Collateral is
required to be returned to the Company under any of the circumstances described
in Section 10.06 (including pursuant to any settlement entered into by
such L/C Issuer in its discretion), and upon any drawing under such Letter of
Credit, such participations by the Revolving Credit Lenders in any Unreimbursed
Amount shall be deemed to be L/C Borrowings and L/C Advances pursuant to this Section 2.03.


 


(h)  Letter of Credit Fees.  The Company shall pay to the Administrative
Agent for the account of each Revolving Credit Lender in accordance with its
Pro Rata Share a Letter of Credit fee for each Letter of Credit issued pursuant
to this Agreement equal to the Applicable Rate times the daily maximum amount
then available to be drawn under such Letter of Credit (whether or not such
maximum amount is then in effect under such Letter of Credit if such maximum
amount increases periodically pursuant to the terms of such Letter of
Credit).  Such letter of credit fees shall
be computed on a quarterly basis in arrears. 
Such letter of credit fees shall be due and payable in Dollars on the
first Business Day after the end of each March, June, September and
December, commencing with the first such date to occur after the issuance of
such Letter of Credit, on the Letter of Credit Expiration Date and thereafter
on demand.  If there is any change in the
Applicable Rate during any quarter, the daily maximum amount of each Letter of
Credit


 


58

















 


shall be computed and multiplied
by the Applicable Rate separately for each period during such quarter that such
Applicable Rate was in effect.


 


(i)  Fronting Fee and Documentary and Processing Charges
Payable to L/C Issuers.  The
Company shall pay directly to each L/C Issuer for its own account a fronting
fee with respect to each Letter of Credit issued by it equal to 0.125% per
annum of the daily maximum amount then available to be drawn under such Letter
of Credit (whether or not such maximum amount is then in effect under such Letter
of Credit if such maximum amount increases periodically pursuant to the terms
of such Letter of Credit).  Such fronting
fees shall be computed on a quarterly basis in arrears.  Such fronting fees shall be due and payable
on the first Business Day after the end of each March, June, September and
December, commencing with the first such date to occur after the issuance of
such Letter of Credit, on the Letter of Credit Expiration Date and thereafter
on demand.  In addition, the Company
shall pay directly to each L/C Issuer for its own account the customary
issuance, presentation, amendment and other processing fees, and other standard
costs and charges, of such L/C Issuer relating to letters of credit as from
time to time in effect.  Such customary
fees and standard costs and charges are due and payable within ten (10) Business
Days of demand and are nonrefundable.


 


(j)  Conflict with Letter of Credit Application.  Notwithstanding anything else to the contrary
in this Agreement, in the event of any conflict between the terms hereof and
the terms of any Letter of Credit Application, the terms hereof shall control.


 


(k)  Addition of an L/C Issuer.  A Revolving Credit Lender may become an
additional L/C Issuer hereunder pursuant to a written agreement among the
Company, the Administrative Agent and such Revolving Credit Lender.  The Administrative Agent shall notify the
Revolving Credit Lenders of any such additional L/C Issuer.


 


(l)  Continuing Agreement.  Prior to the issuance or renewal of any
Letter of Credit for which JPMorgan Chase Bank will act as L/C Issuer, the
Company shall have executed and delivered to JPMorgan Chase Bank the Continuing
Agreement.


 


SECTION 2.04.  Swing Line Loans.  (a)  The Swing Line.  Subject to the terms and conditions set forth
herein, the Swing Line Lender agrees to make loans (each such loan, a “Swing Line Loan”) to the Company from time
to time on any Business Day (other than the Closing Date) until the Maturity
Date in an aggregate amount not to exceed at any time outstanding the amount of
the Swing Line Sublimit, notwithstanding the fact that such Swing Line Loans,
when aggregated with the Pro Rata Share of the Outstanding Amount of Revolving
Credit Loans and L/C Obligations of the Lender acting as Swing Line Lender, may
exceed the amount of such Lender’s Revolving Credit Commitment; provided that, after giving effect to any
Swing Line Loan, the aggregate Outstanding Amount of the Revolving Credit Loans
of any Lender, plus such Lender’s Pro Rata Share of the Outstanding Amount of
all L/C Obligations, plus such Lender’s Pro Rata Share of the Outstanding
Amount of all Swing Line Loans shall not exceed such Lender’s Revolving Credit
Commitment then in effect; provided further
that, the Company shall not use the proceeds of any Swing Line Loan to
refinance any outstanding Swing Line Loan. 
Within the foregoing limits, and subject to the other terms and
conditions hereof, the Company may borrow under this Section 2.04, prepay
under Section 2.05, and reborrow under this Section 2.04.  Each Swing Line Loan shall be a Base Rate
Loan.  Immediately upon the making of a
Swing Line Loan, each Revolving Credit Lender shall be deemed to, and hereby
irrevocably and unconditionally agrees to, purchase from the Swing Line Lender
a risk participation in such Swing Line Loan in an amount equal to the product
of such Lender’s Pro Rata Share times the amount of such Swing Line Loan.


 


59

















 


(b)  Borrowing Procedures.  Each Swing Line Borrowing shall be made upon
the Company’s notice to the Swing Line Lender and the Administrative Agent,
which may be given by telephone.  Each
such notice must be received by the Swing Line Lender and the Administrative
Agent not later than 2:00 p.m. on the requested borrowing date, and shall
specify (i) the amount to be borrowed, which shall be a minimum of
$250,000, and (ii) the requested borrowing date, which shall be a Business
Day.  Each such telephonic notice must be
confirmed promptly by delivery to the Swing Line Lender and the Administrative
Agent of a written Swing Line Loan Notice, appropriately completed and signed
by a Responsible Officer of the Company. 
Promptly after receipt by the Swing Line Lender of any telephonic Swing
Line Loan Notice, the Swing Line Lender will confirm with the Administrative
Agent (by telephone or in writing) that the Administrative Agent has also
received such Swing Line Loan Notice and, if not, the Swing Line Lender will
notify the Administrative Agent (by telephone or in writing) of the contents
thereof.  Unless (A) the making of
such Swing Line Loan would not be permitted pursuant to the proviso to the
first sentence of Section 2.04(a) or (B) one or more of the
applicable conditions specified in Section 4.02 is not then satisfied,
then, subject to the terms and conditions hereof, the Swing Line Lender will,
not later than 4:00 p.m. on the borrowing date specified in such Swing
Line Loan Notice, make the amount of its Swing Line Loan available to the
Company.


 


(c)  Refinancing of Swing Line Loans.  (i)  In order to reimburse any such
Swing Line Loans, the Company at any time may request that each Revolving
Credit Lender make a Revolving Credit Loan (which shall be a Base Rate Loan) in
an amount equal to such Lender’s Pro Rata Share of the amount of Swing Line
Loans then outstanding.  Such request
shall be made in accordance with the requirements of Section 2.02, without
regard to the minimum and multiples specified therein for the principal amount
of Base Rate Loans, but subject to the unutilized portion of the aggregate
Revolving Credit Commitments and the conditions set forth in Section 4.02.  Each Revolving Credit Lender shall make an
amount equal to its Pro Rata Share of the amount specified in such Committed
Loan Notice available to the Administrative Agent in immediately available
funds for the account of the Swing Line Lender at the Administrative Agent’s
Office not later than 1:00 p.m. on the day specified in such Committed
Loan Notice.  The Administrative Agent
shall remit the funds so received to the Swing Line Lender.


 


(ii)  If
an Event of Default has occurred and is continuing, or if for any reason any
Swing Line Loan cannot be refinanced by such a Revolving Credit Borrowing in
accordance with Section 2.04(c)(i), then upon notice by the Administrative
Agent to the Revolving Credit Lenders each of the Revolving Credit Lenders
shall fund its risk participation in the relevant Swing Line Loan by making an
amount equal to its Pro Rata Share of the amount of such Swing Line Loan
available to the Administrative Agent in immediately available funds for the
account of the Swing Line Lender at the Administrative Agent’s Office not later
than 1:00 p.m. on the day such Event of Default occurs or the day
specified in such Committed Loan Notice, as the case may be.  The Administrative Agent shall remit the
funds so received to the Swing Line Lender.


 


(iii)  If
any Revolving Credit Lender fails to make available to the Administrative Agent
for the account of the Swing Line Lender any amount required to be paid by such
Lender pursuant to the foregoing provisions of this Section 2.04(c) by
the time specified in Section 2.04(c)(i), the Swing Line Lender shall be
entitled to recover from such Lender (acting through the Administrative Agent),
on demand, such amount with interest thereon for the period from the date such
payment is required to the date on which such payment is immediately available
to the Swing Line Lender at a rate per annum equal to the Federal Funds Rate
from time to time in effect.  A certificate
of the Swing Line Lender submitted to any Lender (through the Administrative
Agent) with respect to any amounts owing under this clause (iii) shall be
conclusive absent manifest error.


 


60






 












 


(iv)  Each
Revolving Credit Lender’s obligation to make Revolving Credit Loans or to
purchase and fund risk participations in Swing Line Loans pursuant to this Section 2.04(c) shall
be absolute and unconditional and shall not be affected by any circumstance,
including (A) any setoff, counterclaim, recoupment, defense or other right
which such Lender may have against the Swing Line Lender, the Company or any
other Person for any reason whatsoever, (B) the occurrence or continuance
of a Default, or (C) any other occurrence, event or condition, whether or
not similar to any of the foregoing; provided
that each Revolving Credit Lender’s obligation to make Revolving Credit Loans
pursuant to this Section 2.04(c) is subject to the conditions set
forth in Section 4.02.  No such
funding of risk participations shall relieve or otherwise impair the obligation
of the Company to repay Swing Line Loans, together with interest as provided
herein.


 


(d)  Repayment of Participations.  (i)  At any time after any
Revolving Credit Lender has purchased and funded a risk participation in a
Swing Line Loan, if the Swing Line Lender receives any payment on account of
such Swing Line Loan, the Swing Line Lender will distribute to such Lender its
Pro Rata Share of such payment (appropriately adjusted, in the case of interest
payments, to reflect the period of time during which such Lender’s risk
participation was funded) in the same funds as those received by the Swing Line
Lender.


 


(ii)  If
any payment received by the Swing Line Lender in respect of principal or
interest on any Swing Line Loan is required to be returned by the Swing Line
Lender under any of the circumstances described in Section 10.06
(including pursuant to any settlement entered into by the Swing Line Lender in
its discretion), each Revolving Credit Lender shall pay to the Swing Line
Lender its Pro Rata Share thereof on demand of the Administrative Agent, plus
interest thereon from the date of such demand to the date such amount is
returned, at a rate per annum equal to the Federal Funds Rate.  The Administrative Agent will make such
demand upon the request of the Swing Line Lender.


 


(e)  Interest for Account of Swing Line Lender.  The Swing Line Lender shall be responsible
for invoicing the Company for interest on the Swing Line Loans.  Until each Revolving Credit Lender funds its
Base Rate Loan or risk participation pursuant to this Section 2.04 to
refinance such Lender’s Pro Rata Share of any Swing Line Loan, interest in
respect of such Pro Rata Share shall be solely for the account of the Swing
Line Lender.


 


(f)  Payments Directly to Swing Line Lender.  The Company shall make all payments of
principal and interest in respect of the Swing Line Loans directly to the Swing
Line Lender.


 


SECTION 2.05.  Prepayments.  (a)  Optional. 
(i)  Any Borrower may, upon notice to the Administrative
Agent, at any time or from time to time voluntarily prepay Term Loans and
Revolving Credit Loans in whole or in part without premium or penalty; provided
that (1) such notice must be received by the Administrative Agent not
later than 12:30 p.m. (New York time or London time in the case of Loans
denominated in an Alternative Currency) (A) three (3) Business Days
prior to any date of prepayment of Eurocurrency Rate Loans and (B) on the
date of prepayment of Base Rate Loans; (2) any prepayment of Eurocurrency
Rate Loans shall be in a principal amount of $5,000,000 or a whole multiple of
$1,000,000 in excess thereof (or comparable amounts determined by the
Administrative Agent in the case of Alternative Currency Loans); and (3) any
prepayment of Base Rate Loans shall be in a principal amount of $1,000,000 or a
whole multiple of $500,000 in excess thereof or, in each case, if less, the
entire principal amount thereof then outstanding.  Each such notice shall specify the date and
amount of such prepayment and the Class(es) and Type(s) of Loans to be
prepaid.  The Administrative Agent will
promptly notify each Appropriate Lender of its receipt of each such notice, and
of the amount of such Lender’s Pro Rata Share of such prepayment.  If such notice is given by a Borrower, such 


 


61

















 


Borrower shall make such
prepayment and the payment amount specified in such notice shall be due and
payable on the date specified therein. 
Any prepayment of a Eurocurrency Rate Loan shall be accompanied by all
accrued interest thereon, together with any additional amounts required
pursuant to Section 3.05.  Each
prepayment of principal of, and interest on, Alternative Currency Loans shall
be made in the relevant Alternative Currency. 
Each prepayment of the Loans pursuant to this Section 2.05(a) shall
be paid to the Appropriate Lenders in accordance with their respective Pro Rata
Shares.  Each prepayment of Term Loans pursuant to this Section 2.05(a) shall
be applied to repayments thereof required pursuant to Section 2.07(a) in
the order selected by the Company.


 


(ii)  The
Company may, upon notice to the Swing Line Lender (with a copy to the
Administrative Agent), at any time or from time to time, voluntarily prepay
Swing Line Loans in whole or in part without premium or penalty; provided that (1) such notice must be
received by the Swing Line Lender and the Administrative Agent not later than
1:00 p.m. on the date of the prepayment, and (2) any such prepayment
shall be in a minimum principal amount of $250,000 or a whole multiple of
$25,000 in excess thereof or, if less, the entire principal amount thereof then
outstanding.  Each such notice shall
specify the date and amount of such prepayment. 
If such notice is given by the Company, the Company shall make such
prepayment and the payment amount specified in such notice shall be due and
payable on the date specified therein.


 


(iii)  Notwithstanding
anything to the contrary contained in this Agreement, the Company may rescind
any notice of prepayment under Section 2.05(a)(i) or 2.05(a)(ii) if
such prepayment would have resulted from a refinancing of all or any portion of
the Facilities, which refinancing shall not be consummated or shall otherwise
be delayed.


 


(b)  Mandatory. 
(i)  Within twenty (20) days after financial statements are
required to be delivered pursuant to Section 6.01(a), the Company shall
cause to be prepaid an aggregate Dollar Amount of Term Loans in an amount equal
to (A) the ECF Percentage of Excess Cash Flow, if any, for the fiscal year
covered by such financial statements (commencing with the fiscal year ended June 30,
2008) minus (B) the sum of (i) all voluntary prepayments of
Term Loans during such fiscal year and (ii) all voluntary prepayments of
Revolving Credit Loans during such fiscal year to the extent the Revolving
Credit Commitments are permanently reduced by the amount of such payments.


 


(ii)  
(A)  If (x) Holdings, the Company or any Restricted Subsidiary
Disposes of any property or assets (other than any Disposition of any property
or assets permitted by Section 7.05(a), (b), (c), (d), (e), (f), (g), (h),
(i) or (m)) or (y) any Casualty Event occurs, which in the aggregate
results in the realization or receipt by Holdings, the Company or such
Restricted Subsidiary of Net Cash Proceeds, the Company shall cause to be
prepaid on or prior to the date which is ten (10) Business Days after the
date of the realization or receipt of such Net Cash Proceeds an aggregate
Dollar Amount of Term Loans in an amount equal to 100% of all Net Cash Proceeds
received; provided that no such
prepayment shall be required pursuant to this Section 2.05(b)(ii)(A) with
respect to such portion of such Net Cash Proceeds that the Company shall have,
on or prior to such date, given written notice to the Administrative Agent of
its intent to reinvest in accordance with Section 2.05(b)(ii)(B);


 


(B)  With respect to any Net Cash Proceeds realized or
received with respect to any Disposition (other than any Disposition
specifically excluded from the application of Section 2.05(b)(ii)(A)) or
any Casualty Event, at the option of the Company the Company may reinvest all
or any portion of such Net Cash Proceeds in assets useful for the Company’s or
a Restricted Subsidiary’s business (provided that such reinvestment is 


 


62

















 


permitted
by Section 7.02) within (x) twelve (12) months following receipt of
such Net Cash Proceeds or (y) if the Company or a Restricted Subsidiary
enters into a legally binding commitment to reinvest such Net Cash Proceeds
within twelve (12) months following receipt thereof, within twelve (12) months
following the date of such commitment; provided
that an amount equal to any such Net Cash Proceeds shall be applied within five
(5) Business Days after such Net Cash Proceeds cannot be so reinvested or
the Company reasonably determines that such Net Cash Proceeds are no longer
intended to be so reinvested to the prepayment of the Term Loans as set forth
in this Section 2.05.


 


(iii)  If
Holdings, the Company or any Restricted Subsidiary incurs or issues any
Indebtedness not expressly permitted to be incurred or issued pursuant to Section 7.03
(without prejudice to the restrictions therein), the Company shall cause to be
prepaid an aggregate Dollar Amount of Term Loans in an amount equal to 100% of
all Net Cash Proceeds received therefrom on or prior to the date which is five (5) Business
Days after the receipt of such Net Cash Proceeds.  If any Overseas Borrower incurs or issues any
Indebtedness pursuant to Section 2.14(b), the Company or such Overseas
Borrower shall cause to be prepaid an aggregate Dollar Amount of U.S. Term
Loans in an amount equal to 100% of the Net Cash Proceeds received therefrom on
the date of the receipt of such Net Cash Proceeds.


 


(iv)  If
for any reason the aggregate Revolving Credit Exposures at any time exceeds the
aggregate Revolving Credit Commitments then in effect, the Company shall
promptly prepay or cause to be promptly prepaid Revolving Credit Loans and
Swing Line Loans and/or Cash Collateralize the L/C Obligations in an aggregate
amount equal to such excess; provided
that the Company shall not be required to Cash Collateralize the L/C
Obligations pursuant to this Section 2.05(b)(iv) unless after the
prepayment in full of the Revolving Credit Loans and Swing Line Loans such
aggregate Outstanding Amount exceeds the aggregate Revolving Credit Commitments
then in effect.  If the Company is
required to provide an amount of Cash Collateral in respect of L/C Obligations
pursuant to this clause (iv), such amount plus
any accrued interest or realized profits with respect to such amount shall be
returned to the Company as and to the extent that, after giving effect to such
return, the Company would remain in compliance with this clause (iv) and
no Event of Default shall have occurred and be continuing.


 


(v)  Each
prepayment of Term Loans (x) pursuant to clause (i) of this Section 2.05(b) shall
be applied to repayments thereof required pursuant to Section 2.07 in the
order selected by the Company and (y) pursuant to clauses (ii) and (iii) of
this Section 2.05(b) shall be applied first in direct order of maturity to repayments thereof
required pursuant to Section 2.07 in the 24-month period following the
date such prepayment becomes payable and second
ratably to the remaining repayments of Term Loans required pursuant to Section 2.07;
and each such prepayment shall be paid to the Lenders in accordance with their
respective Pro Rata Shares.


 


(vi)  The
Company shall notify the Administrative Agent in writing of any mandatory
prepayment of Term Loans required to be made pursuant to clauses (i) through
(iii) of this Section 2.05(b) at least three (3) Business
Days prior to the date of such prepayment. 
Each such notice shall specify the date of such prepayment and provide a
reasonably detailed calculation of the amount of such prepayment.  The Administrative Agent will promptly notify
each Appropriate Lender of the contents of the Company’s prepayment notice and
of such Appropriate Lender’s Pro Rata Share of the prepayment.


 


(c)  All
prepayments under this Section 2.05 shall be made together with, in the
case of any such prepayment of a Eurocurrency Rate Loan on a date other than
the last day of an Interest 


 


63

















 


Period therefor, any amounts
owing in respect of such Eurocurrency Rate Loan pursuant to Section 3.05.  Notwithstanding any of the provisions of Section 2.05(b),
so long as no Event of Default shall have occurred and be continuing, if any
prepayment of Eurocurrency Rate Loans is required to be made under Section 2.05(b),
other than on the last day of the Interest Period therefor, the relevant
Borrower may, in its sole discretion, deposit the amount of any such prepayment
otherwise required to be made thereunder into a Cash Collateral Account until
the last day of such Interest Period, at which time the Administrative Agent
shall be authorized (without any further action by or notice to or from any
Borrower or any other Loan Party) to apply such amount to the prepayment of
such Loans in accordance with Section 2.05(b).  Upon the occurrence and during the
continuance of any Event of Default, the Administrative Agent shall also be
authorized (without any further action by or notice to or from any Borrower or
any other Loan Party) to apply such amount to the prepayment of the outstanding
Loans in accordance with Section 2.05(b).


 


SECTION 2.06.  Termination or Reduction of Commitments.  (a)  Optional. 
The Company may, upon written notice to the Administrative Agent,
terminate the unused Commitments of any Class, or from time to time permanently
reduce the unused Commitments of any Class; provided
that (i) any such notice shall be received by the Administrative Agent
three (3) Business Days prior to the date of termination or reduction, (ii) any
such partial reduction shall be in an aggregate amount of $1,000,000 or any
whole multiple of $500,000 in excess thereof (or, if less, the remaining amount
of such Commitments) and (iii) if, after giving effect to any reduction of
the Commitments, the Letter of Credit Sublimit or the Swing Line Sublimit
exceeds the amount of the Revolving Credit Facility, such sublimit shall be
automatically reduced by the amount of such excess.  The amount of any such Commitment reduction
shall not be applied to the Letter of Credit Sublimit or the Swing Line
Sublimit unless otherwise specified by the Company.  Notwithstanding the foregoing, the Company
may rescind or postpone any notice of termination or reduction of the
Commitments if such termination or reduction would have resulted from a
refinancing of all or any portion of the Facilities, which refinancing shall
not be consummated or otherwise shall be delayed.


 


(b)  Mandatory. 
The U.S. Term Commitment of each U.S. Term Lender shall be automatically
and permanently reduced to $0 upon the making of such U.S. Term Lender’s U.S.
Term Loans pursuant to Section 2.01(a). 
The Euro Term Commitment of each Euro Term Lender shall be automatically
and permanently reduced to $0 upon the making of such Euro Term Lender’s Euro
Term Loans pursuant to Section 2.01(c). 
In addition, if any Existing Notes remain outstanding on the Closing
Date (in respect of which a Defeasance has not been consummated, or in respect
of which funds have not been placed in escrow for the redemption or repayment
thereof in a manner reasonably satisfactory to the Administrative Agent, as of
the Closing Date), the Term Commitment of each Term Lender shall be
automatically and permanently reduced (effective prior to the borrowing of Term
Loans on the Closing Date) by the amount of such Term Lender’s Pro Rata Share
of the amount that would have been used to purchase such Existing Notes if they
had been tendered and purchased on the Closing Date pursuant to the Existing
Note Indenture.


 


(c)  Application of Commitment Reductions; Payment of Fees.  The Administrative Agent will promptly notify
the Lenders of any termination or reduction of unused portions of the Letter of
Credit Sublimit, or the Swing Line Sublimit or the unused Commitments of any Class under
this Section 2.06.  Upon any
reduction of unused Commitments of any Class, the Commitment of each Lender of
such Class shall be reduced by such Lender’s Pro Rata Share of the amount
by which such Commitments are reduced (other than the termination of the
Commitment of any Lender as provided in Section 3.07).  All commitment fees accrued until the
effective date of any 


 


64

















 


termination of the Aggregate
Commitments shall be paid on the effective date of such termination.


 


SECTION 2.07.  Repayment of Loans.  (a)  U.S. Term Loans.  The Company shall repay to the Administrative
Agent for the ratable account of the U.S. Term Lenders (i) on the last
Business Day of each March, June, September and December, commencing with
the second such date to occur after the Closing Date, an aggregate Dollar
Amount equal to 0.25% of the aggregate amount of all U.S. Term Loans
outstanding on the Closing Date (which payments shall be reduced as a result of
the application of prepayments in accordance with the order of priority set
forth in Section 2.05) and (ii) on the Maturity Date for the Term
Loans, the aggregate principal amount of all U.S. Term Loans outstanding on
such date.


 


(b)  Euro Term Loans.  The German Borrower shall repay to the
Administrative Agent for the ratable account of the Euro Term Lenders (i) on
the last Business Day of each March, June, September and December,
commencing with the second such date to occur after the Closing Date, an
aggregate Dollar Amount equal to 0.25% of the aggregate Dollar Amount of all
Euro Term Loans outstanding on the Closing Date (which payments shall be
reduced as a result of the application of prepayments in accordance with the
order of priority set forth in Section 2.05) and (ii) on the Maturity
Date for the Term Loans, the aggregate principal amount of all Euro Term Loans
outstanding on such date.


 


(c)  Revolving Credit Loans.  The Company shall repay to the Administrative
Agent for the ratable account of the Revolving Credit Lenders on the Maturity
Date for the Revolving Credit Facility the aggregate principal amount of all of
its Revolving Credit Loans outstanding on such date.


 


(d)  Swing Line Loans.  The Company shall repay its Swing Line Loans
on the Maturity Date for the Revolving Credit Facility; provided that on each date that a
Revolving Credit Loan is borrowed, the Company shall repay all Swing Line Loans
then outstanding.


 


SECTION 2.08.  Interest.  (a)  Subject
to the provisions of Section 2.08(b), (i) each Eurocurrency Rate Loan
shall bear interest on the outstanding principal amount thereof for each
Interest Period at a rate per annum equal to the Eurocurrency Rate for such
Interest Period plus the Applicable Rate plus (in the case of a Eurocurrency
Rate Loan denominated in an Alternative Currency of any Lender which is lent
from a Lending Office in the United Kingdom or a Participating Member State)
the Mandatory Cost; (ii) each Base Rate Loan shall bear interest on the
outstanding principal amount thereof from the applicable borrowing date at a
rate per annum equal to the Base Rate plus the Applicable Rate and (iii) each
Swing Line Loan shall bear interest on the outstanding principal amount thereof
from the applicable borrowing date at a rate per annum equal to the Base Rate
plus the Applicable Rate for Revolving Credit Loans.


 


(b)  Each
Borrower shall pay interest on past due amounts owed by it hereunder at a fluctuating
interest rate per annum at all times equal to the Default Rate to the fullest
extent permitted by applicable Laws. 
Accrued and unpaid interest on past due amounts (including interest on
past due interest) shall be due and payable upon demand.


 


(c)  Interest
on each Loan shall be due and payable in arrears on each Interest Payment Date
applicable thereto and at such other times as may be specified herein.  Interest hereunder shall be due and payable
in accordance with the terms hereof before and after judgment, and before and
after the commencement of any proceeding under any Debtor Relief Law.


 


65

















 


SECTION 2.09.  Fees.  In
addition to certain fees described in Sections 2.03(h) and (i):


 


(a)  Commitment Fee.  The Company shall pay to the Administrative
Agent for the account of each Revolving Credit Lender in accordance with its
Pro Rata Share, a commitment fee equal to the Applicable Rate with respect to
commitment fees times the average daily amount by which the aggregate Revolving
Credit Commitment exceeds the sum of (A) the Outstanding Amount of
Revolving Credit Loans (excluding any Swing Line Loans) and (B) the
Outstanding Amount of L/C Obligations; provided
that any commitment fee accrued with respect to any of the Commitments of a
Defaulting Lender during the period prior to the time such Lender became a
Defaulting Lender and unpaid at such time shall not be payable by the Company
so long as such Lender shall be a Defaulting Lender except to the extent that
such commitment fee shall otherwise have been due and payable by the Company
prior to such time; and provided further
that no commitment fee shall accrue on any of the Commitments of a Defaulting
Lender so long as such Lender shall be a Defaulting Lender.  The commitment fee shall accrue at all times
from the Closing Date until the Maturity Date for the Revolving Credit Facility
or such earlier date as the Revolving Credit Commitments shall be terminated hereunder,
including at any time during which one or more of the conditions in Article IV
is not met, and shall be due and payable quarterly in arrears on the last
Business Day of each March, June, September and December, commencing with
the first such date to occur after the Closing Date, and on the Maturity Date
for the Revolving Credit Facility.  The
commitment fee shall be calculated quarterly in arrears, and if there is any
change in the Applicable Rate during any quarter, the average daily amount
shall be computed and multiplied by the Applicable Rate separately for each
period during such quarter that such Applicable Rate was in effect.


 


(b)  Other Fees.  The Company shall pay to the Agents such fees
as shall have been separately agreed upon in writing in the amounts and at the
times so specified.  Such fees shall be
fully earned when paid and shall not be refundable for any reason whatsoever
(except as expressly agreed between the Company and the applicable Agent).


 


SECTION 2.10.  Computation of Interest and Fees.  All
computations of interest for Base Rate Loans when the Base Rate is determined
by JPMorgan Chase Bank’s “prime rate” and for Alternative Currency Loans
denominated in Sterling shall be made on the basis of a year of three hundred
and sixty-five (365) or three hundred and sixty-six (366) days, as the case may
be, and actual days elapsed.  All other
computations of fees and interest shall be made on the basis of a three hundred
and sixty (360) day year and actual days elapsed.  Interest shall accrue on each Loan for the
day on which the Loan is made, and shall not accrue on a Loan, or any portion
thereof, for the day on which the Loan or such portion is paid; provided that
any Loan that is repaid on the same day on which it is made shall, subject to Section 2.12(a),
bear interest for one (1) day.  Each
determination by the Administrative Agent of an interest rate or fee hereunder
shall be conclusive and binding for all purposes, absent manifest error.  The Administrative Agent shall, upon the
reasonable request of the Company, deliver to the Company a statement showing
the quotations used by the Administrative Agent in determining any interest
rate pursuant to Section 2.08(a).


 


SECTION 2.11.  Evidence of Indebtedness.  (a)  The
Credit Extensions made by each Lender shall be evidenced by one or more
accounts or records maintained by such Lender and evidenced by one or more
entries in the Register maintained by the Administrative Agent, acting solely
for purposes of Treasury Regulation Section 5f.103-1(c), as agent for the
Borrowers, in each case in the ordinary course of business.  The accounts or records maintained by the
Administrative Agent and each Lender shall be prima facie evidence absent
manifest error of the amount of the Credit Extensions made by the Lenders to
the Borrowers and the interest and 


 


66

















 


payments thereon.  Any failure to so record or any error in
doing so shall not, however, limit or otherwise affect the obligation of the
Borrowers hereunder to pay any amount owing with respect to the
Obligations.  In the event of any
conflict between the accounts and records maintained by any Lender and the
accounts and records of the Administrative Agent in respect of such matters,
the accounts and records of the Administrative Agent shall control in the
absence of manifest error.  Upon the
request of any Lender made through the Administrative Agent, the Borrowers
shall execute and deliver to such Lender (through the Administrative Agent) a
Note payable to such Lender, which shall evidence such Lender’s Loans in
addition to such accounts or records. 
Each Lender may attach schedules to its Note and endorse thereon the
date, Type (if applicable), amount and maturity of its Loans and payments with respect
thereto.


 


(b)  In
addition to the accounts and records referred to in Section 2.11(a), each
Lender and the Administrative Agent shall maintain in accordance with its usual
practice accounts or records and, in the case of the Administrative Agent,
entries in the Register, evidencing the purchases and sales by such Lender of
participations in Letters of Credit and Swing Line Loans.  In the event of any conflict between the
accounts and records maintained by the Administrative Agent and the accounts and
records of any Lender in respect of such matters, the accounts and records of
the Administrative Agent shall control in the absence of manifest error.


 


(c)  Entries
made in good faith by the Administrative Agent in the Register pursuant to
Sections 2.11(a) and (b), and by each Lender in its account or accounts
pursuant to Sections 2.11(a) and (b), shall be prima facie evidence of the amount of principal and interest
due and payable or to become due and payable from the Borrowers to, in the case
of the Register, each Lender and, in the case of such account or accounts, such
Lender, under this Agreement and the other Loan Documents, absent manifest
error; provided that the failure
of the Administrative Agent or such Lender to make an entry, or any finding
that an entry is incorrect, in the Register or such account or accounts shall
not limit or otherwise affect the obligations of the Borrowers under this
Agreement and the other Loan Documents.


 


SECTION 2.12.  Payments Generally.  (a)  All
payments to be made by the Borrowers shall be made without condition or
deduction for any counterclaim, defense, recoupment or setoff.  Except as otherwise expressly provided
herein, all payments by the Company hereunder shall be made to the
Administrative Agent, for the account of the respective Lenders to which such
payment is owed, at the applicable Administrative Agent’s Office in Dollars and
in Same Day Funds not later than 2:00 p.m. on the date specified
herein.  Except as otherwise expressly
provided herein, all payments by the Borrowers hereunder with respect to
principal and interest on Loans denominated in an Alternative Currency shall be
made to the Administrative Agent, for the account of the respective Lenders to
which such payment is owed, at the applicable Administrative Agent’s Office in
such Alternative Currency and in Same Day Funds not later than 2:00 p.m.
(London time) on the dates specified herein. 
If, for any reason, any Borrower is prohibited by any Law from making
any required payment hereunder in an Alternative Currency, such Borrower shall
make such payment in Dollars in the Dollar Amount of the Alternative Currency
payment amount.  The Administrative Agent
will promptly distribute to each Lender its Pro Rata Share (or other applicable
share as provided herein) of such payment in like funds as received by wire
transfer to such Lender’s Lending Office. 
All payments received by the Administrative Agent (i) after 2:00 p.m.,
in the case of payments in Dollars, or (ii) after 2:00 p.m. (London
time) in the case of payments in an Alternative Currency, shall in each case be
deemed received on the next succeeding Business Day and any applicable interest
or fee shall continue to accrue.


 


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(b)  If
any payment to be made by any Borrower shall come due on a day other than a
Business Day, payment shall be made on the next following Business Day, and
such extension of time shall be reflected in computing interest or fees, as the
case may be; provided that, if
such extension would cause payment of interest on or principal of Eurocurrency
Rate Loans to be made in the next succeeding calendar month, such payment shall
be made on the immediately preceding Business Day.


 


(c)  Unless
any Borrower or any Lender has notified the Administrative Agent, prior to the
time any payment is required to be made by it to the Administrative Agent
hereunder, that such Borrower or such Lender, as the case may be, will not make
such payment, the Administrative Agent may assume that such Borrower or such
Lender, as the case may be, has timely made such payment and may (but shall not
be so required to), in reliance thereon, make available a corresponding amount
to the Person entitled thereto.  If and
to the extent that such payment was not in fact made to the Administrative
Agent in Same Day Funds, then:


 


(i)  if
any Borrower failed to make such payment, each Lender shall forthwith on demand
repay to the Administrative Agent the portion of such assumed payment that was
made available to such Lender in Same Day Funds, together with interest thereon
in respect of each day from and including the date such amount was made
available by the Administrative Agent to such Lender to the date such amount is
repaid to the Administrative Agent in Same Day Funds at the applicable
Overnight Rate from time to time in effect; and


 


(ii)  if
any Lender failed to make such payment, such Lender shall forthwith on demand
pay to the Administrative Agent the amount thereof in Same Day Funds, together
with interest thereon for the period from the date such amount was made
available by the Administrative Agent to the relevant Borrower to the date such
amount is recovered by the Administrative Agent (the “Compensation Period”) at a rate per annum
equal to the applicable Overnight Rate from time to time in effect.  When such Lender makes payment to the
Administrative Agent (together with all accrued interest thereon), then such
payment amount (excluding the amount of any interest which may have accrued and
been paid in respect of such late payment) shall constitute such Lender’s Loan
included in the applicable Borrowing.  If
such Lender does not pay such amount forthwith upon the Administrative Agent’s
demand therefor, the Administrative Agent may make a demand therefor upon the relevant
Borrower, and the relevant Borrower shall pay such amount to the Administrative
Agent, together with interest thereon for the Compensation Period at a rate per
annum equal to the rate of interest applicable to the applicable
Borrowing.  Nothing herein shall be
deemed to relieve any Lender from its obligation to fulfill its Commitment or
to prejudice any rights which the Administrative Agent or any Borrower may have
against any Lender as a result of any default by such Lender hereunder.


 


A
notice of the Administrative Agent to any Lender or the relevant Borrower with
respect to any amount owing under this Section 2.12(c) shall be
conclusive, absent manifest error.


 


(d)  If
any Lender makes available to the Administrative Agent funds for any Loan to be
made by such Lender as provided in the foregoing provisions of this Article II,
and such funds are not made available to the relevant Borrower by the
Administrative Agent because the conditions to the applicable Credit Extension
set forth in Article IV are not satisfied or waived in accordance with the
terms hereof, the Administrative Agent shall return such funds (in like funds
as received from such Lender) to such Lender, without interest.


 


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(e)  The
obligations of the Lenders hereunder to make Loans and to fund participations
in Letters of Credit and Swing Line Loans are several and not joint.  The failure of any Lender to make any Loan or
to fund any such participation on any date required hereunder shall not relieve
any other Lender of its corresponding obligation to do so on such date, and no
Lender shall be responsible for the failure of any other Lender to so make its
Loan or purchase its participation.


 


(f)  Nothing
herein shall be deemed to obligate any Lender to obtain the funds for any Loan
in any particular place or manner or to constitute a representation by any
Lender that it has obtained or will obtain the funds for any Loan in any
particular place or manner.


 


(g)  Whenever
any payment received by the Administrative Agent under this Agreement or any of
the other Loan Documents is insufficient to pay in full all amounts due and
payable to the Administrative Agent and the Lenders under or in respect of this
Agreement and the other Loan Documents on any date, such payment shall be distributed
by the Administrative Agent and applied by the Administrative Agent and the
Lenders in the order of priority set forth in Section 8.04.  If the Administrative Agent receives funds
for application to the Obligations of the Loan Parties under or in respect of
the Loan Documents under circumstances for which the Loan Documents do not
specify the manner in which such funds are to be applied, the Administrative
Agent may, but at the direction of Required Lenders shall, elect to distribute
such funds to each of the Lenders in accordance with such Lender’s Pro Rata
Share of the sum of (a) the Outstanding Amount of all Loans outstanding at
such time and (b) the Outstanding Amount of all L/C Obligations
outstanding at such time, in repayment or prepayment of such of the outstanding
Loans or other Obligations then owing to such Lender.


 


SECTION 2.13.  Sharing of Payments.  If,
other than as expressly provided elsewhere herein, any Lender shall obtain on
account of the Loans made by it, or the participations in L/C Obligations and
Swing Line Loans held by it, any payment (whether voluntary, involuntary,
through the exercise of any right of setoff, or otherwise) in excess of its
ratable share (or other share contemplated hereunder) thereof, such Lender
shall immediately (a) notify the Administrative Agent of such fact, and (b) purchase
from the other Lenders such participations in the Loans made by them and/or
such subparticipations in the participations in L/C Obligations or Swing Line
Loans held by them, as the case may be, as shall be necessary to cause such
purchasing Lender to share the excess payment in respect of such Loans or such
participations, as the case may be, pro rata with each of them; provided that
if all or any portion of such excess payment is thereafter recovered from the
purchasing Lender under any of the circumstances described in Section 10.06
(including pursuant to any settlement entered into by the purchasing Lender in
its discretion), such purchase shall to that extent be rescinded and each other
Lender shall repay to the purchasing Lender the purchase price paid therefor,
together with an amount equal to such paying Lender’s ratable share (according
to the proportion of (i) the amount of such paying Lender’s required
repayment to (ii) the total amount so recovered from the purchasing
Lender) of any interest or other amount paid or payable by the purchasing
Lender in respect of the total amount so recovered, without further interest
thereon.  Each Borrower agrees that any
Lender so purchasing a participation from another Lender may, to the fullest
extent permitted by applicable Law, exercise all its rights of payment
(including the right of setoff, but subject to Section 10.09) with respect
to such participation as fully as if such Lender were the direct creditor of
such Borrower in the amount of such participation.  The Administrative Agent will keep records
(which shall be conclusive and binding in the absence of manifest error) of
participations purchased under this Section 2.13 and will in each case
notify the Lenders following any such purchases or repayments.  Each Lender that purchases a participation
pursuant to this Section 2.13 shall from and after such purchase have the
right to give all notices, requests, demands, directions and other
communications under this Agreement with respect to the portion 


 


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of the Obligations purchased to
the same extent as though the purchasing Lender were the original owner of the
Obligations purchased.


 


SECTION 2.14.  Incremental Credit Extensions.  (a)  The
Company may at any time or from time to time after the Closing Date, by notice
to the Administrative Agent (whereupon the Administrative Agent shall promptly
deliver a copy to each of the Lenders), request (a) one or more additional
tranches of term loans denominated in Dollars (the “Incremental U.S. Term Loans”) or (b) one or more
increases in the amount of the Revolving Credit Commitments on the same terms
and conditions as are then applicable to the Revolving Credit Commitments (each
such increase, a “Revolving Commitment
Increase”); provided
that (i) both at the time of any such request and upon the effectiveness
of any Incremental U.S. Amendment referred to below, no Default or Event of
Default shall exist and at the time that any such Incremental U.S. Term Loan is
made or any such Revolving Commitment Increase becomes effective (and after
giving effect thereto) no Default or Event of Default shall exist and (ii) the
Company shall be in compliance with the covenant set forth in Section 7.10
determined on a Pro Forma Basis as of the date of such Incremental U.S. Term
Loan or Revolving Commitment Increase and the last day of the most recent Test
Period, in each case, as if such Incremental U.S. Term Loans or Revolving
Commitment Increases, as applicable, had been outstanding on the last day of
such fiscal quarter of the Company for testing compliance therewith.  Each tranche of Incremental U.S. Term Loans
and each Revolving Commitment Increase shall be in an aggregate Dollar Amount
that is not less than $50,000,000 (provided
that such amount may be less than $50,000,000 if such amount represents all
remaining availability under the limit set forth in the next sentence).  Notwithstanding anything to the contrary
herein, the aggregate Dollar Amount of the Incremental U.S. Term Loans and the
Revolving Commitment Increases shall not exceed $200,000,000.  The Incremental U.S. Term Loans and any
Revolving Credit Exposure under any such Revolving Commitment Increase (a) shall
rank pari passu in right of payment and of security with the other Revolving
Credit Exposure and the U.S. Term Loans, (b) in the case of Incremental
U.S. Term Loans, shall not mature earlier than the Maturity Date with respect
to the U.S. Term Loans, (c) in the case of Incremental U.S. Term Loans,
shall not have a Weighted Average Life to Maturity that is shorter than the
Weighted Average Life to Maturity with respect to the U.S. Term Loans, (d) in
the case of Incremental U.S. Term Loans, will accrue interest at rates
determined by the Company and the lenders providing such Incremental U.S. Term
Loans, which rates may be higher or lower than the rates applicable to the U.S.
Term Loans, and (e) in the case of Incremental U.S. Term Loans, except as
set forth above, shall be treated substantially the same as, or less favorably
to the lenders thereof than, the U.S. Term Loans (in each case, including with
respect to mandatory and voluntary prepayments), provided that (i) the terms and conditions applicable
to Incremental U.S. Term Loans may be materially different from those of the
U.S. Term Loans to the extent such differences are reasonably acceptable to the
Administrative Agent and (ii) subject to clauses (b), (c) and (d) above,
the interest rates, maturity and amortization schedule applicable to the
Incremental U.S. Term Loans shall be determined by the Company and the lenders
thereof.  Each notice from the Company
pursuant to this Section shall set forth the requested amount and proposed
terms of the relevant Incremental U.S. Term Loans or Revolving Commitment
Increases.  Incremental U.S. Term Loans
may be made, and Revolving Commitment Increases may be provided, by any
existing Lender or by any other bank or other financial institution (any such other
bank or other financial institution being called an “Additional Lender”), in each case as designated by the
Company, provided that the
Administrative Agent, each L/C Issuer and the Swing Line Lender shall have
consented (not to be unreasonably withheld) to such Lender’s or Additional
Lender’s making such Incremental U.S. Term Loans or providing such Revolving
Commitment Increases if such consent would be required under Section 10.07(b) for
an assignment of Loans or Revolving Credit Commitments, as applicable, to such
Lender or Additional Lender.  Commitments
in respect of Incremental U.S. 


 


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Term Loans and Revolving
Commitment Increases shall become Commitments (or in the case of a Revolving
Commitment Increase to be provided by an existing Revolving Credit Lender, an
increase in such Lender’s applicable Revolving Credit Commitment) under this
Agreement pursuant to an amendment (an “Incremental
Amendment”) to this Agreement and, as appropriate, the other Loan
Documents, executed by Holdings, the Company, each Lender agreeing to provide
such Commitment, if any, each Additional Lender, if any, and the Administrative
Agent.  The Incremental Amendment may,
without the consent of any other Lenders, effect such amendments to this
Agreement and the other Loan Documents as may be necessary or appropriate, in
the reasonable opinion of the Administrative Agent and the Company, to effect
the provisions of this Section.  The effectiveness
of any Incremental Amendment shall be subject to the satisfaction on the date
thereof (each, an “Incremental Facility
Closing Date”) of each of the conditions set forth in Section 4.02
(it being understood that all references to “the date of such Credit Extension”
or similar language in such Section 4.02 shall be deemed to refer to the
effective date of such Incremental Amendment) and such other conditions as the
parties thereto shall agree.  The Company
will use the proceeds of the Incremental U.S. Term Loans and Revolving
Commitment Increases for any purpose not prohibited by this Agreement.  No Lender shall be obligated to provide any
Incremental U.S. Term Loans or Revolving Commitment Increases unless it so
agrees.  Upon each increase in the
Revolving Credit Commitments pursuant to this Section, each Revolving Credit
Lender immediately prior to such increase will automatically and without
further act be deemed to have assigned to each Lender providing a portion of
the Revolving Commitment Increase (each a “Revolving
Commitment Increase Lender”) in respect of such increase, and each
such Revolving Commitment Increase Lender will automatically and without
further act be deemed to have assumed, a portion of such Revolving Credit
Lender’s participations hereunder in outstanding Letters of Credit and Swing
Line Loans such that, after giving effect to each such deemed assignment and
assumption of participations, the percentage of the aggregate outstanding (i) participations
hereunder in Letters of Credit and (ii) participations hereunder in Swing
Line Loans held by each Revolving Credit Lender (including each such Revolving
Commitment Increase Lender) will equal the percentage of the aggregate
Revolving Credit Commitments of all Revolving Credit Lenders represented by
such Revolving Credit Lender’s Revolving Credit Commitment and (b) if, on
the date of such increase,
there are any Revolving Credit Loans outstanding, such Revolving Credit Loans
shall on or prior to the effectiveness of such Revolving Commitment Increase be
prepaid from the proceeds of additional Revolving Credit Loans made hereunder
(reflecting such increase in Revolving Credit Commitments), which prepayment
shall be accompanied by accrued interest on the Revolving Credit Loans being
prepaid and any costs incurred by any Lender in accordance with Section 3.05.  The Administrative Agent and the Lenders
hereby agree that the minimum borrowing, pro rata borrowing and pro rata
payment requirements contained elsewhere in this Agreement shall not apply to
the transactions effected pursuant to the immediately preceding sentence.


 


(b)  The
Company may from time to time designate any Foreign Subsidiary organized under
the Laws of Australia, Canada or the United Kingdom as an additional Overseas
Borrower for purposes of this Agreement by delivering written notice thereof to
the Administrative Agent duly executed on behalf of such Foreign Subsidiary and
the Company.  Any such Overseas Borrower
organized under the laws of Australia may, on any one date after the Closing
Date, by notice to the Administrative Agent (whereupon the Administrative Agent
shall promptly deliver a copy to each of the Lenders), request a tranche of
term loans denominated in Australian Dollars, any such Overseas Borrower
organized under the laws of Canada may, on any one date after the Closing Date,
by notice to the Administrative Agent (whereupon the Administrative Agent shall
promptly deliver a copy to each of the Lenders), request a tranche of term
loans denominated in Canadian Dollars, and any such Overseas Borrower organized
under the laws of the United 


 


71

















 


Kingdom may, on any one date
after the Closing Date, by notice to the Administrative Agent (whereupon the
Administrative Agent shall promptly deliver a copy to each of the Lenders),
request a tranche of term loans denominated in Sterling or Euros (any and all
such term loans, the “Incremental Overseas
Term Loans”); provided
that both at the time of any such request and upon the effectiveness of
any Incremental Overseas Amendment referred to below, no Default or Event of
Default shall exist and at the time that any such Incremental Overseas Term
Loan is made (and after giving effect thereto) no Default or Event of Default
shall exist.  Each tranche of Incremental
Overseas Term Loans shall be in an aggregate initial Dollar Amount of not more
than $150,000,000 as of the relevant Incremental Overseas Facility Closing
Date; provided that the aggregate initial Dollar Amount of the Incremental
Overseas Term Loans shall not exceed $300,000,000.  The Incremental Overseas Term Loans (a) shall
rank pari passu in right of payment and of security with the U.S. Term Loans,
but may have additional security or Guarantees or limits on security or
Guarantees to the extent required by the Collateral and Guarantee Requirement, (b) shall
not mature earlier than the Maturity Date with respect to the U.S. Term Loans, (c) shall
not have a Weighted Average Life to Maturity that is shorter than the Weighted
Average Life to Maturity with respect to the U.S. Term Loans, (d) will
accrue interest at rates determined by the applicable Overseas Borrower and the
lenders providing such Incremental Overseas Term Loans, which rates may be
higher or lower than the rates applicable to the U.S. Term Loans, and (e) except
as set forth above, shall be treated substantially the same as, or less
favorably to the lenders thereof than, the U.S. Term Loans (in each case,
including with respect to mandatory and voluntary prepayments), provided that (i) the terms and conditions
applicable to Incremental Overseas Term Loans may be materially different from
those of the U.S. Term Loans to the extent such differences are reasonably
acceptable to the Administrative Agent and (ii) subject to clauses (b), (c) and
(d) above, the interest rates, maturity and amortization schedule
applicable to the Incremental Overseas Term Loans shall be determined by the
applicable Overseas Borrower and the lenders thereof.  Each notice from an Overseas Borrower
pursuant to this Section shall set forth the requested amount and proposed
terms of the relevant Incremental Overseas Term Loans.  Incremental Overseas Term Loans may be made by any existing Lender or
by any other bank or other financial institution (any such other bank or other
financial institution being called an “Additional
Overseas Lender”), in each case as designated by the applicable
Overseas Borrower, provided that
the Administrative Agent shall have consented (not to be unreasonably withheld)
to such Lender’s or Additional Overseas Lender’s making such Incremental
Overseas Term Loans if such consent would be required under Section 10.07(b) for
an assignment of Loans to such Lender or Additional Overseas Lender.  Commitments in respect of Incremental
Overseas Term Loans shall become Commitments under this Agreement pursuant to
an amendment (an “Incremental Overseas
Amendment”) to this Agreement and, as appropriate, the other Loan
Documents, executed by Holdings, the Company, the applicable Overseas Borrower,
each Lender agreeing to provide such Commitment, if any, each Additional
Overseas Lender, if any, and the Administrative Agent.  The Incremental Overseas Amendment may,
without the consent of any other Lenders, effect such amendments to this
Agreement and the other Loan Documents as may be necessary or appropriate, in
the reasonable opinion of the Administrative Agent and the applicable Overseas
Borrower, to effect the provisions of this Section.  The effectiveness of any Incremental Overseas
Amendment shall be subject to the satisfaction on the date thereof (each, an “Incremental Overseas Facility Closing Date”)
of each of the conditions set forth in Section 4.03 and such other
conditions as the parties thereto shall agree. 
The proceeds of the Incremental Overseas Term Loans shall be applied to
the prepayment of the U.S. Term Loans pursuant to Section 2.05(b)(iii).  No Lender shall be obligated to provide any
Incremental Overseas Term Loans unless it so agrees.  The Administrative Agent and the Lenders
hereby agree that the minimum borrowing, pro rata borrowing and pro rata
payment requirements contained elsewhere in this Agreement shall not apply to
the transactions effected pursuant to this Section 2.14(b).


 


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(c)  This
Section 2.14 shall supersede any provisions in Section 2.13 or 10.01
to the contrary.


 


SECTION 2.15.  Overseas Borrower Costs.  (a)  If
as a result of the introduction of or any change in or in the interpretation of
any Law, in each case after the date any Lender makes any Euro Term Loan or
Incremental Overseas Term Loan to the applicable Overseas Borrower, or such
Lender’s compliance therewith, the cost to such Lender of making or maintaining
such Loan to such Overseas Borrower is increased (or the amount of any sum received
or receivable by such Lender or its Lending Office is reduced) by an amount
deemed by such Lender to be material, by reason of the fact that such Overseas
Borrower is incorporated in, or conducts business in, a jurisdiction outside
the United States, such Overseas Borrower shall indemnify such Lender for such
increased cost or reduction within fifteen (15) days after demand by such
Lender (with a copy to the Administrative Agent) (excluding for purposes of
this Section 2.15 any such increased costs resulting from (i) Taxes
or Other Taxes (as to which Section 3.01 and Section 10.15 shall
govern), (ii) changes in the basis of taxation of overall net income or
overall gross income (including branch profits), and franchise (and similar)
taxes imposed in lieu of net income taxes, by the United States or any foreign
jurisdiction or any political subdivision of either thereof under the Laws of
which such Lender is organized or maintains a Lending Office, (iii) reserve
requirements contemplated by Section 3.04(c) (as to which Section 3.04(c) shall
govern) and (iv) the requirements of the Bank of England and the Financial
Services Authority or the European Central Bank reflected in the Mandatory Cost
(as to which Section 3.04(a) shall govern).  A certificate of such Lender claiming
compensation under this Section 2.15 and setting forth the additional
amount or amounts to be paid to it hereunder in reasonable detail shall be
conclusive in the absence of manifest error.


 


(b)  Each
Lender will promptly notify the Company, the relevant Overseas Borrower and the
Administrative Agent of any event or circumstance of which it has knowledge
that will entitle such Lender to compensation pursuant to this Section 2.15.  If any Lender requests compensation under
this Section 2.15, then such Lender will, if requested by the Company, use
commercially reasonable efforts to designate another Lending Office for any
Loan affected by such event; provided
that such efforts are made on terms that, in the reasonable judgment of such Lender,
cause such Lender and its Lending Office(s) to suffer no material
economic, legal or regulatory disadvantage.


 


ARTICLE III




TAXES, INCREASED COSTS PROTECTION AND ILLEGALITY


 


SECTION 3.01.  Taxes.  (a)  Except
as provided in this Section 3.01 and Section 10.15, any and all
payments by any Borrower (the term Borrower under Article III being deemed
to include any Subsidiary for whose account a Letter of Credit is issued) to or
for the account of any Agent or any Lender under any Loan Document shall be made
free and clear of and without deduction for any and all present or future
taxes, duties, levies, imposts, deductions, assessments, fees, withholdings or
similar charges, and all liabilities (including additions to tax, penalties and
interest) with respect thereto, excluding in the case of each Agent and each
Lender, (x) taxes imposed on or measured by its net income or overall
gross income (including branch profits), and franchise (and similar) taxes
imposed on it in lieu of net income taxes, by the jurisdiction (or any
political subdivision thereof) under the Laws of which such Agent or such
Lender, as the case may be, is organized, managed or controlled or maintains a
Lending Office or, in the case of Germany, a permanent establishment for tax
purposes, and all liabilities (including additions to tax, penalties and
interest) with respect thereto and (y) any limited German income tax
liability 


 


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pursuant to § 49 para. 1 no. 5
lit. c) aa) German Income Tax Act imposed on such Agent or such Lender
(including any withholding obligation of the German Borrower on behalf of such
Agent or such Lender pursuant to § 50a para. 7 German Income Tax Act) due to
the fact that the Euro Term Loans are secured by German real property or by any
rights treated as German real property under German Civil Law, and all
liabilities (including additions to tax, penalties and interest) with respect
thereto; provided that the
exclusion set forth in clause (y) above shall be inapplicable for so long
as the Euro Term Loans are secured by German real property or by any rights
treated as German real property under German Civil Law the aggregate fair
market value of which real property and rights exceeds 10% of the consolidated
total assets of the German Borrower and its Subsidiaries.  All non-excluded taxes, duties, levies,
imposts, deductions, assessments, fees, withholdings or similar charges, and
liabilities described in the immediately preceding sentence are hereinafter
referred to as “Taxes”.  If any Borrower shall be required by any Laws
to deduct any Taxes or Other Taxes from or in respect of any sum payable under
any Loan Document to any Agent or any Lender, (i) the sum payable shall be
increased as necessary so that after making all required deductions (including
deductions applicable to additional sums payable under this Section 3.01),
each of such Agent and such Lender receives an amount equal to the sum it would
have received had no such deductions been made, (ii) such Borrower shall
make such deductions, (iii) such Borrower shall pay the full amount
deducted to the relevant taxation authority or other authority in accordance
with applicable Laws, and (iv) within thirty (30) days after the date of
such payment (or, if receipts or evidence are not available within thirty (30)
days, as soon as possible thereafter), such Borrower shall furnish to such
Agent or Lender (as the case may be) the original or a certified copy of a
receipt evidencing payment thereof to the extent such a receipt is issued therefor, or other written proof of payment
thereof that is reasonably satisfactory to the Administrative Agent.  If such Borrower fails to pay any Taxes or
Other Taxes when due to the appropriate taxing authority or fails to remit to
any Agent or any Lender the required receipts or other required documentary
evidence, such Borrower shall indemnify such Agent and such Lender for any
incremental taxes, interest or penalties that may become payable by such Agent
or such Lender arising out of such failure.


 


(b)  In
addition, each Borrower agrees to pay any and all present or future stamp,
court or documentary taxes and any other excise, property, intangible or
mortgage recording taxes or charges or similar levies which arise from any
payment made under any Loan Document or from the execution, delivery,
performance, enforcement or registration of, or otherwise with respect to, any
Loan Document (hereinafter referred to as “Other
Taxes”).


 


(c)  Each
Borrower agrees to indemnify each Agent and each Lender for (i) the full
amount of Taxes and Other Taxes (including any Taxes or Other Taxes imposed or
asserted by any jurisdiction on amounts payable under this Section 3.01)
paid by such Agent and such Lender and (ii) any liability (including
additions to tax, penalties, interest and expenses) arising therefrom or with
respect thereto, in each case whether or not such Taxes or Other Taxes were
correctly or legally imposed or asserted by the relevant Governmental
Authority; provided such Agent or Lender, as the case may be, provides such
Borrower with a written statement thereof setting forth in reasonable detail
the basis and calculation of such amounts. 
Payment under this Section 3.01(c) shall be made within thirty
(30) days after the date such Lender or such Agent makes a demand therefor.


 


(d)  No
Borrower shall be required pursuant to this Section 3.01 to pay any
additional amount to, or to indemnify, any Lender or Agent, as the case may be,
to the extent that such Lender or such Agent becomes subject to Taxes
subsequent to the Closing Date (or, if later, the date such Lender or Agent
becomes a party to this Agreement) as a result of a change in the place of
organization of such Lender or Agent or a change in the lending office of such
Lender, except 


 


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to the extent that any such
change is requested or required in writing by any Borrower (and provided that
nothing in this clause (d) shall be construed as relieving any Borrower
from any obligation to make such payments or indemnification in the event of a
change in lending office or place of organization that precedes a change in Law
to the extent such Taxes result from a change in Law).


 


(e)  Notwithstanding
anything else herein to the contrary, if a Lender or an Agent is subject to
withholding tax imposed by any jurisdiction in which any Borrower is formed or
organized at a rate in excess of zero percent at the time such Lender or such
Agent, as the case may be, first becomes a party to this Agreement (or, if
later, the date such Lender or Agent makes an Incremental Overseas Term Loan to
any Borrower), withholding tax imposed by such jurisdiction at such rate shall
be considered excluded from Taxes unless and until such Lender or Agent, as the
case may be, provides the appropriate forms required or prescribed by
applicable Law certifying that a lesser rate applies, whereupon withholding tax
at such lesser rate only shall be considered excluded from Taxes for periods
governed by such forms; provided
that, if at the date of the Assignment and Assumption pursuant to which a
Lender becomes a party to this Agreement, the Lender assignor was entitled to
payments under clause (a) of this Section 3.01 in respect of
withholding tax with respect to interest paid at such date, then, to such
extent, the term Taxes shall include (in addition to withholding taxes that may
be imposed in the future or other amounts otherwise includable in Taxes)
withholding tax, if any, applicable with respect to the Lender assignee on such
date.


 


(f)  If
any Lender or Agent determines, in its reasonable discretion, that it has
received a refund in respect of any Taxes or Other Taxes as to which
indemnification or additional amounts have been paid to it by any Borrower
pursuant to this Section 3.01, it shall promptly remit such refund (but
only to the extent of indemnity payments made, or additional amounts paid, by
any Borrower under this Section 3.01 with respect to the Taxes or Other
Taxes giving rise to such refund plus any interest included in such refund by
the relevant taxing authority attributable thereto) to such Borrower, net of
all out-of-pocket expenses of the Lender or Agent, as the case may be and
without interest (other than any interest paid by the relevant taxing authority
with respect to such refund); provided
that such Borrower, upon the request of the Lender or Agent, as the case may
be, agrees promptly to return such refund to such party in the event such party
is required to repay such refund to the relevant taxing authority.  Such Lender or Agent, as the case may be,
shall, at such Borrower’s request, provide such Borrower with a copy of any
notice of assessment or other evidence of the requirement to repay such refund
received from the relevant taxing authority (provided
that such Lender or Agent may delete any information therein that such Lender
or Agent deems confidential).  Nothing
herein contained shall interfere with the right of a Lender or Agent to arrange
its tax affairs in whatever manner it thinks fit nor oblige any Lender or Agent
to claim any tax refund or to make available its tax returns or disclose any
information relating to its tax affairs or any computations in respect thereof
or require any Lender or Agent to do anything that would prejudice its ability to
benefit from any other refunds, credits, reliefs, remissions or repayments to
which it may be entitled.


 


(g)  Each
Lender agrees that, upon the occurrence of any event giving rise to the
operation of Section 3.01(a) or (c) with respect to such Lender
it will, if requested by the Company, use commercially reasonable efforts to
designate another Lending Office for any Loan or Letter of Credit affected by
such event; provided that such
efforts are made on terms that, in the sole judgment exercised in good faith of
such Lender, cause such Lender and its Lending Office(s) to suffer no
economic, legal or regulatory disadvantage, and provided further that nothing in this Section 3.01(g) shall
affect or postpone any of the Obligations of any Borrower or the rights of such
Lender pursuant to Section 3.01(a) or (c).


 


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SECTION 3.02.  Illegality.  If
any Lender determines that any Law has made it unlawful, or that any
Governmental Authority has asserted that it is unlawful, for any Lender or its
applicable Lending Office to make, maintain or fund Eurocurrency Rate Loans, or
to determine or charge interest rates based upon the Eurocurrency Rate, then,
on notice thereof by such Lender to the Borrowers through the Administrative
Agent, any obligation of such Lender to make or continue Eurocurrency Rate
Loans or to convert Base Rate Loans to Eurocurrency Rate Loans shall be
suspended until such Lender notifies the Administrative Agent and the relevant
Borrowers that the circumstances giving rise to such determination no longer
exist.  Upon receipt of such notice, the
relevant Borrowers shall upon demand from such Lender (with a copy to the
Administrative Agent), prepay or, if applicable, convert all Eurocurrency Rate
Loans of such Lender to Base Rate Loans, either on the last day of the Interest
Period therefor, if such Lender may lawfully continue to maintain such
Eurocurrency Rate Loans to such day, or promptly, if such Lender may not
lawfully continue to maintain such Eurocurrency Rate Loans.  Upon any such prepayment or conversion, each
relevant Borrower shall also pay accrued interest on the amount so prepaid or
converted and all amounts due, if any, in connection with such prepayment or
conversion under Section 3.05.  Each
Lender agrees to designate a different Lending Office if such designation will
avoid the need for such notice and will not, in the good faith judgment of such
Lender, otherwise be materially disadvantageous to such Lender.


 


SECTION 3.03.  Inability to Determine Rates.  If
the Required Lenders determine that for any reason adequate and reasonable
means do not exist for determining the Eurocurrency Rate for any requested
Interest Period with respect to a proposed Eurocurrency Rate Loan, or that the
Eurocurrency Rate for any requested Interest Period with respect to a proposed
Eurocurrency Rate Loan does not adequately and fairly reflect the cost to such
Lenders of funding such Loan, or that Dollar deposits are not being offered to
banks in the London interbank eurodollar market for the applicable amount and
the Interest Period of such Eurocurrency Rate Loan, the Administrative Agent
will promptly so notify each relevant Borrower and each Lender.  Thereafter, the obligation of the Lenders to
make or maintain Eurocurrency Rate Loans shall be suspended until the
Administrative Agent (upon the instruction of the Required Lenders, which
instruction shall be given promptly upon such condition’s ceasing to exist)
revokes such notice.  Upon receipt of
such notice, each relevant Borrower may revoke any pending request for a
Borrowing of, conversion to or continuation of Eurocurrency Rate Loans or,
failing that, will be deemed to have converted such request into a request for
a Borrowing of Base Rate Loans in the amount specified therein.


 


SECTION 3.04.  Increased Cost and Reduced Return;
Capital Adequacy; Reserves on Eurocurrency Rate Loans.  (a)  If
any Lender determines (in good faith) that as a result of the introduction of
or any change in or in the interpretation of any Law, in each case after the
date hereof, or such Lender’s compliance therewith, there shall be any increase
in the cost to such Lender of agreeing to make or making, funding or
maintaining Eurocurrency Rate Loans or (as the case may be) issuing or participating
in Letters of Credit, or a reduction in the amount received or receivable by
such Lender in connection with any of the foregoing (excluding for purposes of
this Section 3.04(a) any such increased costs or reduction in amount
covered by Section 2.15 or resulting from (i) Taxes or Other Taxes
(as to which Section 3.01 shall govern), (ii) changes in the basis of
taxation of overall net income or overall gross income (including branch
profits), and franchise (and similar) taxes imposed in lieu of net income
taxes, by the United States or any foreign jurisdiction or any political
subdivision of either thereof under the Laws of which such Lender is organized
or maintains a Lending Office, (iii) reserve requirements contemplated by Section 3.04(c) and
(iv) in the case of Eurocurrency Rate Loans denominated in an Alternative
Currency, the requirements of the Bank of England and the Financial Services
Authority or the European Central Bank reflected in the Mandatory Cost, other
than as set forth 


 


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below) or the Mandatory Cost,
as calculated hereunder, does not represent the cost to such Lender of
complying with the requirements of the Bank of England and/or the Financial
Services Authority or the European Central Bank in relation to its making, funding
or maintaining of such Eurocurrency Rate Loans, then from time to time within
fifteen (15) days after demand by such Lender setting forth in reasonable
detail such increased costs (with a copy of such demand to the Administrative
Agent given in accordance with Section 3.06), the Company shall pay to
such Lender such additional amounts as will compensate such Lender for such
increased cost or reduction or, if applicable, the portion of such cost that is
not represented by the Mandatory Cost.


 


(b)  If
any Lender determines (in good faith) that the introduction of any Law
regarding capital adequacy or any change therein or in the interpretation
thereof, in each case after the date hereof, or compliance by such Lender or
such Lender’s holding company therewith, has the effect of reducing the rate of
return on the capital of such Lender or such Lender’s holding company (or its
Lending Office) as a consequence of its obligations hereunder to a level below
that which such Lender or such Lender’s holding company could have achieved but
for such introduction, change or compliance (taking into consideration its
policies with respect to capital adequacy, by an amount deemed by such Lender
to be material, then from time to time upon demand of such Lender setting forth
in reasonable detail the charge and the calculation of such reduced rate of
return (with a copy of such demand to the Administrative Agent given in
accordance with Section 3.06), the Company shall pay to such Lender such
additional amounts as will compensate such Lender or such Lender’s holding
company for such reduction within fifteen (15) days after receipt of such
demand.


 


(c)  The
Company shall pay to each Lender, (i) as long as such Lender shall be
required to maintain reserves with respect to liabilities or assets consisting
of or including Eurocurrency funds or deposits, additional interest on the
unpaid principal amount of each Eurocurrency Rate Loan equal to the actual
costs of such reserves allocated to such Loan by such Lender (as determined by such
Lender in good faith, which determination shall be conclusive in the absence of
manifest error), and (ii) as long as such Lender shall be required to
comply with any reserve ratio requirement or analogous requirement of any other
central banking or financial regulatory authority imposed in respect of the
maintenance of the Commitments or the funding of the Eurocurrency Rate Loans,
such additional costs (expressed as a percentage per annum and rounded upwards,
if necessary, to the nearest five decimal places) equal to the actual costs
allocated to such Commitment or Loan by such Lender (as determined by such
Lender in good faith, which determination shall be conclusive absent manifest
error) which in each case shall be due and payable on each date on which
interest is payable on such Loan, provided the Company shall have received at
least fifteen (15) days’ prior notice (with a copy to the Administrative Agent,
and which notice shall specify the Statutory Reserve Rate, if any, applicable
to such Lender) of such additional interest or cost from such Lender.  If a Lender fails to give notice fifteen (15)
days prior to the relevant Interest Payment Date, such additional interest or
cost shall be due and payable fifteen (15) days from receipt of such notice.


 


(d)  Failure
or delay on the part of any Lender to demand compensation pursuant to this Section 3.04
shall not constitute a waiver of such Lender’s right to demand such
compensation, provided that the
Company shall not be required to compensate a Lender pursuant to Section 3.04(a),
(b) or (c) for any such increased cost or reduction incurred more
than ninety (90) days prior to the date that such Lender demands, or notifies
the Company of its intention to demand, compensation therefor, provided further that, if the circumstance
giving rise to such increased cost or reduction is retroactive, then such
90-day period referred to above shall be extended to include the period of
retroactive effect thereof.


 


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(e)  If
any Lender requests compensation under this Section 3.04, then such Lender
will, if requested by the Company, use commercially reasonable efforts to
designate another Lending Office for any Loan or Letter of Credit affected by
such event; provided that such
efforts are made on terms that, in the reasonable judgment of such Lender,
cause such Lender and its Lending Office(s) to suffer no material
economic, legal or regulatory disadvantage, and provided further that nothing in this Section 3.04(e) shall
affect or postpone any of the Obligations of any Borrower or the rights of such
Lender pursuant to Section 3.04(a), (b), (c) or (d) or any
rights of the Company pursuant to Section 3.07.


 


SECTION 3.05.  Funding Losses.  Upon
demand of any Lender (with a copy to the Administrative Agent) from time to
time, the Company shall promptly compensate such Lender for and hold such
Lender harmless from any loss, cost or expense (excluding loss of profit)
incurred by it as a result of:


 


(a)  (i) any
continuation, conversion, payment or prepayment of any Eurocurrency Rate Loan
on a day other than the last day of the Interest Period for such Loan or (ii) the
CAM Exchange (in each case, whether voluntary, mandatory, automatic, by reason
of acceleration, or otherwise); or


 


(b)  any
failure by any Borrower (for a reason other than the failure of such Lender to
make a Loan) to prepay, borrow, continue or convert any Eurocurrency Rate Loan
on the date or in the amount notified by such Borrower;


 


including
any loss or expense arising from the liquidation or reemployment of funds
obtained by it to maintain such Loan or from fees payable to terminate the
deposits from which such funds were obtained.


 


SECTION 3.06.  Matters Applicable to All Requests for
Compensation.  (a)  Any Agent or any Lender
claiming compensation under this Article III shall deliver a certificate
to the Company setting forth the additional amount or amounts to be paid to it
hereunder which shall be conclusive in the absence of manifest error.


 


(b)  With
respect to any Lender’s claim for compensation under Section 2.15, 3.01,
3.02, 3.03 or 3.04, no Borrower shall be required to compensate such Lender for
any amount incurred more than ninety (90) days prior to the date that such
Lender notifies the relevant Borrowers of the event that gives rise to such
claim; provided that, if the
circumstance giving rise to such claim is retroactive, then such 90-day period
referred to above shall be extended to include the period of retroactive effect
thereof.  If any Lender requests
compensation by the Company under Section 2.15 or 3.04, the Company may,
by notice to such Lender (with a copy to the Administrative Agent), suspend the
obligation of such Lender to make or continue from one Interest Period to
another Eurocurrency Rate Loans, or to convert Base Rate Loans into
Eurocurrency Rate Loans, until the event or condition giving rise to such
request ceases to be in effect (in which case the provisions of Section 3.06(c) shall
be applicable); provided that
such suspension shall not affect the right of such Lender to receive the
compensation so requested.


 


(c)  If
the obligation of any Lender to make or continue from one Interest Period to
another any Eurocurrency Rate Loan, or to convert Base Rate Loans into
Eurocurrency Rate Loans shall be suspended pursuant to Section 3.06(b) hereof,
such Lender’s Eurocurrency Rate Loans shall be automatically converted into
Base Rate Loans on the last day(s) of the then current Interest Period(s) for
such Eurocurrency Rate Loans (or, in the case of an immediate conversion
required by Section 3.02, on such earlier date as required by Law) and,
unless and until such 


 


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Lender gives notice as provided
below that the circumstances specified in Section 2.15, 3.01, 3.02, 3.03
or 3.04 hereof that gave rise to such conversion no longer exist:


 


(i)  to
the extent that such Lender’s Eurocurrency Rate Loans have been so converted,
all payments and prepayments of principal that would otherwise be applied to
such Lender’s Eurocurrency Rate Loans shall be applied instead to its Base Rate
Loans; and


 


(ii)  all
Loans that would otherwise be made or continued from one Interest Period to
another by such Lender as Eurocurrency Rate Loans shall be made or continued
instead as Base Rate Loans, and all Base Rate Loans of such Lender that would
otherwise be converted into Eurocurrency Rate Loans shall remain as Base Rate
Loans.


 


(d)  If
any Lender gives notice to the Company (with a copy to the Agent) that the
circumstances specified in Section 2.15, 3.01, 3.02, 3.03 or 3.04 hereof
that gave rise to the conversion of such Lender’s Eurocurrency Rate Loans
pursuant to this Section 3.06 no longer exist (which such Lender agrees to
do promptly upon such circumstances ceasing to exist) at a time when
Eurocurrency Rate Loans made by other Lenders are outstanding, such Lender’s
Base Rate Loans shall be automatically converted, on the first day(s) of
the next succeeding Interest Period(s) for such outstanding Eurocurrency
Rate Loans, to the extent necessary so that, after giving effect thereto, all
Loans held by the Lenders holding Eurocurrency Rate Loans and by such Lender
are held pro rata (as to principal amounts, interest rate basis, and Interest
Periods) in accordance with their respective Commitments.


 


SECTION 3.07.  Replacement of Lenders under Certain
Circumstances.  (a)  If at any time (i) any
Borrower becomes obligated to pay additional amounts or indemnity payments
described in Section 2.15, 3.01 or 3.04 as a result of any condition
described in such Sections or any Lender ceases to make Eurocurrency Rate Loans
as a result of any condition described in Section 3.02 or Section 3.04,
(ii) any Lender becomes a Defaulting Lender or (iii) any Lender
becomes a Non-Consenting Lender, then the Company may, upon prior written
notice to the Administrative Agent and such Lender, replace such Lender by
causing such Lender to (and such Lender shall be obligated to) assign pursuant
to Section 10.07(b) (with the assignment fee to be paid by the
Company in such instance) all of its rights and obligations under this
Agreement to one or more Eligible Assignees; provided
that neither the Administrative Agent nor any Lender shall have any obligation
to the Company to find a replacement Lender or other such Person.


 


(b)  Any
Lender being replaced pursuant to Section 3.07(a) above shall (i) execute
and deliver an Assignment and Assumption with respect to such Lender’s
Commitment and outstanding Loans and participations in L/C Obligations and Swing
Line Loans, and (ii) deliver any Notes evidencing such Loans to the
Company or Administrative Agent. 
Pursuant to such Assignment and Assumption, (A) the assignee Lender
shall acquire all or a portion, as the case may be, of the assigning Lender’s
Commitment and outstanding Loans and participations in L/C Obligations and
Swing Line Loans, (B) all obligations of the Borrowers owing to the
assigning Lender relating to the Loans and participations so assigned shall be
paid in full by the assignee Lender to such assigning Lender concurrently with
such assignment and assumption and (C) upon such payment and, if so
requested by the assignee Lender, delivery to the assignee Lender of the
appropriate Note or Notes executed by the relevant Borrowers, the assignee
Lender shall become a Lender hereunder and the assigning Lender shall cease to
constitute a Lender hereunder with respect to such assigned Loans, Commitments
and participations, except with respect to indemnification provisions under
this Agreement, which shall survive as to such assigning Lender.


 


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(c)  Notwithstanding
anything to the contrary contained above, any Lender that acts as an L/C Issuer
may not be replaced hereunder at any time that it has any Letter of Credit
outstanding hereunder unless arrangements reasonably satisfactory to such L/C
Issuer (including the furnishing of a back-up standby letter of credit in form
and substance, and issued by an issuer reasonably satisfactory to such L/C Issuer
or the depositing of cash collateral into a cash collateral account in amounts
and pursuant to arrangements reasonably satisfactory to such L/C Issuer) have
been made with respect to each such outstanding Letter of Credit and the Lender
that acts as the Administrative Agent may not be replaced hereunder except in
accordance with the terms of Section 9.09.


 


(d)  In
the event that (i) the Company or the Administrative Agent has requested
that the Lenders consent to a departure or waiver of any provisions of the Loan
Documents or agree to any amendment thereto, (ii) the consent, waiver or
amendment in question requires the agreement of all affected Lenders in
accordance with the terms of Section 10.01 or all the Lenders with respect
to a certain Class of the Loans and (iii) the Required Lenders have
agreed to such consent, waiver or amendment, then any Lender who does not agree
to such consent, waiver or amendment shall be deemed a “Non-Consenting Lender.”


 


SECTION 3.08.  Survival.  All
of the Borrowers’ obligations under this Article III shall survive
termination of the Aggregate Commitments and repayment of all other
Obligations hereunder.


 


ARTICLE IV




CONDITIONS PRECEDENT TO CREDIT EXTENSIONS


 


SECTION 4.01.  Conditions of Initial Credit Extension.  The
obligation of each Lender to make its initial Credit Extension hereunder is
subject to satisfaction or waiver of the following conditions on or prior to
the Closing Date:


 


(a)  The
Administrative Agent’s receipt of the following, each of which shall be
originals or facsimiles (followed promptly by originals) unless otherwise
specified, each properly executed by a Responsible Officer of the signing Loan
Party, each in form and substance reasonably satisfactory to the Administrative
Agent:


 


(i)  executed
counterparts of this Agreement;


 


(ii)  a
Note executed by the Company in favor of each Lender that has requested a Note
at least two Business Days in advance of the Closing Date;


 


(iii)  each
Collateral Document set forth on Schedule 1.01A, duly executed by each Loan
Party thereto, together with:


 


(A)  certificates,
if any, representing the Pledged Equity referred to therein accompanied by
undated stock powers executed in blank and instruments evidencing the Pledged
Debt indorsed in blank;


 


(B)  to
the extent required under the Collateral and Guarantee Requirement, an opinion
of local counsel for the Loan Parties in Iowa with respect to the
enforceability and perfection of the Mortgage with respect to the Mortgaged
Property in Iowa and any 


 


80

















 


related
fixture filings in form and substance reasonably satisfactory to the
Administrative Agent;


 


(C)  evidence
that all other actions, recordings and filings that the Administrative Agent
may deem reasonably necessary to satisfy the Collateral and Guarantee
Requirement shall have been taken, completed or otherwise provided for in a
manner reasonably satisfactory to the Administrative Agent; and


 


(D)  a
completed Perfection Certificate dated the Closing Date and signed by the associate
general counsel or the chief legal officer of the Company, together with all
attachments contemplated thereby;


 


(iv)  such
certificates of resolutions or other action, incumbency certificates and/or
other certificates of Responsible Officers of each Loan Party as the
Administrative Agent may reasonably require evidencing the identity, authority
and capacity of each Responsible Officer thereof authorized to act as a
Responsible Officer in connection with this Agreement and the other Loan
Documents to which such Loan Party is a party or is to be a party on the
Closing Date;


 


(v)  opinion
from (u) Cravath, Swaine & Moore LLP, special New York counsel to
Holdings substantially in the form of Exhibit H-1, (v) local counsel
in each of Iowa and Washington as may be reasonably required by the
Administrative Agent, (w) Richards, Layton & Finger, special
Delaware counsel to the Loan Parties substantially in the form of Exhibit H-2,
and (x) Clifford H.R. DuPree, associate general counsel to the Company
substantially in the form of Exhibit H-3, (y) Karen E. Andrews,
general counsel to WRC Media substantially in the form of Exhibit H-4, and
(z) Randolph H. Elkins, general counsel to Direct Holdings substantially
in the form of Exhibit H-5;


 


(vi)  a
certificate signed by a Responsible Officer of Holdings certifying that (A) except
as set forth (x) in the Company Disclosure Letter (as defined in the
Purchase Agreement) or (y) in Reader’s Digest’s Annual Report on Form 10-K
for the fiscal year ended June 30, 2006, filed with the SEC on August 21,
2006, Reader’s Digest’s Current Reports on Forms 8-K filed with the SEC on October 4,
2006 and October 5, 2006, Reader’s Digest’s proxy statement on Schedule
14A filed with the SEC on September 29, 2006, Reader’s Digest’s Registration
Statement on Form S-8 filed with the SEC on August 21, 2006, and
post-effective amendment thereto dated August 22, 2006, but excluding in
each case under this clause (y) any risk factor disclosures or other
cautionary, predictive and forward looking disclosures contained in any such
document under the heading “Risk Factors” or “Forward Looking Statements” or
under any other heading, from June 30, 2006 to November 16, 2006,
there has been no state of facts, event, change, effect, development, condition
or occurrence that, individually or in the aggregate, has had or could
reasonably be expected to result in a Material Adverse Change, and (B) except
as set forth in the Company Disclosure Letter, since November 16, 2006,
there has been no event, change, effect, development, condition or occurrence
that, individually or in the aggregate, has had or could reasonably be expected
to result in a Material Adverse Change;


 


(vii)  a
certificate signed by a Responsible Officer of Holdings certifying that since June 30,
2006 there has been no event, change, effect, development, condition or
occurrence with respect to WRC Media, Direct Holdings or any of their
respective subsidiaries that, individually or in the aggregate, has had, or
would reasonably be expected to have a material adverse effect on the business,
operations, property or financial condition of Reader’s Digest, WRC Media,
Direct Holdings and their respective subsidiaries, taken as a whole.


 


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(viii)  a
certificate (which shall be reasonably satisfactory to the Administrative
Agent) attesting to the Solvency of the Loan Parties (taken as a whole) after
giving effect to the Transaction, from the Treasurer of Holdings;


 


(ix)  except
as set forth in Section 6.17, evidence that all insurance (including title
insurance) required to be maintained pursuant to the Loan Documents has been
obtained and is in effect and that the Administrative Agent has been named as
loss payee or additional insured, as appropriate, under each insurance policy
with respect to such liability and property insurance as to which the
Administrative Agent shall have reasonably requested to be so named;


 


(x)  a
Committed Loan Notice or Letter of Credit Application, as applicable, relating
to the initial Credit Extension; and


 


(xi)  a
certificate signed by a Responsible Officer of the Company certifying
compliance with the conditions set forth in paragraphs (a) and (b) of
Section 4.02.


 


(b)  All
fees and expenses required to be paid hereunder and invoiced before the Closing
Date shall have been paid in full in cash.


 


(c)  Prior
to or substantially contemporaneously with the initial Credit Extension, (i) the
Sponsor Equity Contributions shall have been funded in full in cash; and (ii) Acquisition
Co shall have received (as a common equity capital contribution or, if
otherwise, on terms and conditions reasonably satisfactory in all material
respects to the Administrative Agent) cash proceeds from the Equity
Contribution in an aggregate amount, when combined with (x) the aggregate
value of the Company Preferred Stock that is rolled over in connection with the
Transactions and (y) the value (which shall be calculated net of the fees
and expenses of the Company in connection with the WRC Acquisition and the DH
Acquisition in excess of $15,000,000) of the Equity Interests issued by
Holdings to the shareholders of WRC Media and Direct Holdings as consideration
for the WRC Acquisition and the DH Acquisition, respectively) is equal to at
least 29% of the total capitalization of the Company.


 


(d)  The
Acquisition and the Merger shall be consummated in accordance with the terms of
the Purchase Agreement without waiver or amendment of any material provisions
thereof (other than any such waivers or amendments as are not, taken as a
whole, materially adverse to the Lenders) unless consented to by the
Administrative Agent, which consent shall not be unreasonably withheld,
conditioned or delayed.


 


(e)  The
DH Acquisition shall be consummated in accordance with the terms of the DH
Acquisition Agreement without waiver or amendment of any material provisions
thereof (other than any such waivers or amendments as are not, taken as a
whole, materially adverse to the Lenders) unless consented to by the Administrative
Agent, which consent shall not be unreasonably withheld, conditioned or
delayed.  Holdings shall have contributed
all of the Equity Interests of Direct Holdings to the Company.


 


(f)  The
WRC Acquisition shall be consummated in accordance with the terms of the WRC
Acquisition Agreement without waiver or amendment of any material provisions
thereof (other than any such waivers or amendments as are not, taken as a
whole, materially adverse to the Lenders) unless consented to by the
Administrative Agent, which consent shall not be unreasonably withheld,
conditioned or delayed.  Holdings shall
have contributed all of the Equity Interests of WRC Media to the Company.


 


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(g)  Prior
to or substantially contemporaneously with the initial Credit Extensions, the
Company shall have received at least $600,000,000 in gross cash proceeds from
the issuance of the Senior Subordinated Notes.


 


(h)  Prior
to or substantially contemporaneously with the initial Credit Extensions,
Holdings shall have received at least $274,000,000 in gross cash proceeds from
the issuance of the Holdings Senior PIK Preferred.


 


(i)  Prior
to or substantially contemporaneously with the initial Credit Extensions,
Holdings shall have received at least $91,333,333.33 in gross cash proceeds
from the issuance of the Holdings Common Equity.


 


(j)  The
Administrative Agent shall have received evidence reasonably satisfactory to it
that all loans outstanding under the Existing Credit Agreement and the Existing
DH/WRC Debt Agreements and all accrued and unpaid interest, fees and other
amounts owing thereunder shall have been paid in full, all commitments to
extend credit thereunder shall have terminated, and all Liens securing
obligations thereunder shall have been released.  A Successful Consent Solicitation or a
Defeasance shall have been consummated. 
Except for (A) any Existing Notes not repurchased or redeemed on or
prior to the Closing Date, (B) Indebtedness listed on Schedule 7.03(b), (C) the
Company Preferred Stock, (D) the Loans and L/C Obligations, (E) the
Senior Subordinated Notes and (F) the Holdings PIK Preferred, Holdings,
the Company and its Subsidiaries shall have no Indebtedness or preferred Equity
Interests outstanding after giving effect to the Transaction.


 


(k)  The
Arrangers and the Lenders shall have received (i) the Audited Financial
Statements, (ii) the Unaudited Financial Statements and (iii) to the
extent made available by each of Reader’s Digest, Direct Holdings and WRC
Media, monthly financial data generated by each of Reader’s Digest’s, Direct
Holdings’, and WRC Media’s internal accounting systems for use by senior
management for each month ended after the latest fiscal quarter for which
Unaudited Financial Statements are delivered pursuant to clause (ii) above
and at least 30 days before the Closing Date.


 


(l)  The
Arrangers and the Lenders shall have received the Pro Forma Balance Sheet.


 


Notwithstanding anything in
this Agreement or any other Loan Document to the contrary, (I) the only
representations and warranties (and related defaults) made by the Loan Parties
relating to Reader’s Digest, its subsidiaries and their businesses the making
of which shall be a condition to availability of the Facilities on the Closing
Date shall be such of the representations made by Reader’s Digest in the
Purchase Agreement as are material to the interests of the Lenders, but only to
the extent that Holdings and Acquisition Co have the right to terminate their
obligations under the Purchase Agreement as a result of a breach of such
representations in the Purchase Agreement (determined without regard to whether
any notice is required to be delivered by Holdings or Acquisition Co), and (II) the
only other representations and warranties (and related defaults) made by the
Loan Parties the making of which shall be a condition to availability of the
Facilities on the Closing Date shall be the Specified Representations (as
defined below).  For purposes hereof, “Specified
Representations” means the representations and warranties set forth in
Sections 5.01(a), 5.01(b), 5.02, 5.04, 5.13, 5.16 and 5.18.


 


SECTION 4.02.  Conditions to All Credit Extensions. 
Subject to the last paragraph of Section 4.01, the obligation of
each Lender to honor any Request for Credit Extension (other than 


 


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a Committed Loan Notice
requesting only a conversion or a continuation of Loans) is subject to the
following conditions precedent:


 


(a)  The
representations and warranties of the Company and each other Loan Party
contained in Article V or any other Loan Document shall be true and
correct in all material respects on and as of the date of such Credit
Extension; provided that, to the
extent that such representations and warranties specifically refer to an
earlier date, they shall be true and correct in all material respects as of
such earlier date; provided, further that,
any representation and warranty that is qualified as to “materiality,”
“Material Adverse Effect” or similar language shall be true and correct in all
respects on such respective dates.


 


(b)  No
Default shall have occurred and be continuing at the time of or immediately
after giving effect to such proposed Credit Extension.


 


(c)  The
Administrative Agent and, if applicable, the relevant L/C Issuer or the Swing
Line Lender shall have received a Request for Credit Extension in accordance
with the requirements hereof.


 


Each
Request for Credit Extension (other than a Committed Loan Notice requesting
only a conversion or a continuation of Loans) submitted by the Company shall be
deemed to be a representation and warranty that the conditions specified in
Sections 4.02(a) and (b) have been satisfied on and as of
the date of the applicable Credit Extension.


 


SECTION 4.03.  Conditions of Initial Credit Extension
to Overseas Borrower.  Subject to the last paragraph
of Section 4.01, the obligation of each Lender to make any Euro Term Loan
or Incremental Overseas Term Loan to any Overseas Borrower is subject to
satisfaction or waiver of the following further conditions:


 


(a)  receipt
by the Administrative Agent of an opinion of counsel for such Overseas Borrower
reasonably acceptable to the Administrative Agent, covering such customary
matters relating to the transactions contemplated hereby as the Administrative
Agent may reasonably request;


 


(b)  receipt
by the Administrative Agent of all documents with respect to such Overseas
Borrower satisfying the requirements set forth in Section 4.01(a)(iv) with
respect thereto;


 


(c)  to
the extent required by the Collateral and Guarantee Requirement, all Overseas
Obligations shall have been (i) unconditionally guaranteed by each
required Guarantor and (ii) secured by a security interest in the required
Collateral with the priority required by the Collateral Documents, and the
Administrative Agent shall have received evidence that all other actions,
recordings and filings that the Administrative Agent may deem reasonably
necessary to satisfy the Collateral and Guarantee Requirement shall have been
taken, completed or otherwise provided for in a manner reasonably satisfactory
to the Administrative Agent;


 


(d)  receipt
by the Administrative Agent of a Note executed by such Overseas Borrower in
favor of each Lender that has requested a Note at least two Business Days in
advance of date of the relevant Credit Extension;


 


(e)  receipt
by the Administrative Agent of a certificate signed by a Responsible Officer of
the Company certifying compliance with the conditions set forth in paragraphs (a) and
(b) of Section 4.02; and


 


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(f)  receipt
by the Administrative Agent of a certificate signed by a Responsible Officer of
such Overseas Borrower certifying that the representations and warranties set
forth in Sections 5.01, 5.02, 5.03 and 5.04 are true and correct in all
material respects as to such Overseas Borrower and any Loan Document to which
such Overseas Borrower is a party on and as of the date of such Credit
Extension; provided that any
representation and warranty that is qualified as to “materiality,” “Material
Adverse Effect” or similar language shall be true and correct in all respects
on such date.


 


ARTICLE V




REPRESENTATIONS AND WARRANTIES


 


The
Company represents and warrants (provided
that, on the Closing Date, only the Specified Representations shall be made as
to the Company and its Subsidiaries, and the Specified Representations shall be
made by Acquisition Co only) to the Agents and the Lenders that:


 


SECTION 5.01.  Existence, Qualification and Power;
Compliance with Laws.  Each Loan Party and each of
its Subsidiaries (a) is a Person duly organized or formed, validly
existing and in good standing (to the extent such concept is applicable in the
applicable jurisdiction) under the Laws of the jurisdiction of its
incorporation or organization, (b) has all requisite power and authority
to (i) own or lease its assets and carry on its business and (ii) execute,
deliver and perform its obligations under the Loan Documents to which it is a
party, (c) is duly qualified and in good standing (to the extent such
concept is applicable in the applicable jurisdiction) under the Laws of each
jurisdiction where its ownership, lease or operation of properties or the
conduct of its business requires such qualification, (d) is in compliance
with all Laws, orders, writs, injunctions and orders and (e) has all
requisite governmental licenses, authorizations, consents and approvals to
operate its business as currently conducted; except in each case referred to in
clause (c), (d) or (e), to the extent that failure to do so could not
reasonably be expected to have a Material Adverse Effect.


 


SECTION 5.02.  Authorization; No Contravention.  The
execution, delivery and performance by each Loan Party of each Loan Document to
which such Person is a party, and the consummation of the Transaction, are
within such Loan Party’s corporate or other powers, have been duly authorized
by all necessary corporate or other organizational action, and do not and will
not (a) violate the terms of any of such Person’s Organization Documents, (b) violate
or result in any breach of, or the creation of any Lien under (other than Liens
created by the Loan Documents and other Liens permitted by Section 7.01),
or require any payment to be made under (i) any Contractual Obligation to
which such Person is a party or which is binding upon such Person or the
properties of such Person or any of its Subsidiaries or (ii) any order,
injunction, writ or decree of any Governmental Authority or any arbitral award
to which such Person or its property is subject; or (c) violate any Law;
except with respect to any violation or breach (but not creation of Liens)
referred to in clause (b) and (c) above, to the extent that such
violation or breach could not reasonably be expected to have a Material Adverse
Effect.


 


SECTION 5.03.  Governmental Authorization; Other
Consents.  No approval, consent, exemption,
authorization, or other action by, or notice to, or filing with, any
Governmental Authority is necessary or required in connection with (a) the
execution, delivery or performance by any Loan Party of this Agreement or any
other Loan Document, or for the consummation of the Transaction, (b) the
grant by any Loan Party of the Liens granted by it pursuant to the Collateral Documents
or (c) the perfection or maintenance of the Liens created under the 


 


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Collateral Documents (including
the priority thereof), except for (i) filings necessary to perfect or
maintain the perfection of the Liens on the Collateral granted by the Loan
Parties in favor of the Secured Parties, (ii) the approvals, consents,
exemptions, authorizations, actions, notices and filings which have been duly
obtained, taken, given or made and are in full force and effect and (iii) those
approvals, consents, exemptions, authorizations or other actions, notices or
filings, the failure of which to obtain or make could not reasonably be
expected to have a Material Adverse Effect.


 


SECTION 5.04.  Binding Effect.  This
Agreement and each other Loan Document has been duly executed and delivered by
each Loan Party that is party thereto. 
This Agreement and each other Loan Document constitutes a legal, valid
and binding obligation of each Loan Party that is party thereto, enforceable
against such Loan Party in accordance with its terms, except as such
enforceability may be limited by Debtor Relief Laws and by general principles
of equity, regardless of whether considered in a proceeding in equity or at
law.


 


SECTION 5.05.  Financial Statements; No Material
Adverse Effect.  (a)  (i)  The Audited
Financial Statements and the Unaudited Financial Statements fairly present in
all material respects the consolidated financial condition of Reader’s Digest,
WRC Media, Direct Holdings and their respective Subsidiaries as of the dates
thereof and their results of operations for the period covered thereby in
accordance with GAAP consistently applied throughout the periods covered
thereby, except as otherwise expressly noted therein and, in the case of the
Unaudited Financial Statements, subject to normal year-end audit adjustments
and the absence of footnotes.


 


(ii)  The
unaudited pro  forma consolidated balance sheet of the Company and
its Subsidiaries as at December 31, 2006 (including the notes thereto)
(the “Pro Forma Balance Sheet”)
has been prepared giving effect (as if such events had occurred on such date)
to the Transaction, each material acquisition by Reader’s Digest, WRC Media,
Direct Holdings or any of their respective Subsidiaries consummated after June 30,
2006 (and, with respect to WRC Media, after December 31, 2005) and prior
to the Closing Date and all other transactions that would be required to be
given pro forma effect by Regulation S-X promulgated under the Exchange Act.  The Pro Forma Balance Sheet has been prepared
in good faith, based on assumptions believed by the Company to be reasonable as
of the date of delivery thereof, and presents fairly in all material respects
in accordance with GAAP the pro  forma financial position of the
Company and its Subsidiaries as at December 31, 2006 and their pro  forma
results of operations for the periods covered thereby, assuming that the events
specified in the preceding sentence had actually occurred at such date.


 


(b)  Since
June 30, 2006, there has been no event or circumstance, either
individually or in the aggregate, that has had or could reasonably be expected
to have a Material Adverse Effect.


 


(c)  The
forecasts of consolidated balance sheets, income statements and cash flow statements
of the Company and its Subsidiaries for each fiscal year through 2013, copies
of which have been furnished to the Administrative Agent prior to the Closing
Date, have been prepared in good faith on the basis of assumptions believed to
be reasonable at the time made, it being understood that forecasts are, by
their nature, inherently uncertain and actual results may vary from such
forecasts and that such variations may be material.


 


(d)  As
of the Closing Date, except as disclosed in any schedule to this Agreement,
neither the Company nor any Subsidiary has any Indebtedness or other
obligations or liabilities, direct or contingent (other than (i) the
Indebtedness, obligations and liabilities reflected on Schedule 5.05, (ii) obligations
arising under this Agreement, the Senior Subordinated Note 


 


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Indenture, the Company
Preferred Stock and the Holdings PIK Preferred, (iii) liabilities arising
as a result of the Transaction and (iv) liabilities incurred in the
ordinary course of business) that, either individually or in the aggregate,
have had or could reasonably be expected to have a Material Adverse Effect.


 


SECTION 5.06.  Litigation.  As
of the Closing Date, there are no actions, suits, proceedings, claims,
investigations or disputes pending or, to the knowledge of the Company,
threatened in writing or contemplated, at law, in equity, in arbitration or
before any Governmental Authority, by or against the Company or any of its
Subsidiaries or against any of their properties or revenues that, either
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect.


 


SECTION 5.07.  No Default. 
Neither the Company nor any Subsidiary is in default under or with
respect to any Contractual Obligation (other than any Contractual Obligation
pursuant to which the Company or such Subsidiary has issued or incurred
Indebtedness) that, either individually or in the aggregate, could reasonably
be expected to have a Material Adverse Effect.


 


SECTION 5.08.  Ownership of Property; Liens.  Each
Loan Party (other than any Immaterial Subsidiary) and each of its Subsidiaries
(other than any Immaterial Subsidiary) has good title to, or valid leasehold
interests in, or easements or other limited property interests in, all its
properties and assets material to the ordinary conduct of its business
(including all Material Real Property), free and clear of all Liens except for
minor defects in title that do not materially interfere with its ability to
conduct its business or to utilize such assets for their intended purposes and
Liens permitted by Section 7.01. 
Each Immaterial Subsidiary has good title to, or valid leasehold
interests in, or easements or other limited property interests in, all its properties
and assets material to the ordinary conduct of the business of the Company and
the Subsidiaries taken as a whole (including all Material Real Property), free
and clear of all Liens except for minor defects in title that do not materially
interfere with its ability to conduct its business or to utilize such assets
for their intended purposes and Liens permitted by Section 7.01.


 


SECTION 5.09.  Environmental Compliance.  (a)  There
are no claims, actions, suits, or proceedings alleging potential liability or
responsibility for violation of, or otherwise relating to, any Environmental
Law that could, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect.


 


(b)  Except
as specifically disclosed in Schedule 5.09 or except as could not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect, (i) none of the properties currently or, to the knowledge
of the Company, formerly owned, leased or operated by any Loan Party or any of
its Subsidiaries is listed or proposed for listing on the NPL or on the CERCLIS
or any analogous foreign, state or local list or, to the knowledge of the
Company, is adjacent to any such property; and (ii) Hazardous Materials
have not been released, discharged or disposed of by any Person on any property
currently or, to the knowledge of the Company, formerly owned, leased or
operated by any Loan Party or any of its Subsidiaries and Hazardous Materials
have not otherwise been released, discharged or disposed of by any of the Loan
Parties and their Subsidiaries at any other location, in each case in a manner
that could reasonably be expected to result in Environmental Liability.


 


(c)  The
properties owned, leased or operated by the Company and the Subsidiaries do not
contain any Hazardous Materials in amounts or concentrations which (i) constitute
a violation of, (ii) require remedial action under, or (iii) could
give rise to liability under, Environmental 


 


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Laws, which violations,
remedial actions and liabilities, individually or in the aggregate, could
reasonably be expected to result in a Material Adverse Effect.


 


(d)  Except
as specifically disclosed in Schedule 5.09, neither the Company nor any of
its Subsidiaries is undertaking, either individually or together with other
potentially responsible parties, any investigation or assessment or remedial or
response action relating to any actual or threatened release, discharge or
disposal of Hazardous Materials at any site, location or operation, either
voluntarily or pursuant to the order of any Governmental Authority or the
requirements of any Environmental Law, except for such investigation or
assessment or remedial or response action that, individually or in the aggregate,
could not reasonably be expected to result in a Material Adverse Effect.


 


(e)  All
Hazardous Materials generated, used, treated, handled or stored at, or
transported to or from, by any Loan Party or any of its Subsidiaries, any
property currently or formerly owned or operated by any Loan Party or any of
its Subsidiaries have been disposed of in a manner not reasonably expected to
result, individually or in the aggregate, in a Material Adverse Effect.


 


(f)  Except
as would not reasonably be expected to result, individually or in the
aggregate, in a Material Adverse Effect, none of the Loan Parties and their
Subsidiaries has contractually assumed any liability or obligation under or
relating to any Environmental Law.


 


SECTION 5.10.  Taxes.  The
Company and its Subsidiaries have filed all Federal and state and other tax
returns and reports required to be filed, and have paid all Federal and state
and other taxes, assessments, fees and other governmental charges levied or
imposed upon them or their properties, income or assets otherwise due and
payable, except those (a) which are not overdue by more than thirty (30)
days, (b) which are being contested in good faith by appropriate
proceedings diligently conducted and for which reserves have been provided to the
extent required by GAAP or (c) set forth in Schedule 5.10 and except as
the failure to do any of the foregoing could not, either individually or in the
aggregate, reasonably be expected to result in a Material Adverse Effect.


 


SECTION 5.11.  ERISA Compliance.  (a)  Except
as set forth in Schedule 5.11 or as could not, either individually or in
the aggregate, reasonably be expected to result in a Material Adverse Effect,
each Plan is in compliance with the applicable provisions of ERISA, the Code
and other Federal or state Laws.


 


(b)  (i) No
ERISA Event has occurred during the five year period prior to the date on which
this representation is made or deemed made with respect to any Pension Plan; (ii) neither
any Loan Party nor any ERISA Affiliate has incurred, or reasonably expects to
incur, any liability under Title IV of ERISA with respect to any Pension
Plan (other than premiums due and not delinquent under Section 4007 of
ERISA); (iii) neither any Loan Party nor any ERISA Affiliate has incurred,
or reasonably expects to incur, any liability (and no event has occurred which,
with the giving of notice under Section 4219 of ERISA, would result in
such liability) under Sections 4201 or 4243 of ERISA with respect to a
Multiemployer Plan; (iv) neither any Loan Party nor any ERISA Affiliate
has engaged in a transaction that could be subject to Sections 4069 or
4212(c) of ERISA; and (v) the present value of all benefit
liabilities under each Pension Plan does not exceed the aggregate current value
of the assets of such Pension Plan (based on those assumptions used to fund the
Pension Plans); except, with respect to each of the foregoing clauses of this Section 5.11(b),
as could not reasonably be expected, individually or in the aggregate, to
result in a Material Adverse Effect.


 


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SECTION 5.12.  Subsidiaries; Equity Interests.  As
of the Closing Date, neither Holdings nor any Loan Party has any Subsidiaries
other than those specifically disclosed in Schedule 5.12, and all of the
outstanding Equity Interests in material Subsidiaries have been validly issued,
are fully paid and nonassessable and all Equity Interests owned by Holdings or
a Loan Party that are required to be pledged on the Closing Date pursuant to
the Collateral and Guarantee Requirement are owned free and clear of all Liens
except (i) those created under the Collateral Documents and (ii) any
nonconsensual Lien that is permitted under Section 7.01.  As of the Closing Date, Schedule 5.12 (a) sets
forth the name and jurisdiction of each Subsidiary, (b) sets forth the
ownership interest of Holdings, the Company and any other Subsidiary in each
Subsidiary, including the percentage of such ownership and (c) identifies
each Subsidiary that is a Subsidiary the Equity Interests of which are required
to be pledged on the Closing Date pursuant to the Collateral and Guarantee
Requirement.


 


SECTION 5.13.  Margin Regulations; Investment Company
Act.  (a)  The Company is not engaged nor
will it engage, principally or as one of its important activities, in the
business of purchasing or carrying margin stock (within the meaning of
Regulation U issued by the Board), or extending credit for the purpose of
purchasing or carrying margin stock, and no proceeds of any Borrowings or
drawings under any Letter of Credit will be used for any purpose that violates
Regulation U.


 


(b)  None
of the Company, any Person Controlling the Company, or any Subsidiary is
required to be registered as an “investment company” under the Investment Company
Act of 1940.


 


SECTION 5.14.  Disclosure.  No
report, financial statement, certificate or other written information furnished
by or on behalf of any Loan Party to any Agent or any Lender in connection with
the transactions contemplated hereby and the negotiation of this Agreement or
delivered hereunder or any other Loan Document (as modified or supplemented by
other information so furnished) when taken as a whole contains any material
misstatement of fact or omits to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not materially misleading; provided
that, with respect to projected financial information and pro forma financial
information, the Company represents only that such information was prepared in
good faith based upon assumptions believed to be reasonable at the time made;
it being understood that projections are, by their nature, inherently uncertain
and such projections may vary from actual results and that such variances may
be material.


 


SECTION 5.15.  Intellectual Property; Licenses, Etc.  Each
of the Loan Parties and their Subsidiaries owns, licenses or possesses the
right to use, all of the United States and foreign trademarks, service marks,
logos, trade names, domain names, copyrights, patents, patent rights, licenses,
trade secrets, proprietary information, technology, software, know-how database
rights, design rights and other intellectual property rights (collectively, “IP Rights”) that are material to the operation
of the business of the Company and its Subsidiaries, taken as a whole, as
currently conducted, and, without conflict with the rights of any Person,
except to the extent such conflicts, either individually or in the aggregate,
could not reasonably be expected to have a Material Adverse Effect.  To the knowledge of the Company, the business
of the Company and its Subsidiaries, taken as a whole, as currently conducted,
does not infringe upon any IP Rights held by any Person and no Person infringes
upon any IP Rights of the Company and its Subsidiaries, except in each case as
could not reasonably be expected to have a Material Adverse Effect.  No claim or litigation regarding any of the
IP Rights is pending or, to the knowledge of any 


 


89

















 


Borrower, threatened against
any Loan Party or Subsidiary, which, either individually or in the aggregate,
could reasonably be expected to have a Material Adverse Effect.


 


SECTION 5.16.  Solvency.  On
the Closing Date after giving effect to the Transaction, the Company and its
Subsidiaries, on a consolidated basis, are Solvent.


 


SECTION 5.17.  Labor Matters. 
Except as, in the aggregate, could not reasonably be expected to have a
Material Adverse Effect, (a) there are no strikes or other labor disputes
against any of Holdings, the Company or any Subsidiary pending or, to the
knowledge of Holdings or the Company, threatened; (b) hours worked by and
payment made to employees of each of Holdings, the Company or any Subsidiary
have not been in violation of the Fair Labor Standards Act or any other
applicable Laws dealing with such matters; and (c) all payments due from
any of Holdings, the Company or any Subsidiary on account of employee health
and welfare insurance have been paid or accrued as a liability on the books of
the relevant party.  The consummation of
the Transaction will not give rise to any right of termination or right of
renegotiation on the part of any union under any collective bargaining
agreement to which Holdings, the Company or any Subsidiary is bound, except as
could not reasonably be expected to have a Material Adverse Effect.


 


SECTION 5.18.  Collateral.  (a)  
The Guarantee and Security Agreement is effective to create in favor of the
Administrative Agent, for the benefit of the Lenders, legal, valid and
enforceable (subject to the effect of Debtor Relief Laws and subject to general
principles of equity) security interests in the Collateral described therein
and proceeds thereof to the extent governed by the Uniform Commercial
Code.  In the case of the Pledged Equity
or Pledged Debt described in any of the Collateral Documents, when stock
certificates representing such Pledged Equity or promissory notes representing
such Pledged Debt are delivered to the Administrative Agent together with the
necessary endorsements (provided that stock certificates representing the
Pledged Equity of any Foreign Immaterial Subsidiary need not be delivered to
the Administrative Agent for so long as such Foreign Immaterial Subsidiary
remains a Foreign Immaterial Subsidiary), and in the case of the other
Collateral described in any of the Collateral Documents, when financing
statements and other filings specified on Schedule 5.18 in appropriate form are
filed in the offices specified on Schedule 5.18, the Guarantee and
Security Agreement shall constitute a fully perfected Lien on, and security
interest in, all right, title and interest of the Loan Parties in such
Collateral and the proceeds thereof, as security for their respective
Obligations to the extent a Lien on such Collateral can be perfected by the
filing of a financing statement, by filings to be made in respect of
Intellectual Property in the United States Patent and Trademark Office and the
United States Copyright Office or, in the case of the Pledged Equity and
Pledged Debt, by possession or control, in each case prior and superior in
right to any other Person (except (x) in the case of Collateral
constituting Pledged Equity and Pledged Debt, nonconsensual Liens permitted by Section 7.01
and (y) in the case of Collateral other than Pledged Equity and Pledged
Debt, Liens permitted by Section 7.01).


 


(b)  Each
of the Mortgages is effective to create in favor of the Administrative Agent,
for the benefit of the Lenders, a legal, valid and enforceable (subject to the
effect of Debtor Relief Laws and subject to general principles of equity) Lien
on the Mortgaged Properties described therein and proceeds thereof, and when
the Mortgages are filed in the appropriate recording offices, each such
Mortgage shall constitute a fully perfected Lien on, and security interest in,
all right, title and interest of the Loan Parties in the Mortgaged Properties
and the proceeds thereof, as security for the Obligations (as defined in the
relevant Mortgage), in each case prior and superior in right to any other
Person (except that the security interest created in such real property and the
Mortgaged Property may be subject to the Liens permitted by Section 7.01).


 


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ARTICLE VI




AFFIRMATIVE COVENANTS


 


So
long as any Lender shall have any Commitment hereunder, any Loan or other
Obligation hereunder which is accrued and payable shall remain unpaid or
unsatisfied, or any Letter of Credit shall remain outstanding, each of Holdings
and the Company shall, and shall (except in the case of the covenants set forth
in Sections 6.01, 6.02 and 6.03) cause each Restricted Subsidiary to:


 


SECTION 6.01.  Financial Statements. 
Deliver to the Administrative Agent for prompt further distribution to
each Lender:


 


(a)  as
soon as available, but in any event within ninety (90) days (or, in the case of
the fiscal year ending June 30, 2007, one hundred twenty (120) days) after
the end of each fiscal year of the Company beginning with the fiscal year
ending June 30, 2007, a consolidated balance sheet of the Company and its
consolidated Subsidiaries as at the end of such fiscal year, and the related
consolidated statements of income or operations, stockholders’ equity and cash
flows for such fiscal year, setting forth in each case in comparative form the
figures for the previous fiscal year, all prepared in accordance with GAAP,
audited and accompanied by a report and opinion of an independent registered
public accounting firm of nationally recognized standing, which report and
opinion shall be prepared in accordance with generally accepted auditing
standards and shall not be subject to any “going concern” or like qualification
or exception or any qualification or exception as to the scope of such audit;


 


(b)  as
soon as available, but in any event within forty-five (45) days (or, in the
case of the fiscal quarter ending March 31, 2007, ninety (90) days) after
the end of each of the first three (3) fiscal quarters of each fiscal year
of the Company, an unaudited consolidated balance sheet of the Company and its
consolidated Subsidiaries (or, at the Company’s option, with respect to the
fiscal quarter of the Company ending March 31, 2007, of each of Reader’s
Digest and its consolidated Subsidiaries, WRC Media and its consolidated
Subsidiaries and Direct Holdings and its consolidated Subsidiaries) as at the
end of such fiscal quarter, and the related unaudited (i) consolidated
statements of income or operations for such fiscal quarter and for the portion
of the fiscal year then ended and (ii) consolidated statements of cash
flows for the portion of the fiscal year then ended, setting forth in each case
in comparative form the figures for the corresponding fiscal quarter of the
previous fiscal year for the applicable entities and the corresponding portion
of the previous fiscal year for the applicable entities, all certified by a
Responsible Officer of the Company as fairly presenting in all material
respects the consolidated financial condition, results of operations,
stockholders’ equity and cash flows of the Company and its consolidated
Subsidiaries (or, at the Company’s option, with respect to the fiscal quarter
of the Company ending March 31, 2007 or the corresponding fiscal quarter ended
March 31, 2006, of each of Reader’s Digest and its consolidated
Subsidiaries, WRC Media and its consolidated Subsidiaries and Direct Holdings
and its consolidated Subsidiaries) in accordance with GAAP (other than the
comparative financial statements for the fiscal quarter ended March 31,
2006 and the fiscal year ended June 30, 2006), subject only to normal
year-end audit adjustments and the absence of footnotes;


 


(c)  as
soon as available, and in any event no later than ninety (90) days after the
end of each fiscal year of the Company beginning with the fiscal year ending June 30,
2007, a reasonably detailed consolidated budget for the following fiscal year
(including a projected consolidated balance sheet of the Company and its
consolidated Subsidiaries as of the end of the 


 


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following fiscal year, the
related consolidated statements of projected cash flow and projected income and
a summary of the material underlying assumptions applicable thereto)
(collectively, the “Projections”);
and


 


(d)  simultaneously
with the delivery of each set of consolidated financial statements referred to
in Sections 6.01(a) and 6.01(b) above, the related consolidating
financial statements reflecting the adjustments necessary to eliminate the
accounts of Unrestricted Subsidiaries (if any) from such consolidated financial
statements.


 


Notwithstanding the
foregoing, the obligations in paragraphs (a) and (b) of this Section 6.01
may be satisfied with respect to financial information of the Company and the
Restricted Subsidiaries by furnishing (A) the applicable financial
statements of Holdings (or any direct or indirect parent of Holdings) or (B) the
Company’s or Holdings’ (or any direct or indirect parent thereof), as
applicable, Form 10-K or 10-Q, as applicable, filed with the SEC; provided that, with respect to each of
clauses (A) and (B), (i) to the extent such information relates to
Holdings (or a parent thereof), such information is accompanied by
consolidating information that explains in reasonable detail the differences
between the information relating to Holdings (or such parent), on the one hand,
and the information relating to the Company and the Restricted Subsidiaries on
a standalone basis, on the other hand and (ii) to the extent such
information is in lieu of information required to be provided under Section 6.01(a),
such materials are accompanied by a report and opinion of an independent
registered public accounting firm of nationally recognized standing, which
report and opinion shall be prepared in accordance with generally accepted auditing
standards and shall not be subject to any “going concern” or like qualification
or exception or any qualification or exception as to the scope of such audit.


 


SECTION 6.02.  Certificates; Other Information.  Deliver to the Administrative Agent for prompt
further distribution to each Lender:


 


(a)  simultaneously
with the delivery of the financial statements referred to in Section 6.01(a),
a certificate of its independent registered public accounting firm certifying
such financial statements and stating that in making the examination necessary
therefor no knowledge was obtained of any Event of Default under Section 7.10
or, if any such Event of Default shall exist, stating the nature and status of
such event (which certificate may be limited to the extent required by such
firm’s general accounting and auditing rules, policies or guidelines);


 


(b)  simultaneously
with the delivery of the financial statements referred to in Section 6.01(a) and
(b), a duly completed Compliance Certificate signed by a Responsible Officer of
the Company and, if such Compliance Certificate demonstrates an Event of
Default of any covenant under Section 7.10, any of the Equity Investors
may deliver, together with such Compliance Certificate or at any time prior to
the end of the applicable Cure Period, notice of their intent to cure (a “Notice of Intent to Cure”) such Event of
Default pursuant to Section 8.05; provided
that the delivery of a Notice of Intent to Cure shall in no way affect or alter
the occurrence, existence or continuation of any such Event of Default or the
rights, benefits, powers and remedies of the Administrative Agent and the
Lenders under any Loan Document;


 


(c)  promptly
after the same are publicly available, copies of all annual, quarterly and
current reports and registration statements which the Company files with the
SEC or with any Governmental Authority that may be substituted therefor (other
than amendments to any registration statement (to the extent such registration
statement, in the form it became effective, is delivered), exhibits to any
registration statement and, if applicable, any registration statement on 


 


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Form S-8) and in any case
not otherwise required to be delivered to the Administrative Agent pursuant
hereto;


 


(d)  promptly
after the furnishing thereof, copies of any material requests or material
notices received by any Loan Party (other than in the ordinary course of
business) or material statements or material reports furnished to any holder of
debt securities of any Loan Party or of any of its Subsidiaries pursuant to the
terms of the Senior Subordinated Note Indenture or any other Junior Financing
Documentation in a principal amount greater than the Threshold Amount or to any
holder of preferred equity securities of any Loan Party and not otherwise
required to be furnished to the Lenders pursuant to any other clause of this Section 6.02;


 


(e)  together
with the delivery of each Compliance Certificate pursuant to Section 6.02(b) required
to be delivered concurrently with the delivery of financial statements referred
to in Section 6.01(a), (i) a certificate of a Responsible Officer of
the Company (x) setting forth the information required pursuant to the
Perfection Certificate or confirming that there has been no change in such
information since the date of the Perfection Certificate delivered on the
Closing Date or the date of the most recent certificate delivered pursuant to
this Section and (y) identifying, based on Collateral owned, and Laws
in effect, as of the date of such certificate, all Uniform Commercial Code
financing statements (including fixture filings, as applicable) or other
appropriate filings, recordings or registrations, including all refilings,
rerecordings and reregistrations, containing a description of the Collateral
that will be required to be filed of record within the 18 months following the
date of such certificate, in each governmental, municipal or other appropriate
office in each jurisdiction identified pursuant to clause (x) above to the
extent necessary and required under the Collateral Documents to protect and
perfect the security interests under the Collateral Documents for a period of
not less than 18 months after the date of such certificate (except as noted
therein with respect to any continuation statements to be filed within such
period), (ii) a reasonably detailed calculation of Excess Cash Flow for
such fiscal year, (iii) a description of any change in the status of a
Subsidiary as a Restricted or an Unrestricted Subsidiary as of the date of
delivery of such Compliance Certificate and (iv) a description of any
change in the status of any Subsidiary as a Foreign Immaterial Subsidiary as of
the date of delivery of such Compliance Certificate; and


 


(f)  promptly,
such additional information regarding the business, legal, financial or
corporate affairs of any Loan Party or any Subsidiary, or compliance with the
terms of the Loan Documents, as the Administrative Agent or any Lender through
the Administrative Agent may from time to time reasonably request.


 


Documents
required to be delivered pursuant to Section 6.01(a) or (b) or Section 6.02(c) or
(d) (to the extent any such documents are included in materials otherwise
filed with the SEC) may be delivered electronically and if so delivered, shall
be deemed to have been delivered on the date (i) on which the Company
posts such documents, or provides a link thereto on the Company’s website on
the Internet at the website address listed on Schedule 10.02; (ii) on which
such documents are posted on the Company’s behalf on IntraLinks/IntraAgency or
another relevant website, if any, to which each Lender and the Administrative
Agent have access (whether a commercial, third-party website or whether
sponsored by the Administrative Agent); or (iii) such documents are
publicly available on the SEC’s website pursuant to the SEC’s EDGAR system; provided that:  (i) upon written request by the
Administrative Agent, the Company shall deliver paper copies of such documents
to the Administrative Agent for further distribution to each Lender until a
written request to cease delivering paper copies is given by the Administrative
Agent and (ii) the Company shall notify (which may be by facsimile or
electronic mail) the Administrative Agent of the posting of any such documents
and provide to the 


 


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Administrative Agent by
electronic mail electronic versions (i.e.,
soft copies) of such documents. 
Notwithstanding anything contained herein, in every instance the Company
shall be required to provide paper copies of the Compliance Certificates
required by Section 6.02(b) to the Administrative Agent.  Each Lender shall be solely responsible for
timely accessing posted documents or requesting delivery of paper copies of
such documents from the Administrative Agent and maintaining its copies of such
documents.


 


SECTION 6.03.  Notices. 
Promptly (but in any event within five Business Days) after any
Responsible Officer of the Company obtains knowledge thereof, notify the
Administrative Agent (for prompt notification to each Lender):


 


(a)  of
the occurrence of any continuing Default; and


 


(b)  of
any dispute, litigation, investigation or proceeding between any Loan Party or
any Subsidiary and any Governmental Authority or other Person that could
reasonably be expected to have a Material Adverse Effect.


 


Each
notice pursuant to this Section shall be accompanied by a written
statement of a Responsible Officer of the Company (x) that such notice is
being delivered pursuant to Section 6.03(a) or (b) (as
applicable) and (y) setting forth details of the occurrence referred to
therein and stating what action the Company has taken and proposes to take with
respect thereto.


 


SECTION 6.04.  Payment of Obligations.  Pay,
discharge or otherwise satisfy as the same shall become due and payable, all
its obligations and liabilities (other than Indebtedness), including in respect
of taxes, assessments and governmental charges or levies imposed upon it or
upon its income or profits or in respect of its property before the same shall
become delinquent or in default; provided,
however, that such payment,
discharge or satisfaction shall not be required hereunder with respect to any
such obligation, liability, tax, assessment, charge or levy (i) so long as
the validity or amount thereof shall be contested in good faith by appropriate
proceedings and the applicable Company or Subsidiary shall have set aside on
its books reserves with respect thereto to the extent required by and in
accordance with GAAP and such contest operates to suspend collection of the
contested obligation, tax, assessment or charge or (ii) to the extent the
failure to pay or discharge the same could not reasonably be expected to have a
Material Adverse Effect.


 


SECTION 6.05.  Preservation of Existence, Etc.  (a) Preserve,
renew and maintain in full force and effect its legal existence under the Laws
of the jurisdiction of its organization except (i) in the case of any
Subsidiary of the Company, where the failure to perform such obligations,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect, or (ii) in a transaction permitted by Section 7.04
or 7.05, and (b) take all reasonable action to maintain all privileges
(including its good standing), material rights, material permits, material
licenses and material franchises necessary or desirable in the normal conduct
of its business, except (i) to the extent that failure to do so could not
reasonably be expected to have a Material Adverse Effect or (ii) pursuant
to a transaction permitted by Section 7.04 or 7.05.


 


SECTION 6.06.  Maintenance of Properties. 
Except if the failure to do so could not reasonably be expected to have
a Material Adverse Effect, (a) maintain, preserve and protect all of its
properties and equipment material to the operation of its business in good
working order, repair and condition, ordinary wear and tear excepted and
casualty or condemnation excepted, and (b) make all necessary renewals,
replacements, modifications, improvements, upgrades, extensions and additions
thereof or thereto in accordance with prudent industry practice.


 


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SECTION 6.07.  Maintenance of Insurance. 
Maintain with financially sound and reputable insurance companies,
insurance with respect to its properties and business against loss or damage of
the kinds customarily insured against by Persons engaged in the same or similar
business, of such types and in such amounts (after giving effect to any
self-insurance reasonable and customary for similarly situated Persons engaged
in the same or similar businesses as the Company and the Restricted
Subsidiaries) and with deductible levels as are customarily carried under
similar circumstances by such other Persons and ensure that the Administrative
Agent is an additional insured and/or loss payee under such liability and
property insurance as reasonably requested by the Administrative Agent.


 


SECTION 6.08.  Compliance with Laws. 
Comply with the requirements of all Laws and all orders, writs,
injunctions and decrees applicable to it or to its business or property, except
if the failure to comply therewith could not reasonably be expected to have a
Material Adverse Effect.


 


SECTION 6.09.  Inspection Rights. 
Permit representatives and independent contractors of the Administrative
Agent and each Lender to (a) visit and inspect any of its properties, (b) examine
its corporate, financial and operating records, and make copies thereof or
abstracts therefrom, and (c) discuss its affairs, finances and accounts
with its directors, officers, and independent public accountants, all at the
reasonable expense of the Company and at such reasonable times during normal
business hours and as often as may be reasonably desired, upon reasonable
advance notice to the Company, in all cases subject to applicable Law and the
terms of any applicable confidentiality agreements not entered into for
purposes of obstructing the operation of this Section 6.09; provided that, excluding any such visits
and inspections during the continuation of an Event of Default, only the
Administrative Agent on behalf of the Lenders may exercise rights of the
Administrative Agent and the Lenders under this Section 6.09 and the
Administrative Agent shall not exercise such rights more often than two (2) times
during any calendar year absent the continuation of an Event of Default and
only one (1) such time shall be at the Company’s expense; provided further that when an Event of
Default shall have occurred and be continuing, the Administrative Agent or any
Lender (or any of their respective representatives or independent contractors)
may do any of the foregoing at the expense of the Company at any time during
normal business hours and upon reasonable advance notice.  The Administrative Agent and the Lenders
shall give the Company the opportunity to participate in any discussions with
the Company’s independent public accountants.


 


SECTION 6.10.  Covenant to Guarantee Obligations and
Give Security.  At the Company’s expense, take all action
reasonably requested by the Administrative Agent to ensure that the Collateral
and Guarantee Requirement continues to be satisfied, including:


 


(a)  upon
the formation or acquisition of any new direct or indirect Restricted
Subsidiary (in each case, other than an Excluded Subsidiary) by any Loan Party
or the designation in accordance with Section 6.15 of any existing direct
or indirect Subsidiary as a Restricted Subsidiary (other than an Excluded
Subsidiary):


 


(i)  within
(x) thirty (30) days after the formation, acquisition or designation of
any such Domestic Subsidiary or such longer period as may be reasonably
acceptable to the Administrative Agent and (y) ninety (90) days after the
formation, acquisition or designation of any such Foreign Subsidiary or such
longer period as may be reasonably acceptable to the Administrative Agent:


 


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(A)  cause
each such Restricted Subsidiary that is required to become a Guarantor under
the Collateral and Guarantee Requirement or becomes a Guarantor to furnish to
the Administrative Agent a description of the Material Real Property owned by
such Restricted Subsidiary, in detail reasonably satisfactory to the
Administrative Agent;


 


(B)  cause
(x) each such Restricted Subsidiary that is required to become a Guarantor
pursuant to the Collateral and Guarantee Requirement or becomes a Guarantor to
duly execute and deliver to the Administrative Agent Mortgages, Security
Agreement Supplements and other security agreements and documents and to
execute, deliver, file and record any such other documents, statements,
assignments, instruments, agreements or other papers and take all other actions
reasonably requested by the Administrative Agent in order to create a perfected
security interest with the priority required by the Collateral Documents in all
of its assets required to constitute Collateral under the Loan Documents
(including, with respect to Mortgages, the documents listed in Section 6.12(b)),
as reasonably requested by and in form and substance reasonably satisfactory to
the Administrative Agent (consistent with the Mortgages, Guarantee and Security
Agreement and other security agreements in effect on the Closing Date), and (y) each
direct parent of each such Restricted Subsidiary (if such parent is a Borrower
or is required to be a Guarantor pursuant to the Collateral and Guarantee
Requirement or becomes a Guarantor) to duly execute and deliver to the
Administrative Agent such Security Agreement Supplements and other security
agreements and to execute, deliver, file and record any such other documents,
statements, assignments, instruments, agreements or other papers and take all
other actions reasonably requested by the Administrative Agent in order to
create a perfected security interest with the priority required by the
Collateral Documents in any uncertificated Equity Interests of such Restricted
Subsidiary that are required to constitute Collateral under the Loan Documents,
as reasonably requested by the Administrative Agent and in form and substance
reasonably satisfactory to the Administrative Agent (consistent with the
Guarantee and Security Agreement in effect on the Closing Date);


 


(C)  (x) cause
each such Restricted Subsidiary that is required to become a Guarantor pursuant
to the Collateral and Guarantee Requirement or becomes a Guarantor to deliver
any and all certificates representing Equity Interests (to the extent
certificated) that are required to be pledged pursuant to the Collateral and
Guarantee Requirement, accompanied by undated stock powers or other appropriate
instruments of transfer executed in blank and any instruments evidencing the
intercompany Indebtedness held by such Restricted Subsidiary and required to be
pledged pursuant to the Collateral Documents, indorsed in blank to the
Administrative Agent and (y) cause each direct parent of such Restricted
Subsidiary (if such parent is a Borrower or is required to be a Guarantor
pursuant to the Collateral and Guarantee Requirement or becomes a Guarantor) to
deliver any and all certificates representing the outstanding Equity Interests
(to the extent certificated) of such Restricted Subsidiary that are required to
be pledged pursuant to the Collateral and Guarantee Requirement, accompanied by
undated stock powers or other appropriate instruments of transfer executed in
blank and any instruments evidencing the intercompany Indebtedness issued by
such Restricted Subsidiary and required to be pledged in 


 


96

















 


accordance
with the Collateral Documents, indorsed in blank to the Administrative Agent;


 


(D)  take
and cause such Restricted Subsidiary and each direct or indirect parent of such
Restricted Subsidiary to take whatever action (including the recording of
Mortgages, the filing of Uniform Commercial Code financing statements, delivery
of stock and membership interest certificates, delivery of promissory notes
duly endorsed in favor of the Administrative Agent, and the execution,
delivery, filing and recording of any such other documents, statements,
assignments, instruments, agreements or other papers) may be reasonably
requested by the Administrative Agent to vest in the Administrative Agent (or
in any representative of the Administrative Agent designated by it) valid Liens
required by the Collateral and Guarantee Requirement, enforceable against all
third parties in accordance with their terms, except as such enforceability may
be limited by Debtor Relief Laws and by general principles of equity;


 


(E)  cause
each such Restricted Subsidiary that is required to become a Guarantor under
the Collateral and Guarantee Requirement to Guarantee the Obligations; and


 


(F)  cause
each such Restricted Subsidiary to deliver to the Administrative Agent copies
of its Organization Documents,


 


(ii)  within
thirty (30) days (with respect to any Domestic Subsidiary) or ninety (90) days
(with respect to any Foreign Subsidiary) after the request therefor by the
Administrative Agent (or such longer period as may be reasonably acceptable to
the Administrative Agent), deliver to the Administrative Agent a signed copy of
an opinion, addressed to the Administrative Agent, the other Agents and the
Lenders, of counsel for the Loan Parties reasonably acceptable to the
Administrative Agent as to such matters set forth in this Section 6.10(a) as
the Administrative Agent may reasonably request, and


 


(iii)  as
promptly as practicable after the request therefor by the Administrative Agent,
deliver to the Administrative Agent, with respect to each parcel of Material
Real Property that is owned by such Restricted Subsidiary, any existing title
reports, existing surveys or existing environmental assessment reports; and


 


(b)  after
the Closing Date, concurrently with the acquisition of any Material Real
Property by any Loan Party and such Material Real Property shall not already be
subject to a perfected Lien pursuant to the Collateral and Guarantee
Requirement, the Company shall give notice thereof to the Administrative Agent
and promptly thereafter shall cause such assets to be subjected to a Lien to
the extent and at such times as shall be required by the Collateral and
Guarantee Requirement and the Collateral Documents, as the case may be, and
will take, or cause the relevant Loan Party to take, such actions and at such
times as shall be reasonably requested by the Administrative Agent to grant and
perfect or record such Lien, including, as applicable, the actions referred to
in Section 6.12(b).


 


SECTION 6.11.  Compliance with Environmental Laws. 
Except, in each case, to the extent that the failure to do so could not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect:  (a) comply, and
take all reasonable actions to cause all lessees and other Persons operating or
occupying its properties to comply, with all applicable 


 


97

















 


Environmental Laws and
Environmental Permits; (b) obtain and renew all Environmental Permits
necessary for its operations and properties; and (c) in each case to the
extent required by Environmental Laws, conduct any investigation, study,
sampling and testing, and undertake any cleanup, removal, remedial or other
action necessary to remove and clean up all Hazardous Materials from any of its
properties, in accordance with the requirements of all Environmental Laws.


 


SECTION 6.12.  Further Assurances.  (a)  Promptly
upon reasonable request by the Administrative Agent (i) correct any
material defect or error that may be discovered in the execution,
acknowledgment, filing or recordation of any Collateral Document or other
document or instrument relating to any Collateral, and (ii) do, execute,
acknowledge, deliver, record, re-record, file, re-file, register and re-register
any and all such further acts, deeds, certificates, assurances and other
instruments as the Administrative Agent may reasonably request from time to
time in order to carry out more effectively the purposes of the Collateral
Documents.


 


(b)  In
the case of any Material Real Property referred to in Section 6.10(b),
provide the Administrative Agent with Mortgages with respect to such Material
Real Property within sixty (60) days of the acquisition of such real property
(or such longer period as may be reasonably acceptable to the Administrative
Agent) together with:


 


(i)  evidence
that counterparts of any such Mortgage has been duly executed, acknowledged and
delivered and is in form suitable for filing or recording in all filing or
recording offices that the Administrative Agent may deem reasonably necessary
or desirable in order to create a valid and subsisting perfected Lien on the
property and/or rights described therein in favor of the Administrative Agent
for the benefit of the Secured Parties and that all filing and recording taxes
and fees have been paid or otherwise provided for in a manner reasonably
satisfactory to the Administrative Agent;


 


(ii)  fully
paid American Land Title Association Lender’s Extended Coverage title insurance
policies or the equivalent or other form available in each applicable
jurisdiction (the “Mortgage Policies”)
in form and substance, with endorsements and in amount, reasonably acceptable
to the Administrative Agent (not to exceed the value of the real properties covered
thereby), issued, coinsured and reinsured by title insurers reasonably
acceptable to the Administrative Agent, insuring the Mortgages to be valid
subsisting Liens on the property described therein, free and clear of all
defects and encumbrances except for minor defects in title that do not
materially interfere with the Loan Party’s ability to conduct business and
subject to Liens permitted by Section 7.01, and providing for such other
affirmative insurance (including endorsements for future advances under the
Loan Documents) and such coinsurance and direct access reinsurance as the
Administrative Agent may reasonably request;


 


(iii)  opinions
of local counsel for the Loan Parties in states in which the real properties
are located, with respect to the enforceability and perfection of any such
Mortgage and any related fixture filings in form and substance reasonably
satisfactory to the Administrative Agent; and


 


(iv)  such
other evidence that all other actions that the Administrative Agent may
reasonably deem necessary or desirable in order to create valid and subsisting
Liens on the property described in each such Mortgage has been taken.


 


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SECTION 6.13.  Use of Proceeds. 
Apply the proceeds of the Term Loans, Revolving Credit Loans and Swing
Line Loans and the Letters of Credit solely to the uses described in the fourth
paragraph of the preliminary statements to this Agreement and in the last
sentence of Section 2.05(b)(iii).


 


SECTION 6.14.  Interest Rate Protection. 
Within 180 days after the Closing Date (or such longer period as may be
reasonably acceptable to the Administrative Agent), enter into, and thereafter
maintain, Swap Contracts to the extent necessary to provide that at least 50%
of the aggregate principal amount of the Funded Debt of the Company and the
Restricted Subsidiaries is subject to either a fixed interest rate or interest
rate protection for a minimum of three years, which Swap Contracts shall have
terms and conditions reasonably satisfactory to the Administrative Agent.


 


SECTION 6.15.  Designation of Subsidiaries.  The
board of directors of Holdings may at any time designate any Restricted
Subsidiary as an Unrestricted Subsidiary or any Unrestricted Subsidiary as a
Restricted Subsidiary; provided
that (i) immediately before and after such designation, no Default shall
have occurred and be continuing, (ii) immediately after giving effect to
such designation, the Company and the Restricted Subsidiaries shall be in
compliance, on a Pro Forma Basis, with the covenants set forth in Section 7.10
(and, as a condition precedent to the effectiveness of any such designation,
the Company shall deliver to the Administrative Agent a certificate setting
forth in reasonable detail the calculations demonstrating such compliance), (iii) no
Subsidiary may be designated as an Unrestricted Subsidiary if it is a
“Restricted Subsidiary” for the purpose of the Senior Subordinated Notes or any
other Junior Financing, as applicable, (iv) no Restricted Subsidiary may
be designated as an Unrestricted Subsidiary if it was previously designated an
Unrestricted Subsidiary and (v) no Subsidiary may be designated as an
Unrestricted Subsidiary if such Subsidiary is a Borrower.  The designation of any Subsidiary that is a
Loan Party as an Unrestricted Subsidiary shall constitute an Investment by the
Company therein at the date of designation in an amount equal to the net book
value of the applicable Loan Party’s investment therein.  The designation of any Unrestricted Subsidiary
as a Restricted Subsidiary shall constitute the incurrence at the time of
designation of any Indebtedness or Liens of such Subsidiary existing at such
time.


 


SECTION 6.16.  Ownership of Overseas Borrowers.  Each
of the Overseas Borrowers shall, at all times, be a direct or indirect
Subsidiary of the Company.


 


SECTION 6.17.  Post-Closing Covenants.  (a)  Within
90 days following the Closing Date (or such longer period as may be reasonably
acceptable to the Administrative Agent), (i) the Company will enter into,
and cause W.A. Publications, LLC to enter into, a pledge agreement under the
laws of Australia in form and substance reasonably satisfactory to the
Administrative Agent and provide legal opinions reasonably satisfactory to the
Administrative Agent with respect to the pledge of the outstanding Equity
Interests (limited, with respect to outstanding voting Equity Interests, to
65%) in The Reader’s Digest Assoc. Pty. Limited and (ii) the Company will
enter into a pledge agreement under the laws of France in form and substance
reasonably satisfactory to the Administrative Agent and provide legal opinions
reasonably satisfactory to the Administrative Agent with respect to the pledge
of the outstanding Equity Interests (limited, with respect to outstanding
voting Equity Interests, to 65%) in Selection du Reader’s Digest S.A.


 


(b)  Within
90 days following the Closing Date (or such longer period as may be reasonably
acceptable to the Administrative Agent), (i) the German Borrower will
enter into, and cause each of its Overseas Guarantors to enter into (and the
Company shall cause the direct parent entity of the German Borrower to enter
into, if such direct parent entity is a Foreign Subsidiary), 


 


99

















 


foreign law security agreements
and pledge agreements and (in the case of such Overseas Guarantors and the
direct parent entity of the German Borrower, if such Person is a Foreign
Subsidiary) Overseas Guarantees, in each case in form and substance reasonably
satisfactory to the Administrative Agent, and provide legal opinions reasonably
satisfactory to the Administrative Agent with respect thereto, in each case to
the extent required to satisfy the Collateral and Guarantee Requirement under
clauses (c), (e) and (f) thereof, and (ii) each of the Company
and any U.S. Guarantor that directly owns Equity Interests in a Subsidiary
organized under the laws of Germany (other than the German Borrower) will enter
into a foreign law pledge agreement with respect to such Equity Interests, in
each case in form and substance reasonably satisfactory to the Administrative
Agent, and provide legal opinions reasonably satisfactory to the Administrative Agent with respect thereto, in
each case to the extent required to satisfy the Collateral and Guarantee
Requirement under clauses (d) and (f) thereof.


 


(c)  Within
30 days following the Closing Date (or such longer period as may be reasonably
acceptable to the Administrative Agent), the Company will enter into a pledge
agreement under the laws of the United Kingdom in form and substance reasonably
satisfactory to the Administrative Agent and provide legal opinions reasonably
satisfactory to the Administrative Agent with respect to the pledge of the
outstanding Equity Interests (limited, with respect to outstanding voting
Equity Interests, to 65%) in The Reader’s Digest Association Limited.


 


(d)  Within
60 days following the Closing Date (or such longer period as may be reasonably
acceptable to the Administrative Agent), deliver to the Administrative Agent
any and all certificates representing Equity Interests of Das Beste aus
Reader’s Digest AG, accompanied by undated stock powers or other appropriate
instruments of transfer executed in blank, in each case to the extent required
to satisfy the Collateral and Guarantee Requirement under clause (d) thereof.


 


ARTICLE VII




NEGATIVE COVENANTS


 


So
long as any Lender shall have any Commitment hereunder, any Loan or other
Obligation hereunder which is accrued and payable shall remain unpaid or unsatisfied,
or any Letter of Credit shall remain outstanding, Holdings and the Company
shall not, nor shall they permit any of their Restricted Subsidiaries to,
directly or indirectly:


 


SECTION 7.01.  Liens. 
Create, incur, assume or suffer to exist any Lien upon any of its
property, assets or revenues, whether now owned or hereafter acquired, other
than the following:


 


(a)  Liens
pursuant to any Loan Document;


 


(b)  Liens
existing on the date hereof and listed on Schedule 7.01(b) and any
modifications, replacements, renewals or extensions thereof; provided that (i) the Lien does not
extend to any additional property other than (A) after-acquired property
that is affixed or incorporated into the property covered by such Lien or
financed by Indebtedness permitted under Section 7.03, and (B) proceeds
and products thereof, and (ii) the renewal, extension or refinancing of
the obligations secured or benefited by such Liens is permitted by Section 7.03;


 


(c)  Liens
for taxes, assessments or governmental charges which are not overdue for a
period of more than thirty (30) days or which are being contested in good faith
and by appropriate 


 


100

















 


proceedings diligently
conducted, if reserves with respect thereto are maintained on the books of the
applicable Person to the extent required by and in accordance with GAAP;


 


(d)  statutory
Liens of landlords, carriers, warehousemen, mechanics, materialmen, repairmen,
workmen, suppliers, construction contractors or other like Liens arising in the
ordinary course of business which secure amounts not overdue for a period of
more than thirty (30) days or if more than thirty (30) days overdue, are
unfiled and no other action has been taken to enforce such Lien or which are
being contested in good faith and by appropriate proceedings diligently
conducted, if reserves with respect thereto are maintained on the books of the
applicable Person to the extent required by and in accordance with GAAP;


 


(e)  (i) Liens,
pledges or deposits in the ordinary course of business in connection with
workers’ compensation, unemployment insurance and other social security
legislation and (ii) Liens, pledges and deposits in the ordinary course of
business securing liability for premiums or reimbursement or indemnification
obligations of (including obligations in respect of letters of credit or bank
guarantees for the benefit of) insurance carriers providing insurance to
Holdings, the Company or any Restricted Subsidiary;


 


(f)  Liens
or deposits (including deposits made to satisfy statutory or other legal
obligations in connection with sweepstakes or similar contests) to secure the
performance of bids, trade contracts, governmental contracts, tenders,
statutory bonds and leases (other than Indebtedness for borrowed money and
Capitalized Leases), statutory obligations, surety, stay, customs and appeal
bonds, performance bonds and other obligations of a like nature (including
those to secure health, safety and environmental obligations) incurred in the
ordinary course of business;


 


(g)  easements,
rights-of-way, restrictions (including zoning restrictions), covenants,
licenses, encroachments, protrusions and other similar encumbrances and minor
title defects affecting real property which, in the aggregate, do not in any
case materially interfere with the ordinary conduct of the business of the
Company or any Subsidiary;


 


(h)  Liens
securing judgments, decrees, attachments or awards for the payment of money not
constituting an Event of Default under Section 8.01(h);


 


(i)  Liens
securing Indebtedness permitted under Section 7.03(e); provided that (i) such Liens attach
concurrently with or within two hundred and seventy (270) days after the
acquisition, repair, replacement, construction or improvement (as applicable)
of the property subject to such Liens, (ii) such Liens do not at any time
encumber any property except for accessions to such property other than the
property financed by such Indebtedness and the proceeds and the products
thereof and (iii) with respect to Capitalized Leases, such Liens do not at
any time extend to or cover any assets (except for accessions to such assets)
other than the assets subject to such Capitalized Leases; provided further that individual
financings of equipment provided by one lender may be cross collateralized to
other financings of equipment provided by such lender;


 


(j)  leases,
licenses, subleases or sublicenses granted to others in the ordinary course of
business which do not (i) interfere in any material respect with the
business of the Company or any Subsidiary or (ii) secure
any Indebtedness;


 


101

















 


(k)  Liens
in favor of customs and revenue authorities arising as a matter of law to
secure payment of customs duties in connection with the importation of goods in
the ordinary course of business;


 


(l)  Liens
(i) of a collection bank arising under Section 4-210 of the Uniform
Commercial Code on items in the course of collection, (ii) attaching to
commodity trading accounts or other commodities brokerage accounts incurred in
the ordinary course of business; and (iii) in favor of a banking
institution arising as a matter of law encumbering deposits (including the
right of set-off);


 


(m)  Liens
(i) on cash advances in favor of the seller of any property to be acquired
in an Investment permitted pursuant to Sections 7.02(f), (i) and (n) to
be applied against the purchase price for such Investment, and (ii) consisting
of an agreement to Dispose of any property in a Disposition permitted under Section 7.05,
in each case, solely to the extent such Investment or Disposition, as the case
may be, would have been permitted on the date of the creation of such Lien;


 


(n)  Liens
on property or Equity Interests of any Foreign Subsidiary (other than a Borrower)
(i) that is not a Loan Party and (ii) which property or Equity
Interests do not constitute Collateral, which Liens secure Indebtedness of such
Foreign Subsidiary permitted under Section 7.03;


 


(o)  Liens
securing Indebtedness permitted under Section 7.03(d) (i) of the
Company or a Restricted Subsidiary in favor of a Loan Party and (ii) of
any Restricted Subsidiary that is not a Loan Party in favor of any other
Restricted Subsidiary that is not a Loan Party;


 


(p)  Liens
existing on property at the time of its acquisition or existing on the property
of any Person at the time such Person becomes a Restricted Subsidiary (other
than by designation as a Restricted Subsidiary pursuant to Section 6.15),
in each case after the date hereof (other than Liens on the Equity Interests of
any Person that becomes a Restricted Subsidiary); provided that (i) such Lien was not created in
contemplation of such acquisition or such Person becoming a Restricted
Subsidiary, (ii) such Lien does not extend to or cover any other assets or
property (other than the proceeds or products thereof and other than
improvements and after-acquired property subjected to a Lien securing
Indebtedness and other obligations incurred prior to such time and which
Indebtedness and other obligations are permitted hereunder that require,
pursuant to their terms at such time, a pledge of after-acquired property, it
being understood that such requirement shall not be permitted to apply to any
property to which such requirement would not have applied but for such
acquisition), and (iii) the Indebtedness secured thereby is permitted
under Section 7.03(e), (g), (h) or (k);


 


(q)  any
interest or title of a lessor under leases entered into by the Company or any
of the Restricted Subsidiaries in the ordinary course of business;


 


(r)  Liens
arising out of conditional sale, title retention, consignment or similar
arrangements for sale of goods entered into by the Company or any of the
Restricted Subsidiaries in the ordinary course of business permitted by this
Agreement;


 


(s)  Liens
deemed to exist in connection with Investments in repurchase agreements under Section 7.02;


 


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(t)  Liens
encumbering reasonable customary initial deposits and margin deposits and
similar Liens attaching to commodity trading accounts or other brokerage
accounts incurred in the ordinary course of business and not for speculative
purposes;


 


(u)  Liens
that are contractual rights of set-off or, in the case of clause (i) or (ii) below,
other bankers’ Liens (i) relating to Cash Management Obligations or to the
establishment of depository relations with banks not given in connection with
the issuance of Indebtedness, (ii) relating to pooled deposit or sweep
accounts of Holdings, the Company or any Restricted Subsidiary to permit
satisfaction of overdraft or similar obligations incurred in the ordinary
course of business of Holdings, the Company and the Restricted Subsidiaries or (iii) relating
to purchase orders and other agreements entered into with customers of the
Company or any Restricted Subsidiary in the ordinary course of business;


 


(v)  Liens
solely on any cash earnest money deposits made by the Company or any of the
Restricted Subsidiaries in connection with any letter of intent or purchase
agreement permitted hereunder;


 


(w)  (i) Liens
placed upon the Equity Interests of any Restricted Subsidiary acquired pursuant
to a Permitted Acquisition to secure Indebtedness incurred pursuant to Section 7.03(g) in
connection with such Permitted Acquisition and (ii) Liens placed upon the
assets of such Restricted Subsidiary and any of its Subsidiaries to secure a
Guarantee by such Restricted Subsidiary and its Subsidiaries of any such
Indebtedness incurred pursuant to Section 7.03(g);


 


(x)  ground
leases in respect of real property on which facilities owned or leased by the
Company or any of its Subsidiaries are located and other Liens affecting the
interest of any landlord (and any underlying landlord) of any real property
leased by the Company or any Restricted Subsidiary;


 


(y)  Liens
on equipment (including printing presses and data-processing equipment) owned
by the Company or any Restricted Subsidiary and located on the premises of any
supplier and used in the ordinary course of business; and


 


(z)  other
Liens securing obligations, including Indebtedness, outstanding in an aggregate
principal amount not to exceed $100,000,000.


 


SECTION 7.02.  Investments.  Make or hold any Investments, except:


 


(a)  Investments
by the Company or a Restricted Subsidiary in cash and assets that were Cash
Equivalents when such Investment was made;


 


(b)  loans
or advances to officers, directors and employees of Holdings, the Company and
the Restricted Subsidiaries (i) for reasonable and customary
business-related travel, entertainment, relocation and analogous ordinary
business purposes, (ii) in connection with such Person’s purchase of
Equity Interests of Holdings (or any direct or indirect parent thereof) (provided that the amount of such loans and
advances shall be contributed to the Company in cash as common equity) and (iii) for
purposes not described in the foregoing clauses (i) and (ii), in an
aggregate principal amount outstanding not to exceed $5,000,000;


 


(c)  Investments
(i) by Holdings, the Company or any Restricted Subsidiary in the Company
or any Subsidiary that is a Loan Party, (ii) by any Restricted Subsidiary
that is not a Loan Party in any other such Restricted Subsidiary that is also
not a Loan Party, and (iii) by the


 


103

















 


Company or any Restricted
Subsidiary (A) in any Restricted Subsidiary; provided that the aggregate amount of such Investments in
Restricted Subsidiaries that are not Loan Parties (together with the aggregate
consideration paid in respect of Permitted Acquisitions of Persons that do not
become Loan Parties pursuant to Section 7.02(i)(B)) shall not exceed (x) $350,000,000
for the period from the Closing Date to the first anniversary of the Closing
Date, (y) $400,000,000 for the period from the Closing Date to the second
anniversary of the Closing Date and (z) $500,000,000 for the period from
the Closing Date to the Maturity Date with respect to the Term Loans (in each
case, net of any return representing a return of capital in respect of any such
Investment), (B) in any Foreign Subsidiary that is a Loan Party,
consisting of the contribution of Equity Interests of any other Foreign
Subsidiary held directly by the Company or such Restricted Subsidiary in
exchange for Indebtedness, Equity Interests or a combination thereof of the
Foreign Subsidiary to which such contribution is made, (C) in any Foreign
Subsidiary, constituting an exchange of Equity Interests of such Foreign
Subsidiary for Indebtedness of such Foreign Subsidiary or (D) constituting
Guarantees of Indebtedness or other monetary obligations of Foreign
Subsidiaries owing to any Loan Party; provided
that any Indebtedness incurred by a Loan Party pursuant to Section 7.03(h)(i)(B) to
finance a Permitted Acquisition and loaned, advanced or contributed to a
Restricted Subsidiary that is not a Loan Party to consummate such Permitted
Acquisition (which, but for the operation of this proviso, would have been
treated as an Investment by such Loan Party pursuant to this clause (c) and
a subsequent Investment by such Restricted Subsidiary that is not a Loan Party
pursuant to Section 7.02(i)) shall be treated as a single Investment by
such Restricted Subsidiary that is not a Loan Party pursuant to Section 7.02(i);


 


(d)  Investments
consisting of extensions of credit in the nature of accounts receivable or
notes receivable arising from the grant of trade credit in the ordinary course
of business, and Investments received in satisfaction or partial satisfaction
thereof from financially troubled account debtors and other credits to
suppliers in the ordinary course of business;


 


(e)  Investments
(i) resulting from the creation of a Lien permitted under Section 7.01,
(ii) resulting from the incurrence of Indebtedness permitted under Section 7.03,
(iii) made to effect Dispositions permitted under Section 7.04 or Section 7.05
(other than Section 7.05(e)) or (iv) made to effect Restricted
Payments permitted under Section 7.06;


 


(f)  (i) Investments
existing or contemplated on the date hereof and set forth on Schedule 7.02(f) and
any modification, replacement, renewal, reinvestment or extension thereof and (ii) Investments
existing on the date hereof by the Company or any Restricted Subsidiary in the
Company or any other Restricted Subsidiary and any modification, renewal or
extension thereof; provided that
the amount of the original Investment is not increased except by the terms of
such Investment or as otherwise permitted by this Section 7.02;


 


(g)  Investments
in Swap Contracts permitted under Section 7.03;


 


(h)  promissory
notes and other non-cash consideration received in connection with Dispositions
permitted by Section 7.05;


 


(i)  the
purchase or other acquisition of property and assets or businesses of any
Person or of assets constituting a business unit, a line of business or
division of such Person, or Equity Interests in a Person that, upon the
consummation thereof, will be a Subsidiary of the Company (including as a
result of a merger or consolidation); provided
that, with respect to each purchase or other acquisition made pursuant to this Section 7.02(i) (each,
a “Permitted Acquisition”):


 


104

















 


(A)  subject
to clause (B) below, each applicable Loan Party and any such newly created
or acquired Subsidiary (and, to the extent required under the Collateral and
Guarantee Requirement, the Subsidiaries of such created or acquired Subsidiary)
shall be a Guarantor and shall have complied with the requirements of and
granted the security interests required by Section 6.10 within the times
specified therein;


 


(B)  the
aggregate amount of consideration (cash and non-cash (other than Qualified
Equity Interests of Holdings and the Net Cash Proceeds of Permitted Equity
Issuances after the Closing Date Not Otherwise Applied), including (i) the
fair market value (on the date of such Permitted Acquisition) of all Equity
Interests issued or transferred to the sellers thereof and (ii) all
indemnities, earnouts and other contingent payment obligations to, and the
aggregate amounts paid or to be paid under noncompete, consulting and other
affiliated agreements with, the sellers thereof, all write-downs of property
and reserves for liabilities with respect thereto and all assumptions of debt,
liabilities and other obligations in connection therewith; provided that any such liability or future
payment pursuant to clause (ii) above that is subject to a contingency
shall be considered consideration for a Permitted Acquisition for purposes of
this clause (B) only to the extent of the amount of such liability or
payment, if any, required under GAAP to be reflected on the face of a
consolidated balance sheet of the Company or the reserve, if any, required
under GAAP to be established in respect thereof by the Company or any of its
Restricted Subsidiaries, in each case at the time such Permitted Acquisition is
consummated) paid in respect of acquisitions of Persons that do not become Loan
Parties (together with the aggregate amount of all Investments in Restricted
Subsidiaries that are not Loan Parties pursuant to Section 7.02(c)(iii))
shall not exceed (x) $350,000,000 for the period from the Closing Date to
the first anniversary of the Closing Date, (y) $400,000,000 for the period
from the Closing Date to the second anniversary of the Closing Date and (z) $500,000,000
for the period from the Closing Date to the Maturity Date with respect to the
Term Loans (in each case, net of any return representing a return of capital in
respect of any such Investment);


 


(C)  
(1) immediately before and immediately after giving Pro Forma Effect to
any such purchase or other acquisition (including any Indebtedness incurred
pursuant thereto as permitted under Sections 7.03(e), (g) and (h)), no
Event of Default shall have occurred and be continuing and (2) immediately
after giving effect to such purchase or other acquisition, the Company and the
Restricted Subsidiaries shall be in Pro Forma Compliance with all of the covenants
set forth in Section 7.10, such compliance to be determined on the basis
of the financial information most recently delivered to the Administrative
Agent and the Lenders pursuant to Section 6.01(a) or (b) as
though such purchase or other acquisition had been consummated as of the first
day of the fiscal period covered thereby and evidenced by a certificate from
the Chief Financial Officer of the Company demonstrating such compliance
calculation in reasonable detail; and


 


(D)  the
Company shall have delivered to the Administrative Agent, on behalf of the
Lenders, no later than five (5) Business Days after the date on which any
such purchase or other acquisition is consummated, a certificate of a
Responsible Officer, in form and substance reasonably satisfactory to the
Administrative Agent, certifying that all of the requirements set forth in this
clause (i) have been satisfied or will be satisfied on or prior to the
consummation of such purchase or other acquisition;


 


(j)  the
Transaction;


 


105

















 


(k)  Investments
in the ordinary course of business consisting of Article 3 endorsements
for collection or deposit and Article 4 customary trade arrangements with
customers consistent with past practices;


 


(l)  Investments
(including debt obligations and Equity Interests) received in connection with
the bankruptcy or reorganization of suppliers and customers or in settlement of
delinquent obligations of, or other disputes with, customers and suppliers
arising in the ordinary course of business or upon the foreclosure with respect
to any secured Investment or other transfer of title with respect to any
secured Investment;


 


(m)  loans
and advances to Holdings (or any direct or indirect parent thereof) in lieu of,
and not in excess of the amount of (after giving effect to any other loans,
advances or Restricted Payments in respect thereof), Restricted Payments to the
extent permitted to be made to Holdings (or such parent) in accordance with
Sections 7.06(f) or (g);


 


(n)  Investments
that do not exceed the sum of (i) $200,000,000 plus (ii) the
aggregate amount of the Net Cash Proceeds of Permitted Equity Issuances after
the Closing Date (other than Permitted Equity Issuances made pursuant to Section 8.05)
that have been contributed to the Company as common equity and Not Otherwise
Applied plus (iii) if, as of the last day of the immediately
preceding Test Period (after giving Pro Forma Effect to such Investments) the
Total Leverage Ratio is less than 4.00:1.00, the amount of Cumulative Excess
Cash Flow that is Not Otherwise Applied;


 


(o)  advances
of payroll payments to employees and advances to authors in the ordinary course
of business;


 


(p)  Investments
to the extent that payment for such Investments is made solely with Qualified
Equity Interests of Holdings;


 


(q)  existing
Investments of a Restricted Subsidiary acquired after the Closing Date or of a
corporation merged into the Company or merged or consolidated with a Restricted
Subsidiary in accordance with Section 7.04 after the Closing Date to the
extent that such Investments were not made in contemplation of or in connection
with such acquisition, merger or consolidation and were in existence on the
date of such acquisition, merger or consolidation;


 


(r)  Guarantees
by Holdings, the Company or any Restricted Subsidiary of leases (other than
Capitalized Leases) or of other obligations that do not constitute
Indebtedness, in each case entered into in the ordinary course of business;


 


(s)  lease,
utility and other similar deposits in the ordinary course of business; and


 


(t)  loans
by any Restricted Subsidiary to any other Restricted Subsidiary of the proceeds
of Incremental Overseas Term Loans provided that such proceeds are ultimately
received by the Company and applied in accordance with Section 2.05(b)(iii);


 


provided that no Investment in an
Unrestricted Subsidiary that would otherwise be permitted under this Section 7.02
shall be permitted hereunder to the extent that any portion of such Investment
is used to make any prepayments, redemptions, purchases, defeasances and other
payments in respect of Junior Financings that would not be permitted by this
Agreement if made by the Company.


 


106

















 


SECTION 7.03.  Indebtedness.  Create, incur, assume or suffer to exist any
Indebtedness, except:


 


(a)  Indebtedness
of Holdings, the Company and any of its Subsidiaries under the Loan Documents;


 


(b)  (i)(x) Indebtedness
outstanding on the date hereof and listed on Schedule 7.03(b) and (y) any
Permitted Refinancing thereof (to the extent (A) such Permitted
Refinancing is incurred by the Person who is the obligor of the Indebtedness
subject to such Permitted Refinancing, (B) such Permitted Refinancing, if
incurred by a Person who is not a Loan Party, is in respect of Indebtedness
originally incurred by a Person who is not a Loan Party, or (C) such
incurrence is otherwise permitted under this Section 7.03) and (ii) intercompany
Indebtedness outstanding on the Closing Date;


 


(c)  Guarantees
by Holdings, the Company and the Restricted Subsidiaries in respect of
Indebtedness otherwise permitted hereunder of the Company or any Restricted
Subsidiary to the extent constituting an Investment permitted under Section 7.02;
provided that (A) no Guarantee
by any Restricted Subsidiary of the Senior Subordinated Notes or any other
Junior Financing shall be permitted unless such Restricted Subsidiary shall
have also provided a Guarantee of the Obligations substantially on the terms
set forth in the Guarantee and Security Agreement, (B) if the Indebtedness
being Guaranteed is subordinated to the Obligations, such Guarantee shall be
subordinated to the Guarantee of the Obligations on terms at least as favorable
to the Lenders (in the reasonable good faith determination of the Company) as
those contained in the subordination of such Indebtedness and (C) a Loan
Party may not Guarantee Indebtedness of a Restricted Subsidiary that is not a
Loan Party unless such Loan Party could have incurred such Indebtedness or such
Guarantee is subordinated to the Obligations on the terms set forth in Section 5.1(b) of
the Guarantee and Security Agreement;


 


(d)  Indebtedness
of the Company or any Restricted Subsidiary owing to the Company or any other
Restricted Subsidiary to the extent constituting an Investment permitted by Section 7.02;
provided that, all such
Indebtedness of any Loan Party owed to any Person that is not a Loan Party
shall be subject to the subordination terms set forth in Section 5.1(b) of
the Guarantee and Security Agreement;


 


(e)  (i) Attributable
Indebtedness and other Indebtedness (including Capitalized Leases) financing
the acquisition, construction, repair, replacement or improvement of fixed or
capital assets; provided that
such Indebtedness is incurred concurrently with or within two hundred and
seventy (270) days after the applicable acquisition, construction, repair,
replacement or improvement, and (ii) any Permitted Refinancing of any
Indebtedness set forth in the immediately preceding clause (i); provided that the aggregate principal
amount of all Indebtedness permitted under this Section 7.03(e) shall
not exceed $50,000,000 at any time outstanding;


 


(f)  Indebtedness
in respect of Swap Contracts incurred in the ordinary course of business and
not for speculative purposes;


 


(g)  Indebtedness
of the Company or any Restricted Subsidiary (i) assumed in connection with
any Permitted Acquisition; provided
that such Indebtedness is not incurred in contemplation of such Permitted
Acquisition or (ii) incurred to finance a Permitted Acquisition, in each
case, that is secured only by the assets or business (including any Equity
Interests) acquired in the applicable Permitted Acquisition and so long as both
immediately prior and after giving effect thereto, (A) no Event of Default
shall exist or result therefrom, (B) the Company and the


 


107

















 


Restricted Subsidiaries will
be in Pro Forma Compliance  with
the covenants set forth in Section 7.10, such compliance to be determined
on the basis of the financial information most recently delivered to the
Administrative Agent and the Lenders pursuant to Section 6.01(a) or (b) as
though such Indebtedness had been assumed or incurred as of the first day of
the fiscal period covered thereby and evidenced by a certificate from the Chief
Financial Officer of the Company demonstrating such compliance calculation in
reasonable detail, (C) the aggregate principal amount of such Indebtedness
and all Indebtedness resulting from any Permitted Refinancing thereof at any
time outstanding pursuant to this paragraph (g) (together with the
aggregate principal amount of Indebtedness incurred pursuant to Section 7.03(h)(y))
does not exceed $150,000,000, and (D) the aggregate principal amount of Indebtedness
pursuant to this clause (g) and clause (h) below assumed by
Restricted Subsidiaries that are not Loan Parties in connection with or
incurred by Restricted Subsidiaries that are not Loan Parties to finance
Permitted Acquisitions of Persons that do not become Loan Parties and all
Indebtedness resulting from any Permitted Refinancing thereof shall not exceed (I) with
respect to any such Permitted Acquisition, 65% of the aggregate amount of
consideration paid in respect thereof pursuant to Section 7.02(i)(B), and (II) with
respect to all such Permitted Acquisitions, (a) $175,000,000 for the
period from the Closing Date to the first anniversary of the Closing Date, (b) $200,000,000
for the period from the Closing Date to the second anniversary of the Closing
Date and (c) $250,000,000 for the period from the Closing Date to the
Maturity Date with respect to the Term Loans;


 


(h)  (i) Indebtedness
of the Company and the Restricted Subsidiaries (A) assumed in connection
with any Permitted Acquisition; provided
that such Indebtedness is not incurred in contemplation of such Permitted
Acquisition, or (B) incurred to finance a Permitted Acquisition and (ii) any
Permitted Refinancing of the foregoing; provided,
in each case that such Indebtedness and all Indebtedness resulting from any
Permitted Refinancing thereof (t) is unsecured, (u) both immediately
prior and after giving effect thereto, (1) no Event of Default shall exist
or result therefrom and (2) the Company and the Restricted Subsidiaries
will be in Pro Forma Compliance with the covenants set forth in Section 7.10,
such compliance to be determined on the basis of the financial information most
recently delivered to the Administrative Agent and the Lenders pursuant to Section 6.01(a) or
(b) as though such Indebtedness had been assumed or incurred as of the
first day of the fiscal period covered thereby and evidenced by a certificate
from the Chief Financial Officer of the Company demonstrating such compliance
calculation in reasonable detail, (v) subject to clause (y) below,
matures after, and does not require any scheduled amortization or other
scheduled payments of principal prior to, the Maturity Date of the Term Loans
(it being understood that such Indebtedness may have mandatory prepayment,
repurchase or redemptions provisions satisfying the requirement of clause (w) hereof),
(w) subject to clause (y) below, has terms and conditions (other than
interest rate and other pricing terms, redemption and prepayment premiums and
subordination terms) which, when taken as a whole, are not materially less
favorable to the Lenders (in the reasonable good faith determination of the
Company) than the terms and conditions of the Senior Subordinated Note
Indenture as of the Closing Date; provided
that the Company shall deliver to the Administrative Agent, at least five
Business Days prior to the incurrence of such Indebtedness, a certificate of a
Responsible Officer, together with a reasonably detailed description of the
material terms and conditions of such Indebtedness or drafts of the
documentation relating thereto, stating that the Company has determined in good
faith that such terms and conditions satisfy the foregoing requirement; (x) subject
to clause (y) below, with respect to such Indebtedness described in the immediately
preceding clause (B), is incurred by the Company or a Subsidiary that is a Loan
Party; (y) the aggregate principal amount of such Indebtedness incurred
pursuant to clause (B) and all Indebtedness resulting from any Permitted
Refinancing thereof, in each case which Indebtedness or Refinancing
Indebtedness would


 


108

















 


otherwise not be permitted
by clauses (v), (w) or (x) above, at any time outstanding pursuant to
this paragraph (h) (together with the aggregate principal amount of
Indebtedness incurred pursuant to Section 7.03(g) and all
Indebtedness resulting from any Permitted Refinancing thereof) does not exceed
$150,000,000, and (z) the aggregate principal amount of Indebtedness
pursuant to clause (g) above and this clause (h) assumed by
Restricted Subsidiaries that are not Loan Parties in connection with or
incurred by Restricted Subsidiaries that are not Loan Parties to finance
Permitted Acquisitions of Persons that do not become Loan Parties and all
Indebtedness resulting from any Permitted Refinancing thereof shall not exceed (I) with
respect to any such Permitted Acquisition, 65% of the aggregate amount of
consideration paid in respect thereof pursuant to Section 7.02(i)(B), and (II) with
respect to all such Permitted Acquisitions, (a) $175,000,000 for the
period from the Closing Date to the first anniversary of the Closing Date, (b) $200,000,000
for the period from the Closing Date to the second anniversary of the Closing
Date and (c) $250,000,000 for the period from the Closing Date to the
Maturity Date with respect to the Term Loans;


 


(i)  Indebtedness
representing deferred compensation to employees of the Company and the
Restricted Subsidiaries incurred in the ordinary course of business;


 


(j)  Indebtedness
consisting of promissory notes issued by any Loan Party to current or former
officers, directors and employees, their respective estates, spouses or former
spouses to finance the purchase or redemption of Equity Interests of Holdings
permitted by Section 7.06;


 


(k)  Indebtedness
incurred by the Company or the Restricted Subsidiaries in a Permitted
Acquisition, any other Investment expressly permitted hereunder or any
Disposition, in each case constituting indemnification obligations or obligations
in respect of purchase price or other similar adjustments;


 


(l)  Indebtedness
consisting of (i) obligations of Holdings, the Company or the Restricted
Subsidiaries under deferred compensation or other similar arrangements incurred
by such Person in connection with the Transaction and Permitted Acquisitions or
any other Investment expressly permitted hereunder or (ii) unsecured
Indebtedness at any time outstanding that is owed to the seller of a business
in a Permitted Acquisition to the extent constituting consideration for such
Permitted Acquisition, provided
that (x) such Indebtedness shall not mature or amortize any principal
prior to the date that is 91 days after the Maturity Date with respect to the
Term Loans, (y) unless, as of the last day of the immediately preceding
Test Period (after giving Pro Forma Effect to the incurrence of such
Indebtedness) the Total Leverage Ratio is less than 4.00:1.00, the aggregate
amount of such Indebtedness shall not exceed $25,000,000 outstanding at any
time and (z) such Indebtedness shall not be incurred in contemplation of
the transfer by such seller to one or more financial institutions;


 


(m)  Cash
Management Obligations and other Indebtedness in respect of netting services,
overdraft protections and similar arrangements in each case in connection with
deposit accounts incurred in the ordinary course of business in connection with
cash management activities;


 


(n)  Indebtedness
in an aggregate principal amount not to exceed $200,000,000 at any time
outstanding;


 


(o)  Indebtedness
consisting of (a) the financing of insurance premiums with the providers
of such insurance or their affiliates or (b) take-or-pay obligations
contained in supply arrangements, in each case, in the ordinary course of
business;


 


109

















 


(p)  Indebtedness
incurred by the Company or any of the Restricted Subsidiaries in respect of
letters of credit, bank guarantees, bankers’ acceptances or similar instruments
issued or created in the ordinary course of business, including in respect of
workers compensation claims, health, disability or other employee benefits or
property, casualty or liability insurance or self-insurance or other
Indebtedness with respect to reimbursement-type obligations regarding workers
compensation claims; provided
that any reimbursement obligations in respect thereof are reimbursed within 30
days following the incurrence thereof;


 


(q)  obligations
in respect of performance, bid, appeal and surety bonds and performance and
completion guarantees and similar obligations provided by the Company or any of
the Restricted Subsidiaries or obligations in respect of letters of credit,
bank guarantees or similar instruments related thereto, in each case in the
ordinary course of business or consistent with past practice;


 


(r)  Indebtedness
supported by a Letter of Credit, in a principal amount not to exceed the face
amount of such Letter of Credit;


 


(s)  any
Existing Notes not tendered and purchased on the Closing Date pursuant to the
Existing Note Indenture;


 


(t)  Indebtedness
in respect of the Senior Subordinated Notes and any Permitted Refinancing
thereof;


 


(u)  Foreign
Jurisdiction Deposits;


 


(v)  Indebtedness
of Holdings represented by the obligations of Holdings to make payments with
respect to the cancellation or repurchase of its common stock or stock options
or warrants in respect of its common stock granted to management investors; provided that any payments with respect to
such obligations shall be subject to Section 7.06;


 


(w)  to
the extent constituting Indebtedness, judgments, decrees, attachments or awards
not constituting an Event of Default under Section 8.01(h);


 


(x)  to
the extent constituting Indebtedness, Indebtedness in respect of the Holdings
PIK Preferred;


 


(y)  Indebtedness
resulting from an Investment permitted by clauses (e)(i), (m) or (p) of
Section 7.02; and


 


(z)  all
premiums (if any), interest (including post-petition interest), fees, expenses,
charges and additional or contingent interest on obligations described in clauses
(a) through (y) above.


 


SECTION 7.04.  Fundamental
Changes.  Merge, dissolve, liquidate,
consolidate with or into another Person, or Dispose of (whether in one
transaction or in a series of transactions) all or substantially all of its
assets (whether now owned or hereafter acquired) to or in favor of any Person,
except that:


 


(a)  any
Restricted Subsidiary may merge with (i) the Company; provided that the Company shall be the
continuing or surviving Person, or (ii) any one or more other Restricted Subsidiaries;
provided that when any Restricted
Subsidiary that is a Borrower or a Loan Party is


 


110

















 


merging with another
Restricted Subsidiary, a Borrower or a Loan Party shall be the continuing or
surviving Person;


 


(b)  (i) any
Subsidiary (other than a Borrower) that is not a Loan Party may merge or
consolidate with or into any other Subsidiary (other than a Borrower) that is
not a Loan Party, (ii) any Overseas Guarantor may merge or consolidate
with or into the applicable Overseas Borrower, provided that the Overseas
Borrower shall be the continuing or surviving Person, and (iii) any
Subsidiary (other than a Borrower) may liquidate or dissolve or change its
legal form if the Company determines in good faith that such action is in the
best interests of the Company and its Subsidiaries and is not materially
disadvantageous to the Lenders;


 


(c)  any
Restricted Subsidiary may Dispose of all or substantially all of its assets
(upon voluntary liquidation or otherwise) to the Company or to another
Restricted Subsidiary; provided
that if the transferor in such a transaction is a Guarantor or a Borrower, then
either (i) the transferee must either be the Company or a U.S. Guarantor, (ii) in
the case of a transfer by an Overseas Guarantor, the transferee must be the
applicable Overseas Borrower or another Overseas Guarantor of such Overseas
Borrower, or (iii) to the extent constituting an Investment, such
Investment must be a permitted Investment in or Indebtedness of a Restricted
Subsidiary which is not a Loan Party in accordance with Sections 7.02 and 7.03,
respectively;


 


(d)  so
long as no Event of Default exists or would result therefrom, the Company may
merge with any other Person; provided
that (i) the Company shall be the continuing or surviving corporation or (ii) if
the Person formed by or surviving any such merger or consolidation is not the
Company (any such Person, the “Successor
Company”), (A) the Successor Company shall be an entity
organized or existing under the laws of the United States, any state thereof,
the District of Columbia or any territory thereof, (B) the Successor
Company shall expressly assume all the obligations of the Company under this
Agreement and the other Loan Documents to which the Company is a party pursuant
to a supplement hereto or thereto in form reasonably satisfactory to the
Administrative Agent, (C) each U.S. Guarantor, unless it is the other
party to such merger or consolidation, shall have by a supplement to the
Guarantee and Security Agreement confirmed that its obligations thereunder
shall apply to the Successor Company’s obligations under this Agreement, (D) each
mortgagor of a Mortgaged Property, unless it is the other party to such merger
or consolidation, shall have by an amendment to or restatement of the
applicable Mortgage confirmed that its obligations thereunder shall apply to
the Successor Company’s obligations under this Agreement, and (E) the
Company shall have delivered to the Administrative Agent an officer’s certificate
and an opinion of counsel, each stating that such merger or consolidation and
such supplement to this Agreement or any Collateral Document comply with this
Agreement; provided, further,
that if the foregoing are satisfied, the Successor Company will succeed to, and
be substituted for, the Company under this Agreement;


 


(e)  any
Restricted Subsidiary may merge with any other Person in order to effect an
Investment permitted pursuant to Section 7.02; provided that the continuing or surviving Person shall be a
Restricted Subsidiary, which together with each of its Restricted Subsidiaries,
shall have complied with the requirements of Section 6.10;


 


(f)  the
Company and the Restricted Subsidiaries may consummate the Acquisitions and
Merger and any Permitted Acquisition; and


 


(g)  a
merger, dissolution, liquidation, consolidation or Disposition, the purpose of
which is to effect a Disposition permitted pursuant to Section 7.05.


 


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SECTION 7.05.  Dispositions.  Make any Disposition or enter into any
agreement to make any Disposition, except:


 


(a)  Dispositions
of obsolete or worn out property, whether now owned or hereafter acquired, in
the ordinary course of business and Dispositions of property no longer used or
useful in the conduct of the business of the Company and the Restricted
Subsidiaries;


 


(b)  Dispositions
of inventory and immaterial assets in the ordinary course of business;


 


(c)  Dispositions
of property to the extent that (i) such property is exchanged for credit
against the purchase price of similar replacement property or (ii) the
proceeds of such Disposition are promptly applied to the purchase price of such
replacement property;


 


(d)  Dispositions
of property (i) to the Company or to a Restricted Subsidiary; provided that if the transferor of such
property is a Guarantor or the Company, the transferee thereof must either be
the Company or a Guarantor, or in the case of a transfer by an Overseas
Guarantor, the applicable Overseas Borrower, (ii) to the extent such
transaction constitutes an Investment permitted under Section 7.02, or (iii) consisting
of Equity Interests of Foreign Subsidiaries to other Foreign Subsidiaries;


 


(e)  Dispositions
permitted by Sections 7.04 and 7.06 and Liens permitted by Section 7.01;


 


(f)  Dispositions
of cash and Cash Equivalents;


 


(g)  Dispositions
of accounts receivable in connection with the collection or compromise thereof;


 


(h)  
leases, subleases, licenses or sublicenses (including the provision of software
under an open source license), in each case in the ordinary course of business
and which do not materially interfere with the business of Holdings, the
Company and the Restricted Subsidiaries;


 


(i)  transfers
of property to the extent subject to Casualty Events;


 


(j)  Dispositions
of property not otherwise permitted under this Section 7.05; provided that (i) at the time of such
Disposition (other than any such Disposition made pursuant to a legally binding
commitment entered into at a time when no Event of Default exists), no Event of
Default shall exist or would result from such Disposition, (ii) the
aggregate book value of all property Disposed of in reliance on this clause (j) shall
not exceed $300,000,000 in the aggregate and (iii) with respect to any
Disposition pursuant to this clause (j) for a purchase price in excess of
$25,000,000, the Company or a Restricted Subsidiary shall receive not less than
75% of such consideration in the form of cash or Cash Equivalents (in each
case, free and clear of all Liens at the time received, other than
nonconsensual Liens permitted by Section 7.01 and Liens permitted by Section 7.01(s) and
clauses (i) and (ii) of Section 7.01(u)); provided, however,
that for the purposes of this clause (iii), each of the following shall be
deemed to be cash:  (A) any
liabilities (as shown on the Company’s or such Restricted Subsidiary’s most
recent balance sheet provided hereunder or in the footnotes thereto) of the
Company or such Restricted Subsidiary, other than liabilities that are by their
terms subordinated to the payment in cash of the Obligations, that are assumed
by the transferee with respect to the applicable Disposition and for which the
Company and all of the Restricted Subsidiaries shall have been validly released
by all applicable creditors in writing and (B) any securities received by
the Company or such Restricted Subsidiary from


 


112
















 


such transferee that are
converted by the Company or such Restricted Subsidiary into cash (to the extent
of the cash received) within 180 days following the closing of the applicable
Disposition;


 


(k)  Dispositions
listed on Schedule 7.05(k);


 


(l)  Dispositions
of Investments in joint ventures to the extent required by, or made pursuant to
customary buy/sell arrangements between, the joint venture parties set forth in
joint venture arrangements and similar binding arrangements; and


 


(m)  the
Disposition for consideration not in excess of €15,000,000 of the building
owned by Verlag Das Beste GmbH located at Augustenstrasse 1, Stuttgart 70178.


 


provided that any Disposition of any
property pursuant to this Section 7.05(j), (k) and (m) shall be
for no less than the fair market value of such property at the time of such
Disposition.  To the extent any
Collateral is Disposed of as expressly permitted by this Section 7.05 to
any Person other than Holdings, the Company or any Restricted Subsidiary, such
Collateral shall be sold free and clear of the Liens created by the Loan
Documents without further action by the Administrative Agent, and the
Administrative Agent shall be authorized to take any actions deemed appropriate
in order to effect the foregoing.


 


SECTION 7.06.  Restricted
Payments.  Declare or
make, directly or indirectly, any Restricted Payment, except:


 


(a)  each
Restricted Subsidiary may make Restricted Payments to the Company and to other
Restricted Subsidiaries (and, in the case of a Restricted Payment by a
non-wholly owned Restricted Subsidiary, to the Company and any other Restricted
Subsidiary and to each other owner of Equity Interests of such Restricted
Subsidiary based on their relative ownership interests of the relevant class of
Equity Interests);


 


(b)  Holdings,
the Company and each Restricted Subsidiary may declare and make dividend
payments or other distributions to the extent payable in the Equity Interests
(other than Disqualified Equity Interests not otherwise permitted by Section 7.03
or such dividend payments or distributions that would cause a Change of
Control) of such Person;


 


(c)  Restricted
Payments made to consummate the Transaction;


 


(d)  to
the extent constituting Restricted Payments, Holdings, the Company and the
Restricted Subsidiaries may enter into and consummate transactions expressly
permitted by any provision of Section 7.04 or 7.08;


 


(e)  repurchases
of Equity Interests in Holdings, the Company or any Restricted Subsidiary
deemed to occur upon exercise of stock options or warrants if such Equity
Interests represent a portion of the exercise price of such options or
warrants;


 


(f)  Holdings
may pay (or make Restricted Payments to allow any direct or indirect parent
thereof to pay) for the repurchase, retirement or other acquisition or
retirement for value of Equity Interests of Holdings (or of any such parent of
Holdings) by any future, present or former employee or director of Holdings (or
any direct or indirect parent of Holdings) or any of its Subsidiaries pursuant
to any employee or director equity plan, employee or director stock option plan
or any other employee or director benefit plan or any agreement (including any
stock subscription or shareholder agreement) with any employee or director of
Holdings or any of its


 


113

















 


Subsidiaries; provided that the aggregate amount of
payments under this clause (f) shall not exceed $16,000,000 in any fiscal
year of the Company;


 


(g)  the
Company and its Restricted Subsidiaries may make Restricted Payments to
Holdings:


 


(i)  the
proceeds of which will be used to pay (or to make Restricted Payments to allow
any direct or indirect parent of Holdings to pay) the tax liability to each
relevant jurisdiction in respect of consolidated, combined, unitary or
affiliated returns for the relevant jurisdiction of Holdings (or such parent)
attributable to Holdings, the Company or its Subsidiaries;


 


(ii)  consisting
of Permitted Holdings Distributions plus an additional amount of $500,000 per
fiscal year (which amount shall be available only to pay Holdings Operating
Expenses);


 


(iii)  the
proceeds of which shall be used by Holdings to make Restricted Payments
permitted by Section 7.06(c), (d) or (f);


 


(iv)  to
finance any Investment permitted to be made pursuant to Section 7.02; provided that (A) such Restricted
Payment shall be made substantially concurrently with the closing of such
Investment and (B) Holdings shall, immediately following the closing
thereof, cause (1) all property acquired (whether assets or Equity
Interests) to be contributed to the Company or its Restricted Subsidiaries or (2) the
merger (to the extent permitted in Section 7.04) of the Person formed or
acquired into the Company or its Restricted Subsidiaries in order to consummate
such Permitted Acquisition, in each case, in accordance with the requirements
of Section 6.10;


 


(h)  so
long as immediately before and after giving effect to any such Restricted
Payment, no Default shall have occurred and be continuing or would result therefrom,
the Company may make additional Restricted Payments to Holdings the proceeds of
which may be utilized by Holdings to make additional Restricted Payments, in an
aggregate amount not to exceed the sum of (i) $100,000,000 plus (ii) the
aggregate amount of the Net Cash Proceeds of Permitted Equity Issuances after
the Closing Date (other than Permitted Equity Issuances made pursuant to Section 8.05)
that have been contributed to the Company as common equity and Not Otherwise
Applied plus (iii) if, as of the last day of the immediately
preceding Test Period (after giving Pro Forma Effect to such Restricted
Payment) the Total Leverage Ratio is less than 4.00:1.00, the amount of
Cumulative Excess Cash Flow that is Not Otherwise Applied;


 


(i)  so
long as immediately before and after giving effect to any such Restricted
Payment, no Default shall have occurred and be continuing or would result
therefrom, the Company may make additional Restricted Payments in cash to
Holdings the proceeds of which may be utilized by Holdings to make additional
Restricted Payments in cash if, as of the last day of the immediately preceding
Test Period (after giving Pro Forma Effect to such Restricted Payment) the
Total Leverage Ratio is less than 4.00:1.00;


 


(j)  Holdings
may declare and pay dividend payments or other distributions in respect of (i) Holdings
Senior PIK Preferred to the extent payable in additional shares of Holdings
Senior PIK Preferred or accrued and added to the liquidation preference thereof
and (ii) Holdings Junior PIK Preferred to the extent payable in additional
shares of Holdings Junior PIK Preferred or accrued and added to the liquidation
preference thereof; and


 


114

















 


(k)  the
Company may (i) declare and pay regular quarterly dividends required
pursuant to the terms of the Company Preferred Stock and (ii) to the
extent any holder of Company Preferred Stock exercises appraisal rights in
respect of its shares of Company Preferred Stock as a result of the Transaction,
pay amounts required to be paid with respect thereto.


 


SECTION 7.07.  Change
in Nature of Business. 
Engage to any material extent in a line of business substantially
different from those lines of business conducted by the Company and the
Restricted Subsidiaries on the date hereof or any business reasonably related,
ancillary or complementary thereto.


 


SECTION 7.08.  Transactions
with Affiliates.  Enter into
any transaction of any kind with any Affiliate of the Company, whether or not
in the ordinary course of business, other than (a) transactions among Loan
Parties or any Restricted Subsidiary or any entity that becomes a Restricted
Subsidiary as a result of such transaction, (b) on terms substantially as
favorable to Holdings, the Company or such Restricted Subsidiary (in the
reasonable good faith determination of the Company) as would be obtainable by
Holdings, the Company or such Restricted Subsidiary at the time in a comparable
arm’s-length transaction with a Person other than an Affiliate, (c) the Transaction
and the payment of fees and expenses related to the Transaction, (d) the
issuance of Qualified Equity Interests of Holdings and the granting of
registration or other customary rights in connection therewith, (e) so
long as immediately before and after giving effect thereto, no Event of Default
shall have occurred and be continuing or would result therefrom, the payment of
management fees to the Sponsors in an aggregate amount in any fiscal quarter
not to exceed $1,875,000, (f) reimbursement of out-of-pocket costs and
expenses to the Sponsors and their Affiliates, (g) loans, Investments,
Restricted Payments and other transactions to the extent otherwise permitted
under this Article VII, (h) employment, incentive, benefit and
severance arrangements between Holdings, the Company and the Restricted
Subsidiaries and their respective officers and employees in the ordinary course
of business, (i) payments by Holdings (and any direct or indirect parent
thereof), the Company and the Restricted Subsidiaries pursuant to the tax
sharing agreements among Holdings (and any such parent thereof), the Company
and the Restricted Subsidiaries on customary terms to the extent attributable
to the ownership or operation of the Company and the Restricted Subsidiaries, (j) customary
compensation and benefits and reimbursement of reasonable out-of-pocket costs
to, and indemnities provided on behalf of, directors, officers and employees of
Holdings, the Company and the Restricted Subsidiaries in the ordinary course of
business to the extent attributable to the ownership or operation of Holdings,
the Company and the Restricted Subsidiaries, (k) transactions pursuant to
permitted agreements in existence on the Closing Date and set forth on Schedule
7.08 or any amendment thereto to the extent such an amendment is not adverse to
the Lenders in any material respect, (l) dividends, redemptions and
repurchases permitted under Section 7.06, (m) customary payments by
Holdings, the Company and any Restricted Subsidiaries to the Sponsors or their
Affiliates made for any financial advisory, financing, underwriting or
placement services or in respect of other investment banking activities
(including in connection with acquisitions or divestitures) up to 5.0% of the
value of transactions with respect to which such services are provided, (n) the
existence of, and the performance by Holdings, the Company or any Restricted
Subsidiary of its obligations under the terms of, any limited liability company
agreement, limited partnership or other organizational document or
securityholders agreement (including any registration rights agreement or
purchase agreement related thereto) to which it is a party on the Closing Date
and which has been disclosed to the Lenders as in effect on the Closing Date, and
similar organizational agreements (including any registration rights agreements
or purchase agreements related thereto) it may enter into thereafter, provided that the existence of, or the
performance by Holdings, the Company or any Restricted Subsidiary of
obligations under, any amendment to any such existing agreement or any such
similar agreement (including any


 


115

















 


registration
rights agreements or purchase agreements related thereto) entered into after the
Closing Date shall only be permitted by this Section 7.08(n) to the
extent not more adverse to the interest of the Lenders in any material respect
when taken as a whole (in the reasonable good faith determination of the
Company) than any of such documents and agreements as in effect on the Closing
Date, and (o) transactions with landlords, customers, clients, suppliers,
authors, joint venture partners or purchasers or sellers of goods and services,
in each case in the ordinary course of business and not otherwise prohibited by
this Agreement.


 


SECTION 7.09.  Burdensome
Agreements.  Enter into
or permit to exist any Contractual Obligation (other than this Agreement or any
other Loan Document) that limits the ability of any Restricted Subsidiary of
the Company that is not a U.S. Guarantor to make Restricted Payments to the
Company or any U.S. Guarantor; provided
that the foregoing shall not apply to Contractual Obligations which (i)(x) exist
on the date hereof and (to the extent not otherwise permitted by this Section 7.09)
are listed on Schedule 7.09 hereto or (y) are set forth in any agreement
evidencing any permitted amendment, renewal, extension or refinancing of any
Contractual Obligation permitted by clause (x) so long as such amendment,
renewal, extension or refinancing is not materially more restrictive (in the
reasonable good faith determination of the Company) than such Contractual
Obligation, (ii) are binding on a Restricted Subsidiary at the time such
Restricted Subsidiary first becomes a Restricted Subsidiary of the Company, so
long as such Contractual Obligations were not entered into solely in
contemplation of such Person becoming a Restricted Subsidiary of the Company,
or are imposed by any permitted amendment, renewal, extension or refinancing of
any such Contractual Obligation so long as the terms of any such amendment,
renewal, extension or refinancing, taken as a whole, are not materially more
restrictive (in the reasonable good faith determination of the Company) than
such Contractual Obligation; provided
further that this clause (ii) shall not apply to Contractual
Obligations that are binding on a Person that becomes a Restricted Subsidiary
pursuant to Section 6.15, (iii) represent Indebtedness of a
Restricted Subsidiary of the Company which is not a Loan Party which is
permitted by Section 7.03, (iv) arise in connection with any
Disposition permitted by Section 7.05, (v) are customary provisions
in joint venture agreements and other similar agreements applicable to joint
ventures permitted under Section 7.02 and applicable solely to such joint
venture entered into in the ordinary course of business, (vi) are
customary restrictions in leases, subleases, licenses or asset sale agreements
otherwise permitted hereby so long as such restrictions relate to the assets
subject thereto, (vii) comprise restrictions imposed by any agreement
relating to secured Indebtedness permitted pursuant to 7.03(g) to the
extent that such restrictions apply only to the Restricted Subsidiaries
incurring or guaranteeing such Indebtedness, (viii) are customary
provisions restricting subletting or assignment of any lease governing a
leasehold interest of the Company or any Restricted Subsidiary, (ix) are
customary provisions restricting assignment of any agreement entered into in
the ordinary course of business, (x) are restrictions on cash or other
deposits or net worth imposed by customers under contracts entered into in the
ordinary course of business, and (xi) comprise restrictions imposed by a Lien
permitted by Section 7.01 restricting the transfer of the property subject
thereto.


 


SECTION 7.10.  Financial
Covenant.  Permit the
Total Leverage Ratio as of the last day of any Test Period (beginning with the
Test Period ending on March 31, 2008) to be greater than the ratio set
forth below opposite the last day of such Test Period:


 


	
  Year

  	
   

  	
  March 31

  	
   

  	
  June 30

  	
   

  	
  September 30

  	
   

  	
  December 31

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2008

  	
   

  	
  8.75:1.00

  	
   

  	
  8.75:1.00

  	
   

  	
  8.75:1.00

  	
   

  	
  8.75:1.00

  	
   

  
	
  2009

  	
   

  	
  8.75:1.00

  	
   

  	
  8.00:1.00

  	
   

  	
  8.00:1.00

  	
   

  	
  8.00:1.00

  	
   

  
	
  2010

  	
   

  	
  8.00:1.00

  	
   

  	
  6.50:1.00

  	
   

  	
  6.50:1.00

  	
   

  	
  6.50:1.00

  	
   

  



 


116

















 


	
  Year

  	
   

  	
  March 31

  	
   

  	
  June 30

  	
   

  	
  September 30

  	
   

  	
  December 31

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2011

  	
   

  	
  6.50:1.00

  	
   

  	
  5.75:1.00

  	
   

  	
  5.75:1.00

  	
   

  	
  5.75:1.00

  	
   

  
	
  2012

  	
   

  	
  5.75:1.00

  	
   

  	
  5.00:1.00

  	
   

  	
  5.00:1.00

  	
   

  	
  5.00:1.00

  	
   

  
	
  2013

  	
   

  	
  5.00:1.00

  	
   

  	
  5.00:1.00

  	
   

  	
  5.00:1.00

  	
   

  	
  5.00:1.00

  	
   

  



 


SECTION 7.11.  Accounting
Changes.  Make any change in fiscal
year; provided, however, that (i) each
of WRC Media and its Subsidiaries may change its fiscal year to June 30
and (ii) each of the Company and its Subsidiaries may, upon written notice
to the Administrative Agent, change its fiscal year to a calendar year or to
any other fiscal year reasonably acceptable to the Administrative Agent, in
which case, the Company and the Administrative Agent will, and are hereby
authorized by the Lenders to, make any adjustments to this Agreement that are
necessary to reflect such change in fiscal year.


 


SECTION 7.12.  Prepayments,
Etc. of Indebtedness.  (a)  Prepay,
redeem, purchase, defease or otherwise satisfy prior to the scheduled maturity
thereof in any manner (it being understood that payments of regularly scheduled
interest shall be permitted) the Senior Subordinated Notes, any other
Indebtedness that is required to be subordinated to the Obligations pursuant to
the terms of the Loan Documents (collectively, “Junior Financing”) or the Holdings PIK Preferred or make any
payment in violation of any subordination terms of any Junior Financing
Documentation, except (i) the refinancing thereof with the Net Cash Proceeds
of any Indebtedness (to the extent such Indebtedness constitutes a Permitted
Refinancing), to the extent not required to prepay any Loans or Facility
pursuant to Section 2.05(b), (ii) the conversion of any Junior
Financing to Equity Interests (other than Disqualified Equity Interests) of
Holdings or any of its direct or indirect parents, (iii) the prepayment of
Indebtedness of the Company or any Restricted Subsidiary to the Company or any
Restricted Subsidiary to the extent permitted by the Collateral Documents, and (iv) so
long as immediately before and after giving effect thereto, no Default shall
have occurred and be continuing or would result therefrom, prepayments,
redemptions, purchases, defeasances and other payments in respect of Junior
Financings or the Holdings PIK Preferred prior to their scheduled maturity in
an aggregate amount not to exceed the sum of (x) $100,000,000 plus (y) the
aggregate amount of the Net Cash Proceeds of Permitted Equity Issuances after
the Closing Date (other than Permitted Equity Issuances made pursuant to Section 8.05)
that (other than with respect to any prepayment, redemption, purchase,
defeasance or other payment of the Holdings PIK Preferred) have been
contributed to the Company as common equity and Not Otherwise Applied plus
(z) if, as of the last day of the immediately preceding Test Period (after
giving Pro Forma Effect to such prepayment, redemption, purchase, defeasance or
other payment) the Total Leverage Ratio is less than 4.00:1.00, the amount of
Cumulative Excess Cash Flow that is Not Otherwise Applied.


 


(b)  Amend,
modify or change in any manner materially adverse to the interests of the
Lenders (i) any term or condition of any Junior Financing Documentation, (ii) any
term or condition of the Company Preferred Stock or (iii) any Organization
Document of Holdings, the Company or any Restricted Subsidiary, in any case
without the consent of the Administrative Agent.


 


SECTION 7.13.  Holding
Company.  In the case of Holdings,
conduct, transact or otherwise engage in any business or operations other than
those incidental to (i) its ownership of the Equity Interests in, and its
management of, the Company, (ii) the maintenance of its legal existence
and its compliance with applicable Laws, (iii) the performance of the Loan
Documents, the documents in respect of the Holdings PIK Preferred, the Purchase
Agreement, the DH


 


117

















 


Acquisition
Agreement, the WRC Acquisition Agreement and the other agreements contemplated
by the Purchase Agreement, the DH Acquisition Agreement or the WRC Acquisition
Agreement, (iv) any public offering of its common stock or any other
issuance of its Equity Interests not prohibited by Article VII, and (v) the
issuance, acquisition or maintenance of any Indebtedness or Investments, or the
making of any Restricted Payments, that Holdings is expressly permitted to
enter into or consummate under this Article VII; provided that, notwithstanding the
foregoing, Holdings shall not own, lease, manage, acquire or otherwise operate
any properties or assets (other than the ownership of Equity Interests in, and
its management of, the Company, cash and Cash Equivalents and de minimis
amounts of other assets incidental to the conduct of its business) or incur any
material consensual liabilities (other than liabilities related to its
existence and permitted business and activities specified above).


 


SECTION 7.14.  Capital
Expenditures.  (a)  
Commencing with the fiscal year ending June 30, 2008, make any Capital Expenditure
except for Capital Expenditures not exceeding, in the aggregate for the Company
and the Restricted Subsidiaries during each fiscal year set forth below, the
amount set forth opposite such fiscal year:


 


	
  Fiscal Year

  	
   

  	
  Amount

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  2008

  	
   

  	
  $

  	
  40,000,000

  	
   

  
	
  2009

  	
   

  	
  $

  	
  40,000,000

  	
   

  
	
  2010

  	
   

  	
  $

  	
  40,000,000

  	
   

  
	
  2011

  	
   

  	
  $

  	
  45,000,000

  	
   

  
	
  2012

  	
   

  	
  $

  	
  45,000,000

  	
   

  
	
  2013

  	
   

  	
  $

  	
  45,000,000

  	
   

  
	
  2014

  	
   

  	
  $

  	
  45,000,000

  	
   

  



 


;
provided that the amount of
Capital Expenditures permitted to be made in respect of any fiscal year shall
be increased (i) after the consummation of any Permitted Acquisition in an
amount equal to 10% of the pro forma aggregate consolidated revenues of the
Acquired Entity or Business so acquired during the fiscal year of such Acquired
Entity or Business beginning after such Permitted Acquisition and (ii) by
an amount equal to the sum of (x) the aggregate amount of the Net Cash
Proceeds of Permitted Equity Issuances after the Closing Date (other than
Permitted Equity Issuances made pursuant to Section 8.05) that have been
contributed to the Company as common equity and Not Otherwise Applied plus
(y) if, as of the last day of the immediately preceding Test Period (after
giving Pro Forma Effect to such Capital Expenditure) the Total Leverage Ratio
is less than 4.00:1.00, the amount of Cumulative Excess Cash Flow that is Not
Otherwise Applied.


 


(b)  Notwithstanding
anything to the contrary contained in clause (a) above, to the extent that
the aggregate amount of Capital Expenditures made by the Company and the
Restricted Subsidiaries in any fiscal year pursuant to Section 7.14(a) is
less than the maximum amount of Capital Expenditures permitted by Section 7.14(a) with
respect to such fiscal year (without taking into consideration any amounts
available pursuant to clause (ii) of the proviso thereto), the amount of
such difference (the “Rollover Amount”)  may be carried forward and used to make
Capital Expenditures in the next succeeding fiscal year; provided that Capital Expenditures in any
fiscal year shall be counted against the base amount set forth in Section 7.14(a) (without
taking into consideration any amounts available pursuant to clause (ii) of
the proviso thereto) with respect to such fiscal year prior to being counted
against any Rollover Amount available with respect to such fiscal year.


 


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ARTICLE VIII


 


EVENTS OF DEFAULT AND REMEDIES


 


SECTION 8.01.  Events
of Default.  Any of the
following shall constitute an Event of Default:


 


(a)  Non-Payment.  Any Borrower or any other Loan Party fails to
pay (i) when and as required to be paid herein, any amount of principal of
any Loan, or (ii) within five (5) Business Days after the same
becomes due, any interest or any other amount (including Cash Collateral)
payable hereunder or with respect to any other Loan Document; or


 


(b)  Specific Covenants.  (i) Any Group Member fails to perform or
observe (or to cause the performance or observance of) any term, covenant or
agreement contained in any of Sections 6.03(a), 6.05(a) (solely with
respect to the existence of Holdings and the Company), 6.17 or Article VII
or (ii) Holdings fails to observe any term, covenant or agreement
contained in Section 7.13; provided
that any Event of Default under Section 7.10 is subject to cure as
contemplated by Section 8.05; or


 


(c)  Other Defaults.  Any Group Member fails to perform or observe
(or to cause the performance or observance of) any other covenant or agreement
(not specified in Section 8.01(a) or (b) above) contained in any
Loan Document on its part to be performed or observed and such failure
continues for thirty (30) days after written notice thereof by the
Administrative Agent to the Company; or


 


(d)  Representations and Warranties.  Any representation, warranty, certification
or statement of fact made or deemed made by or on behalf of the Company or any
other Loan Party herein, in any other Loan Document, or in any document
required to be delivered in connection herewith or therewith shall be incorrect
or misleading in any material respect when made or deemed made; or


 


(e)  Cross-Default.  Any Loan Party or any Restricted Subsidiary (A) fails
to make any payment beyond the applicable grace period with respect thereto, if
any (whether by scheduled maturity, required prepayment, acceleration, demand,
or otherwise) in respect of any Indebtedness (other than Indebtedness
hereunder) having an aggregate principal amount of not less than the Threshold
Amount, or (B) fails to observe or perform any other agreement or
condition contained in any instrument or agreement evidencing or governing any
such Indebtedness, or any other “default” (or like term) occurs, the effect of
which failure or other “default” is to cause, or to permit the holder or
holders of such Indebtedness (or a trustee or agent on behalf of such holder or
holders or beneficiary or beneficiaries) to cause, with the giving of notice if
required, such Indebtedness to become due (automatically or otherwise) prior to
its stated maturity; provided
that this clause (e)(B) shall not apply to secured Indebtedness that
becomes due as a result of the voluntary sale or transfer of the property or
assets securing such Indebtedness, if such sale or transfer is permitted
hereunder and under the documents providing for such Indebtedness; or


 


(f)  Insolvency Proceedings, Etc.  Any Loan Party or any of the Restricted
Subsidiaries institutes or consents to the institution of any proceeding under
any Debtor Relief Law, or makes an assignment for the benefit of creditors; or
applies for or consents to the appointment of any receiver, trustee, custodian,
conservator, liquidator, rehabilitator, administrator, administrative receiver
or similar officer for it or for all or any material part of its property; or
any receiver,


 


119

















 


trustee, custodian,
conservator, liquidator, rehabilitator, administrator, administrative receiver
or similar officer is appointed without the application or consent of such
Person and the appointment continues undischarged or unstayed for sixty (60)
calendar days; or any proceeding under any Debtor Relief Law relating to any
such Person or to all or any material part of its property is instituted
without the consent of such Person and continues undismissed or unstayed for
sixty (60) calendar days, or an order for relief approving or ordering any of
the foregoing is entered in any such proceeding; or


 


(g)  Inability to Pay Debts; Attachment.  (i) Any Loan Party or any Restricted
Subsidiary becomes generally unable or admits in writing its inability
generally or fails generally to pay its debts in excess of the Threshold Amount
as they become due, or (ii) any writ or warrant of attachment or execution
or similar process is issued or levied against all or any material part of the
property of the Loan Parties, taken as a whole, and is not released, vacated or
fully bonded within sixty (60) days after its issue or levy; or


 


(h)  Judgments. 
There is entered against any Loan Party or any Restricted Subsidiary a
final judgment or order for the payment of money in an aggregate amount
exceeding the Threshold Amount (to the extent due and payable and not covered
by independent third-party insurance as to which the insurer has been notified
of such judgment or order and has not disputed coverage) and such judgment or
order shall not have been satisfied, vacated, discharged or stayed or bonded
pending an appeal for a  period of sixty
(60) consecutive days; or


 


(i)  ERISA.  (i) An ERISA Event occurs with respect to
a Pension Plan or Multiemployer Plan which has resulted or could reasonably be
expected to result in liability of any Loan Party under Title IV of ERISA in an
aggregate amount which could reasonably be expected to result in a Material
Adverse Effect, (ii) any Loan Party or any ERISA Affiliate fails to pay
when due, after the expiration of any applicable grace period, any installment
payment with respect to its withdrawal liability under Section 4201 of
ERISA under a Multiemployer Plan in an aggregate amount which could reasonably
be expected to result in a Material Adverse Effect, (iii) any Loan Party
or any of its Subsidiaries or ERISA Affiliates shall engage in any “prohibited
transaction” (as defined in Section 406 of ERISA or Section 4975 of
the Code) involving any Pension Plan which could reasonably be expected to
result in a Material Adverse Effect, or (iv) any other event or condition
shall occur or exist with respect to a Pension Plan which has resulted or could
reasonably be expected to result in a Material Adverse Effect; or


 


(j)  Invalidity of Collateral Documents.  Any material provision of any Collateral
Document, at any time after its execution and delivery and for any reason other
than as expressly permitted hereunder or thereunder (including as a result of a
transaction permitted under Section 7.04 or 7.05) or as a result of acts
or omissions by the Administrative Agent or any Lender or the satisfaction in
full of all the Obligations, ceases to be in full force and effect; or any Loan
Party contests in writing the validity or enforceability of any provision of
any Collateral Document; or any Loan Party denies in writing that it has any or
further liability or obligation under any Collateral Document (other than as a
result of repayment in full of the Obligations and termination of the Aggregate
Commitments), or purports in writing to revoke or rescind any Collateral
Document; or


 


(k)  Change of Control.  There occurs any Change of Control; or


 


(l)  Liens on Collateral.  Any Collateral Document shall for any reason
(other than pursuant to the terms thereof including as a result of a
transaction permitted under Section 7.04 or 7.05) cease to create a valid
and perfected lien, with the priority required by the Collateral


 


120

















 


Documents, (or other
security purported to be created on the applicable Collateral) on and security
interest in any material portion of the Collateral purported to be covered
thereby, subject to Liens permitted under Section 7.01, or any Loan Party
or Affiliate thereof shall so assert in writing, except to the extent that any
such loss of perfection or priority results from the failure of the
Administrative Agent to maintain possession of certificates actually delivered
to it representing securities pledged under the Collateral Documents or to file
Uniform Commercial Code continuation statements and except as to Collateral
consisting of real property to the extent that such losses are covered by a
lender’s title insurance policy and such insurer has not disputed coverage; or


 


(m)  Junior Financing Documentation.  Any of the Obligations of the Loan Parties
under the Loan Documents for any reason shall cease to be “Senior Indebtedness”
(or any comparable term) or “Senior Secured Financing” (or any comparable term)
under, and as defined in the Senior Subordinated Note Indenture or in any other
Junior Financing Documentation.


 


SECTION 8.02.  Remedies
Upon Event of Default.  If
any Event of Default occurs and is continuing, the Administrative Agent may
and, at the request of the Required Lenders, shall take any or all of the
following actions:


 


(a)  declare
the commitment of each Lender to make Loans and any obligation of the L/C
Issuers to make L/C Credit Extensions to be terminated, whereupon such
commitments and obligation shall be terminated;


 


(b)  declare
the unpaid principal amount of all outstanding Loans, all interest accrued and
unpaid thereon, and all other amounts owing or payable hereunder or under any
other Loan Document to be immediately due and payable, without presentment,
demand, protest or other notice of any kind, all of which are hereby expressly
waived by the Borrowers;


 


(c)  require
that the Company Cash Collateralize the L/C Obligations (in an amount equal to
the then Outstanding Amount thereof); and


 


(d)  exercise
on behalf of itself and the Lenders all rights and remedies available to it and
the Lenders under the Loan Documents or applicable Law;


 


provided that upon the occurrence of
an actual or deemed entry of an order for relief with respect to the Company
under the Bankruptcy Code of the United States, the obligation of each Lender
to make Loans and any obligation of the L/C Issuers to make L/C Credit
Extensions shall automatically terminate, the unpaid principal amount of all
outstanding Loans and all interest and other amounts as aforesaid shall
automatically become due and payable, and the obligation of the Company to Cash
Collateralize the L/C Obligations as aforesaid shall automatically become
effective, in each case without further act of the Administrative Agent or any
Lender.


 


SECTION 8.03.  Exclusion
of Immaterial Subsidiaries.  Solely for the purpose of determining whether
a Default has occurred under clause (f) or (g) of Section 8.01,
any reference in any such clause to any Restricted Subsidiary or Loan Party
shall be deemed not to include any Restricted Subsidiary affected by any event
or circumstances referred to in any such clause that did not, as of the last
day of the most recent completed fiscal quarter of the Company, have assets
with a value in excess of 5% of the consolidated total assets of the Company
and the Restricted Subsidiaries and did not, as of the four quarter period
ending on the last day of such fiscal quarter, have revenues exceeding 5% of
the total revenues of the Company and the Restricted Subsidiaries (it being
agreed that all Restricted Subsidiaries affected by any event or circumstance
referred to


 


121

















 


in
any such clause shall be considered together, as a single consolidated Restricted
Subsidiary, for purposes of determining whether the condition specified above
is satisfied).


 


SECTION 8.04.  Application
of Funds.  After the
exercise of remedies provided for in Section 8.02 (or after the Loans have
automatically become immediately due and payable and the L/C Obligations have
automatically been required to be Cash Collateralized as set forth in the
proviso to Section 8.02), any amounts received on account of the
Obligations shall be applied by the Administrative Agent in the following
order:


 


First, to payment of that portion
of the Obligations constituting fees, indemnities, expenses and other amounts
(other than principal and interest, but including Attorney Costs payable under Section 10.04
and amounts payable under Article III) payable to the Administrative Agent
in its capacity as such;


 


Second, to payment of that portion
of the Obligations constituting fees, indemnities and other amounts (other than
principal and interest) payable to the Lenders (including Attorney Costs
payable under Section 10.04 and amounts payable under Article III),
ratably among them in proportion to the amounts described in this clause Second payable to them;


 


Third, to payment of that portion
of the Obligations constituting accrued and unpaid interest on the Loans and
L/C Borrowings, ratably among the holders of such Obligations in proportion to
the respective amounts described in this clause Third payable to them;


 


Fourth, to payment of that portion
of the Obligations constituting unpaid principal of the Loans and L/C
Borrowings, the termination value under Secured Hedge Obligations and Cash
Management Obligations and to Cash Collateralize the portion of the L/C
Obligations comprised of the aggregate undrawn amount of Letters of Credit,
ratably among the holders of such Obligations in proportion to the respective
amounts described in this clause Fourth
held by them;


 


Fifth, to the payment of all
other Obligations of the Loan Parties that are due and payable to the
Administrative Agent and the other Secured Parties on such date, ratably based
upon the respective aggregate amounts of all such Obligations owing to the
Administrative Agent and the other Secured Parties on such date; and


 


Last, the balance, if any, after
all of the Obligations have been paid in full, to the Company or as otherwise
required by Law.


 


Subject
to Section 2.03(c), amounts used to Cash Collateralize the aggregate
undrawn amount of Letters of Credit pursuant to clause Fourth above shall be applied to satisfy
drawings under such Letters of Credit as they occur.  If any amount remains on deposit as Cash
Collateral after all Letters of Credit have either been fully drawn or expired,
such remaining amount shall be applied to the other Obligations, if any, in the
order set forth above and, if no Obligations remain outstanding, to the
Company.


 


Notwithstanding
anything to the contrary in this Agreement, amounts received from any Foreign
Subsidiary on account of the Obligations of any Foreign Subsidiary shall be
applied solely to the payment of Obligations of Foreign Subsidiaries.


 


122






 












 


SECTION 8.05.  Company’s Right to Cure.  (a)   Notwithstanding
anything to the contrary contained in Section 8.01, in the event that
Holdings and the Company fail to comply with the requirements of Section 7.10
at the end of any fiscal quarter, at any time during the period beginning with
the first day of such fiscal quarter and ending on the expiration of the
twentieth (20th) day after the date on which financial
statements are required to be delivered with respect to the applicable fiscal
quarter hereunder (the “Cure Period”),
Holdings shall have the right to engage in a Permitted Equity Issuance for cash
or otherwise receive cash contributions to the capital of Holdings (which, or
the cash proceeds of which, shall be contributed to the Company prior to the
end of the Cure Period), and upon receipt by the Company of such amount in cash
(the “Cure Amount”) to the extent
Not Otherwise Applied, (i) to the extent the Cure Amount is applied to
prepay Term Loans on or prior to the last day of the Cure Period, such
prepayment shall be deemed to have occurred prior to the end of such fiscal
quarter and (ii) the Cure Amount shall be added to Consolidated EBITDA for
purposes of determining compliance with Section 7.10 for the last fiscal
quarter of the four fiscal quarter period for which such failure to comply
would have otherwise occurred (and future four fiscal quarter periods which
include such fiscal quarter).  If, after
giving effect to the foregoing recalculation, the Company shall then be in
compliance with the requirements of Section 7.10, the Company shall be
deemed to have satisfied the requirements of Section 7.10 as of the
relevant date of determination with the same effect as though there had been no
failure to comply therewith at such date, and the applicable breach or default
of Section 7.10 that would have otherwise occurred but for the prepayment
of the Term Loans pursuant to clause (i) above and/or the receipt by the
Company of the Cure Amount and the addition thereof to Consolidated EBITDA
pursuant to clause (ii) above shall be deemed not to have occurred for the
purposes of the Loan Documents.  The
parties hereby acknowledge that, other than as set forth in clause (i) above,
this Section 8.05(a) may not be relied on for purposes of calculating
any financial ratios other than as applicable to Section 7.10 and shall
not result in any adjustment to any amounts other than the amount of the
Consolidated EBITDA as referred to in this Section 8.05(a).


 


(b)  Notwithstanding
anything herein to the contrary, (i) in each period of four fiscal
quarters, there shall be at least two (2) fiscal quarters in which no cure
set forth in Section 8.05(a) is made and (ii) the Cure Amount
shall be no greater than the amount required for purposes of complying with Section 7.10
for the most recently completed four fiscal quarter period.


 


SECTION 8.06.  CAM Exchange.  On
the CAM Exchange Date, (i) the Commitments shall automatically and without
further act be terminated in accordance with Section 8.02, (ii) the
Lenders shall automatically and without further act be deemed to have exchanged
interests in the Designated Obligations such that, in lieu of the interests of
each Lender in the Designated Obligations under each Tranche in which it shall
participate as of such date, such Lender shall own an interest equal to such
Lender’s CAM Percentage in the Designated Obligations under each of the
Tranches and (iii) simultaneously with the deemed exchange of interests
pursuant to clause (ii) above, the interests in the Designated
Obligations to be received in such deemed exchange shall, automatically and
with no further action required, be converted into the Dollar Amount,
determined using the Exchange Rate calculated as of such date, of such amount
and on and after such date all amounts accruing and owed to the Lenders in
respect of such Designated Obligations shall accrue and be payable in Dollars
at the rate otherwise applicable hereunder. 
Each Lender, each person acquiring a participation from any Lender as
contemplated by Section 10.07 and each Borrower hereby consents and agrees
to the CAM Exchange.  Each of the
Borrowers and the Lenders agrees from time to time to execute and deliver to
the Administrative Agent all such promissory notes and other instruments and
documents as the Administrative Agent shall reasonably request to evidence and
confirm the respective interests and obligations of the Lenders after giving
effect to the CAM Exchange, and each Lender agrees to surrender any


 


123

















 


promissory
notes originally received by it in connection with its Loans hereunder to the
Administrative Agent against delivery of any promissory notes so executed and
delivered; provided that the
failure of any Borrower to execute or deliver or of any Lender to accept any
such promissory note, instrument or document shall not affect the validity or
effectiveness of the CAM Exchange.


 


As
a result of the CAM Exchange, on and after the CAM Exchange Date, each payment
received by the Administrative Agent pursuant to any Loan Document in respect
of the Designated Obligations shall be distributed to the Lenders pro rata in
accordance with their respective CAM Percentages (to be redetermined as of each
such date of payment or distribution to the extent required by the next
paragraph below).


 


In
the event that, on or after the CAM Exchange Date, the aggregate amount of the
Designated Obligations shall change as a result of the making of a disbursement
under a Letter of Credit by an L/C Issuer that is not reimbursed by the
Company, then (i) each Revolving Lender shall, in accordance with Section 2.03(c),
promptly make its L/C Advance in respect of such Unreimbursed Amount (without
giving effect to the CAM Exchange), (ii) the Administrative Agent shall
redetermine the CAM Percentages after giving effect to such disbursement and
the making of such L/C Advances and the Lenders shall automatically and without
further act be deemed to have exchanged interests in the Designated Obligations
such that each Lender shall own an interest equal to such Lender’s CAM
Percentage in the Designated Obligations under each of the Tranches (and the
interests in the Designated Obligations to be received in such deemed exchange
shall, automatically and with no further action required, be converted into the
Dollar Amount of such amount in accordance with the first sentence of this Section 8.06),
and (iii) in the event distributions shall have been made in accordance
with clause (i) of the preceding paragraph, the Lenders shall make such payments
to one another as shall be necessary in order that the amounts received by them
shall be equal to the amounts they would have received had each such
disbursement and L/C Advance been outstanding on the CAM Exchange Date.  Each such redetermination shall be binding on
each of the Lenders and their successors and assigns and shall be conclusive,
absent manifest error.


 


ARTICLE IX




ADMINISTRATIVE AGENT AND OTHER AGENTS


 


Section 9.01.  Appointment
and Authorization of Agents.  (a)  Each Lender hereby irrevocably
appoints, designates and authorizes the Administrative Agent to take such
action on its behalf under the provisions of this Agreement and each other Loan
Document and to exercise such powers and perform such duties as are expressly
delegated to it by the terms of this Agreement or any other Loan Document,
together with such powers as are reasonably incidental thereto.  Notwithstanding any provision to the contrary
contained elsewhere herein or in any other Loan Document, the Administrative
Agent shall have no duties or responsibilities, except those expressly set
forth herein, nor shall the Administrative Agent have or be deemed to have any
fiduciary relationship with any Lender or participant, and no implied
covenants, functions, responsibilities, duties, obligations or liabilities
shall be read into this Agreement or any other Loan Document or otherwise exist
against the Administrative Agent. 
Without limiting the generality of the foregoing sentence, the use of
the term “agent” herein and in the other Loan Documents with reference to any
Agent is not intended to connote any fiduciary or other implied (or express)
obligations arising under agency doctrine of any applicable Law.  Instead, such term is used merely as a matter
of market custom, and is intended to create or reflect only an administrative
relationship between independent contracting parties.


 


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(b)  Each
L/C Issuer shall act on behalf of the Lenders with respect to any Letters of
Credit issued by it and the documents associated therewith, and each such L/C
Issuer shall have all of the benefits and immunities (i) provided to the
Agents in this Article IX with respect to any acts taken or omissions
suffered by such L/C Issuer in connection with Letters of Credit issued by it
or proposed to be issued by it and the applications and agreements for letters
of credit pertaining to such Letters of Credit as fully as if the term “Agent”
as used in this Article IX and in the definition of “Agent-Related Person”
included such L/C Issuer with respect to such acts or omissions, and (ii) as
additionally provided herein with respect to such L/C Issuer.


 


(c)  The
Administrative Agent shall also act as the “collateral agent” under the Loan
Documents, and each of the Lenders (in its capacities as a Lender, Swing Line
Lender (if applicable), L/C Issuer (if applicable) and a potential Hedge Bank)
hereby irrevocably appoints and authorizes the Administrative Agent to act as
the agent of (and to hold any security interest created by the Collateral
Documents for and on behalf of or on trust for) such Lender for purposes of
acquiring, holding and enforcing any and all Liens on Collateral granted by any
of the Loan Parties to secure any of the Secured Obligations, together with
such powers and discretion as are reasonably incidental thereto.  In this connection, the Administrative Agent,
as “collateral agent” (and any co-agents, sub-agents and attorneys-in-fact
appointed by the Administrative Agent pursuant to Section 9.02 for
purposes of holding or enforcing any Lien on the Collateral (or any portion
thereof) granted under the Collateral Documents, or for exercising any rights
and remedies thereunder at the direction of the Administrative Agent), shall be
entitled to the benefits of all provisions of this Article IX (including, Section 9.07,
as though such co-agents, sub-agents and attorneys-in-fact were the “collateral
agent” under the Loan Documents) as if set forth in full herein with respect
thereto.


 


Section 9.02.  Delegation
of Duties.  The Administrative Agent may execute any of
its duties under this Agreement or any other Loan Document (including for
purposes of holding or enforcing any Lien on the Collateral (or any portion
thereof) granted under the Collateral Documents or of exercising any rights and
remedies thereunder) by or through agents, employees or attorneys-in-fact
including for the purpose of any Borrowings or payments in Alternative
Currencies, such sub-agents as shall be deemed necessary by the Administrative
Agent and shall be entitled to advice of counsel and other consultants or
experts concerning all matters pertaining to such duties.  The Administrative Agent shall not be
responsible for the negligence or misconduct of any agent or sub-agent or
attorney-in-fact that it selects in the absence of gross negligence or willful
misconduct (as determined in the final non-appealable judgment of a court of
competent jurisdiction).


 


Section 9.03.  Liability
of Agents.  No Agent-Related Person shall (a) be
liable for any action taken or omitted to be taken by any of them under or in
connection with this Agreement or any other Loan Document or the transactions
contemplated hereby (except for its own gross negligence or willful misconduct,
as determined by the final judgment of a court of competent jurisdiction, in
connection with its duties expressly set forth herein), or (b) be
responsible in any manner to any Lender or participant for any recital,
statement, representation or warranty made by any Loan Party or any officer
thereof, contained herein or in any other Loan Document, or in any certificate,
report, statement or other document referred to or provided for in, or received
by the Administrative Agent under or in connection with, this Agreement or any
other Loan Document, or the validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any other Loan Document, or
the perfection or priority of any Lien or security interest created or
purported to be created under the Collateral Documents, or for any failure of
any Loan Party or any other party to any Loan Document to perform its
obligations hereunder or thereunder.  No
Agent-Related Person shall be under any obligation to any Lender or participant


 


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to
ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Agreement or any other Loan
Document, or to inspect the properties, books or records of any Loan Party or
any Affiliate thereof.


 


Section 9.04.  Reliance
by Agents.  (a)  Each Agent shall be entitled
to rely, and shall be fully protected in relying, upon any writing,
communication, signature, resolution, representation, notice, consent,
certificate, affidavit, letter, telegram, facsimile, telex or telephone
message, electronic mail message, statement or other document or conversation
believed by it to be genuine and correct and to have been signed, sent or made
by the proper Person or Persons, and upon advice and statements of legal
counsel (including counsel to any Loan Party), independent accountants and
other experts selected by such Agent. 
Each Agent shall be fully justified in failing or refusing to take any
action under any Loan Document unless it shall first receive such advice or
concurrence of the Required Lenders as it deems appropriate and, if it so
requests, it shall first be indemnified to its satisfaction by the Lenders
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action.  Each Agent shall in all cases be fully
protected in acting, or in refraining from acting, under this Agreement or any
other Loan Document in accordance with a request or consent of the Required
Lenders (or such greater number of Lenders as may be expressly required hereby
in any instance) and such request and any action taken or failure to act
pursuant thereto shall be binding upon all the Lenders.


 


(b)  For
purposes of determining compliance with the conditions specified in Section 4.01,
each Lender that has signed this Agreement shall be deemed to have consented
to, approved or accepted or to be satisfied with, each document or other matter
required thereunder to be consented to or approved by or acceptable or
satisfactory to a Lender unless the Administrative Agent shall have received
notice from such Lender prior to the proposed Closing Date specifying its
objection thereto.


 


Section 9.05.  Notice
of Default.  The Administrative Agent shall not be deemed
to have knowledge or notice of the occurrence of any Default, except with
respect to defaults in the payment of principal, interest and fees required to
be paid to the Administrative Agent for the account of the Lenders, unless the
Administrative Agent shall have received written notice from a Lender or the
Company referring to this Agreement, describing such Default and stating that
such notice is a “notice of default.” 
The Administrative Agent will notify the Lenders of its receipt of any
such notice.  The Administrative Agent
shall take such action with respect to any Event of Default as may be directed
by the Required Lenders in accordance with Article VIII; provided that
unless and until the Administrative Agent has received any such direction, the
Administrative Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Event of Default as it
shall deem advisable or in the best interest of the Lenders.


 


Section 9.06.  Credit
Decision; Disclosure of Information by Agents.  Each Lender acknowledges that
no Agent-Related Person has made any representation or warranty to it, and that
no act by any Agent hereafter taken, including any consent to and acceptance of
any assignment or review of the affairs of any Loan Party or any Affiliate
thereof, shall be deemed to constitute any representation or warranty by any
Agent-Related Person to any Lender as to any matter, including whether
Agent-Related Persons have disclosed material information in their possession.  Each Lender represents to each Agent that it
has, independently and without reliance upon any Agent-Related Person and based
on such documents and information as it has deemed appropriate, made its own
appraisal of and investigation into the business, prospects, operations,
property, financial and other condition and creditworthiness of the Loan
Parties and their


 


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respective
Subsidiaries, and all applicable bank or other regulatory Laws relating to the
transactions contemplated hereby, and made its own decision to enter into this
Agreement and to extend credit to the Company and the other Loan Parties
hereunder.  Each Lender also represents
that it will, independently and without reliance upon any Agent-Related Person
and based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit analysis, appraisals and decisions in
taking or not taking action under this Agreement and the other Loan Documents,
and to make such investigations as it deems necessary to inform itself as to
the business, prospects, operations, property, financial and other condition
and creditworthiness of the Company and the other Loan Parties.  Except for notices, reports and other
documents expressly required to be furnished to the Lenders by any Agent
herein, such Agent shall not have any duty or responsibility to provide any
Lender with any credit or other information concerning the business, prospects,
operations, property, financial and other condition or creditworthiness of any
of the Loan Parties or any of their respective Affiliates which may come into
the possession of any Agent-Related Person.


 


Section 9.07.  Indemnification
of Agents.  Whether or not the transactions contemplated
hereby are consummated, the Lenders shall indemnify upon demand each
Agent-Related Person (to the extent not reimbursed by or on behalf of any Loan
Party and without limiting the obligation of any Loan Party to do so), pro
rata, and hold harmless each Agent-Related Person from and against any and all
Indemnified Liabilities incurred by it; provided
that no Lender shall be liable for the payment to any Agent-Related
Person of any portion of such Indemnified Liabilities resulting from such
Agent-Related Person’s own gross negligence or willful misconduct, as
determined by the final non-appealable judgment of a court of competent
jurisdiction; provided that no action taken in accordance with the directions
of the Required Lenders (or such other number or percentage of the Lenders as
shall be required by the Loan Documents) shall be deemed to constitute gross
negligence or willful misconduct for purposes of this Section 9.07; and provided, further,
that to the extent the indemnification of the L/C Issuer is required hereunder,
such obligation shall be limited solely to the Revolving Credit Lenders.  In the case of any investigation, litigation
or proceeding giving rise to any Indemnified Liabilities, this Section 9.07
applies whether any such investigation, litigation or proceeding is brought by
any Lender or any other Person.  Without
limitation of the foregoing, each Lender shall reimburse the Administrative
Agent upon demand for its ratable share of any costs or out-of-pocket expenses
(including Attorney Costs) incurred by the Administrative Agent in connection
with the preparation, execution, delivery, administration, modification,
amendment or enforcement (whether through negotiations, legal proceedings or
otherwise) of, or legal advice in respect of rights or responsibilities under,
this Agreement, any other Loan Document, or any document contemplated by or
referred to herein, to the extent that the Administrative Agent is not
reimbursed for such expenses by or on behalf of the Company.  The undertaking in this Section 9.07
shall survive termination of the Aggregate Commitments, the payment of all
other Obligations and the resignation of the Administrative Agent.


 


Section 9.08.  Agents
in their Individual Capacities.  JPMorgan Chase Bank and its Affiliates may
make loans to, issue letters of credit for the account of, accept deposits
from, acquire Equity Interests in and generally engage in any kind of banking,
trust, financial advisory, underwriting or other business with each of the Loan
Parties and their respective Affiliates as though JPMorgan Chase Bank were not
the Administrative Agent or an L/C Issuer hereunder and without notice to or
consent of the Lenders.  The Lenders
acknowledge that, pursuant to such activities, JPMorganChase Bank or its Affiliates
may receive information regarding any Loan Party or its Affiliates (including
information that may be subject to confidentiality obligations in favor of such
Loan Party or such Affiliate) and acknowledge that the Administrative Agent
shall be under no obligation to provide such information to them.  With respect to its Loans,JPMorgan


 


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Chase
Bank shall have the same rights and powers under this Agreement as any other
Lender and may exercise such rights and powers as though it were not the
Administrative Agent or an L/C Issuer, and the terms “Lender” and “Lenders”
include JPMorgan Chase Bank in its individual capacity.


 


SECTION 9.09.  Successor Agents.  The
Administrative Agent may resign as the Administrative Agent upon thirty (30)
days’ notice to the Lenders and the Company. 
If the Administrative Agent resigns under this Agreement, the Required
Lenders shall appoint from among the Lenders a successor agent for the Lenders,
which successor agent shall be consented to by the Company at all times other
than during the existence of an Event of Default under Section 8.01(f) or
(g) (which consent of the Company shall not be unreasonably withheld or
delayed).  If no successor agent is
appointed prior to the effective date of the resignation of the Administrative
Agent, the Administrative Agent may appoint, after consulting with the Lenders
and the Company, a successor agent, which shall be a Lender or a bank with an
office in New York, New York or an Affiliate of such Lender or bank, and which
successor agent shall be consented to by the Company at all times other than
during the existence of an Event of Default under Section 8.01(f) or (g) (which
consent of the Company shall not be unreasonably withheld).  Upon the acceptance of its appointment as
successor agent hereunder, the Person acting as such successor agent shall
succeed to all the rights, powers and duties of the retiring Administrative
Agent and the term “Administrative Agent,” shall mean such successor
administrative agent and/or supplemental administrative agent, as the case may
be, and the retiring Administrative Agent’s appointment, powers and duties as
the Administrative Agent shall be terminated. 
After the retiring Administrative Agent’s resignation hereunder as the
Administrative Agent, the provisions of this Article IX and Sections 10.04
and 10.05 shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was the Administrative Agent under this Agreement.  If no successor agent has accepted
appointment as the Administrative Agent by the date which is thirty (30) days
following the retiring Administrative Agent’s notice of resignation, the
retiring Administrative Agent’s resignation shall nevertheless thereupon become
effective and the Lenders shall perform all of the duties of the Administrative
Agent hereunder until such time, if any, as the Required Lenders appoint a
successor agent as provided for above. 
Upon the acceptance of any appointment as the Administrative Agent
hereunder by a successor and upon the execution and filing or recording of such
financing statements, or amendments thereto, and such amendments or supplements
to the Mortgages, and such other instruments or notices, as may be necessary or
desirable, or as the Required Lenders may request, in order to (a) continue
the perfection of the Liens granted or purported to be granted by the
Collateral Documents or (b) otherwise ensure that the Collateral and
Guarantee Requirement is satisfied, the Administrative Agent shall thereupon
succeed to and become vested with all the rights, powers, discretion,
privileges, and duties of the retiring Administrative Agent, and the retiring
Administrative Agent shall be discharged from its duties and obligations under
the Loan Documents.  After the retiring
Administrative Agent’s resignation hereunder as the Administrative Agent, the
provisions of this Article IX shall continue in effect for its benefit in
respect of any actions taken or omitted to be taken by it while it was acting
as the Administrative Agent.


 


Section 9.10.  Administrative
Agent May File Proofs of Claim.  In case of the pendency of any
receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement,
adjustment, composition or other judicial proceeding relative to any Loan
Party, the Administrative Agent (irrespective of whether the principal of any
Loan or L/C Obligation shall then be due and payable as herein expressed or by
declaration or otherwise and irrespective of whether the Administrative Agent
shall have made any demand on any Borrower) shall be entitled and empowered, by
intervention in such proceeding or otherwise:


 


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(a)  to
file and prove a claim for the whole amount of the principal and interest owing
and unpaid in respect of the Loans, L/C Obligations and all other Obligations
that are owing and unpaid and to file such other documents as may be necessary
or advisable in order to have the claims of the Lenders and the Administrative
Agent (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Lenders and the Administrative Agent and
their respective agents and counsel and all other amounts due the Lenders and
the Administrative Agent under Sections 2.03(h) and (i), 2.09 and 10.04)
allowed in such judicial proceeding; and


 


(b)  to
collect and receive any monies or other property payable or deliverable on any
such claims and to distribute the same;


 


and
any custodian, receiver, assignee, trustee, liquidator, sequestrator or other
similar official in any such judicial proceeding is hereby authorized by each
Lender to make such payments to the Administrative Agent and, in the event that
the Administrative Agent shall consent to the making of such payments directly
to the Lenders, to pay to the Administrative Agent any amount due for the
reasonable compensation, expenses, disbursements and advances of the Agents and
their respective agents and counsel, and any other amounts due the Administrative
Agent under Sections 2.09 and 10.04.


 


Nothing
contained herein shall be deemed to authorize the Administrative Agent to
authorize or consent to or accept or adopt on behalf of any Lender any plan of
reorganization, arrangement, adjustment or composition affecting the
Obligations or the rights of any Lender or to authorize the Administrative
Agent to vote in respect of the claim of any Lender in any such proceeding.


 


Section 9.11.  Collateral
and Guarantee Matters.  The Lenders irrevocably agree:


 


(a)  that
any Lien on any property granted to or held by the Administrative Agent under
any Loan Document shall be automatically released (i) upon termination of
the Aggregate Commitments and payment in full of all Obligations (other than (x) obligations
under Secured Hedge Agreements, (y) Cash Management Obligations and (z) contingent
reimbursement and indemnification obligations not yet accrued and payable) and
the expiration or termination of all Letters of Credit, (ii) at the time
the property subject to such Lien is transferred or to be transferred as part
of or in connection with any transfer permitted hereunder or under any other
Loan Document to any Person other than Holdings, the Company or any of its
Domestic Subsidiaries that are Restricted Subsidiaries, (iii) subject to Section 10.01,
if the release of such Lien is approved, authorized or ratified in writing by
the Required Lenders (or such greater number of Lenders as may be required
pursuant to Section 10.01), (iv) if the property subject to such Lien
is owned by a Guarantor, upon release of such Guarantor from its obligations
under its Guarantee under the Guarantee and Security Agreement pursuant to
clause (c) below, or (v) at the time such property subject to such
Lien becomes a Specified Asset (as defined in the Guarantee and Security
Agreement) described in clause (b) of the definition thereof (taking into
account the proviso thereto);


 


(b)  (i) to
release or subordinate any Lien on any property granted to or held by the
Administrative Agent under any Loan Document to the holder of any Lien on such
property that is permitted by Section 7.01(i) and (ii) that the
Administrative Agent is authorized (but not required) to release or subordinate
any Lien on any property granted to or held by the Administrative Agent under
any Loan Document to the holder of any Lien on such property that is permitted
by any other clause of Section 7.01; and


 


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(c)  that
any Guarantor shall be automatically released from its obligations under the
Guarantee and Security Agreement if such Person ceases to be a Restricted
Subsidiary as a result of a transaction or designation permitted hereunder; provided that no such release shall occur
if such Guarantor continues to be a guarantor in respect of any Junior
Financing.


 


Upon
request by the Administrative Agent at any time, the Required Lenders (or such
greater number of Lenders as may be required pursuant to Section 10.01)
will confirm in writing the Administrative Agent’s authority to release or
subordinate its interest in particular types or items of property, or to
release any Guarantor from its obligations under the Guarantee and Security
Agreement pursuant to this Section 9.11. 
In each case as specified in this Section 9.11, the Administrative
Agent will (and each Lender irrevocably authorizes the Administrative Agent
to), at the Company’s expense, execute and deliver to the applicable Loan Party
such documents as such Loan Party may reasonably request to evidence the release
or subordination of such item of Collateral from the assignment and security
interest granted under the Collateral Documents, or to evidence the release of
such Guarantor from its obligations under the Guarantee and Security Agreement,
in each case in accordance with the terms of the Loan Documents and this Section 9.11.


 


Section 9.12.  Other
Agents; Arrangers and Managers.  None of the Lenders or other Persons
identified on the facing page or signature pages of this Agreement as
a “co-syndication agent,” “documentation agent”, “joint bookrunner” or “co-lead
arranger” shall have any right, power, obligation, liability, responsibility or
duty under this Agreement other than those applicable to all Lenders as
such.  Without limiting the foregoing,
none of the Lenders or other Persons so identified shall have or be deemed to
have any fiduciary relationship with any Lender.  Each Lender acknowledges that it has not
relied, and will not rely, on any of the Lenders or other Persons so identified
in deciding to enter into this Agreement or in taking or not taking action
hereunder.


 


Section 9.13.  Appointment
of Supplemental Administrative Agents.  (a)  It is the
purpose of this Agreement and the other Loan Documents that there shall be no
violation of any Law of any jurisdiction denying or restricting the right of
banking corporations or associations to transact business as agent or trustee
in such jurisdiction.  It is recognized
that in case of litigation under this Agreement or any of the other Loan
Documents, and in particular in case of the enforcement of any of the Loan
Documents, or in case the Administrative Agent deems that by reason of any
present or future Law of any jurisdiction it may not exercise any of the
rights, powers or remedies granted herein or in any of the other Loan Documents
or take any other action which may be desirable or necessary in connection
therewith, the Administrative Agent is hereby authorized to appoint an
additional individual or institution selected by the Administrative Agent in its
sole discretion as a separate trustee, co-trustee, administrative agent,
collateral agent, administrative sub-agent or administrative co-agent (any such
additional individual or institution being referred to herein individually as a
“Supplemental Administrative Agent”
and collectively as “Supplemental
Administrative Agents”).


 


(b)  In
the event that the Administrative Agent appoints a Supplemental Administrative
Agent with respect to any Collateral, (i) each and every right, power,
privilege or duty expressed or intended by this Agreement or any of the other
Loan Documents to be exercised by or vested in or conveyed to the
Administrative Agent with respect to such Collateral shall be exercisable by
and vest in such Supplemental Administrative Agent to the extent, and only to
the extent, necessary to enable such Supplemental Administrative Agent to
exercise such rights, powers and privileges with respect to such Collateral and
to perform such duties with respect to such Collateral, and every covenant and obligation
contained in the Loan Documents and necessary to


 


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the exercise or performance
thereof by such Supplemental Administrative Agent shall run to and be
enforceable by either the Administrative Agent or such Supplemental
Administrative Agent, and (ii) the provisions of this Article IX and
of Sections 10.04 and 10.05 that refer to the Administrative Agent shall inure
to the benefit of such Supplemental Administrative Agent and all references
therein to the Administrative Agent shall be deemed to be references to the
Administrative Agent and/or such Supplemental Administrative Agent, as the
context may require.


 


(c)  Should
any instrument in writing from the Company, Holdings or any other Loan Party be
required by any Supplemental Administrative Agent so appointed by the
Administrative Agent for more fully and certainly vesting in and confirming to
him or it such rights, powers, privileges and duties, the Company or Holdings,
as applicable, shall, or shall cause such Loan Party to, execute, acknowledge
and deliver any and all such instruments promptly upon request by the
Administrative Agent.  In case any
Supplemental Administrative Agent, or a successor thereto, shall die, become
incapable of acting, resign or be removed, all the rights, powers, privileges
and duties of such Supplemental Administrative Agent, to the extent permitted
by Law, shall vest in and be exercised by the Administrative Agent until the
appointment of a new Supplemental Administrative Agent.


 


ARTICLE X




MISCELLANEOUS


 


SECTION 10.01.  Amendments, Etc. 
Except as otherwise set forth in this Agreement or any other Loan
Document, no amendment or waiver of any provision of this Agreement or any
other Loan Document, and no consent to any departure by the Company or any
other Loan Party therefrom, shall be effective unless in writing signed by the
Required Lenders and the Company or the applicable Loan Party, as the case may
be, and each such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given; provided that, no such amendment, waiver
or consent shall:


 


(a)  extend
or increase the Commitment of any Lender without the written consent of each
Lender directly affected thereby (it being understood that a waiver of any
condition precedent set forth in Section 4.02 or the waiver of any
Default, mandatory prepayment or mandatory reduction of the Commitments shall
not constitute an extension or increase of any Commitment of any Lender);


 


(b)  postpone
any date scheduled for, or reduce or forgive the amount of, any payment of
principal or interest under Section 2.07 or 2.08 without the written
consent of each Lender directly affected thereby, it being understood that the
waiver of (or amendment to the terms of) any mandatory prepayment of the Term
Loans shall not constitute a postponement of any date scheduled for the payment
of principal or interest;


 


(c)  reduce
or forgive the principal of, or the rate of interest specified herein on, any
Loan or L/C Borrowing or (subject to clause (iii) of the second proviso to
this Section 10.01) any fees (including fees set forth in Section 2.09
or other amounts payable hereunder or under any other Loan Document), or
extend, postpone or waive the date upon which any fees are to be paid, without
the written consent of each Lender directly affected thereby, it being
understood that any change to the definition of Total Leverage Ratio or in the
component definitions thereof shall not constitute a reduction in the rate; provided that, only the consent of the
Required Lenders shall be


 


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necessary to amend the
definition of “Default Rate” or to waive any obligation of the Borrowers to pay
interest at the Default Rate;


 


(d)  change
any provision of this Section 10.01, the definition of “Required Lenders”
or “Pro Rata Share”, Section 2.06(c), the third sentence of Section 2.12(a),
Section 2.13, Section 8.04 or Section 10.07(a)(x) without
the written consent of each Lender affected thereby;


 


(e)  other
than in a transaction permitted under Section 7.05, release all or
substantially all of the Collateral in any transaction or series of related
transactions, without the written consent of each Lender; or


 


(f)  other
than in connection with a transaction permitted under Section 7.04 or
7.05, release all or substantially all of the aggregate value of the
Guarantees, without the written consent of each Lender;


 


and
provided further that (i) no
amendment, waiver or consent shall, unless in writing and signed by each L/C
Issuer in addition to the Lenders required above, affect the rights or duties
of an L/C Issuer under this Agreement or any Letter of Credit Application
relating to any Letter of Credit issued or to be issued by it; (ii) no
amendment, waiver or consent shall, unless in writing and signed by the Swing
Line Lender in addition to the Lenders required above, affect the rights or
duties of the Swing Line Lender under this Agreement; (iii) no amendment,
waiver or consent shall, unless in writing and signed by the Administrative
Agent in addition to the Lenders required above, affect the rights or duties
of, or any fees or other amounts payable to, the Administrative Agent under
this Agreement or any other Loan Document; (iv) Section 10.07(h) may
not be amended, waived or otherwise modified without the consent of each
Granting Lender all or any part of whose Loans are being funded by an SPC at
the time of such amendment, waiver or other modification; and (v) the
consent of Lenders holding more than 50% of any Class of Commitments shall
be required with respect to any amendment that by its terms adversely affects
the rights of such Class in respect of payments hereunder in a manner
different than such amendment affects other Classes.  Notwithstanding anything to the contrary
herein, no Defaulting Lender shall have any right to approve or disapprove any
amendment, waiver or consent hereunder, except that the Commitment of such
Lender may not be increased or extended without the consent of such Lender (it
being understood that any Commitments or Loans held or deemed held by any
Defaulting Lender shall be excluded for a vote of the Lenders hereunder
requiring any consent of the Lenders).


 


Notwithstanding
the foregoing, this Agreement may be amended (or amended and restated) with the
written consent of the Required Lenders, the Administrative Agent and the
Company (a) to add one or more additional credit facilities to this
Agreement and to permit the extensions of credit from time to time outstanding
thereunder and the accrued interest and fees in respect thereof to share
ratably in the benefits of this Agreement and the other Loan Documents with the
U.S. Term Loans, the Euro Term Loans and the Revolving Credit Loans and the
accrued interest and fees in respect thereof and (b) to include
appropriately the Lenders holding such credit facilities in any determination
of the Required Lenders.


 


In
addition, notwithstanding the foregoing, this Agreement may be amended with the
written consent of the Administrative Agent, the Company and the Lenders (and,
in the case of any amendment with respect to Euro Replacement Term Loans (as
defined below), the German Borrower) providing the relevant U.S. Replacement
Term Loans or Euro Replacement Term Loans (as defined below) to permit the
refinancing of all outstanding U.S. Term Loans (“U.S. Refinanced Term Loans”) or Euro Term Loans (the “Euro Refinanced Term Loans”) with a


 


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replacement
U.S. term loan tranche denominated in Dollars (“U.S. Replacement Term Loans”) or Euro term loan tranche
denominated in Euros (“Euro Replacement Term
Loans”), respectively, hereunder; provided
that (a) the aggregate principal amount of such U.S. Replacement Term
Loans or Euro Replacement Term Loans shall not exceed the aggregate principal
amount of such U.S. Refinanced Term Loans or Euro Refinanced Term Loans,
respectively, (b) the Applicable Rate for such U.S. Replacement Term Loans
or Euro Replacement Term Loans shall not be higher than the Applicable Rate for
such U.S. Refinanced Term Loans or Euro Refinanced Term Loans, respectively, (c) the
Weighted Average Life to Maturity of such U.S. Replacement Term Loans or Euro
Replacement Term Loans shall not be shorter than the Weighted Average Life to
Maturity of such U.S. Refinanced Term Loans or Euro Refinanced Term Loans,
respectively, at the time of such refinancing (except to the extent of nominal
amortization for periods where amortization has been eliminated as a result of
prepayment of the applicable Term Loans) and (d) all other terms
applicable to such U.S. Replacement Term Loans or Euro Replacement Term Loans
shall be substantially identical to, or less favorable to the Lenders providing
such U.S. Replacement Term Loans or Euro Replacement Term Loans than, those
applicable to such U.S. Refinanced Term Loans or Euro Refinanced Term Loans,
respectively, except to the extent necessary to provide for covenants and other
terms applicable to any period after the latest final maturity of the Term
Loans in effect immediately prior to such refinancing.


 


Notwithstanding
anything to the contrary contained in Section 10.01, guarantees,
collateral security documents and related documents executed by Foreign
Subsidiaries in connection with this Agreement may be in a form reasonably
determined by the Administrative Agent and may be, together with this
Agreement, amended and waived with the consent of the Administrative Agent at
the request of the Company without the need to obtain the consent of any other
Lender if such amendment or waiver is delivered in order (i) to comply
with local Law or advice of local counsel, (ii) to cure ambiguities or
defects or (iii) to cause such guarantee, collateral security document or
other document to be consistent with this Agreement and the other Loan
Documents.


 


Section 10.02.  Notices
and Other Communications; Facsimile Copies.  (a)  General. 
Unless otherwise expressly provided herein, all notices and other
communications provided for hereunder or under any other Loan Document shall be
in writing (including by facsimile transmission).  All such written notices shall be mailed,
faxed or delivered to the applicable address, facsimile number or electronic
mail address, and all notices and other communications expressly permitted
hereunder to be given by telephone shall be made to the applicable telephone
number, as follows:


 


(i)  if
to any Borrower, the Administrative Agent, an L/C Issuer or the Swing Line
Lender, to the address, facsimile number, electronic mail address or telephone
number specified for such Person on Schedule 10.02 or to such other address,
facsimile number, electronic mail address or telephone number as shall be
designated by such party in a notice to the other parties; and


 


(ii)  if
to any other Lender, to the address, facsimile number, electronic mail address
or telephone number specified in its Administrative Questionnaire or to such
other address, facsimile number, electronic mail address or telephone number as
shall be designated by such party in a notice to the Company, the
Administrative Agent, the L/C Issuers and the Swing Line Lender.


 


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All
such notices and other communications shall be deemed to be given or made, if
given or made during the recipient’s normal business hours (and if not, shall
be deemed to be given or made on the next succeeding Business Day), upon the
earlier to occur of (i) actual receipt by the relevant party hereto and (ii) (A) if
delivered by hand or by courier, when signed for by or on behalf of the
relevant party hereto; (B) if delivered by mail, four (4) Business
Days after deposit in the mails, postage prepaid; (C) if delivered by
facsimile, when sent and receipt has been confirmed by telephone; and (D) if
delivered by electronic mail (which form of delivery is subject to the
provisions of Section 10.02(d)), when delivered; provided that notices and other
communications to the Administrative Agent, the L/C Issuers and the Swing Line
Lender pursuant to Article II shall not be effective until actually
received by such Person.  In no event
shall a voice mail message be effective as a notice, communication or
confirmation hereunder.


 


(b)  Effectiveness of Facsimile Documents and Signatures.  Loan Documents may be transmitted and/or
signed by facsimile or “PDF” (subject to Section 10.02(d).  The effectiveness of any such documents and
signatures shall, subject to applicable Law, have the same force and effect as
manually signed originals and shall be binding on all Loan Parties, the Agents
and the Lenders.


 


(c)  Reliance by Agents and Lenders.  The Administrative Agent and the Lenders
shall be entitled to rely and act upon any notices (including telephonic
Committed Loan Notices and Swing Line Loan Notices) purportedly given by or on
behalf of any Borrower even if (i) such notices were not made in a manner
specified herein, were incomplete or were not preceded or followed by any other
form of notice specified herein, or (ii) the terms thereof, as understood
by the recipient, varied from any confirmation thereof.  The Borrowers shall indemnify each
Agent-Related Person and each Lender from all losses, liabilities and related
reasonable out-of-pocket costs and expenses resulting from the reliance by such
Person on each notice purportedly given by or on behalf of the Borrowers in the
absence of gross negligence or willful misconduct.  All telephonic notices to the Administrative
Agent may be recorded by the Administrative Agent, and each of the parties
hereto hereby consents to such recording.


 


(d)  Electronic Communications.  Notices and other communications to the
Lenders hereunder may be delivered or furnished by electronic communication
(including e-mail and Internet or intranet websites) pursuant to procedures
approved by the Administrative Agent, provided
that the foregoing shall not apply to notices to any Lender pursuant to
Articles II and III, if such Lender has notified the Administrative Agent that
it is incapable of receiving notices thereunder by electronic
communication.  The Administrative Agent
or the Company may, in their discretion, agree to accept notices and other
communications to them hereunder by electronic communications pursuant to
procedures approved by it, provided
that approval of such procedures may be limited to particular notices or
communications.  Unless the
Administrative Agent otherwise prescribes, (i) notices and other
communications sent to an e-mail address shall be deemed received upon the
sender’s receipt of an acknowledgment from the intended recipient (such as by
the “return receipt requested” function, as available, return e-mail or other
written acknowledgment), provided
that if such notice or other communication is not sent during the normal business
hours of the recipient, such notice or communication shall be deemed to have
been sent at the opening of business on the next Business Day for the
recipient, and (ii) notices or communications posted to an Internet or
intranet website shall be deemed received upon the deemed receipt by the
intended recipient at its e-mail address as described in the foregoing
clause (i) of notification that such notice or communication is
available and identifying the website address therefor.


 


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(e)  Designation by Overseas Borrowers.  Each Overseas Borrower hereby designates the
Company as its representative and agent on its behalf for the purposes of
giving and receiving all notices (other than Committed Loan Notices) and any
other documentation required to be delivered to it pursuant to this Agreement
and any other Loan Document by the Administrative Agent or any Lender.  The Company hereby accepts such appointment.  The Agents and the Lenders may regard any
notice (other than Committed Loan Notices) or other communication pursuant to
any Loan Document from the Company as a notice or communication from all
Borrowers, and may give any notice or communication required or permitted to be
given to any Overseas Borrower or Overseas Borrowers hereunder to the Company
on behalf of such Overseas Borrower or Overseas Borrowers.  Each Overseas Borrower agrees that each
notice, election, representation and warranty, covenant, agreement and undertaking
made on its behalf by the Company shall be deemed for all purposes to have been
made by such Overseas Borrower and shall be binding upon and enforceable
against such Overseas Borrower to the same extent as if the same had been made
directly by such Overseas Borrower.


 


Section 10.03.  No
Waiver; Cumulative Remedies.  No failure by any Lender or the
Administrative Agent to exercise, and no delay by any such Person in
exercising, any right, remedy, power or privilege hereunder or under any other
Loan Document shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, remedy, power or privilege hereunder preclude
any other or further exercise thereof or the exercise of any other right,
remedy, power or privilege.  The rights,
remedies, powers and privileges herein provided, and provided under each other
Loan Document, are cumulative and not exclusive of any rights, remedies, powers
and privileges provided by Law.


 


Section 10.04.  Attorney
Costs, Expenses and Taxes.  The Company agrees (a) if the Closing
Date occurs, to pay or reimburse the Administrative Agent, the Syndication
Agent, the Co-Documentation Agents and the Arrangers for all reasonable
out-of-pocket costs and expenses incurred in connection with the preparation,
negotiation, syndication and execution of this Agreement and the other Loan
Documents, and any amendment, waiver, consent or other modification of the
provisions hereof and thereof (whether or not the transactions contemplated
thereby are consummated), and the consummation and administration of the
transactions contemplated hereby and thereby, including all Attorney Costs of
Simpson Thacher & Bartlett LLP and, if necessary, one local counsel in
each applicable jurisdiction, and (b) to pay or reimburse the
Administrative Agent, the Syndication Agent, the Co-Documentation Agents, the
Arrangers and each Lender for all reasonable out-of-pocket costs and expenses
incurred in connection with the enforcement of any rights or remedies under
this Agreement or the other Loan Documents (including all such costs and
expenses incurred during any legal proceeding, including any proceeding under
any Debtor Relief Law, and including all Attorney Costs of one counsel to the
Administrative Agent and the Lenders and, if necessary, one local counsel in
each applicable jurisdiction).  The
foregoing costs and expenses shall include all reasonable search, filing,
recording and title insurance charges and fees and taxes related thereto, and
other reasonable out-of-pocket expenses incurred by any Agent.  The agreements in this Section 10.04
shall survive the termination of the Aggregate Commitments and repayment of all
other Obligations.  All amounts due under
this Section 10.04 shall be paid within ten (10) Business Days of
receipt by the Company of an invoice relating thereto setting forth such
expenses in reasonable detail.  If any
Loan Party fails to pay when due any costs, expenses or other amounts payable
by it hereunder or under any Loan Document, such amount may be paid on behalf
of such Loan Party by the Administrative Agent in its sole discretion.


 


Section 10.05.  Indemnification
by the Company.  Whether or not the transactions contemplated
hereby are consummated, the Company shall indemnify and hold harmless each


 


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Agent-Related
Person, each Lender and their respective Affiliates, directors, officers,
employees, counsel, agents, trustees, investment advisors and attorneys-in-fact
(collectively the “Indemnitees”)
from and against any and all liabilities, obligations, losses, damages,
penalties, claims, demands, actions, judgments and suits and related reasonable
out-of-pocket expenses (including Attorney Costs) of any kind or nature
whatsoever which may at any time be imposed on, incurred by or asserted against
any such Indemnitee in any way relating to or arising out of or in connection
with (a) the execution, delivery, enforcement, performance or
administration of any Loan Document or any other agreement, letter or
instrument delivered in connection with the transactions contemplated thereby
or the consummation of the transactions contemplated thereby, (b) any
Commitment, Loan or Letter of Credit or the use or proposed use of the proceeds
therefrom (including any refusal by an L/C Issuer to honor a demand for payment
under a Letter of Credit if the documents presented in connection with such
demand do not strictly comply with the terms of such Letter of Credit), or (c) to
the extent relating to or arising from any of the foregoing, any actual or
alleged presence or release of Hazardous Materials on or from any property
currently or formerly owned or operated by the Company, any Subsidiary or any
other Loan Party, or any Environmental Liability related in any way to the
Company, any Subsidiary or any other Loan Party, or (d) any actual or
prospective claim, litigation, investigation or proceeding relating to any of
the foregoing, whether based on contract, tort or any other theory (including
any investigation of, preparation for, or defense of any pending or threatened claim,
investigation, litigation or proceeding) and regardless of whether any
Indemnitee is a party thereto (all the foregoing, collectively, the “Indemnified Liabilities”), in all cases,
whether or not caused by or arising, in whole or in part, out of the negligence
of the Indemnitee; provided that such indemnity shall not, as to any
Indemnitee, be available to the extent that such liabilities, obligations,
losses, damages, penalties, claims, demands, actions, judgments, suits or
expenses are found in a final non-appealable judgment of a court of competent
jurisdiction to have resulted from the gross negligence or willful misconduct
of such Indemnitee, any Affiliate of such Indemnitee or any officer, director,
employee, advisor, representative or agent of such Indemnitee or any such
Affiliate.  No Indemnitee shall be liable
to any Group Member for any damages arising from the use by others of any
information or other materials obtained through IntraLinks or other similar
information transmission systems in connection with this Agreement.  No Indemnitee shall be liable (whether direct
or indirect, in contract, tort or otherwise) to any Group Member (other than
the Lenders’ contractual liability for breach under this Agreement) except to
the extent such liability is found in a non-appealable judgment of a court of
competent jurisdiction to have resulted from the gross negligence or willful
misconduct of such Indemnitee, any Affiliate of such Indemnitee or any officer,
director, employee, advisor, representative or agent of such Indemnitee or any
such Affiliate.  No Indemnitee shall have
any liability to any Group Member, nor any Group Member to any Indemnitee, for
any special, punitive, indirect or consequential damages (including, without
limitation, loss of profits, business or anticipated savings) relating to this
Agreement or any other Loan Document or arising out of its activities in
connection herewith or therewith (whether before or after the Closing
Date).  All amounts due under this Section 10.05
shall be paid within ten (10) Business Days after demand therefor;
provided, however, that such Indemnitee shall promptly refund any amount
received under this Section 10.05 to the extent that there is a final
judicial or arbitral determination that such Indemnitee was not entitled to
indemnification or contribution rights with respect to such payment pursuant to
the express terms of this Section 10.05. 
The agreements in this Section 10.05 shall survive the resignation
of the Administrative Agent, the replacement of any Lender, the termination of
the Aggregate Commitments and the repayment, satisfaction or discharge of all
the other Obligations.


 


Section 10.06.  Payments
Set Aside.  To the extent that any payment by or on
behalf of the Company is made to any Agent or any Lender, or any Agent or any
Lender exercises its


 


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right
of setoff, and such payment or the proceeds of such setoff or any part thereof
is subsequently invalidated, declared to be fraudulent or preferential, set
aside or required (including pursuant to any settlement entered into by such
Agent or such Lender in its discretion) to be repaid to a trustee, receiver or
any other party, in connection with any proceeding under any Debtor Relief Law
or otherwise, then (a) to the extent of such recovery, the obligation or
part thereof originally intended to be satisfied shall be revived and continued
in full force and effect as if such payment had not been made or such setoff
had not occurred, and (b) each Lender severally agrees to pay to the
Administrative Agent upon demand its applicable share of any amount so
recovered from or repaid by any Agent, plus interest thereon from the date of
such demand to the date such payment is made at a rate per annum equal to the
applicable Overnight Rate from time to time in effect.


 


Section 10.07.  Successors
and Assigns.  (a)  The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns permitted hereby, except that (x) neither
Holdings nor any Borrower may assign or otherwise transfer any of its rights or
obligations hereunder without the prior written consent of each Lender and (y) no
Lender may assign or otherwise transfer any of its rights or obligations
hereunder except (i) to an Eligible Assignee, (ii) by way of
participation in accordance with the provisions of Section 10.07(e), (iii) by
way of pledge or assignment of a security interest subject to the restrictions
of Sections 10.07(g) or 10.07(i) or (iv) to an SPC in
accordance with the provisions of Section 10.07(h) (and any other
attempted assignment or transfer by any party hereto shall be null and
void).  Nothing in this Agreement,
expressed or implied, shall be construed to confer upon any Person (other than
the parties hereto, their respective successors and assigns permitted hereby,
Participants to the extent provided in Section 10.07(e) and, to the
extent expressly contemplated hereby, the Indemnitees) any legal or equitable right,
remedy or claim under or by reason of this Agreement.


 


(b)  (i)  Subject
to the conditions set forth in paragraph (b)(ii) below, any Lender may
assign to one or more assignees (“Assignees”)
all or a portion of its rights and obligations under this Agreement (including
all or a portion of its Commitment and the Loans (including for purposes of
this Section 10.07(b), participations in L/C Obligations and in Swing Line
Loans) at the time owing to it) with the prior written consent (such consent
not to be unreasonably withheld or delayed) of:


 


(A)  the
Company, provided that no consent
of the Company shall be required for an assignment to a Lender, an Affiliate of
a Lender, an Approved Fund or, if an Event of Default under Section 8.01(a),
(f) or (g) has occurred and is continuing, any Assignee;


 


(B)  the
Administrative Agent, provided
that no consent of the Administrative Agent shall be required for an assignment
of all or any portion of a Term Loan to a Lender, an Affiliate of a Lender or
an Approved Fund;


 


(C)  each
L/C Issuer at the time of such assignment, provided
that no consent of the L/C Issuers shall be required for any assignment of a
Term Loan; and


 


(D)  the
Swing Line Lender; provided that
no consent of the Swing Line Lender shall be required for any assignment of a
Term Loan.


 


(ii)  Assignments
shall be subject to the following additional conditions:


 


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(A)  except
in the case of an assignment to a Lender, an Affiliate of a Lender or an
Approved Fund or an assignment of the entire remaining amount of the assigning
Lender’s Commitment or Loans of any Class, the amount of the Commitment or
Loans of the assigning Lender subject to each such assignment (determined as of
the date the Assignment and Assumption with respect to such assignment is
delivered to the Administrative Agent) shall not be less than $5,000,000 (in
the case of each Revolving Credit Facility), or $1,000,000 (in the case of a
Term Loan) and in increments of $1,000,000 in excess thereof unless each of the
Company and the Administrative Agent otherwise consents, provided that such amounts shall be
aggregated in respect of each Lender and its Affiliates or Approved Funds, if
any;


 


(B)  the
parties to each assignment shall execute and deliver to the Administrative
Agent an Assignment and Assumption, together with a processing and recordation
fee of $3,500; and


 


(C)  the
Assignee, if it shall not be a Lender, shall deliver to the Administrative
Agent (1) an Administrative Questionnaire in which the assignee designates
one or more Credit Contacts (as defined in the Administrative Questionnaire) to
whom all syndicate-level information (which may contain material non-public
information about Holdings, the Borrowers, the other Loan Parties and their
Affiliates and related parties or their respective securities) will be made
available and who may receive such information in accordance with the
Assignee’s compliance procedures and applicable laws, including Federal and
state securities laws.


 


This
paragraph (b) shall not prohibit any Lender from assigning all or a
portion of its rights and obligations among separate Facilities on a non-pro
rata basis.


 


(c)  Subject
to acceptance and recording thereof by the Administrative Agent pursuant to Section 10.07(d),
from and after the effective date specified in each Assignment and Assumption,
the Eligible Assignee thereunder shall be a party to this Agreement and, to the
extent of the interest assigned by such Assignment and Assumption, have the
rights and obligations of a Lender under this Agreement, and the assigning
Lender thereunder shall, to the extent of the interest assigned by such
Assignment and Assumption, be released from its obligations under this
Agreement (and, in the case of an Assignment and Assumption covering all of the
assigning Lender’s rights and obligations under this Agreement, such Lender
shall cease to be a party hereto but shall continue to be entitled to the
benefits of Sections 3.01, 3.04, 3.05, 10.04 and 10.05 with respect to facts
and circumstances occurring prior to the effective date of such
assignment).  Upon request, and the
surrender by the assigning Lender of its Note, the relevant Borrower (at its
expense) shall execute and deliver a Note to the assignee Lender.  Any assignment or transfer by a Lender of
rights or obligations under this Agreement that does not comply with this
clause (c) shall be treated for purposes of this Agreement as a sale by
such Lender of a participation in such rights and obligations in accordance with
Section 10.07(e).


 


(d)  The
Administrative Agent, acting solely for this purpose as an agent of the
Borrowers, shall maintain at the Administrative Agent’s Office a copy of each
Assignment and Assumption delivered to it and a register for the recordation of
the names and addresses of the Lenders, and the Commitments of, and principal
amounts (and related interest amounts) of the Loans, L/C Obligations
(specifying the Unreimbursed Amounts), L/C Borrowings and amounts due under Section 2.03,
owing to, each Lender pursuant to the terms hereof from time to time (the “Register”). 
The entries in the Register shall be conclusive, absent manifest error,
and the Borrowers, the Agents and the Lenders shall treat each Person whose
name is recorded in the


 


138

















 


Register pursuant to the
terms hereof as a Lender hereunder for all purposes of this Agreement,
notwithstanding notice to the contrary. 
The Register shall be available for inspection by the Company, any Agent
and any Lender, at any reasonable time and from time to time upon reasonable
prior notice.


 


(e)  Any
Lender may at any time, without the consent of, or notice to, the Borrowers or
the Administrative Agent, sell participations to any Person (other than a natural
person) (each, a “Participant”) in
all or a portion of such Lender’s rights and/or obligations under this
Agreement (including all or a portion of its Commitment and/or the Loans
(including such Lender’s participations in L/C Obligations and/or Swing Line
Loans) owing to it); provided
that (i) such Lender’s obligations under this Agreement shall remain
unchanged, (ii) such Lender shall remain solely responsible to the other
parties hereto for the performance of such obligations and (iii) the
Borrowers, the Agents and the other Lenders shall continue to deal solely and
directly with such Lender in connection with such Lender’s rights and
obligations under this Agreement.  Any
agreement or instrument pursuant to which a Lender sells such a participation
shall provide that such Lender shall retain the sole right to enforce this
Agreement and the other Loan Documents and to approve any amendment,
modification or waiver of any provision of this Agreement or the other Loan
Documents; provided that such
agreement or instrument may provide that such Lender will not, without the
consent of the Participant, agree to any amendment, waiver or other
modification described in the first proviso to Section 10.01 that directly
affects such Participant.  Subject to Section 10.07(f),
the Borrowers agree that each Participant shall be entitled to the benefits of
Sections 3.01, 3.04 and 3.05 to the same extent as if it were a Lender and had
acquired its interest by assignment pursuant to Section 10.07(c) but
shall not be entitled to recover greater amounts under such Sections than the
selling Lender would be entitled to recover. 
To the extent permitted by applicable Law, each Participant also shall
be entitled to the benefits of Section 10.09 as though it were a Lender; provided that such Participant agrees to
be subject to Section 2.13 as though it were a Lender.


 


(f)  A
Participant shall not be entitled to receive any greater payment under Section 3.01,
3.04 or 3.05 than the applicable Lender would have been entitled to receive
with respect to the participation sold to such Participant, unless the sale of
the participation to such Participant is made with the relevant Borrower’s
prior written consent.  A Participant
shall not be entitled to the benefits of Section 3.01 unless the relevant
Borrower is notified of the participation sold to such Participant and such
Participant agrees, for the benefit of the relevant Borrower, to comply with Section 10.15
as though it were a Lender.


 


(g)  Any
Lender may at any time, without the consent of the Company or the
Administrative Agent, pledge or assign a security interest in all or any
portion of its rights under this Agreement (including under its Note, if any)
to secure obligations of such Lender, including any pledge or assignment to secure
obligations to a Federal Reserve Bank; provided
that no such pledge or assignment shall release such Lender from any of its
obligations hereunder or substitute any such pledgee or assignee for such
Lender as a party hereto.


 


(h)  Notwithstanding
anything to the contrary contained herein, any Lender (a “Granting Lender”) may grant to a special
purpose funding vehicle identified as such in writing from time to time by the
Granting Lender to the Administrative Agent and the relevant Borrower (an “SPC”) the option to provide all or any part
of any Loan that such Granting Lender would otherwise be obligated to make
pursuant to this Agreement; provided
that (i) nothing herein shall constitute a commitment by any SPC to fund
any Loan, and (ii) if an SPC elects not to exercise such option or
otherwise fails to make all or any part of such Loan, the Granting Lender shall
be obligated to make such Loan pursuant to the terms hereof.  Each party hereto hereby agrees that


 


139

















 


(i) neither the grant
to any SPC nor the exercise by any SPC of such option shall increase the costs
or expenses or otherwise increase or change the obligations of the relevant
Borrower under this Agreement (including its obligations under Section 3.01,
3.04 or 3.05), (ii) no SPC shall be liable for any indemnity or similar
payment obligation under this Agreement for which a Lender would be liable, and
(iii) the Granting Lender shall for all purposes, including the approval
of any amendment, waiver or other modification of any provision of any Loan
Document, remain the lender of record hereunder.  The making of a Loan by an SPC hereunder
shall utilize the Commitment of the Granting Lender to the same extent, and as
if, such Loan were made by such Granting Lender.  Notwithstanding anything to the contrary
contained herein, any SPC may (i) with notice to, but without prior
consent of the relevant Borrower and the Administrative Agent and with the
payment of a processing fee of $3,500, assign all or any portion of its right
to receive payment with respect to any Loan to the Granting Lender and (ii) disclose
on a confidential basis any non-public information relating to its funding of
Loans to any rating agency, commercial paper dealer or provider of any surety
or Guarantee or credit or liquidity enhancement to such SPC.


 


(i)  Notwithstanding
anything to the contrary contained herein, (1) any Lender may in
accordance with applicable Law create a security interest in all or any portion
of the Loans owing to it and the Note, if any, held by it and (2) any
Lender that is a Fund may, without the consent of the Company or the
Administrative Agent, create a security interest in all or any portion of the
Loans owing to it and the Note, if any, held by it to the trustee for holders
of obligations owed, or securities issued, by such Fund as security for such
obligations or securities; provided
that unless and until such trustee actually becomes a Lender in compliance with
the other provisions of this Section 10.07, (i) no such pledge shall
release the pledging Lender from any of its obligations under the Loan
Documents and (ii) such trustee shall not be entitled to exercise any of
the rights of a Lender under the Loan Documents.


 


(j)  Notwithstanding
anything to the contrary contained herein, any L/C Issuer or the Swing Line
Lender may, upon thirty (30) days’ notice to the Company and the Lenders,
resign as an L/C Issuer or the Swing Line Lender, respectively; provided that on or prior to the
expiration of such 30-day period with respect to such resignation, the relevant
L/C Issuer or the Swing Line Lender shall have identified a successor L/C
Issuer or Swing Line Lender reasonably acceptable to the Company willing to
accept its appointment as successor L/C Issuer or Swing Line Lender, as
applicable.  In the event of any such
resignation of an L/C Issuer or the Swing Line Lender, the Company shall be
entitled to appoint from among the Lenders willing to accept such appointment a
successor L/C Issuer or Swing Line Lender hereunder; provided that no failure by the Company to appoint any such
successor shall affect the resignation of the relevant L/C Issuer or the Swing
Line Lender, as the case may be, except as expressly provided above.  If an L/C Issuer resigns as an L/C Issuer, it
shall retain all the rights and obligations of an L/C Issuer hereunder with
respect to all Letters of Credit outstanding as of the effective date of its
resignation as an L/C Issuer and all L/C Obligations with respect thereto
(including the right to require the Lenders to make Base Rate Loans or fund
risk participations in Unreimbursed Amounts pursuant to Section 2.03(c)).  If the Swing Line Lender resigns as Swing
Line Lender, it shall retain all the rights of the Swing Line Lender provided
for hereunder with respect to Swing Line Loans made by it and outstanding as of
the effective date of such resignation, including the right to require the
Lenders to make Base Rate Loans or fund risk participations in outstanding
Swing Line Loans pursuant to Section 2.04(c).


 


SECTION 10.08.  Confidentiality.  Each
of the Agents and the Lenders agrees to maintain the confidentiality of the
Information, except that Information may be disclosed (a) to its
Affiliates and its and its Affiliates’ directors, officers, employees,
trustees, investment advisors 


 


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and
agents, including accountants, legal counsel and other advisors (it being
understood that the Persons to whom such disclosure is made will be informed of
the confidential nature of such Information and instructed to keep such
Information confidential pursuant to the terms hereof); (b) to the extent
requested by any Governmental Authority; (c) to the extent  required by applicable Laws or regulations or
by any subpoena or similar legal process; (d) to any other party to this
Agreement; (e) subject to an agreement for the benefit of the Company
containing provisions substantially the same as those of this Section 10.08
(or as may otherwise be reasonably acceptable to the Company), to any pledgee
referred to in Section 10.07(g), counterparty to a Swap Contract, Eligible
Assignee of or Participant in, or any prospective Eligible Assignee of or
Participant in, any of its rights or obligations under this Agreement; (f) with
the written consent of the Company; (g) to the extent such Information
becomes publicly available other than as a result of a breach of this Section 10.08;
(h) to any Governmental Authority or examiner (including the National
Association of Insurance Commissioners or any other similar organization)
regulating any Lender; or (i) to any rating agency when required by it (it
being understood that, prior to any such disclosure, such rating agency shall
undertake to preserve the confidentiality of any Information relating to the
Loan Parties received by it from such Lender). 
In addition, the Agents and the Lenders may disclose the existence of
this Agreement and information about this Agreement to market data collectors,
similar service providers to the lending industry, and service providers to the
Agents and the Lenders in connection with the administration and management of
this Agreement, the other Loan Documents, the Commitments, and the Credit
Extensions.  For the purposes of this Section 10.08,
“Information” means all
information received from any Loan Party relating to any Loan Party or its
business, other than any such information that is publicly available to any
Agent or any Lender prior to disclosure by any Loan Party other than as a
result of a breach of this Section 10.08; provided that, in the case of
information received from a Loan Party after the date hereof, such information (i) is
clearly identified at the time of delivery as confidential or (ii) is
delivered pursuant to Section 6.01, 6.02 or 6.03 hereof.


 


EACH LENDER ACKNOWLEDGES THAT INFORMATION FURNISHED TO
IT PURSUANT TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS MAY INCLUDE
MATERIAL NON-PUBLIC INFORMATION CONCERNING HOLDINGS, THE BORROWERS, THE OTHER
LOAN PARTIES AND THEIR AFFILIATES AND RELATED PARTIES OR THEIR RESPECTIVE
SECURITIES, AND CONFIRMS THAT IT HAS DEVELOPED COMPLIANCE PROCEDURES REGARDING
THE USE OF MATERIAL NON-PUBLIC INFORMATION AND THAT IT WILL HANDLE SUCH
MATERIAL NON-PUBLIC INFORMATION IN ACCORDANCE WITH THOSE PROCEDURES AND
APPLICABLE LAW, INCLUDING FEDERAL AND STATE SECURITIES LAWS.


 


ALL INFORMATION, INCLUDING WAIVERS AND AMENDMENTS,
FURNISHED BY HOLDINGS, THE BORROWERS OR THE ADMINISTRATIVE AGENT PURSUANT TO,
OR IN THE COURSE OF ADMINISTERING, THIS AGREEMENT WILL BE SYNDICATE-LEVEL
INFORMATION, WHICH MAY CONTAIN MATERIAL NON-PUBLIC INFORMATION ABOUT
HOLDINGS, THE BORROWERS, THE OTHER LOAN PARTIES AND THEIR AFFILIATES AND
RELATED PARTIES OR THEIR RESPECTIVE SECURITIES. 
ACCORDINGLY, EACH LENDER REPRESENTS TO HOLDINGS, THE BORROWERS AND THE
ADMINISTRATIVE AGENT THAT IT HAS IDENTIFIED IN ITS ADMINISTRATIVE QUESTIONNAIRE
A CREDIT CONTACT WHO MAY RECEIVE INFORMATION THAT MAY CONTAIN
MATERIAL NON-PUBLIC INFORMATION IN


 


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ACCORDANCE WITH ITS COMPLIANCE PROCEDURES AND APPLICABLE LAW,
INCLUDING FEDERAL AND STATE SECURITIES LAWS.


 


SECTION 10.09.  Setoff.  In
addition to any rights and remedies of the Lenders provided by Law, upon the
occurrence and during the continuance of any Event of Default, each Lender and
its Affiliates is authorized at any time and from time to time, without prior
notice to the Company or any other Loan Party, any such notice being waived by
the Company (on its own behalf and on behalf of each Loan Party and its
Subsidiaries) to the fullest extent permitted by applicable Law, to set off and
apply any and all deposits (general or special, time or demand, provisional or
final) at any time held by, and other Indebtedness at any time owing by, such
Lender and its Affiliates to or for the credit or the account of the respective
Loan Parties and their Subsidiaries against any and all Obligations owing to
such Lender and its Affiliates hereunder or under any other Loan Document, now
or hereafter existing, irrespective of whether or not such Agent or such Lender
or Affiliate shall have made demand under this Agreement or any other Loan
Document and although such Obligations may be contingent or unmatured or
denominated in a currency different from that of the applicable deposit or
Indebtedness; provided that, in
the case of any such deposits or other Indebtedness for the credit or the
account of any Foreign Subsidiary, such set off may only be against any
Obligations of Foreign Subsidiaries. 
Each Lender agrees promptly to notify the Company and the Administrative
Agent after any such set off and application made by such Lender; provided, that the failure to give such
notice shall not affect the validity of such setoff and application.  The rights of the Administrative Agent and
each Lender under this Section 10.09 are in addition to other rights and
remedies (including other rights of setoff) that the Administrative Agent and
such Lender may have.  Notwithstanding
anything herein or in any other Loan Document to the contrary, in no event
shall the assets of any Foreign Subsidiary that is not a Loan Party constitute
collateral security for payment of the Obligations of the Company or any
Domestic Subsidiary, it being understood that (a) the Equity Interests of
any Foreign Subsidiary that is not a Loan Party do not constitute such an asset
and (b) the provisions hereof shall not limit, reduce or otherwise
diminish in any respect the Borrowers’ obligations to make any mandatory
prepayment pursuant to Section 2.05(b)(ii).


 


SECTION 10.10.  Interest Rate Limitation. 
Notwithstanding anything to the contrary contained in any Loan Document,
if at any time the interest rate applicable to any Loan, together with all
fees, charges and other amounts which are treated as interest on such Loan
under applicable Law (collectively the “Charges”),
shall exceed the maximum lawful rate (the “Maximum
Rate”) which may be contracted for, charged, taken, received or
reserved by the Lender holding such Loan in accordance with applicable Law, the
rate of interest payable in respect of such Loan hereunder, together with all
Charges payable in respect thereof, shall be limited to the Maximum Rate and,
to the extent lawful, the interest and Charges that would have been payable in
respect of such Loan but were not payable as a result of the operation of this Section shall
be cumulated and the interest and Charges payable to such Lender in respect of
other Loans or periods shall be increased (but not above the Maximum Rate
therefor) until such cumulated amount, together with interest thereon at the
Federal Funds Rate to the date of repayment, shall have been received by such
Lender.


 


SECTION 10.11.  Counterparts.  This
Agreement and each other Loan Document may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.  Delivery by telecopier of an executed
counterpart of a signature page to this Agreement and each other Loan
Document shall be effective as delivery of an original executed counterpart of
this Agreement and such other Loan Document. 
The Agents may also require that any such documents and signatures
delivered by telecopier be confirmed by a manually signed original thereof;
provided that the failure to request


 


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or
deliver the same shall not limit the effectiveness of any document or signature
delivered by telecopier.


 


SECTION 10.12.  Integration.  This
Agreement, together with the other Loan Documents, comprises the complete and
integrated agreement of the parties on the subject matter hereof and thereof
and supersedes all prior agreements, written or oral, on such subject
matter.  In the event of any conflict
between the provisions of this Agreement and those of any other Loan Document,
the provisions of this Agreement shall control; provided that the inclusion of
supplemental rights or remedies in favor of the Agents or the Lenders in any
other Loan Document shall not be deemed a conflict with this Agreement.  Each Loan Document was drafted with the joint
participation of the respective parties thereto and shall be construed neither
against nor in favor of any party, but rather in accordance with the fair
meaning thereof.


 


SECTION 10.13.  Survival of Representations and
Warranties.  All representations and warranties made
hereunder and in any other Loan Document or other document delivered pursuant
hereto or thereto or in connection herewith or therewith shall survive the
execution and delivery hereof and thereof. 
Such representations and warranties have been or will be relied upon by
each Agent and each Lender, regardless of any investigation made by any Agent
or any Lender or on their behalf and notwithstanding that any Agent or any
Lender may have had notice or knowledge of any Default at the time of any
Credit Extension, and shall continue in full force and effect as long as any
Loan or any other Obligation hereunder shall remain unpaid or unsatisfied or
any Letter of Credit shall remain outstanding.


 


SECTION 10.14.  Severability.  If
any provision of this Agreement or the other Loan Documents is held to be
illegal, invalid or unenforceable, the legality, validity and enforceability of
the remaining provisions of this Agreement and the other Loan Documents shall
not be affected or impaired thereby.  The
invalidity of a provision in a particular jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.


 


SECTION 10.15.  Tax Forms.  (a)  (i)  Each
Lender and Agent that is not a “United States person” within the meaning of Section 7701(a)(30)
of the Code (each, a “Foreign Lender”)
shall deliver to the Company and the Administrative Agent, on or prior to the
date which is ten (10) Business Days after the Closing Date (or upon
accepting an assignment of an interest herein), two duly signed, properly completed
copies of either IRS Form W-8BEN or any successor thereto (relating to
such Foreign Lender and entitling it to an exemption from, or reduction of,
United States withholding tax on all payments to be made to such Foreign Lender
by the Company or any other Loan Party pursuant to this Agreement or any other
Loan Document) or IRS Form W-8ECI or any successor thereto (relating to
all payments to be made to such Foreign Lender by the Company or any other Loan
Party pursuant to this Agreement or any other Loan Document) or such other
evidence reasonably satisfactory to the Company and the Administrative Agent
that such Foreign Lender is entitled to an exemption from, or reduction of,
United States withholding tax, including any exemption pursuant to Section 871(h) or
881(c) of the Code, and in the case of a Foreign Lender claiming such an
exemption under Section 881(c) of the Code, a certificate that
establishes in writing to the Company and the Administrative Agent that such
Foreign Lender is not (i) a “bank” as defined in Section 881(c)(3)(A) of
the Code, (ii) a 10-percent stockholder within the meaning of Section 871(h)(3)(B) of
the Code, or (iii) a controlled foreign corporation related to the Company
with the meaning of Section 864(d) of the Code.  Thereafter and from time to time, each such
Foreign Lender shall (A) promptly submit to the Company and the
Administrative Agent such additional duly completed and signed copies of one or
more of such forms or certificates (or such successor forms or certificates as
shall be adopted from time to time by the relevant United States taxing
authorities) as may then be 


 


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available
under then current United States Laws and regulations to avoid, or such
evidence as is reasonably satisfactory to the Company and the Administrative
Agent of any available exemption from, or reduction of, United States
withholding taxes in respect of all payments to be made to such Foreign Lender
by the Company or other Loan Party pursuant to this Agreement, or any other
Loan Document, in each case, (1) on or before the date that any such form,
certificate or other evidence expires or becomes obsolete, (2) after the
occurrence of any event requiring a change in the most recent form, certificate
or evidence previously delivered by it to the Company and the Administrative
Agent and (3) from time to time thereafter if reasonably requested by the
Company or the Administrative Agent, and (B) promptly notify the Company
and the Administrative Agent of any change in circumstances which would modify
or render invalid any claimed exemption or reduction.


 


(ii)  Each
Foreign Lender, to the extent it does not act or ceases to act for its own
account with respect to any portion of any sums paid or payable to such Foreign
Lender under any of the Loan Documents (for example, in the case of a typical
participation by such Foreign Lender), shall deliver to the Company and the
Administrative Agent on the date when such Foreign Lender ceases to act for its
own account with respect to any portion of any such sums paid or payable, and
at such other times as may be necessary in the determination of the Company or
the Administrative Agent (in either case, in the reasonable exercise of its
discretion), (A) two duly signed completed copies of the forms or
statements required to be provided by such Foreign Lender as set forth above,
to establish the portion of any such sums paid or payable with respect to which
such Foreign Lender acts for its own account that is not subject to United
States withholding tax, and (B) two duly signed completed copies of IRS Form W-8IMY
(or any successor thereto), together with any information such Foreign Lender
chooses to transmit with such form, and any other certificate or statement of exemption
required under the Code, to establish that such Foreign Lender is not acting
for its own account with respect to a portion of any such sums payable to such
Foreign Lender.


 


(iii)  Each
Lender and Agent (or Participant) that is entitled to an exemption from or
reduction of non-U.S. withholding tax under the law of the jurisdiction in
which a Borrower is formed or organized, or any treaty to which such
jurisdiction is a party, with respect to payments under this Agreement shall
deliver to such Borrower (with a copy to the Administrative Agent), at the time
or times prescribed by applicable law or reasonably requested by such Borrower,
such properly completed and executed documentation prescribed by applicable law
as will permit such payments to be made without withholding, or at a reduced
rate, provided that such Lender
or Agent (or Participant) is legally entitled to complete, execute and deliver
such documentation.  Each Lender and
Agent (or Participant) shall promptly notify such Borrower and the Administrative
Agent of any change in circumstances which would modify or render invalid any
claimed exemption or reduction.


 


(iv)  No
Borrower shall be required to pay any additional amount or any indemnity
payment under Section 3.01 to (A) any Lender if such Lender shall
have failed to satisfy the foregoing provisions of this Section 10.15(a),
or (B) any U.S. Lender if such U.S. Lender shall have failed to satisfy
the provisions of Section 10.15(b); provided
that (i) if such Lender shall have satisfied the requirement of this or Section 10.15(b),
as applicable, on the date such Lender became a Lender or, if later, the date
such Lender made an Incremental Overseas Term Loan to any Borrower or the date
a CAM Exchange occurred, or ceased to act for its own account with respect to
any payment under any of the Loan Documents, nothing in this Section 10.15(a) or
Section 10.15(b) shall relieve any Borrower of its obligation to pay
any amounts pursuant to Section 3.01 in the event that, as a result of any
change in any applicable Law, treaty or governmental rule, regulation or order,
or any change in the interpretation, administration or


 


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application thereof, such
Lender is no longer properly entitled to deliver forms, certificates or other
evidence at a subsequent date establishing the fact that such Lender or other
Person for the account of which such Lender receives any sums payable under any
of the Loan Documents is not subject to withholding or is subject to withholding
at a reduced rate and (ii) nothing in this Section 10.15(a) shall
relieve any Borrower of its obligation to pay any amounts pursuant to Section 3.01
in the event that the requirements of Section 10.15(a)(ii) or
10.15(a)(iii) have not been satisfied if such Borrower is entitled, under
applicable Law, to rely on any applicable forms and statements required to be
provided under this Section 10.15 by the Lender that does not act or has
ceased to act for its own account under any of the Loan Documents, including in
the case of a typical participation.


 


(v)  The
Administrative Agent may deduct and withhold any taxes required by any Laws to
be deducted and withheld from any payment under any of the Loan Documents.


 


(b)  Each
Lender and Agent that is a “United States person” within the meaning of Section 7701(a)(30)
of the Code (each, a “U.S. Lender”)
shall deliver to the Administrative Agent and the Company two duly signed,
properly completed copies of IRS Form W-9 on or prior to the Closing Date
(or on or prior to the date it becomes a party to this Agreement), certifying
that such U.S. Lender is entitled to an exemption from United States backup
withholding tax, or any successor form. 
If such U.S. Lender fails to deliver such forms, then the Administrative
Agent may withhold from any payment to such U.S. Lender an amount equivalent to
the applicable backup withholding tax imposed by the Code.  Thereafter and from time to time, each such
U.S. Lender shall (A) promptly submit to the Company and the Administrative
Agent such additional duly completed and signed copies of one or more of such
forms or certificates (or such successor forms) as may then be available under
then current United States Laws and regulations to avoid, or such evidence as
is reasonably satisfactory to the Company and the Administrative Agent of any
available exemption from United States back up withholding taxes in respect of
all payments to be made to such U.S. Lender by the Company or other Loan Party
pursuant to this Agreement, or any other Loan Document, in each case, (1) on
or before the date that any such form or other evidence expires or becomes
obsolete, (2) after the occurrence of any event requiring a change in the
most recent form or evidence previously delivered by it to the Company and the
Administrative Agent and (3) from time to time thereafter if reasonably
requested by the Company or the Administrative Agent, and (B) promptly
notify the Company and the Administrative Agent of any change in circumstances
which would modify or render invalid any claimed exemption.


 


SECTION 10.16.  Governing Law.  (a) 
THIS AGREEMENT AND EACH OTHER LOAN DOCUMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.


 


(b) 
ANY LEGAL ACTION OR PROCEEDING ARISING UNDER ANY LOAN DOCUMENT OR IN ANY WAY
CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO
OR ANY OF THEM WITH RESPECT TO ANY LOAN DOCUMENT, OR THE TRANSACTIONS RELATED
THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, MAY BE
BROUGHT IN THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK CITY OR OF
THE UNITED STATES FOR THE SOUTHERN DISTRICT OF SUCH STATE, AND BY EXECUTION AND
DELIVERY OF THIS AGREEMENT, EACH BORROWER, HOLDINGS, EACH AGENT AND EACH LENDER
CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE
JURISDICTION OF THOSE COURTS.  EACH
BORROWER, HOLDINGS, EACH AGENT AND EACH LENDER IRREVOCABLY WAIVES


 


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ANY
OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE
GROUNDS OF FORUM NON CONVENIENS,
WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR
PROCEEDING IN SUCH COURTS IN RESPECT OF ANY LOAN DOCUMENT OR OTHER DOCUMENT
RELATED THERETO.


 


SECTION 10.17.  Waiver of Right to Trial by Jury.  EACH
PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF
ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER ANY LOAN DOCUMENT OR
IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE
PARTIES HERETO OR ANY OF THEM WITH RESPECT TO ANY LOAN DOCUMENT, OR THE
TRANSACTIONS RELATED THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER
ARISING, AND WHETHER FOUNDED IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY
HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF
ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO
THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION 10.17
WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE SIGNATORIES HERETO TO
THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.


 


SECTION 10.18.  Binding Effect.  This
Agreement shall become effective when it shall have been executed by the
Borrowers and Holdings and the Administrative Agent shall have been notified by
each Lender, Swing Line Lender and L/C Issuer that each such Lender, Swing Line
Lender and L/C Issuer has executed it and thereafter shall be binding upon and
inure to the benefit of the Company, each Agent and each Lender and their respective
permitted successors and assigns, except that the Company shall not have the
right to assign its rights hereunder or any interest herein without the prior
written consent of the Lenders except as permitted by Section 7.04.


 


SECTION 10.19.  Lender Action.  Each
Lender agrees that it shall not take or institute any actions or proceedings,
judicial or otherwise, for any right or remedy against any Loan Party or any
other obligor under any of the Loan Documents or the Secured Hedge Agreements
(including the exercise of any right of setoff, rights on account of any
banker’s lien or similar claim or other rights of self-help), or institute any
actions or proceedings, or otherwise commence any remedial procedures, with
respect to any Collateral or any other property of any such Loan Party, without
the prior written consent of the Administrative Agent.  The provision of this Section 10.19 are
for the sole benefit of the Lenders and shall not afford any right to, or
constitute a defense available to, any Loan Party.


 


SECTION 10.20.  USA PATRIOT Act.  Each
Lender hereby notifies the Borrowers that pursuant to the requirements of the
Patriot Act, it is required to obtain, verify and record information that
identifies the Borrowers, which information includes the name and address of
the Borrowers and other information that will allow such Lender to identify the
Borrowers in accordance with the Act.


 


SECTION 10.21.  Agent for Service of Process.  The
Company agrees that promptly following request by the Administrative Agent it
shall cause each Foreign Subsidiary which is a Loan Party or for whose account
a Letter of Credit is issued to appoint and maintain an agent reasonably
satisfactory to the Administrative Agent to receive service of process in New
York City on behalf of such Foreign Subsidiary.


 


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SECTION 10.22.  Effectiveness of the Merger;
Assignment and Delegation to and Assumption by Reader’s Digest. 
Reader’s Digest shall have no rights or obligations hereunder until the
consummation of the Merger and any representations and warranties of Reader’s
Digest hereunder shall not become effective until such time.  Upon consummation of the Merger, and without
any further action by any Person, (a) Reader’s Digest hereby irrevocably
and unconditionally (i) assumes and agrees punctually to pay, perform and
discharge when due each of the Obligations and each and every debt, covenant
and agreement incurred, made or to be paid, performed or discharged by the
Company under the Loan Documents, (ii) agrees to be bound by all the
terms, provisions and conditions of the Loan Documents applicable to the
Company and (iii) agrees that it will be responsible for and deemed to
have made all the representations and warranties of the Company, whenever made
or deemed to have been made and (b) Reader’s Digest automatically assumes
and agrees to perform all the obligations of Acquisition Co under the
Commitment Letter dated November 16, 2006, among Holdings, Acquisition Co,
the Arrangers and the Agents and the Fee Letter referred to therein.  Upon the effectiveness of the assumption
provided for above, Reader’s Digest will be the Company for all purposes of
this Agreement and the other Loan Documents and may exercise every right and
power of the Company under this Agreement and the other Loan Documents.


 


SECTION 10.23.  Judgment Currency.  If,
for the purposes of obtaining judgment in any court, it is necessary to convert
a sum due hereunder or any other Loan Document in one currency into another
currency, the rate of exchange used shall be that at which in accordance with
normal banking procedures the Administrative Agent could purchase the first
currency with such other currency on the Business Day preceding that on which
final judgment is given.  The obligation
of each Borrower in respect of any such sum due from it to the Administrative
Agent or the Lenders hereunder or under the other Loan Documents shall,
notwithstanding any judgment in a currency (the “Judgment Currency”) other than that in which such sum is
denominated in accordance with the applicable provisions of this Agreement (the
“Agreement Currency”), be
discharged only to the extent that on the Business Day following receipt by the
Administrative Agent of any sum adjudged to be so due in the Judgment Currency,
the Administrative Agent may in accordance with normal banking procedures
purchase the Agreement Currency with the Judgment Currency.  If the amount of the Agreement Currency so
purchased is less than the sum originally due to the Administrative Agent from
any Borrower in the Agreement Currency, such Borrower agrees, as a separate
obligation and notwithstanding any such judgment, to indemnify the
Administrative Agent or the Person to whom such obligation was owing against such
loss.  If the amount of the Agreement
Currency so purchased is greater than the sum originally due to the
Administrative Agent in such currency, the Administrative Agent agrees to
return the amount of any excess to such Borrower (or to any other Person who
may be entitled thereto under applicable Law).


 


SECTION 10.24.  German Tax Confirmation.  (a)   If, at
any time after the Closing Date, the German Borrower determines that a
confirmation by the Administrative Agent and/or each of the Euro Term Lenders
substantially in the form of the Decree issued by the German Federal Ministry
of Finance as of October 20, 2005 (substantially in the form of Exhibit L,
the “Tax Confirmation”) may be
required under the decrees to § 8a of the German Corporate Income Tax Act (Körperschaftsteuergesetz or KStG) dated July 15,
2004, July 22, 2005, and October 20, 2005 (as in effect on the
date hereof, the “Decrees”) with
respect to the Euro Term Loans, the German Borrower may prepare and deliver to
the Euro Term Lenders (through the Administrative Agent) a complete and
accurate draft Tax Confirmation listing all guarantees and security interests
securing the claims of the Euro Term Lenders under the Loan Documents and the
Secured Hedge Agreements and provide to the Euro Term Lenders any further
information which may reasonably be required by the Administrative Agent or any
Euro Term Lender to issue the


 


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Tax Confirmation (based on the then applicable
practice of the German tax authorities), such information to be requested
within fifteen (15) Business Days after the delivery of the draft Tax
Confirmation by the German Borrower to the Euro Term Lenders (through the
Administrative Agent).


 


(b)  The Tax
Confirmation shall only include factual but not legal statements to be issued
by the Euro Term Lenders.  The Tax
Confirmation shall not contain any statement that any Euro Term Lender is not
permitted to issue by law, administrative rule or regulation of the
jurisdiction to which the relevant Euro Term Lender is subject.


 


(c)  Each Euro Term
Lender (including any Person that becomes a Euro Term Lender subsequent to the
date hereof pursuant to Section 10.07) hereby authorizes the
Administrative Agent on behalf of such Euro Term Lender to issue a Tax
Confirmation and provide it to the German Borrower within sixteen (16) Business
Days after such Euro Term Lender’s receipt of the following (which receipt
shall be deemed to have occurred upon the Administrative Agent’s posting of the
following to Intralinks or other similar information transmission
system):


 


(i)  the German Borrower’s request
therefor,


 


(ii)  a complete and accurate draft
of such Tax Confirmation listing all guarantees and security interests pursuant
to clause (a) above, and


 


(iii)  all further information
reasonably requested within the period set forth for such request pursuant to
clause (a) above to enable the Euro Term Lenders to complete such Tax
Confirmation,


 


unless such Euro Term Lender notifies the
Administrative Agent within the 15-Business Day period described in clause (a) above
that (x) it is prohibited from doing so by law, administrative rule or
regulation of the jurisdiction to which such Euro Term Lender is subject or (y) it
has reasonably determined that the factual information provided by the German
Borrower is not correct or not complete or, in the view of such Euro Term
Lender (acting in good faith), is misleading or (z) such Euro Term Lender
has not been released from confidentiality obligations to any Loan Party under
applicable banking secrecy rules with respect to confidential information
with respect to such Loan Party contained in such Tax Confirmation or, to the
extent applicable, has not been instructed to disclose any such information by
the relevant Loan Party.  Subject to the
terms of the preceding sentence, within the 16-Business Day period set forth
above, the Administrative Agent acting also on behalf of the Euro Term Lenders
shall issue and provide to the German Borrower the requested Tax Confirmation.


 


(d)  The Company
agrees to pay or reimburse the Administrative Agent and each Euro Term Lender
for all reasonable expenses incurred in connection with any Tax Confirmation in
accordance with the principles set forth in Section 10.04, including Attorney
Costs.  The Company shall indemnify and
hold harmless each Indemnitee from and against any and all liabilities,
obligations, losses, damages, penalties, claims, demands, actions, judgments
and suits and related reasonable expenses (including all reasonable Attorney
Costs) of any kind or nature whatsoever which may at any time be imposed on,
incurred by or asserted against any such Indemnitee in any way relating to or
arising out of or in connection with any Tax Confirmation in accordance with
the principles set forth in Section 10.05. 
The agreements in this clause (d) shall survive the resignation of
the Administrative Agent, the replacement of any Lender, the termination of the
Aggregate Commitments and repayment, satisfaction or discharge of all other
Obligations.


 


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(e)  The German Borrower confirms to
the Administrative Agent and each Euro Term Lender that (i) the Euro Term
Lenders will issue their respective Tax Confirmations exclusively at the request
of the German Borrower and solely for the purpose of providing information to
the German tax authorities as required pursuant to the Decrees, (ii) the
Euro Term Lenders are not responsible for examining any Borrower’s tax position
or for achieving any certain tax treatment with respect to any Borrower and (iii) no
Loan Party will raise any claims against the Administrative Agent or any Euro
Term Lender based on, or in connection with, any Tax Confirmation and no Euro
Term Lender will have any liability to any Loan Party with respect to any Tax
Confirmation (other than, subject to the principles of Section 10.05, for
failure to comply with the last sentence of Section 10.24(c)).


 


(f)  It is the common understanding
of the parties hereto that no party is providing any legal and/or tax advice to
any other party with respect to this Agreement or, in particular, with respect
to the application of § 8a KStG and the interpretation of § 8a KStG in the
Decrees, and that it is the responsibility of each party, in particular each
Loan Party, to consult with its own legal/tax advisers.


 


(g)  Each Loan Party releases each
Euro Term Lender from its duty of confidentiality and/or obligation of bank
secrecy (Bankgeheimnis) with
regard to the issuance of a Tax Confirmation to the German Borrower and its
submission to the German tax authorities.


 


(h)  If, after the date of this
Agreement, changes occur to German tax legislation or its interpretation
materially prejudicing the tax treatment of interest payments of the German
Borrower, the Administrative Agent and the Euro Term Lenders agree that they
will negotiate in good faith (without any legal obligation to agree) with the
Company and the German Borrower to restructure the Collateral securing the Euro
Term Loans to seek to reduce the impact of such materially prejudicial tax
treatment while retaining Collateral acceptable to the Euro Term Lenders.


 


[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]


 


149
















 


IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as
of the date first above written.


 


 


	
   

  	
  DOCTOR ACQUISITION CO.

  
	
   

  	
   

  
	
   

  	
       by

  
	
   

  	
   

  	
  /s/
  Christopher Minnetian

  
	
   

  	
   

  	
  Name:
  Christopher Minnetian

  
	
   

  	
   

  	
  Title:

  



 


Senior Secured Credit Agreement


 

















 


	
   

  	
  RDA HOLDING CO.

  
	
   

  	
        by

  
	
   

  	
   

  
	
   

  	
   

  	
  /s/
  Christopher Minnetian

  
	
   

  	
   

  	
  Name:
  Christopher Minnetian

  
	
   

  	
   

  	
  Title:

  



 


Senior Secured Credit Agreement


 

















 


	
   

  	
  THE READER’S DIGEST ASSOCIATION,

  INC.

  
	
   

  	
   

  
	
   

  	
      by

  
	
   

  	
   

  	
  /s/
  William H. Magill

  
	
   

  	
   

  	
  Name:
  William H. Magill

  
	
   

  	
   

  	
  Title:
  Vice President and Treasurer

  



 


Senior Secured Credit Agreement


 

















 


	
   

  	
  RD GERMAN HOLDINGS GMBH

  
	
   

  	
   

  
	
   

  	
      by

  
	
   

  	
   

  	
  /s/
  Werner Neunzig

  
	
   

  	
   

  	
  Name:
  Werner Neunzig

  
	
   

  	
   

  	
  Title:
  Managing Director

  



 


Senior Secured Credit Agreement


 

















 


	
   

  	
  JPMORGAN CHASE BANK, N.A., as

  Administrative Agent and a Lender,

  
	
   

  	
   

  
	
   

  	
      by

  
	
   

  	
   

  	
  /s/
  Gary L. Spevack

  
	
   

  	
   

  	
  Name:
  Gary L. Spevack

  
	
   

  	
   

  	
  Title:
  Vice President

  



 


Senior Secured Credit Agreement


 

















 


	
   

  	
  CITICORP NORTH AMERICA, INC., as

  Co-Syndication Agent and a Lender,

  
	
   

  	
   

  
	
   

  	
      by

  
	
   

  	
   

  	
  /s/
  Caesar Wyszomirski

  
	
   

  	
   

  	
  Name:
  Caesar Wyszomirski

  
	
   

  	
   

  	
  Title:
  Vice President

  



 


Senior Secured Credit Agreement


 

















 


	
   

  	
  MERRILL LYNCH, PIERCE, FENNER &

  SMITH INCORPORATED,
  as Co-

  Syndication Agent, Co-Lead Arranger and Joint Bookrunner

  
	
   

  	
   

  
	
   

  	
      by

  
	
   

  	
   

  	
  /s/
  Gregory Margolies

  
	
   

  	
   

  	
  Name:
  Gregory Margolies

  
	
   

  	
   

  	
  Title:
  Managing Director

  



 


Senior Secured Credit Agreement


 

















 


	
   

  	
  MERRILL LYNCH CAPITAL

  CORPORATION, as a
  Lender,

  
	
   

  	
   

  
	
   

  	
      by

  
	
   

  	
   

  	
  /s/
  Gregory Margolies

  
	
   

  	
   

  	
  Name:
  Gregory Margolies

  
	
   

  	
   

  	
  Title:
  Vice President

  



 


Senior Secured Credit Agreement


 

















 


	
   

  	
  THE ROYAL BANK OF SCOTLAND PLC,

  as Documentation Agent and a Lender,

  
	
   

  	
   

  
	
   

  	
      by

  
	
   

  	
   

  	
  /s/
  Jim Kuster

  
	
   

  	
   

  	
  Name:
  Jim Kuster

  
	
   

  	
   

  	
  Title:
  Managing Director

  



 


Senior Secured Credit Agreement


 

















 


	
   

  	
  Credit Industrial ET Commercial,

  
	
   

  	
  as a Lender

  
	
   

  	
   

  
	
   

  	
  by

  	
  /s/ Marcus Edward

  
	
   

  	
   

  	
  Name:

  	
  Marcus Edward

  
	
   

  	
   

  	
  Title:

  	
  Managing Director

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  by

  	
  /s/ Anthony Rock

  
	
   

  	
   

  	
  Name:

  	
  Anthony Rock

  
	
   

  	
   

  	
  Title:

  	
  Managing Director

  



 

















 


	
   

  	
  General Electric Capital Corporation,

  as a Lender

  
	
   

  	
   

  	
   

  
	
   

  	
  by

  	
  /s/ Karl E. Kleffer

  
	
   

  	
   

  	
  Name:

  	
  Karl E. Kleffer

  
	
   

  	
   

  	
  Title:

  	
  Duly Authorized Signatory

  



 

















 


	
   

  	
  Toronto Dominion (Texas) LLC,

  as a Lender

  
	
   

  	
   

  	
   

  
	
   

  	
  by

  	
  /s/ Debbi Brito

  
	
   

  	
   

  	
  Name:

  	
  Debbi Brito

  
	
   

  	
   

  	
  Title:

  	
  Authorized Signatory

  



 

















 


	
   

  	
  The CIT Group/Equipment Financing, Inc.,

  as a Lender

  
	
   

  	
   

  	
   

  
	
   

  	
  by

  	
  /s/ Peter Connolly

  
	
   

  	
   

  	
  Name:

  	
  Peter Connolly

  
	
   

  	
   

  	
  Title:

  	
  EVP

  



 

















 


	
   

  	
  J.P. Morgan Securities Inc., as Co-Lead Arranger and Joint Bookrunner

  
	
   

  	
   

  	
   

  
	
   

  	
  by:

  	
  /s/ Gary L. Spevack

  
	
   

  	
   

  	
  Name:

  	
  Gary L. Spevack

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  



 

















 


	
   

  	
  Citigroup Global Markets, Inc., as Co-Lead Arranger and Joint
  Bookrunner

  
	
   

  	
   

  	
   

  
	
   

  	
  by

  	
  /s/
  Caesar Wyszomirski

  
	
   

  	
   

  	
  Name:

  	
  Caesar
  Wyszomirski

  
	
   

  	
   

  	
  Title:

  	
  Director

  



 

















 


	
   

  	
  RBS Securities Corporation, as Co-Lead Arranger and Joint Bookrunner

  
	
   

  	
   

  	
   

  
	
   

  	
  by

  	
  /s/ Jim Kuster

  
	
   

  	
   

  	
  Name:

  	
  Jim Kuster

  
	
   

  	
   

  	
  Title:

  	
  Managing Director

  



 
















 


Schedule 1.01A


Certain Security Interests and Guarantees


 


·                                          Guarantee
and Collateral Agreement; and


 


·                                          Mortgages
with respect to each real property listed in Schedule 1.01B.


 

















 


Schedule 1.01B


Mortgaged Properties


 


	
  Record Owner

  	
   

  	
  Property Address

  
	
  Books Are Fun, Ltd.

  	
   

  	
  1680 Highway 1 North

  Fairfield, Iowa

   

  111 North Main Street

  Fairfield, Iowa

   

  123 North Main Street

  Fairfield, Iowa

  
	
   

  	
   

  	
   

  
	
  Reiman Media Group, Inc.

  	
   

  	
  5400 South 60th Street

  Greendale, Wisconsin

  



 

















 


Schedule 1.01C


Management Adjustments


 


Reader’s Digest adjustments:


 


·                                          In
connection with the Transactions, Reader’s Digest will record a pro forma
balance sheet adjustment to decrease unearned revenue by approximately $175.0
million. This adjustment is expected to reduce net revenue by approximately
$133.0 million in the first year following the Transactions. The remaining
balance is expected to impact net revenue in periods thereafter.


 


·                                          Restructuring
activities comprised:


 


·                                          Charges
of $2.8 million for severance, $2.6 million for asset impairments and $0.5
million for other costs associated with the restructuring plan at Books Are
Fun, Ltd.. These charges were taken at Books Are Fun,
Ltd. to lower the cost base, upgrade the management team and sales force and
improve the business model. The actions associated with these initiatives are
expected to be completed by the end of fiscal 2007. Asset impairment charges
were primarily attributed to write-offs of capitalized software costs related
to abandoned assets. The remaining costs are those incurred to close Books Are
Fun Ltd.’s jewelry business and to terminate contractual lease obligations.


 


·                                          Charges
of $3.5 million for severance, $0.2 million for asset impairments, and $1.4
million in other costs to lower Reader’s Digest’s cost base commensurate with
Reader’s Digest’s current revenue and in an effort to streamline Reader’s
Digest’s operations. Approximately 29%, 54% and 17% of these costs related to
Reader’s Digest North America, Reader’s Digest International and Consumer
Business Services, respectively. These actions are expected to be completed by
the end of fiscal 2007.


 


·                                          Income
of $2.0 million related to reversals of charges, primarily severance, recorded
in previous years and the reversal of amortized gains related to the sale and
partial lease-back of the Reader’s Digest headquarters facility. Reader’s
Digest reviews its restructuring plans periodically to determine the
appropriateness of existing accruals in light of current circumstances.
Accordingly, these charges were reversed because of the occurrence of events
that affected the original plans.


 


·                                          Reader’s
Digest disposed of American Woodworker magazine in the second quarter of fiscal
2007 at a book loss of $6.2 million.


 


·                                          Represents a charge of $5.6 million because Reader’s Digest
determined that it was probable that QSP, Inc. would not satisfy the
minimum tonnage purchase requirement during calendar 2006 in its World’s Finest
Chocolate licensing agreement. In the event QSP, Inc. does not satisfy the
purchase requirement in future calendar years, QSP, Inc. 


 

















 


will be required
to make similar payments. QSP, Inc. paid $2.0 million and $0.8 million in
fiscal 2003 and 2004, respectively, in penalties to World’s Finest Chocolate
for failure to satisfy minimum purchase requirements.


 


·                                          Includes
$2.0 million of expense under Reader’s Digest’s key employee long-term
incentive compensation plan, primarily attributable to the increase in the
market price of Reader’s Digest’s common stock in connection with the
Transactions. Also includes additional compensation of $0.6 million to retain
key personnel in connection with the Transactions.


 


·                                          Compensation
and benefits paid to, and other expenses in the aggregate amount of $4.2
million associated with, Reader’s Digest’s chairman of the board during the
twelve months ended December 31, 2006. Reader’s Digest’s chairman of the
board retired from that capacity on December 31, 2006.


 


·                                          Professional
fees of $4.0 million relating to an international tax planning initiative that
ultimately was not implemented.


 


·                                          Books
Are Fun, Ltd. adjustments relate to: (a) a $7.0 million charge in fiscal
2006 to write down the value of old and discontinued items, (b) $6.1
million of legal expenses incurred in connection with suits against the founder
of Books Are Fun, a competitor of Books Are Fun, Ltd. and certain former
executives of Books Are Fun, Ltd. and (c) $1.1 million of expenses to
relocate the Books Are Fun, Ltd. headquarters from Iowa to the Chicago area and
recruit new management.


 


·                                          Stock-based
compensation of $11.4 million includes: (a) compensation costs for all
share-based payments granted prior to, but not yet vested as of July 1,
2005, based on the grant date fair value estimated in accordance with the
original provisions of SFAS No. 123, and compensation cost for all
share-based payments granted subsequent to July 1, 2005, based on the
grant date fair values estimated in accordance with the provisions of SFAS No. 123R
and (b) the expensing of restricted and deferred stock awards over the
two- to four-year restriction period.


 


·                                          Anticipated
cost savings include (a) $4.0 million of estimated annual cost savings
expected to be recognized through the restructuring of certain of Reader’s
Digest’s operations and (b) $7.0 million of estimated annual cost savings
as a consequence of the conversion to a private company. These costs savings
will generally be in the areas of eliminating or reducing public company
director fees, director and officer insurance, and certain professional
services and staff.*


 


WRC Media
adjustments:


 


·                                          Restructuring
and other non-recurring items include:


 

















 


·                                          Costs
related to the shutdown of CompassLearning facilities in San Diego, California
($2.6 million) and Weston, Florida ($0.5 million) and a Gareth Stevens facility
in Milwaukee, Wisconsin ($0.4 million). San Diego facility costs include $2.0
million in employee-related expenses (including severance and relocations) and
$0.6 million in vacated facility rent and fixed asset moving expenses. Weston,
Florida-related charges of $0.5 million relate to employee severance and
relocation. The Gareth Stevens-related charges include $0.2 million of employee
severance and relocation costs and $0.2 million of fixed asset write-offs.


 


·                                          Indemnification
costs of $0.7 million for defense of former WRC Media’s employees with regard
to an SEC investigation regarding such employees.


 


·                                          Costs
of $1.5 million associated with the closure of two warehouse facilities
(Cleveland, Ohio and Milwaukee, Wisconsin) in connection with the opening of
WRC Media’s new warehouse in Strongsville, Ohio. Expenses include $0.9 million
in rent payments on vacated facilities, $0.3 million in relocation and moving
costs and $0.2 million of employee severance costs.


 


·                                          Impairment
of goodwill and intangibles charge of $5.0 million.


 


·                                          Anticipated
cost savings include (1) estimated annual cost savings of $7.4 million
attributable to transitioning corporate functions to Reader’s Digest and
consolidating operations in Austin, Texas and Stamford, Connecticut, and (2) estimated
annual cost savings of $1.9 million attributable to consolidation of
fulfillment systems and renegotiation of supply contracts.*


 


Direct Holdings adjustments:


 


·                                          $1.4
million stock-based compensation expense attributable to equity-based awards to
Direct Holdings employees.


 


·                                          Restructuring
and other non-recurring items include (1) a write-off of $20.6 million
related to a loan to Lillian Vernon Corporation (LVC), a former affiliate of
Direct Holdings, (2) $1.0 million of transaction fees related to the sale
of LVC and (3) $0.8 million of expenses related to the European and other
restructuring activities.


 


·                                          Portion
of annualized cost savings attributable to restructuring actions taken during
the twelve months ended December 31, 2006 that are not reflected in
historical results of $1.4 million. These actions primarily related to the
restructuring of Direct Holdings’ European operations.


 

















 


·                                          Anticipated
cost savings include: (1) anticipated cost savings of $5.9 million
attributable to closing certain offices and transitioning corporate functions
to Reader’s Digest and (2) anticipated fulfillment savings of $5.6
million.*


 


·                                          Annual
monitoring fee of $7.5 million to be paid to the Sponsors following the consummation
of the Transactions.


 






*  The
adjustments for the anticipated cost savings described do not include
anticipated cash costs to implement such cost savings. Reader’s Digest has
budgeted $40 million in expected cash costs to achieve these anticipated annual
cost savings.


 

















 


Schedule 1.01D


Excluded Subsidiaries


 


Direct Holdings IP L.L.C.


 

















 


Schedule 1.01E


Foreign Subsidiaries


 


	
  Foreign
  Subsidiary

  	
   

  	
  Country of

  Organization

  
	
  Reader’s Digest Argentina, SRL

  	
   

  	
  Argentina

  
	
  The Reader’s Digest Association Pty. Limited

  	
   

  	
  Australia

  
	
  Reader’s Digest (Australia) Pty. Ltd.

  	
   

  	
  Australia

  
	
  Verlag Das Beste GmbH

  	
   

  	
  Austria

  
	
  Reader’s Digest N.V. - S.A.

  	
   

  	
  Belgium

  
	
  Reader’s Digest World Services S.A.

  	
   

  	
  Belgium

  
	
  Reader’s Digest Brasil Ltda.

  	
   

  	
  Brazil

  
	
  Reader’s Digest EOOD

  	
   

  	
  Bulgaria

  
	
  1302791 Alberta ULC

  	
   

  	
  Canada

  
	
  Quality Service Programs, Inc.

  	
   

  	
  Canada

  
	
  eFundraising.com Corporation Incorporated/Corporation

  eFundraising.com Incorporee (Canada)

  	
   

  	
  Canada

  
	
  The Reader’s Digest Association (Canada) Ltd.

  	
   

  	
  Canada

  
	
  Reader’s Digest Magazines Limited

  	
   

  	
  Canada

  
	
  3634116 Canada Inc.

  	
   

  	
  Canada

  
	
  Shanghai Ying Cui Advertising Company Ltd.

  	
   

  	
  China

  
	
  Guangdong Pegasus Marketing Information & Services Co. Ltd

  	
   

  	
  China

  
	
  Reader’s Digest (Guangzhou) Direct Mail Service Co. Ltd.

  	
   

  	
  China

  
	
  Reader’s Digest Vyber s.r.o.

  	
   

  	
  Czech Republic

  
	
  Oy Valitut Palat - Reader’s Digest Ab

  	
   

  	
  Finland

  
	
  Sélection du Reader’s Digest S.A.

  	
   

  	
  France

  
	
  Sélection du Reader’s Digest
  Assurances SARL

  	
   

  	
  France

  
	
  RD German Holdings GmbH

  	
   

  	
  Germany

  
	
  Verlag Das Beste GmbH

  	
   

  	
  Germany

  
	
  Optimail Direkwerbeservice GmbH

  	
   

  	
  Germany

  
	
  Pegasus Medien Produktions-und
  Vertriebsgesellschaft mbH

  	
   

  	
  Germany

  
	
  Reader’s Digest Deutschland Holding GmbH

  	
   

  	
  Germany

  
	
  Reader’s Digest Hellas Publications Company with Limited Liability

  	
   

  	
  Greece

  
	
  Asian Qualiproducts Services, Ltd.

  	
   

  	
  Hong Kong

  
	
  Reader’s Digest Global Advertising Ltd.

  	
   

  	
  Hong Kong

  
	
  Reader’s Digest Association Far East Limited

  	
   

  	
  Hong Kong

  
	
  Reader’s Digest Asia, Ltd.

  	
   

  	
  Hong Kong

  
	
  Reader’s Digest (China) Direct Marketing Services Co., Ltd.

  	
   

  	
  Hong Kong

  
	
  Reader’s Digest (East Asia) Limited

  	
   

  	
  Hong Kong

  
	
  R.D. Properties, Ltd.

  	
   

  	
  Hong Kong

  
	
  Reader’s Digest Kiadó Korlátolt Felelosségu Társaság

  	
   

  	
  Hungary

  
	
  Reader’s Digest Book and Home Entertainment (India) Private Limited

  	
   

  	
  India

  



 

















 


	
  Foreign
  Subsidiary

  	
   

  	
  Country of

  Organization

  
	
  Libri e più, S.r.l.

  	
   

  	
  Italy

  
	
  The Reader’s Digest Ltd.

  	
   

  	
  Japan

  
	
  LLC Publisher Reader’s Digest

  	
   

  	
  Kazakhstan

  
	
  Pegasus Netherlands Services Lux Primary SC

  	
   

  	
  Luxembourg

  
	
  Pegasus Netherlands Services Lux Secondary SCS

  	
   

  	
  Luxembourg

  
	
  RD Luxembourg Tertiary Services

  	
   

  	
  Luxembourg

  
	
  Reader’s Digest (Malaysia) Sdn. Bhd

  	
   

  	
  Malaysia

  
	
  Caribe Condor S.A. de C.V.

  	
   

  	
  Mexico

  
	
  Reader’s Digest México, S.A. de
  C.V.

  	
   

  	
  Mexico

  
	
  Corporativo Reader’s Digest Mexico, S. de R.L. de C.V.

  	
   

  	
  Mexico

  
	
  Grupo Editorial Reader’s Digest,
  S. de R.L. de C.V.

  	
   

  	
  Mexico

  
	
  Distrimedia Services B.V.

  	
   

  	
  Netherlands

  
	
  Pegasus Netherlands Services CV

  	
   

  	
  Netherlands

  
	
  RD Netherlands Holdings BV

  	
   

  	
  Netherlands

  
	
  Uitgeversmaatschappij The
  Reader’s Digest N.V.

  	
   

  	
  Netherlands

  
	
  Reader’s Digest European Shared Services B.V.

  	
   

  	
  Netherlands

  
	
  Reader’s Digest Netherlands Holdings B.V.

  	
   

  	
  Netherlands

  
	
  Reader’s Digest (Philippines) Inc.

  	
   

  	
  Philippines

  
	
  Reader’s Digest Przeglad Sp. z.o.o.

  	
   

  	
  Poland

  
	
  Selecçoes do Reader’s Digest (Portugal) S.A.

  	
   

  	
  Portugal

  
	
  Euroselecçoes — Publicaçoes E Artigos Promocionais, Lda. 

  Promocionals, Lda.

  	
   

  	
  Portugal

  
	
  Editura Reader’s Digest SRL

  	
   

  	
  Romania

  
	
  LLC Digest Direct

  	
   

  	
  Russia

  
	
  JSC Publishing House Reader’s Digest

  	
   

  	
  Russia

  
	
  Reader’s Digest Asia Pte. Ltd.

  	
   

  	
  Singapore

  
	
  Reader’s Digest Vyber Slovensko,
  s.r.o.

  	
   

  	
  Slovak Republic

  
	
  Reader’s Digest Selecciones S.A.

  	
   

  	
  Spain

  
	
  Sociedad Difusión Cultural, S.L.

  	
   

  	
  Spain

  
	
  Reader’s Digest Aktiebolag

  	
   

  	
  Sweden

  
	
  Das Beste aus Reader’s Digest AG

  	
   

  	
  Switzerland

  
	
  Reader’s Digest (Thailand) Limited

  	
   

  	
  Thailand

  
	
  Reader’s Digest Secilmis Yayincilik Dagitim Pazarlama Ticaret Limited
  Sirketi

  	
   

  	
  Turkey

  
	
  LLC Direct Digest

  	
   

  	
  Ukraine

  
	
  LLC Publisher Reader’s Digest

  	
   

  	
  Ukraine

  
	
  Pegasus UK Holdings Limited

  	
   

  	
  United Kingdom

  
	
  The Reader’s Digest Association Limited

  	
   

  	
  United Kingdom

  
	
  RD Publications Limited

  	
   

  	
  United Kingdom

  
	
  Money Magazine Limited

  	
   

  	
  United Kingdom

  
	
  Reader’s Digest Financial Services Limited

  	
   

  	
  United Kingdom

  
	
  Fundraising For You Limited

  	
   

  	
  United Kingdom

  
	
  Reader’s Digest Europe Limited

  	
   

  	
  United Kingdom

  



 

















 


	
  Foreign
  Subsidiary

  	
   

  	
  Country of

  Organization

  
	
  Reader’s Digest Children’s Publishing Limited

  	
   

  	
  United Kingdom

  
	
  Reader’s Digest European Systems Ltd.

  	
   

  	
  United Kingdom

  
	
  Reader’s Digest Central & Eastern Europe Limited

  	
   

  	
  United Kingdom

  
	
  Reader’s Digest Holdings Limited

  	
   

  	
  United Kingdom

  
	
   

  	
   

  	
   

  
	
  Direct Holdings (N.Z.) Pty Limited

  	
   

  	
  Australia

  
	
  Direct Holdings Asia Pacific Pty Limited

  	
   

  	
  Australia

  
	
  Direct Holdings Australia Pty Limited

  	
   

  	
  Australia

  
	
  Shop Australia Pty Limited

  	
   

  	
  Australia

  
	
  Direct Entertainment U.K. Limited

  	
   

  	
  England and Wales

  
	
  Target Direct Marketing Services GmbH

  	
   

  	
  Germany

  
	
  Direct Holdings Holland B.V.

  	
   

  	
  Netherlands

  
	
  Direct Holdings International B.V.

  	
   

  	
  Netherlands

  
	
  Direct Holdings Switzerland GmbH

  	
   

  	
  Switzerland

  



 
















 


Schedule 1.01F


Holdings Contractual Obligations


 


Agreement and Plan of Merger dated as of November 16, 2006, among
RDA Holding Co. (f/k/a Doctor Acquisition Holding Co.), Doctor Acquisition Co.
and The Reader’s Digest Association, Inc.


 


Stock Acquisition Agreement dated as of January 23, 2007, among
Direct Holdings U.S. Corp., RDA Holding Co., and the Transferors (as defined
therein).


 


Agreement and Plan of Merger dated as of January 23, 2007, among
RDA Holding Co., WRC Acquisition Co., a Delaware corporation, and WRC Media
Inc.


 


Procurement Agreement dated as of February 2, 2007, between Opera
Solutions, LLC and RDA Holding Co.(1)


 






(1) The obligations of RDA Holding Co. (other than the issuance of
equity interests) under this agreement to be assigned to a Restricted
Subsidiary on or prior to the Closing Date.


 

















 


Schedule 1.01G


Unrestricted Subsidiaries


 


None.


 

















 


Schedule 1.01H


Mandatory Cost Formulae


 


1.                                       The
Mandatory Cost (to the extent applicable) is an addition to the interest rate
to compensate Lenders for the cost of compliance with:


 


(a)                                  the requirements of
the Bank of England and/or the Financial Services Authority (or, in either
case, any other authority which replaces all or any of its functions); or


 


(b)                                 the requirements of the European Central Bank.


 


2.                                       On
the first day of each Interest Period (or as soon as practicable thereafter)
the Administrative Agent shall calculate, as a percentage rate, a rate (the “Additional Cost Rate”) for each Lender, in accordance with
the paragraphs set out below.  The
Mandatory Cost will be calculated by the Administrative Agent as a weighted
average of the Lenders’ Additional Cost Rates (weighted in proportion to the
percentage participation of each Lender in the relevant Loan) and will be
expressed as a percentage rate per annum. 
The Administrative Agent will, at the request of the Company or any
Lender, deliver to the Company or such Lender as the case may be, a statement
setting forth the calculation of any Mandatory Cost.


 


3.                                       The
Additional Cost Rate for any Lender lending from a Lending Office in a
Participating Member State will be the percentage notified by that Lender to
the Administrative Agent.  This
percentage will be certified by such Lender in its notice to the Administrative
Agent to be its reasonable determination of the cost (expressed as a percentage
of such Lender’s participation in all Loans made from such Lending Office) of
complying with the minimum reserve requirements of the European Central Bank in
respect of Loans made from that Lending Office.


 


4.                                       The
Additional Cost Rate for any Lender lending from a Lending Office in the United
Kingdom will be calculated by the Administrative Agent as follows:


 


(a)                                  in relation to any Loan in Sterling:


 


	
  
  AB+C(B-D)+E
  x 0.01

  

  	
  p per cent per annum

  
	
  100 - (A+C)

  



 


(b)                                 in relation to any Loan in any currency other
than Sterling:


 


	
  
  E x 0.01 

  

  	
  p percent per annum

  
	
  300

  



 

















 


Where:


 


“A”                          is the
percentage of Eligible Liabilities (assuming these to be in excess of any
stated minimum) which that Lender is from time to time required to maintain as
an interest free cash ratio deposit with the Bank of England to comply with
cash ratio requirements.


 


“B”                            is the percentage rate of interest (excluding the Applicable Rate, the
Mandatory Cost and any interest charged on overdue amounts pursuant to the
first sentence of Section 2.08(b) and, in the case of interest (other
than on overdue amounts) charged at the Default Rate, without counting any
increase in interest rate effected by the charging of the Default Rate) payable
for the relevant Interest Period of such Loan.


 


“C”                            is the percentage (if any)
of Eligible Liabilities which that Lender is required from time to time to
maintain as interest bearing Special Deposits with the Bank of England.


 


“D”                           is the
percentage rate per annum payable by the Bank of England to the Administrative
Agent on interest bearing Special Deposits.


 


“E”                             is
designed to compensate Lenders for amounts payable under the Fees Regulations
and is calculated by the Administrative Agent as being the average of the most
recent rates of charge supplied by the Lenders to the Administrative Agent pursuant to paragraph 7 below
and expressed in pounds per £1,000,000.


 


5.                                       For
the purposes of this Schedule:


 


(a)                                  “Eligible Liabilities”
and “Special Deposits” have the meanings
given to them from time to time under or pursuant to the Bank of England Act
1998 or (as may be appropriate) by the Bank of England;


 


(b)                                 “Fees Regulations”
means the rules or periodic fees contained in the FSA Supervision Manual
or such other law or regulation as may be in force from time to time in respect
of the payment of fees for the acceptance of deposits;


 


(c)                                  “Fee Tariffs”
means the fee tariffs specified in the Fees Regulations under the activity
group A.1 Deposit acceptors (ignoring any minimum fee or zero rated fee
required pursuant to the Fees Regulations but taking into account any
applicable discount rate); and


 

















 


(d)                                 “Tariff Base”
has the meaning given to it in, and will be calculated in accordance with, the
Fees Regulations.


 


6.                                       In
application of the above formulae, A, B, C and D will be included in the
formulae as percentages (i.e. 5% will be included in the formula as 5 and not
as 0.05).  A negative result obtained by
subtracting D from B shall be taken as zero. 
The resulting figures shall be rounded to four decimal places.


 


7.                                       If
requested by the Administrative Agent or the Company, each Lender with a
Lending Office in the United Kingdom or a Participating Member State shall, as
soon as practicable after publication by the Financial Services Authority,
supply to the Administrative Agent and the Company, the rate of charge payable
by such Lender to the Financial Services Authority pursuant to the Fees
Regulations in respect of the relevant financial year of the Financial Services
Authority (calculated for this purpose by such Lender as being the average of
the Fee Tariffs applicable to such Lender for that financial year) and
expressed in pounds per £1,000,000 of the Tariff Base of such Lender.


 


8.                                       Each
Lender shall supply any information required by the Administrative Agent for
the purpose of calculating its Additional Cost Rate.  In particular, but without limitation, each
Lender shall supply the following information in writing on or prior to the date
on which it becomes a Lender:


 


(a)                                  its jurisdiction of incorporation and the
jurisdiction of the Lending Office out of which it is making available its
participation in the relevant Loan; and


 


(b)                                 any other information that the Administrative
Agent may reasonably require for such purpose.


 


Each Lender shall promptly
notify the Administrative Agent in writing of any change to the information
provided by it pursuant to this paragraph.


 


9.                                       The
percentages or rates of charge of each Lender for the purpose of A, C and E
above shall be determined by the Administrative Agent based upon the
information supplied to it pursuant to paragraphs 7 and 8 above
and on the assumption that, unless a Lender notifies the Administrative Agent
to the contrary, each Lender’s obligations in relation to cash ratio deposits,
Special Deposits and the Fees Regulations are the same as those of a typical
bank from its jurisdiction of incorporation with a Lending Office in the same
jurisdiction as such Lender’s Lending Office.


 


10.                                 The
Administrative Agent shall have no liability to any Person if such
determination results in an Additional Cost Rate which over- or
under-compensates any Lender and shall be entitled to assume that the
information provided by any Lender pursuant to paragraphs 3, 7
and 8 above is true and correct in all respects.


 

















 


11.                                 The
Administrative Agent shall distribute the additional amounts received as a
result of the Mandatory Cost to the Lenders on the basis of the Additional Cost
Rate for each Lender based on the information provided by each Lender pursuant
to paragraphs 3, 7 and 8 above.


 


12.                                 Any
determination by the Administrative Agent pursuant to this Schedule in relation
to a formula, the Mandatory Cost, an Additional Cost Rate or any amount payable
to a Lender shall, in the absence of manifest error, be conclusive and binding
on all parties hereto.


 


The Administrative Agent may from time to time, after consultation with
the Company and the Lenders, determine and notify to all parties any amendments
which are required to be made to this Schedule in order to comply with any
change in law, regulation or any requirements from time to time imposed by the
Bank of England, the Financial Services Authority or the European Central Bank
(or, in any case, any other authority which replaces all or any of its functions)
and any such determination shall, in the absence of manifest error, be
conclusive and binding on all parties hereto.


 

















 


Schedule 1.01I


Letters of Credit


 


Each of the following letters
of credit are issued by JPMorgan Chase Bank, N.A.:


 


	
  Letter of Credit No.

  	
   

  	
  Beneficiary

  	
   

  	
  Stated Amount

  	
   

  	
  Expiry Date

  	
   

  
	
  T-612818

  	
   

  	
  COGNAC
  WILLOW, LLC C/O PRUDENTIAL REAL ESTATE INVESTORS

  	
   

  	
  $

  	
  559,667.06

  	
   

  	
  12-Oct-07

  	
   

  
	
  IBTI580368

  	
   

  	
  TRANSFAR
  INTERNATIONAL CORP.

  	
   

  	
  $

  	
  56,749.20

  	
   

  	
  5-Mar-07

  	
   

  
	
  IBTI580368

  	
   

  	
  TRANSFAR
  INTERNATIONAL CORP.

  	
   

  	
  $

  	
  60,283.20

  	
   

  	
  5-Mar-07

  	
   

  
	
  IBTI580368

  	
   

  	
  TRANSFAR
  INTERNATIONAL CORP.

  	
   

  	
  $

  	
  90,424.80

  	
   

  	
  13-Mar-07

  	
   

  
	
  IBTI580368

  	
   

  	
  TRANSFAR
  INTERNATIONAL CORP.

  	
   

  	
  $

  	
  42,271.20

  	
   

  	
  19-Mar-07

  	
   

  
	
  IBTI580368

  	
   

  	
  TRANSFAR
  INTERNATIONAL CORP.

  	
   

  	
  $

  	
  30,141.60

  	
   

  	
  19-Mar-07

  	
   

  
	
  IBTI581571

  	
   

  	
  TRANSFAR
  INTERNATIONAL CORP.

  	
   

  	
  $

  	
  26,769.60

  	
   

  	
  6-Mar-07

  	
   

  
	
  IBTI581571

  	
   

  	
  TRANSFAR
  INTERNATIONAL CORP.

  	
   

  	
  $

  	
  26,769.60

  	
   

  	
  6-Mar-07

  	
   

  
	
  IBTI581571

  	
   

  	
  TRANSFAR
  INTERNATIONAL CORP.

  	
   

  	
  $

  	
  26,769.60

  	
   

  	
  7-Mar-07

  	
   

  
	
  IBTI581571

  	
   

  	
  TRANSFAR
  INTERNATIONAL CORP.

  	
   

  	
  $

  	
  26,769.60

  	
   

  	
  16-Mar-07

  	
   

  
	
  IBTI581571

  	
   

  	
  TRANSFAR INTERNATIONAL
  CORP.

  	
   

  	
  $

  	
  9,235.20

  	
   

  	
  13-Mar-07

  	
   

  
	
  IBTI581571

  	
   

  	
  TRANSFAR
  INTERNATIONAL CORP.

  	
   

  	
  $

  	
  53,539.20

  	
   

  	
  13-Mar-07

  	
   

  
	
  IBTI581571

  	
   

  	
  TRANSFAR
  INTERNATIONAL CORP.

  	
   

  	
  $

  	
  26,769.60

  	
   

  	
  13-Mar-07

  	
   

  
	
  IBTI581571

  	
   

  	
  TRANSFAR
  INTERNATIONAL CORP.

  	
   

  	
  $

  	
  26,769.60

  	
   

  	
  13-Mar-07

  	
   

  
	
  IBTI582020

  	
   

  	
  SUN VIGOR
  INDUSTRIAL CO. LTD.

  	
   

  	
  $

  	
  86,793.18

  	
   

  	
  6-Apr-07

  	
   

  
	
  IBTI583478

  	
   

  	
  M. K.
  DISTRIBUTORS INC.

  	
   

  	
  $

  	
  340,470.00

  	
   

  	
  20-Mar-07

  	
   

  
	
  IBTI583479

  	
   

  	
  WOODMAX KY
  INDUSTRIES CORP.

  	
   

  	
  $

  	
  151,988.94

  	
   

  	
  7-Mar-07

  	
   

  
	
  IBTI583944

  	
   

  	
  YOA LING
  INDUSTRY CO LTD

  	
   

  	
  $

  	
  148,751.80

  	
   

  	
  13-Mar-07

  	
   

  
	
  IBTI584462

  	
   

  	
  SUN VIGOR
  INDUSTRIAL CO. LTD.

  	
   

  	
  $

  	
  98,455.00

  	
   

  	
  8-Mar-07

  	
   

  
	
  I584463

  	
   

  	
  SUN VIGOR
  INDUSTRIAL CO. LTD.

  	
   

  	
  $

  	
  162,086.64

  	
   

  	
  2-May-07

  	
   

  
	
  I585750

  	
   

  	
  SUN VIGOR
  INDUSTRIAL CO. LTD.

  	
   

  	
  $

  	
  106,898.30

  	
   

  	
  16-Apr-07

  	
   

  
																			



 

















 


Schedule 2.01


Commitments


 


 


	
  LENDER

  	
   

  	
  REVOLVING

  COMMITMENT

  	
   

  	
  TERM LOAN

  COMMITMENT

  	
   

  	
  EURO TERM LOAN

  COMMITMENT(1)

  	
   

  
	
  JPMorgan Chase Bank, N.A.

  	
   

  	
  $

  	
  77,666,666.68

  	
   

  	
  $

  	
  403,333,333.34

  	
   

  	
  $

  	
  100,000,000

  	
   

  
	
  Citicorp North America, Inc.

  	
   

  	
  $

  	
  77,666,666.66

  	
   

  	
  $

  	
  403,333,333.33

  	
   

  	
  $

  	
  0

  	
   

  
	
  Merrill Lynch Capital Corporation

  	
   

  	
  $

  	
  77,666,666.66

  	
   

  	
  $

  	
  403,333,333.33

  	
   

  	
  $

  	
  0

  	
   

  
	
  The Royal Bank of Scotland plc

  	
   

  	
  $

  	
  35,000,000

  	
   

  	
  $

  	
  0

  	
   

  	
  $

  	
  0

  	
   

  
	
  General Electric Capital Corporation

  	
   

  	
  $

  	
  25,000,000

  	
   

  	
  $

  	
  0

  	
   

  	
  $

  	
  0

  	
   

  
	
  Toronto Dominion (Texas) LLC

  	
   

  	
  $

  	
  5,000,000

  	
   

  	
  $

  	
  0

  	
   

  	
  $

  	
  0

  	
   

  
	
  The CIT Group/Equipment Financing, Inc.

  	
   

  	
  $

  	
  2,000,000

  	
   

  	
  $

  	
  0

  	
   

  	
  $

  	
  0

  	
   

  
	
  Total

  	
   

  	
  $

  	
  300,000,000

  	
   

  	
  $

  	
  1,210,000,000

  	
   

  	
  $

  	
  100,000,000

  	
   

  



 






(1) To be funded in Euros.


 

















 


Schedule 5.05


Certain Liabilities


 


·                                          The
Reader’s Digest Pension Scheme (U.K.), approved, is currently under funded by
approximately $70 million.


 


·                                          Lindner, et al. v. the Company.  The Company is a defendant in a putative
class action before the U.S. District Court for the Central District of
California, Southern Division.  The class
action claims that Reader’s Digest magazine’s continuous renewal program
violates federal and state consumer protection status.  As of September 25, 2006, this matter
was fully briefed on appeal to the 9th Circuit Court of Appeals following the
trial court’s dismissal of the action.


 


·                                          The following table lists ongoing audits or examinations
by taxing authorities of Reader’s Digest or any of its Subsidiaries:


 


	
  Company

  	
   

  	
  Taxing Jurisdiction

  	
   

  	
  Type of Tax

  	
   

  	
  Period Under Audit

  
	
  Domestic Tax Audits

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  The
  Reader’s Digest Association, Inc.

  	
   

  	
  Federal

  	
   

  	
  Income

  	
   

  	
  2001 - 2003

  
	
  The
  Reader’s Digest Association, Inc.

  	
   

  	
  Federal

  	
   

  	
  Employment

  	
   

  	
  2000 - 2003

  
	
  The
  Reader’s Digest Association, Inc.

  	
   

  	
  New York

  	
   

  	
  Income

  	
   

  	
  1997 - 1999

  
	
  The
  Reader’s Digest Association, Inc.

  	
   

  	
  New York

  	
   

  	
  Income

  	
   

  	
  2000 - 2003

  
	
  The
  Reader’s Digest Association, Inc.

  	
   

  	
  Texas

  	
   

  	
  Franchise

  	
   

  	
  TBD(2)

  
	
  Books
  Are Fun, Ltd.

  	
   

  	
  Minnesota

  	
   

  	
  Sales

  	
   

  	
  1/03 - 5/06

  
	
  Books
  Are Fun, Ltd.

  	
   

  	
  Wisconsin

  	
   

  	
  Income

  	
   

  	
  2002 - 2005

  
	
  QSP, Inc.

  	
   

  	
  Arizona

  	
   

  	
  Sales

  	
   

  	
  4/00 - 3/04

  
	
  QSP, Inc.

  	
   

  	
  Florida

  	
   

  	
  Sales

  	
   

  	
  12/03 - 11/06

  
	
  QSP, Inc.

  	
   

  	
  Illinois

  	
   

  	
  Sales

  	
   

  	
  2003 - 2005

  
	
  QSP, Inc.

  	
   

  	
  Minnesota

  	
   

  	
  Income

  	
   

  	
  2001 - 2004

  
	
  QSP, Inc.

  	
   

  	
  New York

  	
   

  	
  Income

  	
   

  	
  2002 - 2003

  
	
  QSP, Inc.

  	
   

  	
  Ohio

  	
   

  	
  Franchise

  	
   

  	
  2002 - 2003

  
	
  QSP, Inc.

  	
   

  	
  Washington

  	
   

  	
  Sales & B&O

  	
   

  	
  2002 - 2005

  
	
  Taste
  of Home Entertaining, Inc.

  	
   

  	
  Shelby County, AL

  	
   

  	
  Sales

  	
   

  	
  TBD(3)

  
	
  Taste
  of Home Productions, Inc.

  	
   

  	
  South Dakota

  	
   

  	
  Sales

  	
   

  	
  2002 - 2006

  
	
  World
  Wide Country Tours, Inc.

  	
   

  	
  Minnesota

  	
   

  	
  Income

  	
   

  	
  2003 - 2005

  
	
  World
  Wide Country Tours, Inc.

  	
   

  	
  Texas

  	
   

  	
  Income & Sales

  	
   

  	
  2002 - 2006

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Foreign Tax Audits

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  The
  Reader’s Digest Association (Canada), Ltd.

  	
   

  	
  Federal Revenue

  	
   

  	
  Income

  	
   

  	
  2001 - 2004

  



 






(2) State to
inform company regarding period being audited.


 


(3) County to
inform company regarding period being audited.


 

















 


	
  The
  Reader’s Digest Association (Canada), Ltd.

  	
   

  	
  Ontario

  	
   

  	
  Sales

  	
   

  	
  1/02 - 7/05

  
	
  Quality
  Service Programs, Inc. (Canada)

  	
   

  	
  Federal Revenue

  	
   

  	
  Income

  	
   

  	
  2002 - 2003

  
	
  Quality
  Service Programs, Inc. (Canada)

  	
   

  	
  Provincial - Quebec

  	
   

  	
  Sales

  	
   

  	
  6/03 - 6/06

  
	
  Selecceous
  do Reader’s Digest (Portugal) S.A.

  	
   

  	
  Federal

  	
   

  	
  Income

  	
   

  	
  2001 - 2005

  
	
  Selecceous
  do Reader’s Digest (Portugal) S.A.

  	
   

  	
  Federal

  	
   

  	
  Withholding

  	
   

  	
  2002

  
	
  JSC
  Publishing House Reader’s Digest (Russia)

  	
   

  	
  Federal

  	
   

  	
  Income

  	
   

  	
  2002 - 2003

  
	
  Das Beste Aus Reader’s Digest AG (Switzerland)

  	
   

  	
  Federal

  	
   

  	
  Income

  	
   

  	
  2004

  
	
  Reader’s
  Digest N.V. - S.A. (Belgium)

  	
   

  	
  Federal

  	
   

  	
  Income

  	
   

  	
  2004 - 2005

  
	
  eFundraising.com
  Corporation

  Incorporated/Corporation eFundraising.com 

  Incorporee (Canada)

  	
   

  	
  Provincial - Quebec

  	
   

  	
  Income

  	
   

  	
  2003 - 2005

  
	
  Reader’s
  Digest (Guangzhou) Direct Mail Service Co. Ltd. (China)

  	
   

  	
  Federal

  	
   

  	
  Income

  	
   

  	
  2004

  
	
  Reader’s
  Digest Vyber S.R.O. (Czech)

  	
   

  	
  Federal

  	
   

  	
  Income

  	
   

  	
  2006

  
	
  LLC
  Publisher Reader’s Digest (Kazakhstan)

  	
   

  	
  Federal

  	
   

  	
  VAT

  	
   

  	
  2005

  
	
  The
  Reader’s Digest Assoc. Ltd. (UK)

  	
   

  	
  Federla

  	
   

  	
  Income

  	
   

  	
  2004

  



 


·                                          Direct
Holdings U.S. Corp. will assume the indemnification obligations of Direct
Holdings Worldwide L.L.C. under the Stock Purchase Agreement dated as of May 26,
2006, among LV Catalog Holding Corp., LVC, Direct Holdings Worldwide L.L.C.,
and Lillian Vernon.


 


·                                          By
email dated December 2, 2005, a representative of Warner Music Group
advised DHAI of several issues they considered open in connection with an
agreement between Rhino Entertainment Company and DHAI entered into in 2001
regarding a music product called “Treasury of Folk” or “The Folk Years” and an
agreement entered into between Warner Strategic Marketing, Inc. and DHAI
entered into in 2002 regarding a video product called “Doo Wop”.  The email asserted, among other things, that
Rhino has never received any accounting or payments on certain incremental
sales associated with Treasury of Folk or The Folk Years purportedly due, that
a royalty reduction on the Doo Wop product was subject to conditions that had
not been satisfied and that underpayment of royalties based on the unreduced
rate was $791,626 through March 2005, and that WQED has separately brought
a breach of contract claim against Warner Strategic Marketing on the basis that
DHAI’s inclusion of WQED’s “This Land is Your Land” 2-CD music set in
non-pledge box set sales was not authorized. 
By subsequent email dated January 11, 2006, a representative of
Warner Music Group stated, among other things, that nearly $800,000 in royalties
remain unpaid and that, as a result of Time Life’s actions, Warner Music Group
has had to settle a related royalty dispute with WQED for over
$400,000.  The matter is still pending.


 


·                                          SEC
v. Martin E. Kenney, 05 Civ. 7944 (S.D.N.Y. Sept. 13, 2005):  The Securities and Exchange Commission (SEC)
filed a complaint against Martin E. Kenney, former Chief Executive Officer of
the Company, alleging various securities law violations.  The Company was not named as a defendant in
the lawsuit.  A tentative settlement has
been reached and remains subject to final agreement among the parties and SEC
approval.


 
















 


The terms of the tentative settlement would
require Kenney to pay a penalty of $60,000, for which he could not be
reimbursed by the Company.  Kenney
requested indemnification by the Company in a letter dated March 10, 2004,
pursuant to Article VII of the Company’s By-Laws, which provides for
indemnification of officers for expenses, judgments, fines and amounts paid in
settlement expenses.  The Company
incurred approximately $3.4 million in legal fees in connetion with this case,
including fees incurred during the initial investigation by the SEC, the
defense of an officer of CompassLearning, other employees of CompassLearning,
and Kenney.  Kenney’s attorneys have
indicated that they intend to take the position that the Company should pay
whatever legal fees are not covered by the insurance company.  To date, the Company’s directors and officers
insurance carrrier has taken the position that it will cover only reasonable
counsel fees for Kenney’s attorney following the commencement of the action,
potentially leaving approximately $2.1 million or more in legal fees uncovered,
of which the Company has already paid all but approximately $600,000.


 


·                                          Kindle
Publishing LLC v. CompassLearning, Inc. and American Guidance Service, Inc.,
No. A06CA948-SS (W.D. Tex. Dec. 4, 2006):  Kindle Publishing has filed a complaint
against CompassLearning alleging copyright infringement and unfair competition
and seeking a preliminary injunction in connection with a license agreement
between CompassLearning and Lindy Acquisition, which subsequently assigned its
rights to Kindle Publishing. 
CompasLearning intends to deny any liability under the license
agreement, but it projects that it will nevertheless incur approximately $1.25
million in expenses in replacing such content since Kindle has effectively
terminated the license agreement effective August 2007.


 

















 


Schedule 5.09


Environmental Matters


 


None.


 

















 


Schedule 5.10


Taxes


 


·                                          The Reader’s Digest Association, Inc. currently has a
tax reserve for possible state and local income tax liabilities related to QSP, Inc.
for tax returns that have not been filed in prior years in the following states
and localities:


 


Arizona


Colorado


Connecticut


Florida


Georgia


Hawaii


Louisiana


Maryland


Massachusetts


Minnesota


New Mexico


New York City


Ohio


Tennessee


Texas


 


·                                          Weekly
Reader Corporation.  Connecticut
Income/Franchise tax assessment (12/31/1994-12/31/1999).  $592,000. 
Connecticut has imputed interest income on the taxpayer’s intercompany
balances.  In addition, the state has
challenged the Company’s apportionment of intangibles outside of the state
(franchise component).  An informal
conference has been requested (indmenified by Primedia, Inc.).  The Company contests the assessment on the
basis of procedural grounds (the statute of limitations has expired) as well as
technical merits.


 


·                                          Weekly
Reader Corporation.  Connecticut
Income/Franchise tax assessment (11/17/1999). 
$740,000.  The assessment relates
to a state challenge to the taxpayer’s unitary apportionment filing
method.  The state recalculated the
Company’s tax liability based upon a separate filing method.  The liability is materially due to the
apportionment of IRC 338(h)(10) gain to Connecticut.  An informal conference was requested
(indemnified by Primedia, Inc.)  The
Company contests the assessment on technical merits and abuse of Commissioner
of Revenue Services’ discretion in granting an alternative apportionment
method.


 


·                                          Lifetime
Learning Systems, Inc.  Connecticut
Income/Franchise tax assessment (Primedia, Inc. Combined Return).  (1/1/1999-11/17/1999).  $1,395,000. 
The assesstment relates to a state challenge to the taxpayer’s unitary
apportionment filing method.  The state
recalculated the Company’s tax liability based upon a separate filing
method.  The liability is materially due
to the apportionment of IRC 338(h)(10) gain to Connecticut.  An informal conference was requested
(indemnified by Primedia, Inc.)  The



 

















 


Company contests the assessment on technical
merits and abuse of Commissioner of Revenue Services’ discretion in granting an
alternative apportionment method.


 


·                                          Additional
tax exposure related to the pushdown and allocation of interest to its
subsidiaries was reflected in the 12/31/2005 financial statements.


 


24

















 


Schedule 5.11


ERISA Compliance


 


None.


 

















 


Schedule 5.12


Subsidiaries and Other Equity Investments(4)


 


Domestic


 


	
  Loan
  Party

  	
   

  	
  Subsidiary

  	
   

  	
  Subsidiary

  Jurisdiction 

  of 

  Organization

  	
   

  	
  Ownership Interest

  	
   

  	
  Percent

  Ownership

  	
   

  	
  Equity

  Interest

  Required to 

  be Pledged

  	
   

  
	
  RDA
  Holding Co.

  	
   

  	
  The
  Reader’s Digest Association, Inc.

  	
   

  	
  Delaware

  	
   

  	
  1,000 shares common

  	
   

  	
  100

  	
  %

  	
  100

  	
  %

  
	
  The
  Reader’s Digest Association, Inc.

  	
   

  	
  Allrecipes.com, Inc.

  	
   

  	
  Washington

  	
   

  	
  10 shares common

  	
   

  	
  100

  	
  %

  	
  100

  	
  %

  
	
  The
  Reader’s Digest Association, Inc.

  	
   

  	
  Ardee
  Music Publishing, Inc.

  	
   

  	
  Delaware

  	
   

  	
  100 shares common

  	
   

  	
  100

  	
  %

  	
  100

  	
  %

  
	
  The
  Reader’s Digest Association, Inc.

  	
   

  	
  Books
  Are Fun, Ltd.

  	
   

  	
  Iowa

  	
   

  	
  100 shares common

  	
   

  	
  100

  	
  %

  	
  100

  	
  %

  
	
  The
  Reader’s Digest Association, Inc.

  	
   

  	
  Christmas
  Angel Productions, Inc.

  	
   

  	
  Delaware

  	
   

  	
  10 shares common

  	
   

  	
  100

  	
  %

  	
  100

  	
  %

  
	
  The
  Reader’s Digest Association, Inc.

  	
   

  	
  Pegasus
  Asia Investments Inc.

  	
   

  	
  Delaware

  	
   

  	
  10 shares common

  	
   

  	
  100

  	
  %

  	
  100

  	
  %

  
	
  The
  Reader’s Digest Association, Inc.

  	
   

  	
  Pegasus
  Finance Corp.

  	
   

  	
  Delaware

  	
   

  	
  10 shares common

  	
   

  	
  100

  	
  %

  	
  100

  	
  %

  
	
  The
  Reader’s Digest Association, Inc.

  	
   

  	
  Pegasus
  Investment, Inc.

  	
   

  	
  Delaware

  	
   

  	
  10 shares common

  	
   

  	
  100

  	
  %

  	
  100

  	
  %

  
	
  The
  Reader’s Digest Association, Inc.

  	
   

  	
  Pegasus
  Sales, Inc.

  	
   

  	
  Delaware

  	
   

  	
  1,000 shares common

  	
   

  	
  100

  	
  %

  	
  100

  	
  %

  
	
  The
  Reader’s Digest Association, Inc.

  	
   

  	
  Pleasantville
  Music Publishing, Inc.

  	
   

  	
  Delaware

  	
   

  	
  100 shares common

  	
   

  	
  100

  	
  %

  	
  100

  	
  %

  
	
  The
  Reader’s Digest Association, Inc.

  	
   

  	
  QSP, Inc.

  	
   

  	
  Delaware

  	
   

  	
  10 shares common

  	
   

  	
  100

  	
  %

  	
  100

  	
  %

  
	
  The
  Reader’s Digest Association, Inc.

  	
   

  	
  R.
  D. Manufacturing Corporation

  	
   

  	
  Delaware

  	
   

  	
  1,000 shares common

  	
   

  	
  100

  	
  %

  	
  100

  	
  %

  
	
  The
  Reader’s Digest Association, Inc.

  	
   

  	
  RD
  Publications, Inc. (f/k/a Travel Publications, Inc.)

  	
   

  	
  Delaware

  	
   

  	
  10 shares common

  	
   

  	
  100

  	
  %

  	
  100

  	
  %

  
	
  The
  Reader’s Digest Association, Inc.

  	
   

  	
  Reader’s
  Digest Children’s Publishing, Inc. (f/k/a Reader’s Digest Sub
  Five, Inc.)

  	
   

  	
  Delaware

  	
   

  	
  10 shares common

  	
   

  	
  100

  	
  %

  	
  100

  	
  %

  
	
  The
  Reader’s Digest Association, Inc.

  	
   

  	
  Reader’s
  Digest Consumer Services, Inc.

  	
   

  	
  Delaware

  	
   

  	
  10 shares common

  	
   

  	
  100

  	
  %

  	
  100

  	
  %

  



 






(4) Reflects final structure on the Closing Date, following the
consummation of the Acquisitions and the contribution by RDA Holding Co. to The
Reader’s Digest Association, Inc. of the Equity Interests of each of
Direct Holdings U.S. Corp. and WRC Media Inc.


 

















 


	
  The
  Reader’s Digest Association, Inc.

  	
   

  	
  Reader’s
  Digest Entertainment, Inc.

  	
   

  	
  Delaware

  	
   

  	
  10 shares common

  	
   

  	
  100

  	
  %

  	
  100

  	
  %

  
	
  The
  Reader’s Digest Association, Inc.

  	
   

  	
  Reader’s
  Digest Financial Services, Inc.

  	
   

  	
  Delaware

  	
   

  	
  10 shares common

  	
   

  	
  100

  	
  %

  	
  100

  	
  %

  
	
  The
  Reader’s Digest Association, Inc.

  	
   

  	
  Reader’s
  Digest Latinoamerica S.A.

  	
   

  	
  Delaware

  	
   

  	
  10 shares common

  	
   

  	
  100

  	
  %

  	
  100

  	
  %

  
	
  The
  Reader’s Digest Association, Inc.

  	
   

  	
  Reader’s
  Digest Sales and Services, Inc.

  	
   

  	
  Delaware

  	
   

  	
  1,000 shares common

  	
   

  	
  100

  	
  %

  	
  100

  	
  %

  
	
  The
  Reader’s Digest Association, Inc.

  	
   

  	
  Reader’s
  Digest Sub Nine, Inc.

  	
   

  	
  Delaware

  	
   

  	
  10 shares common

  	
   

  	
  100

  	
  %

  	
  100

  	
  %

  
	
  The
  Reader’s Digest Association, Inc.

  	
   

  	
  Reader’s
  Digest Young Families, Inc.

  	
   

  	
  Delaware

  	
   

  	
  10 shares common

  	
   

  	
  100

  	
  %

  	
  100

  	
  %

  
	
  The
  Reader’s Digest Association, Inc.

  	
   

  	
  SMDDMS, Inc.

  	
   

  	
  Delaware

  	
   

  	
  10 shares common

  	
   

  	
  100

  	
  %

  	
  100

  	
  %

  
	
  The
  Reader’s Digest Association, Inc.

  	
   

  	
  Taste
  of Home Entertaining, Inc. (f/k/a Reader’s Digest Home Parties)

  	
   

  	
  Delaware

  	
   

  	
  10 shares common

  	
   

  	
  100

  	
  %

  	
  100

  	
  %

  
	
  The
  Reader’s Digest Association, Inc.

  	
   

  	
  The
  Reader’s Digest Association (Russia) Incorporated (f/k/a Reader’s Digest Sub
  Four, Inc.)

  	
   

  	
  Delaware

  	
   

  	
  10 shares common

  	
   

  	
  100

  	
  %

  	
  100

  	
  %

  
	
  The
  Reader’s Digest Association, Inc.

  	
   

  	
  W.A.
  Publications, LLC

  	
   

  	
  Delaware

  	
   

  	
  100%

  	
   

  	
  100

  	
  %

  	
  100

  	
  %

  
	
  QSP, Inc.

  	
   

  	
  Family
  Reading Program Corp.

  	
   

  	
  Delaware

  	
   

  	
  10 shares common

  	
   

  	
  100

  	
  %

  	
  100

  	
  %

  
	
  QSP, Inc.

  	
   

  	
  Fundraising.com, Inc.
  (f/k/a Reader’s Digest Sub Eight, Inc.)

  	
   

  	
  Delaware

  	
   

  	
  10 shares common

  	
   

  	
  100

  	
  %

  	
  100

  	
  %

  
	
  QSP, Inc.

  	
   

  	
  QSP
  Distribution Services, LLC

  	
   

  	
  Delaware

  	
   

  	
  100%

  	
   

  	
  100

  	
  %

  	
  100

  	
  %

  
	
  QSP, Inc.

  	
   

  	
  QSP
  Products and Programs, LLC

  	
   

  	
  Delaware

  	
   

  	
  100%

  	
   

  	
  100

  	
  %

  	
  100

  	
  %

  
	
  QSP, Inc.

  	
   

  	
  QSP
  Sales, LLC

  	
   

  	
  Delaware

  	
   

  	
  100%

  	
   

  	
  100

  	
  %

  	
  100

  	
  %

  
	
  QSP, Inc.

  	
   

  	
  QSP
  Services, LLC

  	
   

  	
  Delaware

  	
   

  	
  100%

  	
   

  	
  100

  	
  %

  	
  100

  	
  %

  
	
  QSP, Inc.

  	
   

  	
  QSP
  Ventures, LLC

  	
   

  	
  Delaware

  	
   

  	
  100%

  	
   

  	
  100

  	
  %

  	
  100

  	
  %

  
	
  QSP, Inc.

  	
   

  	
  Reiman
  Media Group, Inc. (f/k/a Reader’s Digest Media Group, Inc.)

  	
   

  	
  Delaware

  	
   

  	
  10 shares common

  	
   

  	
  100

  	
  %

  	
  100

  	
  %

  
	
  QSP, Inc.

  	
   

  	
  VideOvation, Inc.  (f/k/a
  Reader’s Digest Sub Three, Inc.)

  	
   

  	
  Delaware

  	
   

  	
  10 shares common

  	
   

  	
  100

  	
  %

  	
  100

  	
  %

  
	
  RD
  Publications, Inc. (f/k/a Travel Publications, Inc.)

  	
   

  	
  Home
  Service Publications, Inc.

  	
   

  	
  Delaware

  	
   

  	
  10 shares common

  	
   

  	
  100

  	
  %

  	
  100

  	
  %

  



 


27

















 


	
  RD
  Publications, Inc.

  	
   

  	
  RD
  Large Edition, Inc.

  	
   

  	
  Delaware

  	
   

  	
  10 shares common

  	
   

  	
  100

  	
  %

  	
  100

  	
  %

  
	
  RD
  Publications, Inc.

  	
   

  	
  RD
  Trade Shows, Inc.

  	
   

  	
  Delaware

  	
   

  	
  10 shares common

  	
   

  	
  100

  	
  %

  	
  100

  	
  %

  
	
  RD
  Publications, Inc.

  	
   

  	
  RD
  Walking, Inc.

  	
   

  	
  Delaware

  	
   

  	
  10 shares common

  	
   

  	
  100

  	
  %

  	
  100

  	
  %

  
	
  RD
  Publications, Inc.

  	
   

  	
  Retirement
  Living Publishing Company, Inc.

  	
   

  	
  Delaware

  	
   

  	
  10 shares common

  	
   

  	
  100

  	
  %

  	
  100

  	
  %

  
	
  RD
  Publications, Inc.

  	
   

  	
  Travel
  Publications, Inc. (f/k/a RD Publications, Inc.)

  	
   

  	
  Delaware

  	
   

  	
  10 shares common

  	
   

  	
  100

  	
  %

  	
  100

  	
  %

  
	
  Reader’s
  Digest Consumer Services, Inc.

  	
   

  	
  RD
  Magazine Value Partners, Inc.

  	
   

  	
  Delaware

  	
   

  	
  10 shares common

  	
   

  	
  100

  	
  %

  	
  100

  	
  %

  
	
  Reader’s
  Digest Latinoamerica, S.A.

  	
   

  	
  WAPLA,
  LLC

  	
   

  	
  Delaware

  	
   

  	
  100 units limited liability interests

  	
   

  	
  100

  	
  %

  	
  100

  	
  %

  
	
  Reiman
  Media Group, Inc. (f/k/a Reader’s Digest Media Group, Inc.)

  	
   

  	
  Taste
  of Home Media Group, Inc.  (f/k/a
  Reader’s Digest RAP, Inc.)

  	
   

  	
  Delaware

  	
   

  	
  10 shares common

  	
   

  	
  100

  	
  %

  	
  100

  	
  %

  
	
  Reiman
  Media Group, Inc. (f/k/a Reader’s Digest Media Group, Inc.)

  	
   

  	
  Taste
  of Home Productions, Inc.  (f/k/a
  Reader’s Digest HV, Inc.)

  	
   

  	
  Delaware

  	
   

  	
  10 shares common

  	
   

  	
  100

  	
  %

  	
  100

  	
  %

  
	
  Reiman
  Media Group, Inc. (f/k/a Reader’s Digest Media Group, Inc.)

  	
   

  	
  World
  Wide Country Tours, Inc.  (f/k/a
  Reader’s Digest WWCT, Inc.)

  	
   

  	
  Delaware

  	
   

  	
  10 shares common

  	
   

  	
  100

  	
  %

  	
  100

  	
  %

  
	
  Travel
  Publications, Inc.

  	
   

  	
  RD
  Member Services, Inc.

  	
   

  	
  Delaware

  	
   

  	
  10 shares common

  	
   

  	
  100

  	
  %

  	
  100

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  The
  Reader’s Digest Association, Inc.

  	
   

  	
  Direct
  Holdings U.S. Corp.

  	
   

  	
  Delaware

  	
   

  	
  200,000 shares common

  	
   

  	
  100

  	
  %

  	
  100

  	
  %

  
	
  Direct
  Holdings U.S. Corp.

  	
   

  	
  Direct
  Holdings Americas Inc. (f/k/a Time-Life Books Inc.)

  	
   

  	
  Delaware

  	
   

  	
  1,000 shares common

  	
   

  	
  100

  	
  %

  	
  100

  	
  %

  
	
  Direct
  Holdings U.S. Corp.

  	
   

  	
  Direct
  Holdings IP L.L.C.

  	
   

  	
  Delaware

  	
   

  	
  100%

  	
   

  	
  100

  	
  %

  	
  100

  	
  %

  
	
  Direct
  Holdings Americas Inc. (f/k/a Time Life Inc.)

  	
   

  	
  Direct
  Holdings Custom Publishing Inc. (f/k/a Time Life Custom Publishing Inc.)

  	
   

  	
  Delaware

  	
   

  	
  100 shares common

  	
   

  	
  100

  	
  %

  	
  100

  	
  %

  
	
  Direct
  Holdings Americas Inc. (f/k/a Time Life Inc.)

  	
   

  	
  Direct
  Holdings Education Inc. (f/k/a Time Life Education Inc.)

  	
   

  	
  Delaware

  	
   

  	
  100 shares common

  	
   

  	
  100

  	
  %

  	
  100

  	
  %

  
	
  Direct
  Holdings Americas Inc. (f/k/a Time Life Inc.)

  	
   

  	
  Alex
  Inc.

  	
   

  	
  Delaware

  	
   

  	
  100 shares common

  	
   

  	
  100

  	
  %

  	
  100

  	
  %

  
	
  Direct
  Holdings Americas Inc. (f/k/a Time-Life Books Inc.)

  	
   

  	
  Direct
  Holdings Customer Service, Inc. (f/k/a Time-Life Customer Service Inc.)

  	
   

  	
  Delaware

  	
   

  	
  100 shares common

  	
   

  	
  100

  	
  %

  	
  100

  	
  %

  
	
  Direct
  Holdings Americas Inc. (f/k/a Time Life Inc.)

  	
   

  	
  Direct
  Holdings Libraries Inc. (f/k/a Time-Life Libraries, Inc.)

  	
   

  	
  New
  York

  	
   

  	
  10,000 shares common

  	
   

  	
  100

  	
  %

  	
  100

  	
  %

  



 


28

















 


	
  The
  Reader’s Digest Association, Inc.

  	
   

  	
  WRC
  Media Inc.

  	
   

  	
  Delaware

  	
   

  	
  1,000 shares common

  	
   

  	
  100

  	
  %

  	
  100

  	
  %

  
	
  WRC
  Media Inc.

  	
   

  	
  CompassLearning, Inc.

  	
   

  	
  Delaware

  	
   

  	
  10,000 shares common

  	
   

  	
  100

  	
  %

  	
  100

  	
  %

  
	
  WRC
  Media Inc.

  	
   

  	
  Weekly
  Reader Corporation

  	
   

  	
  Delaware

  	
   

  	
  2,685,670 shares common

  	
   

  	
  94.9

  	
  %

  	
  100

  	
  %

  
	
  Weekly
  Reader Corporation

  	
   

  	
  Lifetime
  Learning Systems, Inc.

  	
   

  	
  Delaware

  	
   

  	
  1,000 shares common

  	
   

  	
  100

  	
  %

  	
  100

  	
  %

  
	
  Weekly
  Reader Corporation

  	
   

  	
  World
  Almanac Education Group, Inc.

  	
   

  	
  Delaware

  	
   

  	
  1,000 shares common

  	
   

  	
  100

  	
  %

  	
  100

  	
  %

  
	
  World
  Almanac Education Group, Inc.

  	
   

  	
  Funk &
  Wagnalls Yearbook Corp.

  	
   

  	
  Delaware

  	
   

  	
  1,000 shares common

  	
   

  	
  100

  	
  %

  	
  100

  	
  %

  
	
  World
  Almanac Education Group, Inc.

  	
   

  	
  Gareth
  Stevens, Inc.

  	
   

  	
  Wisconsin

  	
   

  	
  2,314,305 shares common

  	
   

  	
  100

  	
  %

  	
  100

  	
  %

  



 


Foreign


 


	
  Loan
  Party

  	
   

  	
  No. of

  Shares

  	
   

  	
  Subsidiary / Equity Investment

  	
   

  	
  Country

  of Incorporation

  	
   

  	
  Percent Ownership

  	
   

  	
  Equity 

  Interest 

  Required to

  be Pledged

  	
   

  
	
  W.A. Publications, LLC 

  The Reader’s Digest Association, Inc. 

  The Reader’s Digest Association, Inc.

  	
   

  	
  1

  872,237

  469,665

  	
   

  	
  The Reader’s Digest
  Association Pty. Limited

  	
   

  	
  Australia

  	
   

  	
  100

  	
  %

  	
  65

  	
  %

  
	
  Doctor Acquisition Co.

  	
   

  	
  1,000

  	
   

  	
  1302791 Alberta ULC

  	
   

  	
  Canada

  	
   

  	
  100

  	
  %

  	
  0

  	
  %(5)

  
	
  The Reader’s Digest
  Association, Inc.

  The Reader’s Digest Association, Inc.

  	
   

  	
  72,000

  38,000

  	
   

  	
  Oy Valitut Palat -
  Reader’s Digest Ab

  	
   

  	
  Finland

  	
   

  	
  100

  	
  %

  	
  65

  	
  %

  
	
  The Reader’s Digest
  Association, Inc.

  	
   

  	
  1

  	
   

  	
  RD German Holdings GmbH

  	
   

  	
  Germany

  	
   

  	
  100

  	
  %

  	
  65

  100

  	
  %(6)

  %(7)

  



 






(5) Not required to
be delivered.


 


(6) With respect to
the Obligations.


 


(7) With respect to
the Obligations of the German Borrower.


 


29

















 


	
  Loan Party

  	
   

  	
  No. of

  Shares

  	
   

  	
  Subsidiary / Equity Investment

  	
   

  	
  Country

  of Incorporation

  	
   

  	
  Percent
  Ownership

  	
   

  	
  Equity
  Interest Required to

  be Pledged

  	
   

  
	
  The Reader’s Digest
  Association, Inc.

  	
   

  	
  80,000 DM

  20,000 DM

  1,900,000 DM

  1,000,000 DM

  9,000,000 DM

  8,000,000 DM

  	
   

  	
  Verlag Das Beste GmbH  

  	
   

  	
  Germany

  	
   

  	
  100

  	
  %

  	
  10

  	
  %(8)

  
	
  W.A. Publications, LLC

  The Reader’s Digest
  Association, Inc.

  The Reader’s Digest
  Association, Inc.

  The Reader’s Digest
  Association, Inc.

  	
   

  	
  5

  45

  33

  12

  	
   

  	
  Reader’s Digest
  Association Far East Limited  

  	
   

  	
  Hong Kong

  	
   

  	
  100

  	
  %

  	
  65

  	
  %

  
	
  W.A. Publications, LLC

  W.A. Publications, LLC

  The Reader’s Digest Association, Inc.

  The Reader’s Digest
  Association, Inc.

  	
   

  	
  1

  9

  65

  25

  	
   

  	
  Reader’s Digest Asia,
  Ltd.

  	
   

  	
  Hong Kong

   

  	
   

  	
  100

  	
  %

  	
  65

  	
  %

  
	
  W.A. Publications, LLC

  W.A. Publications, LLC

  The Reader’s Digest
  Association, Inc. 

  The Reader’s Digest Association, Inc.

  	
   

  	
  1

  9

  65

  24

  	
   

  	
  Reader’s Digest (East
  Asia) Limited

  	
   

  	
  Hong Kong

   

  	
   

  	
  100

  	
  %

  	
  65

  	
  %

  
	
  W.A. Publications, LLC

  The Reader’s Digest
  Association, Inc.

  The Reader’s Digest Association, Inc.

  	
   

  	
  1

  6,500

  3,499

  	
   

  	
  R.D. Properties, Ltd.

  	
   

  	
  Hong Kong

   

  	
   

  	
  100

  	
  %

  	
  65

  	
  %

  
	
  Reader’s Digest
  Association Far East Limited

  The Reader’s Digest Association, Inc.

  	
   

  	
  1

  99

  	
   

  	
  Reader’s Digest Book
  and Home Entertainment (India) Private Limited

  	
   

  	
  India

   

  	
   

  	
  100

  	
  %

  	
  65

  	
  %

  
	
  The Reader’s Digest
  Association, Inc.

  The Reader’s Digest
  Association, Inc.

  	
   

  	
  130

  70

  	
   

  	
  The Reader’s Digest
  Ltd.

  	
   

  	
  Japan

   

  	
   

  	
  100

  	
  %

  	
  65

  	
  %

  
	
  W.A. Publications, LLC

  The Reader’s Digest
  Association, Inc.

  The Reader’s Digest
  Association, Inc.

  	
   

  	
  1

  17,913,286

  9,645,615

  	
   

  	
  Caribe Condor S.A. de C.V.

  	
   

  	
  Mexico

   

  	
   

  	
  100

  	
  %

  	
  65

  	
  %

  
	
  W.A. Publications, LLC

  	
   

  	
  1

  	
   

  	
  Reader’s Digest Mexico
  S.A. de C.V.

  	
   

  	
  Mexico

  	
   

  	
  1

  	
  %

  	
  65

  	
  %(9)

  



 






(8) 90% to be
transferred to the RD German Holdings GmbH.


 


(9) Certificated,
but not to be delivered given that W.A. Publications, LLC only owns one share.


 


30

















 


	
  Loan Party

  	
   

  	
  No. of

  Shares

  	
   

  	
  Subsidiary / Equity Investment

  	
   

  	
  Country

  of Incorporation

  	
   

  	
  Percent 

  Ownership

  	
   

  	
  Equity

  Interest

  Required to

  be Pledged

  	
   

  
	
  W.A. Publications, LLC

  	
   

  	
  1

  	
   

  	
  Corporativo Reader’s
  Digest Mexico S. de R.L. de C.V.

  	
   

  	
  Mexico

  	
   

  	
  1

  	
  %

  	
  65

  	
  %

  
	
  W.A. Publications, LLC

  	
   

  	
  1

  	
   

  	
  Grupo Editorial
  Reader’s Digest S. de R.L. de C.V.

  	
   

  	
  Mexico

  	
   

  	
  1

  	
  %

  	
  65

  	
  %

  
	
  W.A. Publications, LLC 

  W.A. Publications, LLC

  The Reader’s Digest Association, Inc.

  The Reader’s Digest
  Association, Inc.

  	
   

  	
  100

  100

  1,300

  495

  	
   

  	
  Reader’s Digest
  (Philippines) Inc.

  	
   

  	
  Philippines

   

  	
   

  	
  100

  	
  %(10)

  	
  65

  	
  %

  
	
  Selecções do Reader’s Digest (Portugal), SA

  The Reader’s Digest Association, Inc.

  The Reader’s Digest Association, Inc.

  The Reader’s Digest Association, Inc.

  The Reader’s Digest Association, Inc.

  The Reader’s Digest Association, Inc.

  The Reader’s Digest Association, Inc.

  The Reader’s Digest Association, Inc.

  The Reader’s Digest Association, Inc

  The Reader’s Digest Association, Inc.

  The Reader’s Digest Association, Inc.

  	
   

  	
  20

  5

  5

  5

  5

  5

  5

  50

  4,900

  1,100

  443,900

  	
   

  	
  Selecções do
  Reader’s Digest (Portugal) S.A.

  	
   

  	
  Portugal

   

  	
   

  	
  100

  	
  %

  	
  65

  	
  %

  
	
  Selecções do Reader’s Digest (Portugal), SA

  The Reader’s Digest Association, Inc.

  	
   

  	
  €1,796

  €199

  	
   

  	
  Euroselecções - Publicações E Artigos Promocionais, Lda.

  	
   

  	
  Portugal

   

  	
   

  	
  100

  	
  %

  	
  65

  	
  %

  
	
  W.A. Publications, LLC

  The Reader’s Digest Association, Inc.

  The Reader’s Digest Association, Inc.

  	
   

  	
  2

  4,550

  2,448

  	
   

  	
  Reader’s Digest Selecciones S.A.

  	
   

  	
  Spain

   

  	
   

  	
  100

  	
  %

  	
  65

  	
  %

  
	
  The Reader’s Digest
  Association, Inc.

  The Reader’s Digest
  Association, Inc.

  	
   

  	
  15,750

  29,250

  	
   

  	
  Reader’s Digest
  Aktiebolag

  	
   

  	
  Sweden

   

  	
   

  	
  100

  	
  %

  	
  65

  	
  %

  
	
  The Reader’s Digest
  Association, Inc.

  	
   

  	
  497



  	
   

  	
  Das Beste aus Reader’s Digest AG/

  Sélection du Reader’s Digest SA/

  Selezione dal Reader’s Digest SA

  	
   

  	
  Switzerland

   

  	
   

  	
  100

  	
  %(11)

  	
  65

  	
  %

  



 






(10) Five shares
held by each of the five directors.


 


(11) 3 shares held by
individuals.


 


31






 













 


	
  Loan Party

  	
   

  	
  No. of

  Shares

  	
   

  	
  Subsidiary / Equity Investment

  	
   

  	
  Country

  of Incorporation

  	
   

  	
  Percent 

  Ownership

  	
   

  	
  Equity

  Interest

  Required to

  be Pledged

  	
   

  
	
  The Reader’s Digest
  Association, Inc.

  The Reader’s Digest Association, Inc.

  The Reader’s Digest Association, Inc.

  	
   

  	
  9,993

  571,996

  298,004

  	
   

  	
  Reader’s Digest
  (Thailand) Limited

  	
   

  	
  Thailand

  	
   

  	
  100

  	
  %(12)

  	
  65

  	
  %

  
	
  The Reader’s Digest
  Association, Inc.

  The Reader’s Digest Association, Inc.

  	
   

  	
  201,500,000

  108,500,000

  	
   

  	
  The Reader’s Digest
  Association Limited

  	
   

  	
  United Kingdom

  	
   

  	
  100

  	
  %

  	
  65

  	
  %

  
	
  The Reader’s Digest
  Association, Inc.

  The Reader’s Digest Association, Inc.

  	
   

  	
  1,089,573

  586,692

  	
   

  	
  Reader’s Digest
  Children’s Publishing Limited 

  	
   

  	
  United Kingdom

  	
   

  	
  100

  	
  %

  	
  65

  	
  %

  
	
  The Reader’s Digest
  Association, Inc.

  The Reader’s Digest Association, Inc.

  The Reader’s Digest Association, Inc.

  	
   

  	
  1

  34

  65

  	
   

  	
  Reader’s Digest Europe
  Limited

  	
   

  	
  United Kingdom

  	
   

  	
  100

  	
  %

  	
  65

  	
  %

  
	
  Reader’s Digest
  Latinoamerica, S.A.

  WAPLA, LLC 

  	
   

  	
  11,880 interests

  120 interests

  	
   

  	
  Reader’s Digest Argentina, SRL

  	
   

  	
  Argentina

  	
   

  	
  100

  	
  %

  	
  65

  	
  %*

  
	
  The Reader’s Digest
  Association, Inc.

  	
   

  	
  500,000

  	
   

  	
  Verlag Das Beste GmbH

  	
   

  	
  Austria

  	
   

  	
  100

  	
  %

  	
  65

  	
  %*

  
	
  W.A. Publications, LLC

  The Reader’s Digest Association, Inc.

  	
   

  	
  1

  253,845

  	
   

  	
  Reader’s Digest World
  Services, S.A.

  	
   

  	
  Belgium

  	
   

  	
  100

  	
  %

  	
  65

  	
  %*

  
	
  W.A. Publications, LLC

  The Reader’s Digest Association, Inc.

  	
   

  	
  164,200

  656,800

  	
   

  	
  Reader’s Digest N.V. -
  S.A.

  	
   

  	
  Belgium

  	
   

  	
  100

  	
  %

  	
  65

  	
  %*

  
	
  W.A. Publications, LLC

  The Reader’s Digest Association, Inc.

  	
   

  	
  10%

  90%

  	
   

  	
  Reader’s Digest Brasil,
  Ltda.

  	
   

  	
  Brazil

  	
   

  	
  100

  	
  %

  	
  65

  	
  %*

  
	
  The Reader’s Digest
  Association, Inc.

  	
   

  	
  193,846,000,000
  CZK (no shares issued)

  	
   

  	
  Reader’s Digest Vyber
  s.r.o.

  	
   

  	
  Czech Republic

  	
   

  	
  100

  	
  %

  	
  65

  	
  %*

  
	
  The Reader’s Digest
  Association, Inc.

  	
   

  	
  61,992

  	
   

  	
  Sélection du Reader’s Digest S.A.

  	
   

  	
  France

  	
   

  	
  100

  	
  %(13)

  	
  65

  	
  %*

  
	
  The Reader’s Digest
  Association, Inc.

  	
   

  	
  25,000

  	
   

  	
  Reader’s Digest
  Deutschland Holding GmbH

  	
   

  	
  Germany

  	
   

  	
  100

  	
  %

  	
  65

  	
  %*

  
	
  The Reader’s Digest
  Association, Inc.

  	
   

  	
  599

  	
   

  	
  Reader’s Digest Hellas
  Publications Company with Limited Liability

  	
   

  	
  Greece

  	
   

  	
  100

  	
  %(14)

  	
  65

  	
  %*

  



 






(12) 7 shares held by
individuals.


 


(13) 8 shares held by
individuals.


 


(14) 1 share held by an
individual.


 


32

















 


	
  Loan Party

  	
   

  	
  No. of

  Shares

  	
   

  	
  Subsidiary / Equity Investment

  	
   

  	
  Country

  of Incorporation

  	
   

  	
  Percent 

  Ownership

  	
   

  	
  Equity

  Interest

  Required to

   be Pledged

  	
   

  
	
  The Reader’s Digest
  Association, Inc.

  	
   

  	
  600,000,000 HUF
  (no shares issued)

  	
   

  	
  Reader’s Digest Kiadó
  Korlátolt Felelosségu Társaság

  	
   

  	
  Hungary

  	
   

  	
  100

  	
  %

  	
  65

  	
  %*

  
	
  The Reader’s Digest
  Association, Inc.

  	
   

  	
  €10,000

  	
   

  	
  Libri e più, S.r.l.

  	
   

  	
  Italy

  	
   

  	
  100

  	
  %

  	
  65

  	
  %*

  
	
  The Reader’s Digest
  Association, Inc.

  	
   

  	
  182

  	
   

  	
  Reader’s Digest
  European Shared Services B.V.

  	
   

  	
  Netherlands

  	
   

  	
  100

  	
  %

  	
  65

  	
  %*

  
	
  The Reader’s Digest
  Association, Inc.

  	
   

  	
  100%

  	
   

  	
  Uitgeversmaatschappij The Reader’s Digest N.V.

  	
   

  	
  Netherlands

  	
   

  	
  100

  	
  %

  	
  65

  	
  %*

  
	
  The Reader’s Digest
  Association, Inc.

  	
   

  	
  16,162

  	
   

  	
  Reader’s Digest
  Przeglad Sp Z.o.o.

  	
   

  	
  Poland

  	
   

  	
  100

  	
  %

  	
  65

  	
  %*

  
	
  The Reader’s Digest
  Association, Inc. 

  	
   

  	
  299,999

  	
   

  	
  Reader’s Digest Asia
  Pte. Ltd.

  	
   

  	
  Singapore

  	
   

  	
  100

  	
  %(15)

  	
  65

  	
  %*

  
	
  The Reader’s Digest
  Association, Inc.

  	
   

  	
  4,500 YTL

  	
   

  	
  Reader’s Digest
  Secilmis Yayincilik Dagitim Pazarlama Ticaret Limited Sirketi

  	
   

  	
  Turkey

  	
   

  	
  90

  	
  %(16)

  	
  65

  	
  %*

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Direct Holdings U.S.
  Corp.

  	
   

  	
  404 shares common

  	
   

  	
  Direct Holdings
  International B.V.

  	
   

  	
  Netherlands

  	
   

  	
  100

  	
  %

  	
  65

  	
  %*

  



 






*
Uncertificated.


 


(15) 1 share owned by an
individual.


 


(16) 10% owned by an
individual.


 


33






 













 


Non-first
tier foreign subsidiaries/equity investments:


 


	
  Foreign

  	
   

  	
  No. of

  Shares

  	
   

  	
  Subsidiary / Equity Investment

  	
   

  	
  Country

  of Incorporation

  	
   

  	
  Percent 

  Ownership

  	
   

  	
  Equity

  Interest

  Required to

  be Pledged

  	
   

  
	
  The Reader’s
  Digest Association (Pty.) Limited

  	
   

  	
  9,998

  1

  1

  	
   

  	
  Reader’s Digest (Australia) Pty. Ltd.

   

  	
   

  	
  Australia

  	
   

  	
  100

  	
  %

  	
  0

  	
  %

  
	
  The Reader’s
  Digest Association (Canada) Ltd.

  	
   

  	
  1

  4,999

  5,000

  	
   

  	
  Quality Service
  Programs, Inc.

  	
   

  	
  Canada

  	
   

  	
  100

  	
  %

  	
  0

  	
  %

  
	
  Quality Service
  Programs, Inc.

  (100%)

  	
   

  	
  Quality Service Programs, Inc. (100 Common
  Shares)

   

  The Reader’s Digest Association (Canada) Ltd.
  (5,500,000 Class A preferred shares)

  	
   

  	
  eFundraising.com
  Corporation 

  Incorporated / Corporation 

  eFundraising.com Incorporée

  	
   

  	
  Canada

  	
   

  	
  100

  	
  %

  	
  0

  	
  %

  
	
  1302791 Alberta
  ULC

  	
   

  	
  1,000

  	
   

  	
  The Reader’s Digest
  Association (Canada) Ltd.

  	
   

  	
  Canada

  	
   

  	
  100

  	
  %

  	
  0

  	
  %

  
	
  The Reader’s
  Digest Association (Canada) Ltd.

  	
   

  	
  50,000

  	
   

  	
  Reader’s Digest
  Magazines Limited

  	
   

  	
  Canada

  	
   

  	
  25

  	
  %(17)

  	
  0

  	
  %

  
	
  The Reader’s
  Digest Association (Canada) Ltd.

  	
   

  	
  1

  	
   

  	
  3634116 Canada
  Inc.

  	
   

  	
  Canada

  	
   

  	
  100

  	
  %

  	
  0

  	
  %

  
	
  Reader’s Digest
  Far East Ltd.

  	
   

  	
  100%

  	
   

  	
  Shanghai Ying Cui
  Advertising Company Ltd.

  	
   

  	
  China

  	
   

  	
  100

  	
  %**

  	
  0

  	
  %

  
	
  Asian
  Qualiproducts. Services Ltd.

  	
   

  	
  CNY945,000

  	
   

  	
  Guangdong
  Pegasus Marketing Information & Service Co. Ltd.

  	
   

  	
  China

  	
   

  	
  90

  	
  %(18)**

  	
  0

  	
  %

  



 






(17)
150,000 shares owned by Reader’s Digest Foundation of Canada.


 


34

















 


	
  Foreign

  	
   

  	
  No. of

  Shares

  	
   

  	
  Subsidiary / Equity Investment

  	
   

  	
  Country

  of Incorporation

  	
   

  	
  Percent

   Ownership

  	
   

  	
  Equity

  Interest

  Required to

  be Pledged

  	
   

  
	
  Reader’s Digest
  (China) Direct Marketing Service Co. Ltd.

  	
   

  	
  HK$1,890,000

  	
   

  	
  Reader’s Digest
  (Guangzhou) Direct Mail Service Co. Ltd.

  	
   

  	
  China

  	
   

  	
  90

  	
  %(19)**

  	
  0

  	
  %

  
	
  Sélection du Reader’s Digest S.A.

  	
   

  	
  1,999

  	
   

  	
  Sélection du Reader’s Digest Assurances SARL

  	
   

  	
  France

  	
   

  	
  100

  	
  %(20)

  	
  0

  	
  %

  
	
  Verlag Das Beste
  GmbH

  	
   

  	
  100,000 DEM

  	
   

  	
  Optimail
  Direktwerbeservice GmbH

  	
   

  	
  Germany

  	
   

  	
  100

  	
  %**

  	
  0

  	
  %

  
	
  Verlag Das Beste
  GmbH

  	
   

  	
  DM200,000

  	
   

  	
  Pegasus Medien Produktions- und Vertriebsgesellschaft
  GmbH

  	
   

  	
  Germany

  	
   

  	
  100

  	
  %**

  	
  0

  	
  %

  
	
  Reader’s Digest
  Association Far East Limited

  Reader’s Digest
  Asia, Ltd.

  	
   

  	
  99

  1

  	
   

  	
  Asian Qualiproducts
  Services, Ltd.

  	
   

  	
  Hong Kong

  	
   

  	
  100

  	
  %

  	
  0

  	
  %

  
	
  Reader’s Digest
  (East Asia), Ltd.

  Reader’s Digest Asia, Ltd.

  	
   

  	
  9,999

  1

  	
   

  	
  Reader’s Digest Global
  Advertising Ltd.

  	
   

  	
  Hong Kong

  	
   

  	
  100

  	
  %

  	
  0

  	
  %

  
	
  Reader’s Digest
  Association Far East Ltd.

  	
   

  	
  1

  59,999

  	
   

  	
  Reader’s Digest  (China) Direct Marketing Services Co., Ltd.

  	
   

  	
  Hong Kong

  	
   

  	
  60

  	
  %(21)

  	
  0

  	
  %

  
	
  JSC Publishing
  House Reader’s Digest

  	
   

  	
  No shares issued

  	
   

  	
  LLC Publisher Reader’s
  Digest

  	
   

  	
  Kazakhstan

  	
   

  	
  100

  	
  %

  	
  0

  	
  %

  
	
  Pegasus
  Netherlands Services CV (99%), RD Primary European Holdings, LLC (1%)

  	
   

  	
  124,000 euro of share capital

  	
   

  	
  Pegasus Netherlands
  Services Lux Primary SC

  	
   

  	
  Luxembourg

  	
   

  	
  100

  	
  %**

  	
  0

  	
  %

  
	
  Pegasus
  Netherlands Services CV (99%), RD Secondary European Holdings, LLC (1%)

  	
   

  	
  € 83,000 share capital

  	
   

  	
  Pegasus Netherlands
  Services Lux Secondary SCS

  	
   

  	
  Luxembourg

  	
   

  	
  100

  	
  %**

  	
  0

  	
  %

  
	
  Pegasus
  Netherlands Services Lux Secondary SCS

  	
   

  	
  1,000 shares of € 25 each

  	
   

  	
  RD Luxembourg Tertiary
  Services

  	
   

  	
  Luxembourg

  	
   

  	
  100

  	
  %**

  	
  0

  	
  %

  



 






(18)
10% owned by third party.


 


(19)
10% owned by third party.


 


(20)
1 share owned by an individual.


 


(21)
40% owned by third party.


 


35

















 


	
  Foreign

  	
   

  	
  No. of

  Shares

  	
   

  	
  Subsidiary / Equity Investment

  	
   

  	
  Country

  of Incorporation

  	
   

  	
  Percent

  Ownership

  	
   

  	
  Equity

  Interest 

  Required to

  be Pledged

  	
   

  
	
  Reader’s Digest
  (East Asia) Limited

   

   

  

  Reader’s Digest Asia Ltd.

  	
   

  	
  98

  1

  99,990

  400,000

  1

  	
   

  	
  Reader’s Digest
  (Malaysia) Sdn. Bhd

  	
   

  	
  Malaysia

  	
   

  	
  100

  	
  %

  	
  0

  	
  %

  
	
  Caribe Condor, S.A. de C.V.

  	
   

  	
  $23,965,884

  	
   

  	
  Reader’s Digest
  México, S.A. de C.V.

  	
   

  	
  Mexico

  	
   

  	
  99

  	
  %

  	
  0

  	
  %

  
	
  Caribe Condor, S.A. de C.V.

  	
   

  	
  $3,620,460

  	
   

  	
  Corporativo Reader’s
  Digest Mexico, S. de R.L. de C.V.

  	
   

  	
  Mexico

  	
   

  	
  99

  	
  %

  	
  0

  	
  %

  
	
  Caribe Condor, S.A. de C.V. 

  	
   

  	
  $4,999

  	
   

  	
  Grupo Editorial
  Reader’s Digest, S. de R.L. de C.V.

  	
   

  	
  Mexico

  	
   

  	
  100

  	
  %

  	
  0

  	
  %

  
	
  Uitgeversmaatschappij The Reader’s Digest N.V.

  	
   

  	
  35

  	
   

  	
  Distrimedia
  Services B.V.

  	
   

  	
  Netherlands

  	
   

  	
  100

  	
  %**

  	
  0

  	
  %

  
	
  Reader’s Digest
  World Services S.A. 

  Reader’s Digest N.V. - S.A.

  	
   

  	
  270,000 shares of € 1 each

  	
   

  	
  Pegasus
  Netherlands Services CV

  	
   

  	
  Netherlands

  	
   

  	
  100

  	
  %

  	
  0

  	
  %

  
	
  Pegasus UK
  Holdings Ltd.

  	
   

  	
  90,000 shares of € 1 each

  	
   

  	
  RD Netherlands
  Holdings BV

  	
   

  	
  Netherlands

  	
   

  	
  100

  	
  %

  	
  0

  	
  %

  
	
  Uitgeversmaatschappij The Reader’s Digest N.V.

  	
   

  	
  100 shares

  	
   

  	
  Reader’s Digest
  Netherlands Holdings B.V.

  	
   

  	
  Netherlands

  	
   

  	
  100

  	
  %**

  	
  0

  	
  %

  
	
  Reader’s Digest
  Vyber s.r.o. (Czech Republic)

  	
   

  	
  3,380 shares of
  10 RON each , 1 class

  	
   

  	
  Editura Reader’s
  Digest SRL

  	
   

  	
  Romania

  	
   

  	
  100

  	
  %**

  	
  0

  	
  %

  
	
  JSC Publishing
  House Reader’s Digest

  	
   

  	
  No shares issued

  	
   

  	
  LLC Digest
  Direct

  	
   

  	
  Russia

  	
   

  	
  100

  	
  %**

  	
  0

  	
  %

  
	
  Reader’s Digest
  Deutschland Holding GmbH

  	
   

  	
  10

  	
   

  	
  JSC Publishing
  House Reader’s Digest

  	
   

  	
  Russia

  	
   

  	
  100

  	
  %**

  	
  0

  	
  %

  
	
  Reader’s Digest
  Vyber s.r.o.

  Reader’s Digest
  Kiado KFT (Hungary)

  	
   

  	
  99.7059%

  0.2941%

  No shares issued

  	
   

  	
  Reader’s Digest
  Vyber Slovensko, s.r.o.

  	
   

  	
  Slovak Republic

  	
   

  	
  100

  	
  %

  	
  0

  	
  %

  
	
  Reader’s Digest
  Selecciones S.A.

  	
   

  	
  199

  	
   

  	
  Sociedad
  Difusión Cultural, S.L.

  	
   

  	
  Spain

  	
   

  	
  100

  	
  %(22)

  	
  0

  	
  %

  



 






(22)
1 share held by an individual.


 


36

















 


	
  Foreign

  	
   

  	
  No. of

  Shares

  	
   

  	
  Subsidiary / Equity Investment

  	
   

  	
  Country

  of Incorporation

  	
   

  	
  Percent 

  Ownership

  	
   

  	
  Equity

  Interest

  Required to

  be Pledged

  	
   

  
	
  JSC Publishing
  House Reader’ Digest [Russia]

  LLC Digest
  Direct [Russia]

   

  	
   

  	
  90%

  10%

  No shares issued

  	
   

  	
  LLC Direct Digest

  	
   

  	
  Ukraine

  	
   

  	
  100

  	
  %

  	
  0

  	
  %

  
	
  JSC Publishing
  House Reader’s Digest [Russia]

  LLC Direct Digest
  [Ukraine]

  	
   

  	
  29%

  71%

  	
   

  	
  LLC Publisher
  Reader’s Digest

  	
   

  	
  Ukraine

  	
   

  	
  100

  	
  %

  	
  0

  	
  %

  
	
  The Reader’s
  Digest Association, Inc.

   

  	
   

  	
  100,000,000 ordinary shares of ₤ 1 each

  	
   

  	
  Pegasus UK Holdings
  Limited

  	
   

  	
  United Kingdom

  	
   

  	
  100

  	
  %

  	
  0

  	
  %

  
	
  Reader’s Digest  Holdings Limited 

  	
   

  	
  100

  	
   

  	
  RD Publications Limited
  (Previously Berkeley Magazine Ltd.)

  	
   

  	
  United Kingdom

  	
   

  	
  100

  	
  %

  	
  0

  	
  %

  
	
  Reader’s
  Digest  Holdings Limited

  	
   

  	
  100

  	
   

  	
  Money Magazine Limited

  	
   

  	
  United Kingdom

  	
   

  	
  100

  	
  %

  	
  0

  	
  %

  
	
  Reader’s
  Digest  Holdings Limited

  	
   

  	
  201,000

  	
   

  	
  Reader’s Digest
  Financial Services Limited

  	
   

  	
  United Kingdom

  	
   

  	
  100

  	
  %

  	
  0

  	
  %

  
	
  Reader’s
  Digest  Holdings Limited

  	
   

  	
  100

  	
   

  	
  Fundraising For You
  Limited

  	
   

  	
  United Kingdom

  	
   

  	
  100

  	
  %

  	
  0

  	
  %

  
	
  Reader’s
  Digest  Holdings Limited

  	
   

  	
  19,184,000

  	
   

  	
  Reader’s Digest
  European Systems Ltd.

  	
   

  	
  United Kingdom

  	
   

  	
  100

  	
  %

  	
  0

  	
  %

  
	
  Reader’s
  Digest  Holdings Limited

  	
   

  	
  1

  	
   

  	
  Reader’s Digest Central &
  Eastern Europe Limited

  	
   

  	
  United Kingdom

  	
   

  	
  100

  	
  %

  	
  0

  	
  %

  



 


37

















 


	
  Foreign

  	
   

  	
  No. of

  Shares

  	
   

  	
  Subsidiary / Equity Investment

  	
   

  	
  Country

  of Incorporation

  	
   

  	
  Percent

  Ownership

  	
   

  	
  Equity

  Interest

  Required to

  be Pledged

  	
   

  
	
  Reader’s Digest
  Association Ltd.

  	
   

  	
  402 Ordinary
  shares of nominal value £1 issued as follows:

   

  100 shares at £1
  per share at a premium of £171,665 per share

   

  100 shares at £1
  per share at a premium of £2,009 per share

   

  202 shares at £1
  per share (including original subscriber share)

  	
   

  	
  Reader’s Digest
  Holdings Limited

  	
   

  	
  United Kingdom

  	
   

  	
  100

  	
  %

  	
  0

  	
  %

  



 






**
Uncertificated.


 


38
















 


Schedule 5.18


Collateral Matters


 


	
  Loan
  Party

  	
   

  	
  Filing Office

  
	
  RDA
  Holding Co.

  	
   

  	
  Delaware Secretary of State

  
	
  Doctor
  Acquisition Co.

  	
   

  	
  Delaware Secretary of State

  
	
  The
  Reader’s Digest Association, Inc.

  	
   

  	
  Delaware Secretary of State

  United States Patent and Trademark Office 

  United States Copyright Office

  
	
  Allrecipes.com, Inc.

  	
   

  	
  Washington Secretary of State 

  United States Patent and Trademark Office

  
	
  Ardee
  Music Publishing, Inc.

  	
   

  	
  Delaware Secretary of State

  
	
  Books
  Are Fun, Ltd.

  	
   

  	
  Iowa Secretary of State

  United StatesPatent and Trademark Office

  United States Copyright Office

  
	
  Christmas
  Angel Productions, Inc.

  	
   

  	
  Delaware Secretary of State

  
	
  Pegasus
  Asia Investments Inc.

  	
   

  	
  Delaware Secretary of State

  
	
  Pegasus
  Finance Corp.

  	
   

  	
  Delaware Secretary of State

  
	
  Pegasus
  Investment, Inc.

  	
   

  	
  Delaware Secretary of State

  
	
  Pegasus
  Sales, Inc.

  	
   

  	
  Delaware Secretary of State

  
	
  Pleasantville
  Music Publishing, Inc.

  	
   

  	
  Delaware Secretary of State

  
	
  QSP, Inc.

  	
   

  	
  Delaware Secretary of State 

  United States Patent and Trademark Office

  
	
  Family
  Reading Program Corp.

  	
   

  	
  Delaware Secretary of State

  
	
  QSP
  Distribution Services, LLC

  	
   

  	
  Delaware Secretary of State

  
	
  QSP
  Products and Programs, LLC

  	
   

  	
  Delaware Secretary of State

  
	
  QSP
  Sales, LLC

  	
   

  	
  Delaware Secretary of State

  
	
  QSP
  Services, LLC

  	
   

  	
  Delaware Secretary of State

  
	
  QSP
  Ventures, LLC

  	
   

  	
  Delaware Secretary of State

  
	
  Fundraising.com, Inc.

  	
   

  	
  Delaware Secretary of State

  
	
  Reiman
  Media Group, Inc.

  	
   

  	
  Delaware Secretary of State
  United States Patent and Trademark
  Office
  United States Copyright Office

  
	
  Taste
  of Home Productions, Inc.

  	
   

  	
  Delaware Secretary of State

  
	
  Taste
  of Home Media Group, Inc.

  	
   

  	
  Delaware Secretary of State

  
	
  World
  Wide Country Tours, Inc.

  	
   

  	
  Delaware Secretary of State

  
	
  VideOvation, Inc.

  	
   

  	
  Delaware Secretary of State

  
	
  R.
  D. Manufacturing Corporation

  	
   

  	
  Delaware Secretary of State

  
	
  RD
  Publications, Inc.

  	
   

  	
  Delaware Secretary of State

  United States Patent and Trademark Office

  
	
  Home
  Service Publications, Inc.

  	
   

  	
  Delaware Secretary of State

  
	
  RD
  Large Edition, Inc.

  	
   

  	
  Delaware Secretary of State

  
	
  RD
  Trade Shows, Inc.

  	
   

  	
  Delaware Secretary of State

  



 

















 


	
  RD
  Walking, Inc.

  	
   

  	
  Delaware Secretary of State

  
	
  Retirement
  Living Publishing Company, Inc.

  	
   

  	
  Delaware Secretary of State

  
	
  Travel
  Publications, Inc.

  	
   

  	
  Delaware Secretary of State

  
	
  RD
  Member Services, Inc.

  	
   

  	
  Delaware Secretary of State

  
	
  Reader’s
  Digest Children’s Publishing, Inc.

  	
   

  	
  Delaware Secretary of State

  United States Patent and Trademark Office

  
	
  Reader’s
  Digest Consumer Services, Inc.

  	
   

  	
  Delaware Secretary of State

  
	
  RD
  Magazine Value Partners, Inc.

  	
   

  	
  Delaware Secretary of State

  
	
  Reader’s
  Digest Entertainment, Inc.

  	
   

  	
  Delaware Secretary of State

  
	
  Reader’s
  Digest Financial Services, Inc.

  	
   

  	
  Delaware Secretary of State

  
	
  Taste
  of Home Entertaining, Inc.

  	
   

  	
  Delaware Secretary of State

  
	
  Reader’s
  Digest Latinoamerica S.A.

  	
   

  	
  Delaware Secretary of State

  
	
  WAPLA,
  LLC

  	
   

  	
  Delaware Secretary of State

  
	
  Reader’s
  Digest Sales and Services, Inc.

  	
   

  	
  Delaware Secretary of State

  
	
  Reader’s
  Digest Sub Nine, Inc.

  	
   

  	
  Delaware Secretary of State

  
	
  Reader’s
  Digest Young Families, Inc.

  	
   

  	
  Delaware Secretary of State 

  United States Patent and Trademark Office

  
	
  SMDDMS, Inc.

  	
   

  	
  Delaware Secretary of State

  
	
  The
  Reader’s Digest Association (Russia) Incorporated

  	
   

  	
  Delaware Secretary of State

  
	
  W.A.
  Publications, LLC

  	
   

  	
  Delaware Secretary of State

  
	
   

  	
   

  	
   

  
	
  Alex
  Inc.

  	
   

  	
  Delaware Secretary of State

  
	
  Direct
  Holdings Americas Inc.

  	
   

  	
  Delaware Secretary of State

  United States Patent and Trademark Office 

  United States Copyright Office

  
	
  Direct
  Holdings Custom Publishing Inc.

  	
   

  	
  Delaware Secretary of State

  
	
  Direct
  Holdings Customer Service, Inc.

  	
   

  	
  Delaware Secretary of State

  
	
  Direct
  Holdings Education Inc.

  	
   

  	
  Delaware Secretary of State

  
	
  Direct
  Holdings Libraries Inc.

  	
   

  	
  New York Secretary of State

  
	
  Direct
  Holdings U.S. Corp.

  	
   

  	
  Delaware Secretary of State

  
	
   

  	
   

  	
   

  
	
  WRC
  Media Inc.

  	
   

  	
  Delaware Secretary of State 

  United States Patent and Trademark Office

  
	
  CompassLearning, Inc.

  	
   

  	
  Delaware Secretary of State

  United States Patent and Trademark Office

  United States Copyright Office

  
	
  Weekly
  Reader Corporation

  	
   

  	
  Delaware Secretary of State

  United States Patent and Trademark Office

  
	
  Lifetime
  Learning Systems, Inc.

  	
   

  	
  Delaware Secretary of State 

  United States Patent and Trademark Office

  
	
  World
  Almanac Education Group, Inc.

  	
   

  	
  Delaware Secretary of State 

  United States Patent and Trademark Office 

  United States Copyright Office

  
	
  Funk &
  Wagnalls Yearbook Corp.

  	
   

  	
  Delaware Secretary of State

  
	
  Gareth
  Stevens, Inc.

  	
   

  	
  Wisconsin Secretary of State

  



 


40

















 


Schedule 7.01(b)


Existing Liens


 


·                                          UCC-1 financing statement
number 52446723 filed with the Delaware Secretary of State on August 8,
2005.  Reader’s Digest Entertainment, Inc.
is the debtor.  Screen Actors Guild, Inc.
is the secured party.  Collateral
includes made-for-television motion picture tentatively entitled “Prisoner of
Silence.”


 


·                                          Cash Collateral Security
Agreement made as of July 22, 2005 by and between Weekly Reader
Corporation, CompassLearning, Inc., WRC Media, Inc., World Almanac
Education Group, Inc. and Bank of America, regarding outstanding letters
of credit in an aggregate amount of $2,872,500.


 


·                                          Duplicating and Replicating
Services Agreement effective as of June 7, 2004, by and between
Technicolor Videocassette, Inc. and Technicolor Videocassette of Michigan, Inc.
(collectively, “Technicolor”), and Direct Holdings Americas Inc.  Technicolor has a possessory lien on
videocassets, dvds and certain other materials.


 

















 


Schedule 7.02(f)


Existing Investments


 


	
  Issuer

  	
   

  	
  State/Country

  of

  Incorporation

  	
   

  	
  Equity Interests

  	
   

  	
  No. of Interests

  	
   

  	
  Record and Beneficial Owner

  
	
  BrandDirect
  Marketing, Inc.

  	
   

  	
  Delaware

  	
   

  	
  Series A
  Preferred Stock

  	
   

  	
  69,512
  shares

  	
   

  	
  The
  Reader’s Digest Association, Inc.

  
	
  BrandDirect
  Marketing, Inc.

  	
   

  	
  Delaware

  	
   

  	
  Series A
  Preferred Stock

  	
   

  	
  41,707
  shares

  	
   

  	
  The
  Reader’s Digest Association, Inc.

  
	
  BrandDirect
  Marketing, Inc.

  	
   

  	
  Delaware

  	
   

  	
  Series A
  Preferred Stock

  	
   

  	
  41,708
  shares

  	
   

  	
  The
  Reader’s Digest Association, Inc.

  
	
  BrandDirect
  Marketing, Inc.

  	
   

  	
  Delaware

  	
   

  	
  Series A
  Preferred Stock

  	
   

  	
  41,707
  shares

  	
   

  	
  The
  Reader’s Digest Association, Inc.

  
	
  BrandDirect
  Marketing, Inc.

  	
   

  	
  Delaware

  	
   

  	
  Series A
  Preferred Stock

  	
   

  	
  41,708
  shares

  	
   

  	
  The
  Reader’s Digest Association, Inc.

  
	
  BrandDirect
  Marketing, Inc.

  	
   

  	
  Delaware

  	
   

  	
  Series A
  Preferred Stock

  	
   

  	
  69,512
  shares

  	
   

  	
  The
  Reader’s Digest Association, Inc.

  
	
  BrandDirect
  Marketing, Inc.

  	
   

  	
  Delaware

  	
   

  	
  Series B
  Preferred Stock

  	
   

  	
  55,610
  shares

  	
   

  	
  The
  Reader’s Digest Association, Inc.

  
	
  BrandDirect
  Marketing, Inc.

  	
   

  	
  Delaware

  	
   

  	
  Series B
  Preferred Stock

  	
   

  	
  69,512
  shares

  	
   

  	
  The
  Reader’s Digest Association, Inc.

  
	
  BrandDirect
  Marketing, Inc.

  	
   

  	
  Delaware

  	
   

  	
  Series B
  Preferred Stock

  	
   

  	
  55,610
  shares

  	
   

  	
  The
  Reader’s Digest Association, Inc.

  
	
  BrandDirect
  Marketing, Inc.

  	
   

  	
  Delaware

  	
   

  	
  Series B
  Preferred Stock

  	
   

  	
  69,512
  shares

  	
   

  	
  The
  Reader’s Digest Association, Inc.

  
	
  BrandDirect
  Marketing, Inc.

  	
   

  	
  Delaware

  	
   

  	
  Series D
  Preferred Stock

  	
   

  	
  1,112,200
  shares

  	
   

  	
  The
  Reader’s Digest Association, Inc.

  
	
  BrandDirect
  Marketing, Inc.

  	
   

  	
  Delaware

  	
   

  	
  Series D
  Preferred Stock

  	
   

  	
  278,050
  shares

  	
   

  	
  The
  Reader’s Digest Association, Inc.

  
	
  BrandDirect
  Marketing, Inc.

  	
   

  	
  Delaware

  	
   

  	
  Series D
  Preferred Stock

  	
   

  	
  834,150
  shares

  	
   

  	
  The
  Reader’s Digest Association, Inc.

  
	
  BrandDirect
  Marketing, Inc.

  	
   

  	
  Delaware

  	
   

  	
  Series D
  Preferred Stock Warrant

  	
   

  	
  Variable

  	
   

  	
  The
  Reader’s Digest Association, Inc.

  
	
  BrandDirect
  Marketing, Inc.

  	
   

  	
  Delaware

  	
   

  	
  Series D
  Preferred Stock Warrant

  	
   

  	
  839,807
  shares

  	
   

  	
  The
  Reader’s Digest Association, Inc.

  
	
  BrandDirect
  Marketing, Inc.

  	
   

  	
  Delaware

  	
   

  	
  Series D
  Preferred Stock Warrant

  	
   

  	
  839,807
  shares

  	
   

  	
  The
  Reader’s Digest Association, Inc.

  
	
  BrandDirect
  Marketing (UK) Limited

  	
   

  	
  U.K.

  	
   

  	
  Shares

  	
   

  	
  1,000
  shares

  	
   

  	
  The
  Reader’s Digest Association, Inc.

  
	
  Dynegy, Inc.

  	
   

  	
  Illinois

  	
   

  	
  Class A
  Common Stock

  	
   

  	
  2,426
  shares

  	
   

  	
  The
  Reader’s Digest Association, Inc.

  
	
  Finet
  Group Limited (formerly known as Finet International Holdings
  Ltd. and China Markets Limited)

  	
   

  	
  Cayman
  Islands

  	
   

  	
  Series B
  Common Shares

  	
   

  	
  341,516
  shares

  	
   

  	
  The
  Reader’s Digest Association, Inc.

  
	
  Infocrossing, Inc.

  	
   

  	
  Delaware

  	
   

  	
  Common
  Stock Purchase Warrant

  	
   

  	
  50,000
  shares

  	
   

  	
  The
  Reader’s Digest Association, Inc.

  
	
  LoyaltyPoint, Inc.

  	
   

  	
  Delaware

  	
   

  	
  Common
  Stock

  	
   

  	
  3,335,263
  shares

  	
   

  	
  The
  Reader’s Digest Association, Inc.

  
	
  Onvia.com, Inc.

  	
   

  	
  Delaware

  	
   

  	
  Common
  Stock

  	
   

  	
  2,558
  shares

  	
   

  	
  The
  Reader’s Digest Association, Inc.

  
	
  Onvia.com, Inc.

  	
   

  	
  Delaware

  	
   

  	
  Common
  Stock

  	
   

  	
  639
  shares

  	
   

  	
  Reader’s
  Digest Sales and Services, Inc.

  



 
















 


·              Direct
Holdings Australia Pty Limited is party to an Alliance Sales Agreement for
Japan dated as of February 22, 2005, as amended, with Oak Lawn Marketing
Inc.  Although the relationship under the
agreement is not structured as a joint venture entity or partnership for legal
purposes, the arrangement is accounted for as a joint venture.


 


·              CompassLearning, Inc.
has a minority investment in ThinkBox, Inc. represented by 13,632,838
shares of Series C preferred stock, convertible into common stock equal to
31.06% of Think Box, Inc.’s outstanding common stock.


 

















 


Schedule 7.03(b)


Existing Indebtedness


 


Three letters of credit issued by Bank of America on behalf of Weekly
Reader Corporation/WRC Media Inc. in an aggregate amount of $2,872,500.


 

















 


Schedule 7.05(k)


Dispositions


 


·              Dispositions of the
businesses of (or Equity Interests in) QSP, Inc., Family Reading
Program Corp., QSP Distribution Services, LLC, QSP Products and Programs, LLC,
QSP Sales, LLC, QSP Services, LLC, QSP Ventures, LLC, Fundraising.com, Inc.,
RD Magazine Value Partners, Inc., EFundraising.com Corporation
Incorporated/Corporation eFundraising.com Incorporee (Canada), Books are Fun, Ltd.,
Weekly Reader Corporation, CompassLearning, Inc. and World Almanac
Education Group.


 


·              The
Company is in the process of negotiating the sale of a 15% interest in Reader’s
Digest Book and Home Entertainment (India) Private Limited to Living Media
India Ltd.


 

















 


Schedule 7.08


Transactions with Affiliates


 


·                                          Consulting
Agreement between Direct Holdings U.S. Corp., ZelnickMedia Corp. and Strauss
Zelnick dated as of January 23, 2007, providing for the payment of
$750,000.  Agreement expires December 31,
2008.


 


·                                          Management
Agreement dated as of November 17, 1999 among Ripplewood Holdings L.L.C.
and CompassLearning, Inc.*


 


·                                          Management
Agreement dated as of November 17, 1999 among Ripplewood Holdings L.L.C.
and Weekly Reader Corporation.*


 






*  Together with the
payment of management fees to the Sponsors, not to exceed $1,875,000 in any
fiscal quarter.


 

















 


Schedule 7.09


Existing Restrictions


 


None.


 

















 


Schedule 10.02


Administrative Agent’s Office, Certain
Addresses for Notices


 


	
  If to the Administrative Agent, to:

  
	
   

  	
   

  
	
   

  	
  For Houston Loan and Agency:

  
	
   

  	
   

  
	
   

  	
  Cynthia E.
  Jasso

  
	
   

  	
  JPMorgan
  Chase Bank N.A.

  
	
   

  	
  Americas
  Investment Bank Loan Operations

  
	
   

  	
  Phone:
  713-750-2119

  
	
   

  	
  Fax:713-750-2782

  
	
   

  	
   

  
	
   

  	
  For London:

  
	
   

  	
   

  
	
   

  	
  J.P.Morgan
  Europe Limited

  
	
   

  	
  125 London
  Wall, London EC2Y 5AJ

  
	
   

  	
  Attn : The
  Manager

  
	
   

  	
  Tel : +44
  207 777 2434 / +44 207 7772940

  
	
   

  	
  Fax: +44 207
  777 2360

  
	
   

  	
   

  
	
  If to Holdings or Acquisition Co, to:

  
	
   

  	
  c/o Ripplewood Holdings L.L.C.

  
	
   

  	
  One Rockefeller Plaza, 32nd Floor

  
	
   

  	
  New York, NY 10010

  
	
   

  	
  Attention: Christopher Minnetian, Esq.

  
	
   

  	
   

  
	
  If to Reader’s Digest, to:

  
	
   

  	
   

  
	
   

  	
  The Reader’s Digest Association, Inc.

  
	
   

  	
  Reader’s Digest Road

  
	
   

  	
  Pleasantville, NY 10570

  
	
   

  	
  Attention: Treasurer

  
	
   

  	
   

  
	
   

  	
  Telephone number:

  	
  914-244-7683

  
	
   

  	
  Facsimile number:

  	
  914-244-5904

  
	
   

  	
  Electronic mail address:

  	
  william.magill@rd.com

  
	
   

  	
  Website address:

  	
  www.rd.com

  



 

















 


EXHIBIT A


 


[FORM OF]


 


COMMITTED LOAN NOTICE


 


	
  To:

  	
  JPMorgan Chase Bank, N.A.,
  as Administrative Agent

  
	
   

  	
  Loan & Agency
  Services

  
	
   

  	
  1111 Fannin, 10th Floor

  
	
   

  	
  Houston, TX 77002-6925

  
	
   

  	
  Attention: Antonio Adollo

  



 


[Date]


 


Ladies
and Gentlemen:


 


Reference is made to the Credit Agreement
dated as of March 2, 2007 (as amended, supplemented or otherwise modified
from time to time, the “Credit
Agreement”), among
Doctor Acquisition Co., a Delaware corporation (to be merged with and into
Reader’s Digest (as defined herein), the “Company”), RDA Holding Co., a
Delaware corporation (“Holdings”), The Reader’s Digest Association, Inc.,
a Delaware corporation (“Reader’s Digest”), the Overseas Borrowers from
time to time party hereto, JPMorgan Chase Bank, N.A., as Administrative Agent,
each lender from time to time party thereto (collectively, the “Lenders”
and individually, a “Lender”), Citicorp North America, Inc. and
Merrill Lynch, Pierce, Fenner & Smith Incorporated, as Co-Syndication
Agents, and The Royal Bank of Scotland plc, as Documentation Agent.  Capitalized terms used herein and not
otherwise defined herein shall have the meanings assigned to such terms in the
Credit Agreement.


 


The undersigned
Company hereby requests (select one):


 


o  A Borrowing of new Loans


 


o  A conversion of Loans


 


o  A continuation of Loans


 


to be made on the terms set forth below:


 


	
  (A)

  	
  Class of
  Borrowing (Term or Revolving Credit)

  	
   

  
	
   

  	
   

  
	
  (B)

  	
  Date
  of Borrowing, conversion or continuation

  (which is a Business Day)

  	
   

  
	
   

  	
   

  
	
  (C)

  	
  Aggregate
  principal amount

  	
   

  
	
   

  	
   

  
	
  (D)

  	
  Type
  of Loan (Eurodollar or Base Rate)

  	
   

  
				



 

















 


	
  (E)

  	
  Initial
  Interest Period (23)

  	
   

  



 


[The undersigned Company
hereby represents and warrants to the Administrative Agent and the Lenders
that, on the date of this Committed Loan Notice and on the date of the related
Borrowing, the conditions to lending specified in paragraphs (a) and (b) of
Section 4.02 of the Credit Agreement have been satisfied.](24)


 


	
   

  	
  [COMPANY],

  
	
   

  	
   

  
	
   

  	
  by

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  



 






(23) Applicable for
Eurodollar Borrowings/Loans only.


 


(24) Insert bracketed
language if the Borrowing is the initial Credit Extension, to include only
those Specified Representations in Section 4.01 of the Credit Agreement.


 

















 


EXHIBIT B


 


[FORM OF]


 


SWING LINE LOAN NOTICE


 


	
  To:

  	
  JPMorgan Chase Bank, N.A.,
  as Swing Line Lender and Administrative Agent

  
	
   

  	
  1111 Fannin, 10th Floor

  
	
   

  	
  Houston, TX 77002

  
	
   

  	
  Attention: Antonio Adollo

  



 


[Date]


 


Ladies
and Gentlemen:


 


Reference is made to the Credit Agreement
dated as of March 2, 2007 (as amended, supplemented or otherwise modified
from time to time, the “Credit
Agreement”), among
Doctor Acquisition Co., a Delaware corporation (to be merged with and into
Reader’s Digest (as defined herein), the “Company”), RDA Holding Co., a
Delaware corporation (“Holdings”), The Reader’s Digest Association, Inc.,
a Delaware corporation (“Reader’s Digest”), the Overseas Borrowers from
time to time party hereto, JPMorgan Chase Bank, N.A., as Administrative Agent,
each lender from time to time party thereto (collectively, the “Lenders”
and individually, a “Lender”), Citicorp North America, Inc. and
Merrill Lynch, Pierce, Fenner & Smith Incorporated, as Co-Syndication
Agents, and The Royal Bank of Scotland plc, as Documentation Agent.  Capitalized terms used herein and not
otherwise defined herein shall have the meanings assigned to such terms in the
Credit Agreement.


 


	
  (A)

  	
  Aggregate
  principal amount

  to be borrowed(25)

  	
   

  	
   

  
	
   

  	
   

  
	
  (B)

  	
  Date
  of Borrowing

  (which is a Business Day)

  	
   

  	
   

  



 


	
   

  	
  [THE
  READER’S DIGEST ASSOCIATION, INC.],

  
	
   

  	
   

  
	
   

  	
  by

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  



 






(25) Shall be a minimum of
$250,000.


 

















 


EXHIBIT C-1


 


LENDER:
[·]


PRINCIPAL
AMOUNT: $[·]


 


[FORM OF] TERM NOTE


 


New York, New York


[Date]


 


FOR
VALUE RECEIVED, the undersigned, Doctor Acquisition Co., a Delaware corporation
(to be merged with and into Reader’s Digest (as defined herein), the “Company”),
hereby promises to pay to the Lender set forth above (the “Lender”), in
lawful money of the United States of America in immediately available funds at
the relevant Administrative Agent’s Office (such term, and each other
capitalized term used but not defined herein, having the meaning assigned to it
in the Credit Agreement dated as of March 2, 2007 (as the same may be
amended, supplemented or otherwise modified from time to time, the “Credit
Agreement”), among the Company, RDA Holding Co., a Delaware corporation,
The Reader’s Digest Association, Inc., a Delaware corporation (“Reader’s
Digest”), the Overseas Borrowers from time to time party hereto, JPMorgan
Chase Bank, N.A., as Administrative Agent, the lenders from time to time party
thereto, Citicorp North America, Inc. and Merrill Lynch, Pierce, Fenner &
Smith Incorporated, as Co-Syndication Agents, and The Royal Bank of Scotland
plc, as Documentation Agent (i) on the Maturity Date the principal sum of
                
Dollars ($        ) or, if less, the
then unpaid principal amount of all Term Loans made by the Lender to the
Company pursuant to the Credit Agreement and (ii) on each Interest Payment
Date, interest at the rate or rates per annum as provided in the Credit
Agreement on the unpaid principal amount of all Term Loans made by the Lender
to the Company pursuant to the Credit Agreement.


 


The Company promises to pay interest, on
demand, on any overdue principal and, to the extent permitted by applicable
Law, overdue interest from their due dates at the rate or rates provided in the
Credit Agreement.


 


The Company hereby waives diligence,
presentment, demand, protest and notice of any kind whatsoever.


 


All borrowings evidenced by this note and all
payments and prepayments of the principal hereof and interest hereon and the
respective dates thereof shall be endorsed by the holder hereof on the schedule
attached hereto and made a part hereof or on a continuation thereof which shall
be attached hereto and made a part hereof, or otherwise recorded by such holder
in its internal records; provided, however, that the failure of
the holder hereof to make such a notation or any error in such notation shall
not affect the obligations of the Company under this note.


 


This note is one of the Term Notes referred
to in the Credit Agreement that, among other things, contains provisions for
the acceleration of the maturity hereof upon the continuance of an Event of
Default, for optional and mandatory prepayment of the principal hereof prior to
the Maturity Date with respect to the Term Loans and for the


 
















 


amendment or waiver of
certain provisions of the Credit Agreement, all upon the terms and conditions
specified in the Credit Agreement.


 


THIS NOTE SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.


 


***********************************************


 


	
   

  	
  DOCTOR
  ACQUISITION CO.,

  
	
   

  	
   

  
	
   

  	
  by

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  



 

















 


LOANS AND PAYMENTS


 


	
  Date

  	
   

  	
  Amount of Loan

  	
   

  	
  Maturity

  Date

  	
   

  	
  Payments of

  Principal/Interest

  	
   

  	
  Principal

  Balance of

  Note

  	
   

  	
  Name of

  Person

  Making the

  Notation

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  



 

















 


EXHIBIT C-2


 


LENDER:
[·]


PRINCIPAL
AMOUNT: $[·]


 


[FORM OF] REVOLVING CREDIT NOTE


 


New York, New York


[Date]


 


FOR
VALUE RECEIVED, the undersigned, Doctor Acquisition Co., a Delaware corporation
(to be merged with and into Reader’s Digest (as defined herein), the “Company”),
hereby promises to pay to the Lender set forth above (the “Lender”), in
lawful money of the United States of America in immediately available funds at
the relevant Administrative Agent’s Office (such term, and each other
capitalized term used but not defined herein, having the meaning assigned to it
in the Credit Agreement dated as of March 2, 2007 (as the same may be
amended, supplemented or otherwise modified from time to time, the “Credit
Agreement”), among the Company, RDA Holding Co., a Delaware corporation,
The Reader’s Digest Association, Inc., a Delaware corporation (“Reader’s
Digest”), the Overseas Borrowers from time to time party hereto, JPMorgan
Chase Bank, N.A., as Administrative Agent, the lenders from time to time party
thereto, Citicorp North America, Inc. and Merrill Lynch, Pierce, Fenner &
Smith Incorporated, as Co-Syndication Agents, and The Royal Bank of Scotland
plc, as Documentation Agent (i) on the Maturity Date the principal sum of
                
Dollars ($        ) or, if less, the
then unpaid principal amount of all Term Loans made by the Lender to the Company
pursuant to the Credit Agreement and (ii) on each Interest Payment Date,
interest at the rate or rates per annum as provided in the Credit Agreement on
the unpaid principal amount of all Term Loans made by the Lender to the Company
pursuant to the Credit Agreement.


 


The Company promises to pay interest, on
demand, on any overdue principal and, to the extent permitted by applicable
Law, overdue interest from their due dates at the rate or rates provided in the
Credit Agreement.


 


The Company hereby waives diligence,
presentment, demand, protest and notice of any kind whatsoever.


 


All borrowings evidenced by this note and all
payments and prepayments of the principal hereof and interest hereon and the
respective dates thereof shall be endorsed by the holder hereof on the schedule
attached hereto and made a part hereof or on a continuation thereof which shall
be attached hereto and made a part hereof, or otherwise recorded by such holder
in its internal records; provided, however, that the failure of
the holder hereof to make such a notation or any error in such notation shall
not affect the obligations of the Company under this note.


 


This note is one of the Revolving Credit
Notes referred to in the Credit Agreement that, among other things, contains
provisions for the acceleration of the maturity hereof upon the continuance of
an Event of Default, for optional and mandatory prepayment of the principal
hereof prior to the Maturity Date with respect to the Revolving Credit Facility
and


 

















 


for the amendment or waiver
of certain provisions of the Credit Agreement, all upon the terms and
conditions specified in the Credit Agreement.


 




THIS
NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE
STATE OF NEW YORK.


 





 


 


	
   

  	
  DOCTOR
  ACQUISITION CO.,

  
	
   

  	
   

  
	
   

  	
  by

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  



 

















 


LOANS AND PAYMENTS


 


	
  Date

  	
   

  	
  Amount of Loan

  	
   

  	
  Maturity

  Date

  	
   

  	
  Payments of

  Principal/Interest

  	
   

  	
  Principal

  Balance of

  Note

  	
   

  	
  Name of

  Person

  Making the

  Notation

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  



 

















 


EXHIBIT C-3


 


LENDER:
[·]


PRINCIPAL
AMOUNT: € [·]


 


[FORM OF] EURO TERM NOTE


 


New York, New York


[Date]


 


FOR
VALUE RECEIVED, the undersigned, RD German Holdings GmbH, a German corporation
(the “Company”), hereby promises to pay to the Lender set forth above
(the “Lender”), in Euros in immediately available funds at the relevant
Administrative Agent’s Office (such term, and each other capitalized term used
but not defined herein, having the meaning assigned to it in the Credit
Agreement dated as of March 2, 2007 (as the same may be amended,
supplemented or otherwise modified from time to time, the “Credit Agreement”),
among Doctor Acquisition Co., a Delaware corporation, RDA Holding Co., a
Delaware corporation, The Reader’s Digest Association, Inc., a Delaware
corporation (“Reader’s Digest”), the Overseas Borrowers from time to
time party hereto, JPMorgan Chase Bank, N.A., as Administrative Agent, the
lenders from time to time party thereto, Citicorp North America, Inc. and
Merrill Lynch, Pierce, Fenner & Smith Incorporated, as Co-Syndication
Agents, and The Royal Bank of Scotland plc, as Documentation Agent (i) on
the Maturity Date the principal sum of
                
Euros (€        )
or, if less, the then unpaid principal amount of all Euro Term Loans made by
the Lender to the Company pursuant to the Credit Agreement and (ii) on
each Interest Payment Date, interest at the rate or rates per annum as provided
in the Credit Agreement on the unpaid principal amount of all Euro Term Loans
made by the Lender to the Company pursuant to the Credit Agreement.


 


The Company promises to pay interest, on
demand, on any overdue principal and, to the extent permitted by applicable
Law, overdue interest from their due dates at the rate or rates provided in the
Credit Agreement.


 


The Company hereby waives diligence,
presentment, demand, protest and notice of any kind whatsoever.


 


All borrowings evidenced by this note and all
payments and prepayments of the principal hereof and interest hereon and the
respective dates thereof shall be endorsed by the holder hereof on the schedule
attached hereto and made a part hereof or on a continuation thereof which shall
be attached hereto and made a part hereof, or otherwise recorded by such holder
in its internal records; provided, however, that the failure of
the holder hereof to make such a notation or any error in such notation shall
not affect the obligations of the Company under this note.


 


This note is one of the Euro Term Notes
referred to in the Credit Agreement that, among other things, contains
provisions for the acceleration of the maturity hereof upon the continuance of
an Event of Default, for optional and mandatory prepayment of the principal hereof
prior to the Maturity Date with respect to the Euro Term Loans and for the
amendment or


 

















 


waiver of certain provisions
of the Credit Agreement, all upon the terms and conditions specified in the
Credit Agreement.


 


THIS NOTE SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.


 


***********************************************


 


 


	
   

  	
  RD
  GERMAN HOLDINGS GMBH,

  
	
   

  	
   

  
	
   

  	
  by

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  



 

















 


LOANS AND PAYMENTS


 


	
  Date

  	
   

  	
  Amount of Loan

  	
   

  	
  Maturity

  Date

  	
   

  	
  Payments of

  Principal/Interest

  	
   

  	
  Principal

  Balance of

  Note

  	
   

  	
  Name of

  Person

  Making the

  Notation

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  



 

















 


EXHIBIT D


 


[FORM OF]


 


COMPLIANCE CERTIFICATE


 


Reference is made to the
Credit Agreement dated as of March 2, 2007 (as amended, supplemented or
otherwise modified from time to time, the “Credit Agreement”),
among Doctor Acquisition Co., a Delaware corporation (to be merged with and
into Reader’s Digest (as defined herein), the “Company”), RDA Holding
Co., a Delaware corporation (“Holdings”), The Reader’s Digest
Association, Inc., a Delaware corporation (“Reader’s Digest”), the
Overseas Borrowers from time to time party hereto, JPMorgan Chase Bank, N.A.,
as Administrative Agent, each lender from time to time party thereto
(collectively, the “Lenders” and individually, a “Lender”),
Citicorp North America, Inc. and Merrill Lynch, Pierce, Fenner &
Smith Incorporated, as Co-Syndication Agents, and The Royal Bank of Scotland
plc, as Documentation Agent.  Capitalized
terms used herein and not otherwise defined herein shall have the meanings
assigned to such terms in the Credit Agreement.


 


Pursuant to Section 6.02 of the Credit
Agreement, the undersigned, in his/her capacity as a Responsible Officer of the
Company certifies as follows:


 


1.                                       [Attached hereto as Exhibit [A]
is the audited consolidated balance sheet of the Company and its consolidated
Subsidiaries as at the end of the fiscal year ended [     ] and related consolidated statements of
income or operations, stockholders’ equity and cash flows for such fiscal year,
setting forth in each case in comparative form the figures for the previous
fiscal year, all prepared in accordance with GAAP, audited and accompanied by a
report and opinion of [        ], prepared
in accordance with generally accepted auditing standards in the United States
and not subject to any “going concern” or like qualification or exception or
any qualification or exception as to the scope of such audit.]


 


2.                                       [Attached hereto as Exhibit [B]
is the unaudited consolidated balance sheet of the Company and its consolidated
Subsidiaries as at the end of the fiscal quarter ended [     ] and the related unaudited (i) consolidated
statements of income or operations for such fiscal quarter and for the portion
of the fiscal year then ended and (ii) consolidated statements of cash
flows for the portion of the fiscal year then ended, setting forth in each case
in comparative form the figures for the corresponding fiscal quarter of the
previous fiscal year and the corresponding portion of the previous fiscal
year.  These present fairly in all
material respects the consolidated financial condition, results of operations,
stockholders’ equity and cash flows of the Company and its consolidated
Subsidiaries in accordance with GAAP, subject only to normal year-end audit
adjustments and the absence of footnotes.]


 


3.                                       To my knowledge, on the date hereof, no
Default or Event of Default has occurred and is continuing.  [If unable to provide the foregoing
certification, fully describe the reasons therefor and circumstances thereof
and any action taken or proposed to be taken with respect thereto on
Annex A attached hereto.]


 

















 


4.                                       The following represent true and accurate
calculations to be used to determine whether the Company is in compliance with
the financial covenant set forth in Section 7.10 of the Credit Agreement
as of the last day of the Test Period ended [  
] (the “Certificate Period”):


 


Total
Leverage Ratio.


 


	
  Consolidated Total Debt=

  	
  [          ]

  
	
  Consolidated EBITDA=

  	
  [          ]

  
	
  Actual Ratio=

  	
  [          ]
  to 1.0

  
	
  Required Ratio=

  	
  [          ]
  to 1.0

  



 


Supporting
detail showing the calculation of Consolidated Total Debt, as of the last day
of the Certificate Period, is attached hereto as Schedule 1.  Supporting detail showing the calculation of Consolidated
EBITDA, for the Certificate Period, is attached hereto as Schedule 2.


 


5.                                       The
Company and its Restricted Subsidiaries are in compliance with Section 7.14
of the Credit Agreement.  For the current
fiscal year the limit on Capital Expenditures is $[     ] [, which amount includes the unused
amount carried forward from the previous fiscal year pursuant to Section 7.14
of the Credit Agreement].  The amount of
Capital Expenditures incurred by the Company and its Restricted Subsidiaries in
the current fiscal year through the end of the fiscal quarter most recently
ended is $[     ].  Supporting detail showing the calculation of
the foregoing Capital Expenditures is attached hereto as Schedule 4.


 


IN WITNESS WHEREOF, the undersigned, in
his/her capacity as a Responsible Officer of the Company, has executed this
certificate for and on behalf of the Company and has caused this certificate to
be delivered this          day of
                  .


 


	
   

  	
  THE
  READER’S DIGEST ASSOCIATION, INC.

  
	
   

  	
   

  
	
   

  	
  by

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  



 
















 


EXHIBIT E


 


[FORM OF]


 


ASSIGNMENT AND ASSUMPTION


 


This Assignment and Assumption (this “Assignment
and Assumption”) is dated as of the Effective Date set forth below and is
entered into by and between the Assignor (as defined below) and the Assignee
(as defined below).  Capitalized terms
used in this Assignment and Assumption and not otherwise defined herein have
the meanings specified in the Credit Agreement dated as of March 2, 2007
(as amended, supplemented or otherwise modified from time to time, the “Credit Agreement”), among Doctor Acquisition Co., a
Delaware corporation (to be merged with and into Reader’s Digest (as defined
herein), the “Company”), RDA Holding Co., a Delaware corporation (“Holdings”),
The Reader’s Digest Association, Inc., a Delaware corporation (“Reader’s
Digest”), the Overseas Borrowers from time to time party hereto, JPMorgan
Chase Bank, N.A., as Administrative Agent, each lender from time to time party
thereto (collectively, the “Lenders” and individually, a “Lender”),
Citicorp North America, Inc. and Merrill Lynch, Pierce, Fenner &
Smith Incorporated, as Co-Syndication Agents, and The Royal Bank of Scotland
plc, as Documentation Agent, receipt of a copy of which is hereby acknowledged
by the Assignee.  The Standard Terms and
Conditions set forth in Annex 1 attached hereto are hereby agreed to and
incorporated herein by reference and made a part of this Assignment and
Assumption as if set forth herein in full.


 


For an agreed consideration, the Assignor
hereby irrevocably sells and assigns to the Assignee, and the Assignee hereby
irrevocably purchases and assumes from the Assignor, subject to and in
accordance with the Standard Terms and Conditions and the Credit Agreement, as
of the Effective Date inserted by the Administrative Agent as contemplated
below, (i) all of the Assignor’s rights and obligations in its capacity as
a Lender under the Credit Agreement and any other documents or instruments
delivered pursuant thereto to the extent related to the amount and percentage
interest identified below of all of such outstanding rights and obligations of
the Assignor under the facility identified below (including participations in
any Letters of Credit or Swing Line Loans included in such facility) and (ii) to
the extent permitted to be assigned under applicable law, all claims, suits,
causes of action and any other right of the Assignor (in its capacity as a
Lender) against any Person, whether known or unknown, arising under or in
connection with the Credit Agreement, any other documents or instruments
delivered pursuant thereto or the loan transactions governed thereby or in any
way based on or related to any of the foregoing, including, but not limited to,
contract claims, tort claims, malpractice claims, statutory claims and all
other claims at law or in equity related to the rights and obligations sold and
assigned pursuant to clause (i) above (the rights and obligations sold and
assigned pursuant to clauses (i) and (ii) above being referred to
herein collectively as the “Assigned Interest”).  Such sale and assignment is without recourse
to the Assignor and, except as expressly provided in this Assignment and
Assumption, without representation or warranty by the Assignor.


 


1.                                       Assignor (the “Assignor”):


 

















 


2.                                       Assignee (the “Assignee”):


 


Assignee
is an Affiliate of: [Name of Lender]


 


Assignee
is an Approved Fund of: [Name of Lender]


 


3.                                       Borrowers: 
The Reader’s Digest Association, Inc.


 


4.                                       Administrative Agent:  JPMorgan Chase Bank, N.A.


 


5.                                       Assigned Interest:


 


	
  Facility

  	
   

  	
  Aggregate Amount

  of

  Commitment/Loans

  of all Lenders

  	
   

  	
  Amount of

  Commitment/Loans

  Assigned

  	
   

  	
  Percentage

  Assigned of

  Commitment/

  Loans(26)

  	
   

  
	
  Revolving Credit Facility

  	
   

  	
  $

  	
    

  	
   

  	
  $

  	
    

  	
   

  	
  %

  	
   

  
	
  Term Loans

  	
   

  	
  $

  	
    

  	
   

  	
  $

  	
    

  	
   

  	
  %

  	
   

  
	
  Euro Term Loans

  	
   

  	
  €

  	
    

  	
   

  	
  €

  	
    

  	
   

  	
  %

  	
   

  



 


Effective Date:


 


[To be inserted by Administrative Agent and
which shall be the Effective Date of Recordation of Transfer in the Register
therefore.]


 






(26)  The Assignee (in the case an Assignee is not
a Lender) agrees to deliver to the Administrative Agent a completed Administrative
Questionnaire in which the Assignee designates one or more credit contacts to
whom all syndicate-level information (which may contain material non-public
information about the Loan Parties and their Related Parties or their
respective securities) will be made available and who may receive such
information in accordance with the Assignee’s compliance procedures and
applicable laws, including Federal and state securities laws.


 

















 


The terms set forth in this
Assignment and Assumption are hereby agreed to:


 


 


	
   

  	
  JPMORGAN
  CHASE BANK, N.A., as Assignor,

  
	
   

  	
   

  
	
   

  	
  by

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  



 

















 


	
   

  	
  [NAME
  OF ASSIGNEE], as Assignee,

  
	
   

  	
   

  
	
   

  	
  by

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  



 

















 


	
  [Consented
  to and](27) Accepted:

  
	
   

  
	
  JPMORGAN
  CHASE BANK, N.A.

  
	
  as
  Administrative Agent,

  
	
   

  
	
  by

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  
	
  [Consented
  to:

  
	
   

  
	
  [L/C
  ISSUER], as L/C Issuer,

  
	
   

  
	
  by

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  
	
  JPMORGAN
  CHASE BANK, N.A., as Swing Line Lender,

  
	
   

  
	
  by

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:]](28)

  	
   

  



 






(27)  No consent of the Administrative Agent shall
be required for an assignment of a Term Loan or a Euro Term Loan to a Lender,
an Affiliate of a Lender or an Approved Fund.


 


(28)  No consent of any L/C Issuer or the Swing
Line Lender shall be required for an assignment of a Term Loan or a Euro Term
Loan.


 

















 


	
  [THE
  READER’S DIGEST ASSOCIATION, INC.

  
	
   

  
	
  by

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:](29)

  	
   

  



 






(29)  No consent of the Company shall be required for
an assignment to a Lender, an Affiliate of a Lender, an Approved Fund or, if an
Event of Default under Section 8.01(a), (f) or (g) of the Credit
Agreement has occurred and is continuing, any Assignee.


 

















 


Annex 1


 


CREDIT AGREEMENT(30)


 


STANDARD TERMS AND CONDITIONS FOR

ASSIGNMENT AND ASSUMPTION


 


1.  Representations
and Warranties.


 


1.1  Assignor.  The Assignor (a) represents
and warrants that (i) it is the legal and beneficial owner of the Assigned
Interest, (ii) the Assigned Interest is free and clear of any lien,
encumbrance or other adverse claim and (iii) it has full power and
authority, and has taken all action necessary, to execute and deliver this
Assignment and Assumption and to consummate the transactions contemplated
hereby; and (b) assumes no responsibility with respect to (i) any
statements, warranties or representations made in or in connection with the
Credit Agreement, (ii) the execution, legality, validity, enforceability,
genuineness, sufficiency or value of the Credit Agreement, (iii) the
financial condition of Holdings, the Company, or any of their Subsidiaries or
Affiliates or any other Person obligated in respect of the Credit Agreement or (iv) the
performance or observance by Holdings, the Company, or any of their
Subsidiaries or Affiliates or any other Person of any of their obligations
under the Credit Agreement.


 


1.2.  Assignee.  The Assignee (a) represents and warrants
that (i) it has full power and authority, and has taken all action
necessary, to execute and deliver this Assignment and Assumption and to
consummate the transactions contemplated hereby and to become a Lender under
the Credit Agreement, (ii) it satisfies the requirements, if any,
specified in the Credit Agreement that are required to be satisfied by it in
order to acquire the Assigned Interest and become a Lender, (iii) from and
after the Effective Date, it shall be bound by the provisions of the Credit Agreement
as a Lender thereunder and, to the extent of the Assigned Interest, shall have
the obligations of a Lender thereunder, (iv) it has received a copy of the
Credit Agreement, together with copies of the most recent financial statements
delivered pursuant to Section 6.01 thereof, and such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into this Assignment and Assumption and to purchase the


 










(30)  Capitalized terms used in this Assignment and
Assumption and not otherwise defined herein have the meanings specified in the
Credit Agreement dated as of March [ 
], 2007 (as amended, supplemented or otherwise modified from time to
time, the “Credit Agreement”), among Doctor Acquisition Co., a Delaware
corporation (to be merged with and into Reader’s Digest (as defined herein),
the “Company”), RDA Holding Co., a Delaware corporation (“Holdings”),
The Reader’s Digest Association, Inc., a Delaware corporation (“Reader’s
Digest”), the Overseas Borrowers from time to time party hereto, JPMorgan Chase
Bank, N.A., as Administrative Agent, each lender from time to time party
thereto (collectively, the “Lenders” and individually, a “Lender”),
Citicorp North America, Inc. and Merrill Lynch, Pierce, Fenner & Smith
Incorporated, as Co-Syndication Agents, and The Royal Bank of Scotland plc, as Documentation
Agent.


 





















 


Assigned Interest on the
basis of which it has made such analysis and decision independently and without
reliance on any Agent or any other Lender, and (v) if it is a Foreign
Lender, attached to this Assignment and Assumption is any documentation
required to be delivered by it pursuant to Section 10.15 of the Credit
Agreement, duly completed and executed by the Assignee; and (b) agrees
that (i) it will, independently and without reliance on the Assignor, any
Agent 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 the Credit Agreement, and (ii) it
will perform in accordance with their terms all of the obligations which by the
terms of the Credit Agreement are required to be performed by it as a Lender.


 


2.  Payments.  From and after the Effective Date, the Administrative
Agent shall make all payments in respect of the Assigned Interest (including
payments of principal, interest, fees and other amounts) to the Assignor for
amounts which have accrued to but excluding the Effective Date and to the
Assignee for amounts which have accrued from and after the Effective Date.


 


3.  General
Provisions.  This Assignment and
Assumption shall be binding upon and inure to the benefit of the parties hereto
and their respective permitted successors and assigns.  This Assignment and Assumption may be
executed in any number of counterparts, which together
shall constitute one instrument. 
Delivery of an executed counterpart of a signature page of this
Assignment and Assumption by facsimile or other electronic transmission shall
be effective as delivery of a manually executed counterpart of this Assignment
and Assumption.  This Assignment and
Assumption shall be construed in accordance with and governed by the law of the
State of New York.


 




















EXHIBIT F


 




 





 


GUARANTEE AND COLLATERAL AGREEMENT


 


made by 


 


DOCTOR ACQUISITION CO.,


 


RDA HOLDING CO.,


 


THE READER’S DIGEST ASSOCIATION, INC.


 


and


 


THE GUARANTORS IDENTIFIED HEREIN


 


in favor of


 


JPMORGAN CHASE BANK, N.A.,


as Administrative Agent


 


Dated as of March 2, 2007


 




 





 

















 


TABLE OF CONTENTS


 


	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  Section 1.

  	
  DEFINED TERMS

  	
  1

  
	
  1.1.

  	
  Definitions

  	
  1

  
	
  1.2.

  	
  Other
  Definitional Provisions

  	
  5

  
	
   

  	
   

  	
   

  
	
  Section 2.

  	
  GUARANTEE

  	
  5

  
	
  2.1.

  	
  Guarantee

  	
  5

  
	
  2.2.

  	
  Right of
  Contribution

  	
  6

  
	
  2.3.

  	
  No Subrogation

  	
  6

  
	
  2.4.

  	
  Amendments, etc.,
  with respect to the Borrower Obligations

  	
  7

  
	
  2.5.

  	
  Guarantee
  Absolute and Unconditional

  	
  7

  
	
  2.6.

  	
  Reinstatement

  	
  8

  
	
  2.7.

  	
  Payments

  	
  8

  
	
   

  	
   

  	
   

  
	
  Section 3.

  	
  GRANT OF SECURITY INTEREST

  	
  8

  
	
   

  	
   

  	
   

  
	
  Section 4.

  	
  REPRESENTATIONS AND WARRANTIES

  	
  10

  
	
  4.1.

  	
  Title; No Other
  Liens

  	
  10

  
	
  4.2.

  	
  Perfected First
  Priority Liens

  	
  11

  
	
  4.3.

  	
  Jurisdiction of
  Organization

  	
  11

  
	
  4.4.

  	
  Inventory and
  Equipment

  	
  11

  
	
  4.5.

  	
  Farm Products

  	
  11

  
	
  4.6.

  	
  Investment
  Property

  	
  11

  
	
  4.7.

  	
  Receivables

  	
  12

  
	
  4.8.

  	
  Intellectual
  Property

  	
  12

  
	
  4.9.

  	
  Commercial Tort
  Claims

  	
  12

  
	
   

  	
   

  	
   

  
	
  Section 5.

  	
  COVENANTS

  	
  12

  
	
  5.1.

  	
  Delivery of
  Instruments, Certificated Securities and Chattel Paper

  	
  13

  
	
  5.2.

  	
  Maintenance of
  Insurance

  	
  13

  
	
  5.3.

  	
  Maintenance of
  Perfected Security Interest; Further Documentation

  	
  13

  
	
  5.4.

  	
  Changes in
  Locations, Name, etc.

  	
  14

  
	
  5.5.

  	
  Notices

  	
  14

  
	
  5.6.

  	
  Investment
  Property

  	
  14

  
	
  5.7.

  	
  Receivables

  	
  16

  
	
  5.8.

  	
  Intellectual
  Property

  	
  16

  
	
  5.9.

  	
  Commercial Tort
  Claims

  	
  18

  
	
   

  	
   

  	
   

  
	
  Section 6.

  	
  REMEDIAL PROVISIONS

  	
  18

  
	
  6.1.

  	
  Certain Matters
  Relating to Receivables

  	
  18

  
	
  6.2.

  	
  Communications
  with Obligors; Grantors Remain Liable

  	
  19

  
	
  6.3.

  	
  Pledged Equity

  	
  20

  
	
  6.4.

  	
  Proceeds to be
  Turned Over to Administrative Agent

  	
  21

  



 


i

















 


	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  6.5.

  	
  Application of
  Proceeds

  	
  21

  
	
  6.6.

  	
  Code and Other
  Remedies

  	
  21

  
	
  6.7.

  	
  Registration
  Rights

  	
  22

  
	
  6.8.

  	
  Deficiency

  	
  23

  
	
   

  	
   

  	
   

  
	
  Section 7.

  	
  THE ADMINISTRATIVE AGENT

  	
  23

  
	
  7.1.

  	
  Administrative
  Agent’s Appointment as Attorney-in-Fact, etc.

  	
  23

  
	
  7.2.

  	
  Duty of
  Administrative Agent

  	
  25

  
	
  7.3.

  	
  Execution of
  Financing Statements

  	
  25

  
	
  7.4.

  	
  Authority of
  Administrative Agent

  	
  26

  
	
   

  	
   

  	
   

  
	
  Section 8.

  	
  MISCELLANEOUS

  	
  26

  
	
  8.1.

  	
  Amendments in
  Writing

  	
  26

  
	
  8.2.

  	
  Notices

  	
  26

  
	
  8.3.

  	
  No Waiver by
  Course of Conduct; Cumulative Remedies

  	
  26

  
	
  8.4.

  	
  Enforcement
  Expenses; Indemnification

  	
  26

  
	
  8.5.

  	
  Successors and
  Assigns

  	
  27

  
	
  8.6.

  	
  Setoff

  	
  27

  
	
  8.7.

  	
  Counterparts

  	
  27

  
	
  8.8.

  	
  Severability

  	
  28

  
	
  8.9.

  	
  Section Headings

  	
  28

  
	
  8.10.

  	
  Integration

  	
  28

  
	
  8.11.

  	
  GOVERNING
  LAW

  	
  28

  
	
  8.12.

  	
  Submission To
  Jurisdiction; Waivers

  	
  28

  
	
  8.13.

  	
  Acknowledgments

  	
  29

  
	
  8.14.

  	
  Additional
  Guarantors and Grantors

  	
  29

  
	
  8.15.

  	
  Releases

  	
  29

  
	
  8.16.

  	
  WAIVER
  OF JURY TRIAL

  	
  30

  
	
  8.17.

  	
  Effectiveness of
  the Merger; Assignment and Delegation to and Assumption by Reader’s Digest

  	
  30

  
	
  8.18.

  	
  German Borrower
  Security

  	
  30

  
	
  8.19.

  	
  Parallel
  Obligations

  	
  31

  



 


	
  SCHEDULES

  	
   

  
	
  Schedule 1

  	
  Notice
  Addresses

  
	
  Schedule 2

  	
  Investment
  Property

  
	
  Schedule 3

  	
  Perfection
  Matters

  
	
  Schedule 4

  	
  Jurisdictions
  of Organization

  
	
  Schedule 5

  	
  Inventory
  and Equipment Locations

  
	
  Schedule 6

  	
  Intellectual
  Property

  
	
  Schedule 7

  	
  Commercial
  Tort Claims

  
	
   

  	
   

  
	
  ANNEX

  	
   

  
	
  Annex 1

  	
  Form of
  Security Agreement Supplement

  
	
  Annex 2

  	
  Form of
  Perfection Certificate

  



 


ii

















 


GUARANTEE AND COLLATERAL AGREEMENT, dated as of March 2, 2007,
made by each of the signatories hereto (other than the German Borrower, and
together with any other entity that may become a party hereto as provided
herein, the “Grantors”), in favor of JPMORGAN CHASE BANK, N.A., as
Administrative Agent (in such capacity, the “Administrative Agent”) for
the lending and other financial institutions (the “Lenders”) from time
to time parties to the Credit Agreement, dated as of the date hereof (as
amended, supplemented or otherwise modified from time to time, the “Credit
Agreement”), among DOCTOR ACQUISITION CO., a Delaware corporation (to be
merged with and into Reader’s Digest (as defined below), the “Company”),
RDA HOLDING CO., a Delaware corporation (“Holdings”), THE READER’S
DIGEST ASSOCIATION, INC., a Delaware corporation (“Reader’s Digest”),
the Overseas Borrowers from time to time party thereto (together with the
Company, the “Borrowers”), the Lenders and the Administrative Agent.


 


W  I  T  N  E  S
S  E  T  H:


 


WHEREAS, Holdings, the Borrowers, the Lenders
and the Administrative Agent have entered into the Credit Agreement, pursuant
to which the Lenders have severally agreed to make extensions of credit to the
Borrowers upon the terms and subject to the conditions set forth therein;


 


WHEREAS, each Borrower is a member of an
affiliated group of companies that, following the consummation of the
Acquisitions, will include each other Grantor;


 


WHEREAS, the proceeds of the extensions of
credit under the Credit Agreement will be used in part to enable the Borrowers
to make valuable transfers to one or more of the other Grantors in connection
with the operation of their respective businesses;


 


WHEREAS, the Borrowers and the other Grantors
are engaged in related businesses, and each Grantor will derive substantial
direct and indirect benefit from the making of the extensions of credit under
the Credit Agreement; and


 


WHEREAS, it is a condition precedent to the
obligation of the Lenders to make their respective extensions of credit to the
Borrowers under the Credit Agreement that the Grantors shall have executed and
delivered this Agreement to the Administrative Agent for the ratable benefit of
the Secured Parties;


 


NOW, THEREFORE, in consideration of the
premises and the agreements hereinafter set forth, and in order to induce the
Administrative Agent and the Lenders to enter into the Credit Agreement and in
order to induce the Lenders to make their respective extensions of credit to
the Borrowers thereunder, each Grantor hereby agrees with the Administrative
Agent, for the ratable benefit of the Secured Parties, as follows:


 


SECTION 1.                                DEFINED
TERMS


 


1.1.                              Definitions.  (a)  Unless otherwise defined herein,
terms defined in the Credit Agreement and used herein shall have the meanings
given to them in the Credit Agreement, and the following terms are used herein
as defined in the New York UCC: 
Accounts, Certificated Security, Chattel Paper, Commercial Tort Claims,
Documents,


 

















 


Equipment, Farm
Products, General Intangibles, Instruments, Inventory, Letter of Credit Rights
and Supporting Obligations.


 


(b)         The following terms shall have the following meanings:


 


“Agreement”:  this Guarantee and Collateral Agreement, as
the same may be amended, supplemented or otherwise modified from time to time.


 


“Applicable Governmental Authority”:  as defined in Section 5.7(c).


 


“Borrower Obligations”:  the “Obligations” as defined in the Credit
Agreement.


 


“Collateral”:  as defined in Section 3.


 


“Collateral Account”:  any collateral account established by the
Administrative Agent as provided in Section 6.1 or 6.4.


 


“Copyrights”:  (i) all copyrights arising under the
laws of the United States, any other country or any political subdivision
thereof, whether registered or unregistered and whether published or
unpublished (including, without limitation, those listed in Schedule 6),
all registrations and recordings thereof, and all applications in connection
therewith, including, without limitation, all registrations, recordings and
applications in the United States Copyright Office, and (ii) the right to
obtain all renewals thereof.


 


“Copyright Licenses”:  any written agreement naming any Grantor as
licensor or licensee, granting any right under any Copyright, including,
without limitation, the grant of rights to manufacture, distribute, exploit and
sell materials derived from any Copyright.


 


“Deposit Account”:  as defined in the Uniform Commercial Code of
any applicable jurisdiction and, in any event, including, without limitation,
any demand, time savings, passbook or like account maintained with a depositary
institution.


 


“Excluded Property”: as defined in Section 3.


 


“Foreign Subsidiary”:  any direct or indirect Restricted Subsidiary
of the Company which (i) is not a Domestic Subsidiary or (ii) is set
forth on Schedule 1.01E to the Credit Agreement.


 


“Foreign Subsidiary Voting Stock”:  the voting Equity Interests of any Foreign
Subsidiary and of any Domestic Subsidiary substantially all of whose assets
consist of voting Equity Interests of one or more Foreign Subsidiaries.


 


“Guarantor Obligations”:  with respect to any Guarantor, all
obligations and liabilities of such Guarantor which may arise under or in
connection with this Agreement (including, without limitation, Section 2)
or any other Loan Document or any Secured Hedge Agreement to which such
Guarantor is a party, in each case whether on account of guarantee obligations,
reimbursement obligations, fees, indemnities, costs, expenses or 


 


2

















 


otherwise (including, without
limitation, all Attorney Costs that are required to be paid by such Guarantor
pursuant to the terms of this Agreement or any other Loan Document).


 


“Guarantors”:  the collective reference to each Grantor
other than the Company; provided that the term “Guarantors” shall
include the Company in the case of the Overseas Obligations.


 


“Intellectual Property”:  the collective reference to all rights,
priorities and privileges relating to intellectual property, whether arising
under United States, multinational or foreign laws or otherwise, including,
without limitation, the Copyrights, the Copyright Licenses, the Patents, the
Patent Licenses, the Trademarks and the Trademark Licenses, and all rights to
sue at law or in equity for any infringement or other impairment thereof,
including the right to receive all proceeds and damages therefrom.


 


“Intercompany Note”:  any promissory note evidencing loans made by
any Grantor to Holdings or any of its Subsidiaries.


 


“Investment Property”:  the collective reference to (i) all “investment
property” as such term is defined in Section 9-102(a)(49) of the New York
UCC (other than any Foreign Subsidiary Voting Stock and any Equity Interests of
Unrestricted Subsidiaries excluded from the definition of “Pledged Equity”) and
(ii) whether or not constituting “investment property” as so defined, all
Pledged Debt and all Pledged Equity.


 


“Issuers”:  the collective reference to each issuer of
any Investment Property.


 


“LTIBR”:  any interest-bearing receivables, including
deposits or other funds, with a maturity that qualifies as long-term pursuant
to section 8 no. 1 German Trade Tax Act (Gewerbesteuergesetz)
to be applied mutatis  mutandis
in accordance with marginal notes 20 and 37 of the decree to § 8a of the German
Corporate Income Tax Act (Körperschaftsteuergesetz)
dated July 15, 2004.


 


“New York UCC”:  the Uniform Commercial Code as from time to
time in effect in the State of New York.


 


“Obligations”:  (i) in the case of each Borrower, its
Borrower Obligations, and (ii) in the case of each Guarantor, its
Guarantor Obligations.


 


“Patents”:  (i) all letters patent of the United
States, any other country or any political subdivision thereof, all reissues
and extensions thereof and all goodwill associated therewith, including,
without limitation, any of the foregoing referred to in Schedule 6,
(ii) all applications for letters patent of the United States or any other
country and all divisions, continuations and continuations-in-part thereof,
including, without limitation, any of the foregoing referred to in Schedule 6,
and (iii) all rights to obtain any reissues or extensions of the
foregoing.


 


“Patent License”:  all agreements, whether written or oral,
providing for the grant by or to any Grantor of any right to manufacture, use
or sell any invention covered in 


 


3

















 


whole or in part by a Patent,
including, without limitation, any of the foregoing referred to in Schedule 6.


 


“Perfection Certificate” means a
certificate substantially in the form of Annex 2, completed and supplemented
with the schedules and attachments contemplated thereby, and duly executed by
the associate general counsel or the chief legal officer of Reader’s Digest.


 


“Pledged Debt”:  all promissory notes listed on Schedule 2,
all Intercompany Notes at any time issued to any Grantor and all other
promissory notes issued to or held by any Grantor (other than promissory notes
issued in connection with extensions of trade credit by any Grantor in the
ordinary course of business).


 


“Pledged Equity”:  the Equity Interests listed on Schedule 2,
together with any other shares, stock certificates, options or rights of any
nature whatsoever in respect of the Equity Interests of any Person that may be
issued or granted to, or held by, any Grantor while this Agreement is in
effect; provided that in no event shall (i) more than 65% of the
issued and outstanding Foreign Subsidiary Voting Stock of any Foreign
Subsidiary or of any Domestic Subsidiary substantially all of whose assets
consist of voting Equity Interests of one or more Foreign Subsidiaries, (ii) Equity
Interests of any Unrestricted Subsidiary, (iii) the Company Preferred
Stock or (iv) Equity Interests of any Restricted Subsidiary pledged to
secure Indebtedness permitted under Section 7.03(g) of the Credit
Agreement constitute Pledged Equity or be required to be pledged hereunder.


 


“Proceeds”:  all “proceeds” as such term is defined in Section 9-102(a)(64)
of the New York UCC and, in any event, shall include, without limitation, all
dividends or other income from the Investment Property, collections thereon or
distributions or payments with respect thereto.


 


“Receivable”:  any right to payment for goods sold or leased
or for services rendered, whether or not such right is evidenced by an
Instrument or Chattel Paper and whether or not it has been earned by
performance (including, without limitation, any Account).


 


“Secured Parties”:  the collective reference to the Administrative Agent, the other Agents,
the L/C Issuers, the Lenders, the Hedge Banks, any Affiliate of a
Lender, the Supplemental
Administrative Agent and each co-agent or sub-agent appointed by the
Administrative Agent from time to time pursuant to Section 9.01(c) of
the Credit Agreement, to which Borrower Obligations or Guarantor
Obligations, as applicable, are owed.


 


“Securities Act”:  the Securities Act of 1933, as amended.


 


“Specified Assets” means (a) LTIBR
and (b) following any amendment or replacement of § 8a of the German
Corporate Income Tax Act (Körperschaftsteuergesetz),
any other property or assets owned by any Loan Party or any other provider of
security, direct or indirect access to which property or assets (whether
through inclusion in the Collateral or otherwise) would result in adverse tax 


 


4

















 


consequences to Holdings and
its Subsidiaries as a consequence of any such amendment or replacement,
provided that the aggregate fair market value of the property and assets
included in the definition of Specified Assets pursuant to this clause (b) shall
not exceed an amount equal to 10% of the consolidated total assets of the
German Borrower and its Subsidiaries.


 


“Subsidiary Guarantor”:  any Subsidiary of the Company that is or
becomes a party to this Agreement.


 


“Trademarks”:  (i) all trademarks, trade names,
corporate names, company names, business names, fictitious business names,
trade styles, service marks, logos and other source or business identifiers,
and all goodwill associated therewith, now existing or hereafter adopted or
acquired, all registrations and recordings thereof, and all applications in
connection therewith, whether in the United States Patent and Trademark Office
or in any similar office or agency of the United States, any State thereof or
any other country or any political subdivision thereof, or otherwise, and all
common-law rights related thereto, including, without limitation, any of the
foregoing referred to in Schedule 6, and (ii) the right to
obtain all renewals thereof.


 


“Trademark License”:  any agreement, whether written or oral,
providing for the grant by or to any Grantor of any right to use any Trademark.


 


1.2.                              Other
Definitional Provisions.  (a) 
The words “hereof,” “herein, “ “hereto” and “hereunder” and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and Section and
Schedule references are to this Agreement unless otherwise specified.


 


(b)         The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.


 


(c)          Where the context requires, terms relating to the Collateral
or any part thereof, when used in relation to a Grantor, shall refer to such
Grantor’s Collateral or the relevant part thereof.


 


SECTION 2.                                GUARANTEE


 


2.1.                              Guarantee.  (a)  Each of the Guarantors hereby,
jointly and severally, unconditionally and irrevocably, guarantees to the
Administrative Agent, for the ratable benefit of the Secured Parties and their
respective successors and permitted indorsees, transferees and assigns, the
prompt and complete payment and performance by the Borrowers when due (whether
at the stated maturity, by acceleration or otherwise) of the Borrower
Obligations.


 


(b)         Anything herein or in any other Loan Document to the
contrary notwithstanding, the maximum liability of each Guarantor hereunder and
under the other Loan Documents shall in no event exceed the amount which can be
guaranteed by such Guarantor under applicable federal and state laws relating
to the insolvency of debtors (after giving effect to the right of contribution
established in Section 2.2).


 


5

















 


(c)          Each Guarantor agrees that the Borrower Obligations may at
any time and from time to time exceed the amount of the liability of such
Guarantor hereunder without impairing the guarantee contained in this Section 2
or affecting the rights and remedies of the Administrative Agent or any Lender
hereunder.


 


(d)         The guarantee contained in this Section 2 shall remain
in full force and effect until all the Obligations (other than contingent
indemnification and contingent expense reimbursement obligations, any
Obligations in respect of Secured Hedge Agreements and Cash Management
Obligations) shall have been satisfied by payment in full, no Letter of Credit
shall be outstanding and the Commitments shall be terminated, notwithstanding
that from time to time during the term of the Credit Agreement the Borrowers
may be free from any Borrower Obligations.


 


(e)          Except as provided in Section 8.15, no payment made by
any Borrower, any of the Guarantors, any other guarantor or any other Person or
received or collected by the Administrative Agent or any Lender from any
Borrower, any of the Guarantors, any other guarantor or any other Person by
virtue of any action or proceeding or any setoff, appropriation or application
at any time or from time to time in reduction of or in payment of the Borrower
Obligations shall be deemed to modify, reduce, release or otherwise affect the
liability of any Guarantor hereunder which shall, notwithstanding any such
payment (other than any payment made by such Guarantor in respect of the
Borrower Obligations or any payment received or collected from such Guarantor
in respect of the Borrower Obligations), remain liable for the Borrower
Obligations up to the maximum liability of such Guarantor hereunder until the
Borrower Obligations are paid in full, no Letter of Credit is outstanding and
the Commitments are terminated.


 


2.2.                              Right
of Contribution.  Each Subsidiary
Guarantor hereby agrees that to the extent that a Subsidiary Guarantor shall
have paid more than its proportionate share of any payment made hereunder, such
Subsidiary Guarantor shall be entitled to seek and receive contribution from
and against any other Subsidiary Guarantor hereunder which has not paid its
proportionate share of such payment. 
Each Subsidiary Guarantor’s right of contribution shall be subject to
the terms and conditions of Section 2.3. 
The provisions of this Section 2.2 shall in no respect limit the
obligations and liabilities of any Subsidiary Guarantor to the Administrative
Agent and the Lenders, and each Subsidiary Guarantor shall remain liable to the
Administrative Agent and the Lenders for the full amount guaranteed by such
Subsidiary Guarantor hereunder.


 


2.3.                              No
Subrogation.  Notwithstanding any
payment made by any Guarantor hereunder or any setoff or application of funds
of any Guarantor by the Administrative Agent or any Lender, no Guarantor shall
be entitled to be subrogated to any of the rights of the Administrative Agent
or any Lender against any Borrower or any other Guarantor or any collateral security,
guarantee or right of offset held by the Administrative Agent or any Lender for
the payment of the Borrower Obligations, nor shall any Guarantor seek any
contribution or reimbursement from any Borrower or any other Guarantor in
respect of payments made by such Guarantor hereunder, until all amounts owing
to the Administrative Agent and the Lenders by the Borrowers on account of the
Borrower Obligations are paid in full, no Letter of Credit is outstanding and
the Commitments are terminated.  If any
amount shall be paid to any Guarantor on account of such subrogation rights at
any time when all of the Borrower Obligations shall not 


 


6

















 


have been paid in
full, such amount shall be held by such Guarantor in trust for the
Administrative Agent and the Lenders, segregated from other funds of such
Guarantor, and shall, forthwith upon receipt by such Guarantor, be turned over
to the Administrative Agent in the exact form received by such Guarantor (duly
indorsed by such Guarantor to the Administrative Agent, if required), to be
applied against the Borrower Obligations, whether matured or unmatured, in such
order as the Administrative Agent may determine.  For the avoidance of doubt, nothing in the
foregoing shall operate as a waiver of any subrogation rights.


 


2.4.                              Amendments,
etc., with respect to the Borrower Obligations.  To the fullest extent permitted by applicable
law, each Guarantor shall remain obligated hereunder notwithstanding that,
without any reservation of rights against any Guarantor and without notice to
or further assent by any Guarantor, any demand for payment of any of the
Borrower Obligations made by the Administrative Agent or any Lender may be
rescinded by the Administrative Agent or such Lender and any of the Borrower
Obligations continued, and the Borrower Obligations, or the liability of any
other Person upon them or for any part thereof, or any collateral security or
guarantee therefor or right of offset with respect thereto, may, from time to
time, in whole or in part, be renewed, extended, amended, modified,
accelerated, compromised, waived, surrendered or released by the Administrative
Agent or any Lender, and the Credit Agreement and the other Loan Documents and
any other documents executed and delivered in connection therewith may be
amended, modified, supplemented or terminated, in whole or in part, as the
Administrative Agent (or the Required Lenders or all Lenders, as the case may
be) may reasonably deem advisable from time to time, and any collateral
security, guarantee or right of offset at any time held by the Administrative
Agent or any Lender for the payment of the Borrower Obligations may be sold,
exchanged, waived, surrendered or released. 
Neither the Administrative Agent nor any Lender shall have any
obligation to protect, secure, perfect or insure any Lien at any time held by
it as security for the Borrower Obligations or for the guarantee contained in
this Section 2 or any property subject thereto.


 


2.5.                              Guarantee
Absolute and Unconditional.  To the
fullest extent permitted by applicable law, each Guarantor waives any and all
notice of the creation, renewal, extension or accrual of any of the Borrower
Obligations and notice of or proof of reliance by the Administrative Agent or
any Lender upon the guarantee contained in this Section 2 or acceptance of
the guarantee contained in this Section 2; the Borrower Obligations, and
any of them, shall conclusively be deemed to have been created, contracted or
incurred, or renewed, extended, amended or waived, in reliance upon the
guarantee contained in this Section 2; and all dealings between any
Borrower and any of the Guarantors, on the one hand, and the Administrative
Agent and the Lenders, on the other hand, likewise shall be conclusively
presumed to have been had or consummated in reliance upon the guarantee
contained in this Section 2.  To the
fullest extent permitted by applicable law, each Guarantor waives diligence,
presentment, protest, demand for payment and notice of default or nonpayment to
or upon any Borrower or any of the Guarantors with respect to the Borrower
Obligations.  Each Guarantor understands
and agrees that the guarantee contained in this Section 2, to the fullest
extent permitted by applicable law, shall be construed as a continuing,
absolute and unconditional guarantee of payment without regard to (a) the
validity or enforceability of the Credit Agreement or any other Loan Document,
any of the Borrower Obligations or any other collateral security therefor or
guarantee or right of offset with respect thereto at any time or from time to
time held by the Administrative Agent or any Lender, (b) any defense,
setoff or counterclaim (other than a defense of payment or performance)


 


7
















 


which may at any
time be available to or be asserted by any Borrower or any other Person against
the Administrative Agent or any Lender or (c) any other circumstance
whatsoever (with or without notice to or knowledge of any Borrower or such
Guarantor) which constitutes, or might be construed to constitute, an equitable
or legal discharge of any Borrower for the Borrower Obligations, or of such
Guarantor under the guarantee contained in this Section 2, in bankruptcy
or in any other instance.  When making any
demand hereunder or otherwise pursuing its rights and remedies hereunder
against any Guarantor, the Administrative Agent or any Lender may, but shall be
under no obligation to, make a similar demand on or otherwise pursue such
rights and remedies as it may have against any Borrower, any other Guarantor or
any other Person or against any collateral security or guarantee for the
Borrower Obligations or any right of offset with respect thereto, and any
failure by the Administrative Agent or any Lender to make any such demand, to
pursue such other rights or remedies or to collect any payments from any
Borrower, any other Guarantor or any other Person or to realize upon any such
collateral security or guarantee or to exercise any such right of offset, or
any release of any Borrower, any other Guarantor or any other Person or any
such collateral security, guarantee or right of offset, shall not relieve any
Guarantor of any obligation or liability hereunder, and shall not impair or
affect the rights and remedies, whether express, implied or available as a
matter of law, of the Administrative Agent or any Lender against any
Guarantor.  For the purposes hereof “demand”
shall include the commencement and continuance of any legal proceedings.


 


2.6.                              Reinstatement.  The guarantee contained in this Section 2
shall continue to be effective, or be reinstated, as the case may be, if at any
time payment, or any part thereof, of any of the Borrower Obligations is
rescinded or must otherwise be restored or returned by the Administrative Agent
or any Lender upon the insolvency, bankruptcy, dissolution, liquidation or
reorganization of any Borrower or any Guarantor, or upon or as a result of the
appointment of a receiver, intervenor or conservator of, or trustee or similar
officer for, any Borrower or any Guarantor or any substantial part of its
property, or otherwise, all as though such payments had not been made.


 


2.7.                              Payments.  Each Guarantor hereby guarantees that
payments hereunder will be paid to the Administrative Agent without setoff or
counterclaim in Dollars at the Administrative Agent’s Office.


 


SECTION 3.                                GRANT OF
SECURITY INTEREST


 


Each Grantor hereby assigns and transfers to
the Administrative Agent, and hereby grants to the Administrative Agent, for
the ratable benefit of the Secured Parties, a security interest in, all of the
following property now owned or at any time hereafter acquired by such Grantor
or in which such Grantor now has or at any time in the future may acquire any
right, title or interest other than Excluded Property (collectively, the “Collateral”),
as collateral security for the prompt and complete payment and performance when
due (whether at the stated maturity, by acceleration or otherwise) of such
Grantor’s Obligations:


 


(a)          all
Accounts;


 


(b)         all
Chattel Paper;


 


8

















 


(c)          all
Deposit Accounts;


 


(d)         all
Documents;


 


(e)          all
Equipment;


 


(f)            all
Fixtures;


 


(g)         all
General Intangibles;


 


(h)         all
Instruments;


 


(i)             all
Intellectual Property;


 


(j)             all
Inventory;


 


(k)          all
Investment Property;


 


(l)             all
Letter of Credit Rights;


 


(m)       all
Commercial Tort Claims with respect to the matters described on Schedule 7;


 


(n)         all
other personal property not otherwise described above;


 


(o)         all
books and records pertaining to the Collateral; and


 


(p)         to
the extent not otherwise included, all Proceeds, Supporting Obligations and
products of any and all of the foregoing and all collateral security and
guarantees given by any Person with respect to any of the foregoing;


 


provided,
however, that notwithstanding any of the other provisions set forth in
this Section 3, the term Collateral and the terms set forth in this Section defining
the components of Collateral shall not include, and this Agreement shall not
constitute a grant of a security interest in, any of the following (the “Excluded
Property”): (i) any property to the extent that such grant of a
security interest is prohibited by any applicable Law of a Governmental
Authority, requires a consent not obtained of any Governmental Authority
pursuant to such Law or is prohibited by, or constitutes a breach or default
under or results in the termination of or gives rise to a right on the part of
the parties thereto other than Holdings, the Company and the Company’s
Subsidiaries to terminate (or materially modify) or requires any consent not
obtained under any contract, license, agreement, instrument or other document
evidencing or giving rise to such property or, in the case of any Investment
Property, Pledged Equity or Pledged Debt, any applicable shareholder or similar
agreement, except to the extent that such Law or the term in such contract,
license, agreement, instrument or other document or shareholder or similar
agreement providing for such prohibition, breach, default or right of
termination or modification or requiring such consent is ineffective under
applicable law, (ii) any property owned by any Grantor on the date hereof
or hereafter acquired that is subject to a Lien securing a purchase money,
project financing or capital or finance lease obligation permitted to be
incurred pursuant to the Credit Agreement if 


 


9

















 


the contract or other agreement
in which such Lien is granted (or the documentation providing for such purchase
money, project financing or capital or finance lease obligation) prohibits the
creation of any other Lien on such property, (iii) any trucks, trailers,
tractors, service vehicles, automobiles, rolling stock or other registered
mobile equipment or equipment covered by certificates of title or ownership of
any Grantor, (iv) Deposit Accounts exclusively used for payroll, payroll
taxes and other employee wage and benefit payments or any other Deposit Account
with an average annual balance of less than $5,000,000 and (v) the Equity
Interests of Direct Holdings IP L.L.C., a Delaware limited liability company,
and any joint venture in respect of which Holdings or any of its Subsidiaries
holds an Equity Interest if (and only so long as), in any case, the grant of any
such security interest is prohibited by, or constitutes a breach or default
under or results in the termination of or gives rise to a right on the part of
the parties thereto other than Holdings, the Company and the Company’s
Subsidiaries to terminate (or materially modify) or requires any consent not
obtained under any contract, license, agreement, instrument or other document
evidencing or giving rise to such property or any applicable shareholder, joint
venture or similar agreement; provided, however, that Excluded
Property shall not include any Proceeds, substitutions or replacements of any
Excluded Property referred to above and such Proceeds shall not constitute “Excluded
Property” (unless such Proceeds, substitutions or replacements would constitute
Excluded Property referred to above).  If
an Event of Default shall have occurred and be continuing, each Grantor shall,
if requested to do so by the Administrative Agent, use commercially reasonable
efforts to obtain any required consent that is reasonably obtainable with
respect to Collateral which the Administrative Agent reasonably determines to
be material.


 


SECTION 4.                                REPRESENTATIONS
AND WARRANTIES


 


To induce the Administrative Agent and the
Lenders to enter into the Credit Agreement and to induce the Lenders to make
their respective extensions of credit to the Borrowers thereunder, each Grantor
hereby represents and warrants to the Administrative Agent and each Lender
that:


 


4.1.                              Title;
No Other Liens.  Except for the
security interest granted to the Administrative Agent for the ratable benefit
of the Secured Parties pursuant to this Agreement and the other Liens permitted
to exist on the Collateral by the Credit Agreement, such Grantor owns each item
of the Collateral free and clear of any and all Liens.  No effective financing statement or other
public notice with respect to all or any part of the Collateral is on file or
of record in any public office, except such as have been filed in favor of the
Administrative Agent, for the ratable benefit of the Secured Parties, pursuant
to this Agreement or as are permitted by the Credit Agreement or as to which
documentation to terminate the same shall have been delivered to the
Administrative Agent.  For the avoidance of
doubt, it is understood and agreed that any Grantor may, as part of its
business, grant licenses to third parties to use Intellectual Property owned or
developed by a Grantor.  For purposes of
this Agreement and the other Loan Documents, such licensing activity shall not
constitute a “Lien” on such Intellectual Property.  Each of the Administrative Agent and each
Lender understands that any such licenses may be exclusive to the applicable
licensees, and such exclusivity provisions may limit the ability of the
Administrative Agent to utilize, sell, lease or transfer the related
Intellectual Property or otherwise realize value from such Intellectual
Property pursuant hereto.


 


10

















 


4.2.                              Perfected
First Priority Liens.  The Perfection
Certificate has been duly prepared, completed and executed and the information
set forth therein, including the exact legal name of each Grantor, is correct
and complete in all material aspects as of the Closing Date.  The security interests granted pursuant to
this Agreement (i) upon completion of the filings and other actions
specified on Schedule 3 (which, in the case of all filings and
other documents referred to on said Schedule, have been delivered to the
Administrative Agent in completed and, where required, duly executed form) (x) will
constitute valid perfected security interests in all of the Collateral (other
than Intellectual Property) in favor of the Administrative Agent, for the
ratable benefit of the Secured Parties, as collateral security for such Grantor’s
Obligations, enforceable in accordance with the terms hereof against all
creditors of such Grantor and any Persons purporting to purchase any Collateral
from such Grantor, to the extent a security interest therein may be perfected
by filing, recording or registration in the United States pursuant to the New
York UCC, and (y) will constitute valid perfected security interests in
all of the Collateral consisting of Intellectual Property in favor of the
Administrative Agent, for the ratable benefit of the Secured Parties, as
collateral security for such Grantor’s Obligations, enforceable in accordance
with the terms hereof against all creditors of such Grantor and any Persons
purporting to purchase any Collateral from such Grantor, to the extent a
security interest therein may be perfected by filings to be made in the United
States Patent and Trademark Office and the United States Copyright Office, and (ii) are
prior to all other Liens on the Collateral in existence on the date hereof
except for Liens permitted by the Credit Agreement which have priority over the
Liens on the Collateral by operation of law (including the priority rules under
the New York UCC) or which, in the case of Collateral consisting of Pledged
Equity and Pledged Debt, are nonconsensual Liens permitted pursuant to Section 7.01
of the Credit Agreement to be prior to the security interests granted pursuant
to this Agreement or which, in the case of Collateral other than Pledged Equity
and Pledged Debt, are permitted pursuant to Section 7.01 of the Credit
Agreement to be prior to the security interests granted pursuant to this
Agreement.


 


4.3.                              Jurisdiction
of Organization.  On the date hereof,
such Grantor’s jurisdiction of organization and identification number from the
jurisdiction of organization (if any) are specified on Schedule 4.  Such Grantor has furnished to the
Administrative Agent a certified charter, certificate of incorporation or other
organization document and long-form good standing certificate as of a date
which is recent to the date hereof.


 


4.4.                              Inventory and
Equipment.  On the date hereof, the
Inventory and the Equipment of each Grantor are kept at the locations listed on
Schedule 5.  The provisions
of this Section 4.4 shall not apply to Equipment or Inventory in transit,
that has been sold (including sales on consignment or approval in the ordinary
course of business), that is out for repair, that is at other locations for
purposes of onsite maintenance or repair or to Equipment and Inventory at
locations with less than $5,000,000 in aggregate value.


 


4.5.                              Farm
Products.  None of the Collateral
constitutes, or is the Proceeds of, Farm Products.


 


4.6.                              Investment
Property.  (a)  On the date
hereof, the shares of Pledged Equity pledged by such Grantor hereunder
constitute all the issued and outstanding shares of all classes of the Equity
Interests of each Restricted Subsidiary owned by such Grantor or, in the case
of Restricted Subsidiaries that are Foreign Subsidiaries or Domestic
Subsidiaries substantially all of 


 


11

















 


whose assets
consist of voting Equity Interests of one or more Foreign Subsidiaries, the
shares of such Issuers pledged by such Grantor constitute 65% of the
outstanding Foreign Subsidiary Voting Stock of each such Issuer (or, if such
Grantor owns less than 65% of the outstanding Foreign Subsidiary Voting Stock
of any such Issuer, constitute all the Foreign Subsidiary Voting Stock of such
Issuer owned by such Grantor) in each case to the extent required by clause (d) of
the Collateral and Guarantee Requirement.


 


(b)         All the shares of the Pledged Equity as to which the Company
or a Restricted Subsidiary of the Company is the Issuer have been duly and
validly issued and are fully paid and nonassessable.


 


(c)          To the best of such Grantor’s knowledge, each of the Pledged
Debt constitutes the legal, valid and binding obligation of the obligor with
respect thereto, enforceable in accordance with its terms, subject to the
effects of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors’ rights
generally, general equitable principles (whether considered in a proceeding in
equity or at law) and an implied covenant of good faith and fair dealing.


 


(d)         Such Grantor is the beneficial owner of, and has good and
marketable title to, the Investment Property pledged by it hereunder, free of
any and all Liens or options in favor of any other Person, except the security
interest created by this Agreement or nonconsensual Liens permitted pursuant to
Section 7.01 of the Credit Agreement.


 


4.7.                              Receivables.  (a)  No amount payable to such Grantor
under or in connection with any Receivable of an amount greater than $5,000,000
is evidenced by any Instrument or Chattel Paper which has not been delivered to
the Administrative Agent.


 


(b)         As of the Effective Date, the
aggregate amount of Receivables required to be included in Collateral owed by
Governmental Authorities to the Grantors does not exceed $5,000,000.


 


4.8.                              Intellectual
Property.  Schedule 6 lists
all Intellectual Property (other than Copyright Licenses and Trademark
Licenses) that is registered in the United States or for which application for
registration in the United States has been filed and that is material to the
operation of the business of the Company and its Subsidiaries taken as a whole
owned by such Grantor in its own name on the date hereof.


 


4.9.                              Commercial
Tort Claims.  On the date hereof,
except to the extent listed in Section 3 above, no Grantor has knowledge
of rights in any Commercial Tort Claim as to which it reasonably expects to
recover more than $5,000,000.


 


SECTION 5.                                COVENANTS


 


Each Grantor covenants and agrees with the
Administrative Agent and the Lenders that, from and after the date of this Agreement
until the Obligations (other than contingent indemnification and contingent
expense reimbursement obligations, any Obligations 


 


12

















 


in respect of Secured Hedge Agreements and
Cash Management Obligations) shall have been paid in full, no Letter of Credit
shall be outstanding and the Commitments shall have terminated:


 


5.1.                              Delivery
of Instruments, Certificated Securities and Chattel Paper.  (a)  If (i) any amount in excess of
$5,000,000 owed by any Subsidiary of the Company to any Grantor or (ii) any
other amount in excess of $5,000,000 payable under or in connection with any of
the Collateral shall be or become evidenced by any Instrument, Certificated
Security or Chattel Paper, such Instrument, Certificated Security or Chattel
Paper shall be delivered as soon as reasonably practicable to the
Administrative Agent, duly indorsed in a manner reasonably satisfactory to the
Administrative Agent, to be held as Collateral pursuant to this Agreement.


 


(b)         Any Guarantee required to be subordinated pursuant to Section 7.03(c)(C) of
the Credit Agreement and any Indebtedness required to be subordinated pursuant
to Section 7.03(d) of the Credit Agreement shall, in each case, be
fully subordinated to the payment in full of the Obligations.


 


5.2.                              Maintenance
of Insurance.  (a)  Such Grantor
will maintain the insurance required by Section 6.07 of the Credit
Agreement.


 


(b)         All such insurance shall (i) provide that no
cancellation, material reduction in amount or material change in coverage
thereof shall be effective until at least 30 days or, in the case of insurance
existing as of the date hereof, at least 10 days after receipt by the
Administrative Agent of written notice thereof and (ii) name the
Administrative Agent as insured party or loss payee.


 


5.3.                              Maintenance
of Perfected Security Interest; Further Documentation.  (a)  Such Grantor shall take all actions
reasonably requested by the Administrative Agent to maintain the security
interest created by this Agreement as a security interest having at least the
perfection and priority described in Section 4.2 and shall take all
commercially reasonable actions to defend such security interest against the
claims and demands of all Persons whomsoever, subject in each case to, in the
case of Collateral consisting of Pledged Equity and Pledged Debt, nonconsensual
Liens permitted by Section 7.01 of the Credit Agreement and, in the case
of Collateral other than Pledged Equity and Pledged Debt, Liens permitted by
the Credit Agreement and to the rights of such Grantor under the Loan Documents
to dispose of the Collateral.


 


(b)         Such Grantor will furnish to the Administrative Agent from
time to time statements and schedules further identifying and describing the
assets and property of such Grantor and such other reports in connection
therewith as the Administrative Agent may reasonably request, all in reasonable
detail.  Each year, at the time of
delivery of annual financial statements with respect to the preceding fiscal
year pursuant to Section 6.01(a) of the Credit Agreement, the Company
shall deliver to the Administrative Agent a certificate executed by the
associate general counsel or the chief legal officer of the Company setting
forth the information required pursuant to the Perfection Certificate or
confirming that there has been no change in such information since the date of
such certificate or the date of the most recent certificate delivered pursuant
to this Section 5.3(b).


 


13

















 


(c)          At any time and from time to time, upon the written request
of the Administrative Agent, and at the sole expense of such Grantor, such
Grantor will promptly and duly execute and deliver, and have recorded, such
further instruments and documents and take such further actions as the
Administrative Agent may reasonably request for the purpose of obtaining or
preserving the full benefits of this Agreement and of the rights and powers
herein granted, including, without limitation, (i) filing any financing or
continuation statements under the Uniform Commercial Code (or other similar
laws) in effect in any jurisdiction with respect to the security interests
created hereby and (ii) in the case of Investment Property not issued by
the Company or its Subsidiaries, Deposit Accounts, Letter of Credit Rights and
any other relevant Collateral, using commercially reasonable efforts to take,
at any time after the occurrence and during the continuation of an Event of
Default, any actions necessary to enable the Administrative Agent to obtain “control”
(within the meaning of the applicable Uniform Commercial Code) with respect
thereto.


 


5.4.                              Changes
in Locations, Name, etc.  Such
Grantor will not, except upon 10 days’ prior written notice to the
Administrative Agent (or such shorter notice as shall be reasonably
satisfactory to the Administrative Agent) and delivery to the Administrative
Agent of all additional executed financing statements and other documents
reasonably requested by the Administrative Agent to maintain the validity,
perfection and priority of the security interests provided for herein, (i) change
its jurisdiction of organization from that referred to in Section 4.3 or (ii) change
its name.


 


5.5.                              Notices.  Such Grantor will advise the Administrative
Agent promptly, in reasonable detail, of:


 


(a)          any
Lien (other than security interests created hereby or Liens permitted under the
Credit Agreement) on any of the Collateral which would adversely affect the
ability of the Administrative Agent to exercise any of its remedies hereunder;
and


 


(b)         the
occurrence of any other event which could reasonably be expected to have a
material adverse effect on the aggregate value of the Collateral or on the
security interests created hereby.


 


5.6.                              Investment
Property.  (a)  If such Grantor
shall become entitled to receive or shall receive any certificate (including,
without limitation, any certificate representing a dividend or a distribution
in connection with any reclassification, increase or reduction of capital or
any certificate issued in connection with any reorganization), option or rights
in respect of the Equity Interests of any Restricted Subsidiary, which Equity
Interests are required to have been pledged pursuant to clause (d) of the
Collateral and Guarantee Requirement, whether in addition to, in substitution
of, as a conversion of, or in exchange for, any shares of the Pledged Equity,
or otherwise in respect thereof, such Grantor shall accept the same as the
agent of the Administrative Agent and the Lenders, hold the same in trust for
the Administrative Agent and the Lenders and deliver the same forthwith to the
Administrative Agent in the exact form received, duly indorsed by such Grantor
to the Administrative Agent, if required, together with an undated stock power
covering such certificate duly executed in blank by such Grantor, to be held by
the Administrative Agent, subject to the terms hereof, as additional collateral
security for the Obligations (provided that stock certificates representing the
Pledged Equity of any Foreign 


 


14

















 


Immaterial
Subsidiary need not be delivered to the Administrative Agent for so long as
such Foreign Immaterial Subsidiary remains a Foreign Immaterial
Subsidiary).  If an Event of Default
shall have occurred and be continuing, and any distribution of capital to a
Grantor (other than cash) required to be included in Collateral shall be made
on or in respect of the Investment Property or any property (other than cash)
required to be included in Collateral shall be distributed to a Grantor upon or
with respect to the Investment Property pursuant to the recapitalization or
reclassification of the capital of any Issuer or pursuant to the reorganization
thereof, such Grantor shall, unless such distribution of capital or property is
otherwise subject to a perfected security interest in favor of the
Administrative Agent, use commercially reasonable efforts to cause it to be
subject to a perfected security interest in favor of the Administrative Agent
to the extent and in the manner required pursuant to Section 5.3
hereof.  If any such property so
distributed in respect of the Investment Property shall be received by such
Grantor, such Grantor shall, until such property is delivered to the Administrative
Agent, hold such property in trust for the Administrative Agent and the Lenders
as additional collateral security for the Obligations.


 


(b)         Without the prior written consent of the Administrative
Agent, such consent not to be unreasonably withheld, such Grantor will not (i) sell,
assign, transfer, exchange, or otherwise dispose of, or grant any option with
respect to, the Investment Property or Proceeds thereof (except pursuant to a
transaction expressly permitted by the Credit Agreement), (ii) create,
incur or permit to exist any Lien or option in favor of, or any claim of any
Person with respect to, any of the Investment Property or Proceeds thereof, or
any interest therein, except for the security interests created by this
Agreement or permitted under Section 7.01 of the Credit Agreement or (iii) except
as permitted by the Credit Agreement, enter, subsequent to the date upon which
such Investment Property becomes Collateral hereunder, into any agreement
(other than the Credit Agreement) or undertaking restricting the right or
ability of such Grantor or the Administrative Agent to sell, assign or transfer
any of the Investment Property required to be included in Collateral or
Proceeds thereof.


 


(c)          In the case of each Grantor which is an Issuer, such Issuer
agrees that (i) it will be bound by the terms of this Agreement relating
to the Investment Property required to be included in Collateral issued by it
and will comply with such terms insofar as such terms are applicable to it, (ii) it
will notify the Administrative Agent promptly in writing of the occurrence of
any of the events described in Section 5.6(a) with respect to such
Investment Property issued by it and (iii) the terms of Sections 6.3(c) and
6.7 shall apply to it, mutatis  mutandis, with respect to all
actions that may be required of it pursuant to Section 6.3(c) and 6.7
with respect to such Investment Property issued by it.


 


(d)         No Grantor shall permit any security interest in
certificated Pledged Equity of any Issuer that is not a Subsidiary to be
perfected by possession in favor of a Person other than the Administrative
Agent.


 


(e)          The Company shall not permit any security interest in
certificated Pledged Equity of 1302791 Alberta ULC (or any ULC parent entity
thereof that is a Foreign Subsidiary the Equity Interests of which are directly
owned by the Company or a U.S. Guarantor) to be perfected by possession in
favor of a Person other than the Administrative Agent (and shall so 


 


15

















 


perfect by possession
in favor of the Administrative Agent on behalf of the Secured Parties upon the
reasonable request of the Administrative Agent).


 


5.7.                              Receivables.  (a)  Other than in the ordinary course
of business, such Grantor will not (i) grant any extension of the time of
payment of any Receivable required to be included in Collateral, (ii) compromise
or settle any Receivable required to be included in Collateral for less than
the full amount thereof, (iii) release, wholly or partially, any Person
liable for the payment of any Receivable required to be included in Collateral,
(iv) allow any credit or discount whatsoever on any Receivable required to
be included in Collateral or (v) amend, supplement or modify any
Receivable required to be included in Collateral in any manner that could
adversely affect the value thereof.


 


(b)         Such Grantor will deliver to the Administrative Agent a copy
of each material demand, notice or document received by it that questions or
calls into doubt the validity or enforceability of more than 20% of the
aggregate amount of the then-outstanding Receivables.


 


(c)          If such Grantor shall enter into any contract or other
transaction with an Applicable Governmental Authority (as defined below) which
will result in an Applicable Governmental Authority becoming an obligor on any
Receivable required to be included in Collateral of an amount greater than
$5,000,000, such Grantor shall (i) promptly thereafter notify the
Administrative Agent thereof, (ii) provide to the Administrative Agent all
such documents and instruments, and take all such actions, as shall be
reasonably requested by the Administrative Agent to enable the Administrative
Agent to comply with the requirements of the Federal Assignment of Claims Act
or any other applicable Law to perfect its security interest in such
Receivables and obtain the benefits of such Act or Law with respect thereto and
(iii) otherwise comply with its obligations under Section 5.3(c) with
respect thereto.  As used in this
paragraph, the term “Applicable Governmental Authority” shall mean any
Governmental Authority the  Law
applicable to which provide that, for a creditor of a Person to which such
Governmental Authority has an obligation to pay money, whether pursuant to a
Receivable, a General Intangible or otherwise, to perfect such creditor’s Lien
on such obligation and/or to obtain the full benefits of such Lien and such
Law, certain notice, filing, recording or other similar actions other than the
filing of a financing statement under the Uniform Commercial Code must be
given, executed, filed, recorded, delivered or completed, including, without
limitation, any Federal Governmental Authority to which the Federal Assignment
of Claims Act of 1940 is applicable.


 


5.8.                              Intellectual
Property.  (a)  Such Grantor
(either itself or through licensees) will (i) continue to use each
Trademark that is material to the operation of the business of the Company and
its Subsidiaries taken as a whole on each and every trademark class of goods
applicable to its current line as reflected in its current catalogs, brochures
and price lists in order to maintain such Trademark in full force free from any
claim of abandonment for non-use, (ii) maintain as in the past the quality
of products and services offered under such Trademark, (iii) use such
Trademark with the appropriate notice of registration and all other notices and
legends required by applicable Law, (iv) not adopt or use any mark which
is confusingly similar or a colorable imitation of such Trademark unless the
Administrative Agent, for the ratable benefit of the Secured Parties, shall
obtain a perfected security interest in such mark pursuant to this Agreement
and (v) not (and not permit any licensee or sublicensee thereof to) do any
act or 


 


16

















 


knowingly omit to
do any act whereby such Trademark may become invalidated or impaired in any
material respect.


 


(b)         Such Grantor (either itself or through licensees) will not
do any act, or omit to do any act, whereby any Patent that is material to the
operation of the business of the Company and its Subsidiaries taken as a whole
may become forfeited, abandoned or dedicated to the public.


 


(c)          Such Grantor (either itself or through licensees) (i) will
employ each Copyright that is material to the operation of the business of the
Company and its Subsidiaries taken as a whole and (ii) will not (and will
not permit any licensee or sublicensee thereof to) do any act or knowingly omit
to do any act whereby any portion of the Copyrights that is material to the
operation of the business of the Company and its Subsidiaries taken as a whole
may become invalidated or otherwise impaired. 
Such Grantor will not (either itself or through licensees) do any act
whereby any portion of the Copyrights that is material to the operation of the
business of the Company and its Subsidiaries taken as a whole may fall into the
public domain.


 


(d)         Such Grantor (either itself or through licensees) will not
do any act that knowingly uses any Intellectual Property that is material to
the operation of the business of the Company and its Subsidiaries taken as a
whole to infringe the intellectual property rights of any other Person.


 


(e)          Such Grantor will notify the Administrative Agent
immediately if it knows, or has reason to know, that any application or
registration relating to any Intellectual Property that is material to the
operation of the business of the Company and its Subsidiaries taken as a whole
may become forfeited, abandoned or dedicated to the public, or of any adverse
determination or development (including, without limitation, the institution
of, or any such determination or development in, any proceeding in the United
States Patent and Trademark Office, the United States Copyright Office or any
court or tribunal in any country) regarding such Grantor’s ownership of, or the
validity of, any such Intellectual Property or such Grantor’s right to register
the same or to own and maintain the same.


 


(f)            In the event such Grantor,
either by itself or through any agent, employee, licensee or designee, shall in
any fiscal year file an application for the registration of any Intellectual
Property that is material to the operation of the Company and its Subsidiaries
taken as a whole with the United States Patent and Trademark Office, the United
States Copyright Office or any similar office or agency in any other country or
any political subdivision thereof, such Grantor shall report such filing to the
Administrative Agent at the time of delivery of annual financial statements
with respect to such fiscal year pursuant to Section 6.01(a) of the
Credit Agreement.  Upon reasonable
request of the Administrative Agent, such Grantor shall execute and deliver,
and have recorded, any and all agreements, instruments, documents, and papers
as the Administrative Agent may reasonably request to evidence the
Administrative Agent’s and the Lenders’ security interest in any such
Copyright, Patent or Trademark and the goodwill and general intangibles of such
Grantor relating thereto or represented thereby.


 


(g)         Such Grantor will take all reasonable and necessary steps,
including, without limitation, in any proceeding before the United States
Patent and Trademark Office, the United


 


17
















 


States Copyright
Office or any similar office or agency in any other country or any political
subdivision thereof, to maintain and pursue each application (and to obtain the
relevant registration) and to maintain each registration of the Intellectual
Property that is material to the operation of the business of the Company and
its Subsidiaries taken as a whole, including, without limitation, filing of
applications for renewal, affidavits of use and affidavits of incontestability.


 


(h)         In the event that any Intellectual Property that is material
to the operation of the business of the Company and its Subsidiaries taken as a
whole is infringed, misappropriated or diluted by a third party, such Grantor
shall (i) take such actions as such Grantor shall reasonably deem
appropriate under the circumstances to protect such Intellectual Property and (ii) if
such Intellectual Property is of material economic value, promptly notify the
Administrative Agent after it learns thereof and sue for infringement,
misappropriation or dilution, to seek injunctive relief where appropriate and
to recover any and all damages for such infringement, misappropriation or
dilution.


 


(i)             Notwithstanding anything to the
contrary in this Agreement, subject to the provisions of the Credit Agreement,
nothing shall prevent any Grantor in the ordinary course of business from
abandoning, ceasing to use or otherwise impairing or disposing of any
Intellectual Property if such Grantor reasonably believes that doing so is in
its business interests.  For the
avoidance of doubt, nothing in this Section 5.8 shall prohibit a sale,
transfer or disposition of any Intellectual Property made in accordance with
Sections 7.04 or 7.05 of the Credit Agreement.


 


(j)             No Grantor shall, and the
Grantors in the aggregate shall not, make filings in the United States
Copyright Office or the United States Trademark Office to perfect any security
interest in all or substantially all of the Copyright Licenses held by the
Grantors in the aggregate or all or substantially all of the Trademark Licenses
held by the Grantors in the aggregate (other than to perfect the security
interest in such Copyright Licenses and Trademark Licenses securing the
Obligations).


 


(k)          Upon and during the continuance of an Event of Default, each
Grantor shall use all commercially reasonable efforts to obtain all requisite
consents or approvals under each Copyright License, Patent License and
Trademark License reasonably requested by the Administrative Agent to effect
the assignment of all such Grantor’s right, title and interest thereunder to
the Administrative Agent or its designee.


 


5.9.                              Commercial
Tort Claims.  If such Grantor shall
obtain an interest in any Commercial Tort Claim as to which it determines that
it reasonably expects to recover more than $5,000,000, such Grantor shall
within 30 days of making such determination (or such other period reasonably
satisfactory to the Administrative Agent) sign and deliver documentation
reasonably acceptable to the Administrative Agent granting a security interest
under the terms and provisions of this Agreement in and to such Commercial Tort
Claim.


 


SECTION 6.                                REMEDIAL
PROVISIONS


 


6.1.                              Certain
Matters Relating to Receivables.  (a) 
The Administrative Agent shall have the right annually (or, if an Event of Default
has occurred and is continuing, at any 


 


18

















 


time) to make test
verifications of the Receivables required to be included in Collateral in any
manner and through any medium that it reasonably considers advisable, and each
Grantor shall furnish all such assistance and information as the Administrative
Agent may require in connection with such test verifications.  Annually (or, if an Event of Default has
occurred and is continuing, at any time), upon the Administrative Agent’s
reasonable request and at the expense of the relevant Grantor, such Grantor
shall use commercially reasonable efforts to cause independent public
accountants or others satisfactory to the Administrative Agent to furnish to
the Administrative Agent reports showing reconciliations, aging and test
verifications of, and trial balances for, such Receivables.


 


(b)         The Administrative Agent hereby authorizes each Grantor to
collect such Grantor’s Receivables required to be included in Collateral and
the Administrative Agent may curtail or terminate said authority at any time
after the occurrence and during the continuance of an Event of Default.  If required by the Administrative Agent at
any time after the occurrence and during the continuance of an Event of
Default, any payments of such Receivables, when collected by any Grantor, (i) shall
be forthwith (and, in any event, within two Business Days) deposited by such
Grantor in the exact form received, duly indorsed by such Grantor to the Administrative
Agent if required, in a Collateral Account maintained under the sole dominion
and control of the Administrative Agent, subject to withdrawal by the
Administrative Agent for the account of the Lenders only as provided in Section 6.5,
and (ii) until so turned over, shall be held by such Grantor in trust for
the Administrative Agent and the Lenders, segregated from other funds of such
Grantor.  Each such deposit of Proceeds
of Receivables required to be included in Collateral shall be accompanied by a
report identifying in reasonable detail the nature and source of the payments
included in the deposit.


 


(c)          If an Event of Default has occurred and is continuing, at
the Administrative Agent’s request, each Grantor shall deliver to the
Administrative Agent all original and other documents evidencing, and relating
to, the agreements and transactions which gave rise to the Receivables required
to be included in Collateral, including, without limitation, all original
orders, invoices and shipping receipts.


 


6.2.                              Communications
with Obligors; Grantors Remain Liable. 
(a)  The Administrative Agent in its own name or in the name of
others may at any time when an Event of Default has occurred and is continuing,
communicate with obligors under the Receivables required to be included in
Collateral to verify with them to the Administrative Agent’s satisfaction the
existence, amount and terms of any such Receivables.


 


(b)         Upon the request of the Administrative Agent at any time
after the occurrence and during the continuance of an Event of Default, each
Grantor shall notify obligors on the Receivables required to be included in
Collateral that such Receivables have been assigned to the Administrative Agent
for the ratable benefit of the Secured Parties and that payments in respect
thereof shall be made directly to the Administrative Agent.


 


(c)          Anything herein to the contrary notwithstanding, each
Grantor shall remain liable under each of the Receivables required to be
included in Collateral to observe and perform all the conditions and
obligations to be observed and performed by it thereunder, all in accordance
with the terms of any agreement giving rise thereto.  Neither the Administrative 


 


19

















 


Agent nor any Lender
shall have any obligation or liability under any such Receivable (or any
agreement giving rise thereto) by reason of or arising out of this Agreement or
the receipt by the Administrative Agent or any Lender of any payment relating
thereto, nor shall the Administrative Agent or any Lender be obligated in any
manner to perform any of the obligations of any Grantor under or pursuant to
any such Receivable (or any agreement giving rise thereto), to make any
payment, to make any inquiry as to the nature or the sufficiency of any payment
received by it or as to the sufficiency of any performance by any party
thereunder, to present or file any claim, to take any action to enforce any
performance or to collect the payment of any amounts which may have been
assigned to it or to which it may be entitled at any time or times.


 


6.3.                              Pledged
Equity.  (a)  Unless an Event of
Default shall have occurred and be continuing and the Administrative Agent
shall have given notice to the relevant Grantor of the Administrative Agent’s
intent to exercise its corresponding rights pursuant to Section 6.3(b),
each Grantor shall be permitted to receive all dividends (other than dividends
payable in Equity Interests) paid in respect of the Pledged Equity and all
payments made in respect of the Pledged Debt, in each case to the extent
permitted in the Credit Agreement, and to exercise all voting and corporate or
other organizational rights with respect to the Investment Property; provided,
however, that such Grantor will not be entitled to exercise any such
right if the result thereof could materially and adversely affect the rights
inuring to a holder of the Investment Property or the rights and remedies of
the Administrative Agent or the Lenders under any Loan Document or the ability
of the Administrative Agent or the Lenders to exercise the same.


 


(b)         If an Event of Default shall occur and be continuing and the
Administrative Agent shall give notice of its intent to exercise such rights to
the relevant Grantor or Grantors, (i) the Administrative Agent shall have
the right to receive any and all cash dividends, payments (including sums paid
upon the liquidation or dissolution of any Issuer or in connection with any
distribution of capital) or other Proceeds paid in respect of the Investment Property
and make application thereof to the Obligations in accordance with the
provisions of the Credit Agreement and (ii) any or all of the Investment
Property shall be registered in the name of the Administrative Agent or its
nominee, and the Administrative Agent or its nominee may thereafter exercise (x) all
voting, corporate and other rights pertaining to such Investment Property at
any meeting of shareholders of the relevant Issuer or Issuers or otherwise and (y) any
and all rights of conversion, exchange and subscription and any other rights,
privileges or options pertaining to such Investment Property as if it were the
absolute owner thereof (including, without limitation, the right to exchange at
its discretion any and all of the Investment Property upon the merger,
consolidation, reorganization, recapitalization or other fundamental change in
the corporate or other organizational structure of any Issuer, or upon the
exercise by any Grantor or the Administrative Agent of any right, privilege or
option pertaining to such Investment Property, and in connection therewith, the
right to deposit and deliver any and all of the Investment Property with any
committee, depositary, transfer agent, registrar or other designated agency
upon such terms and conditions as the Administrative Agent may determine), all
without liability except to account for property actually received by it, but
the Administrative Agent shall have no duty to any Grantor to exercise any such
right, privilege or option and shall not be responsible for any failure to do
so or delay in so doing.  If any sums of
money paid or distributed in respect of Investment Property, which the
Administrative Agent shall be entitled to receive pursuant to clause (i) above,
shall be received by a Grantor, such Grantor shall, until such 


 


20

















 


money is paid to the
Administrative Agent, hold such money in trust for the Administrative Agent and
the Lenders as additional collateral for the Obligations.


 


(c)          Each Grantor hereby authorizes and instructs each Issuer of
any Investment Property pledged by such Grantor hereunder to (i) comply
with any instruction received by it from the Administrative Agent in writing
that (x) states that an Event of Default has occurred and is continuing
and (y) is otherwise in accordance with the terms of this Agreement,
without any other or further instructions from such Grantor, and each Grantor
agrees that each Issuer shall be fully protected in so complying, and (ii) unless
otherwise expressly permitted hereby, pay any dividends or other payments with
respect to the Investment Property directly to the Administrative Agent.


 


6.4.                              Proceeds
to be Turned Over to Administrative Agent. 
If an Event of Default occurs and is continuing and the Administrative
Agent so requests, all Proceeds received by any Grantor consisting of cash,
checks and other near-cash items shall be held by such Grantor in trust for the
Administrative Agent and the Lenders, segregated from other funds of such
Grantor, and shall, forthwith upon receipt by such Grantor, be turned over to
the Administrative Agent in the exact form received by such Grantor (duly
indorsed by such Grantor to the Administrative Agent, if required).  All Proceeds received by the Administrative
Agent hereunder shall be held by the Administrative Agent in a Collateral
Account maintained under its sole dominion and control.  All Proceeds while held by the Administrative
Agent in a Collateral Account (or by such Grantor in trust for the
Administrative Agent and the Lenders) shall continue to be held as collateral
security for all the Obligations and shall not constitute payment thereof until
applied as provided in Section 6.5.


 


6.5.                              Application
of Proceeds.  At such intervals as
may be agreed upon by the Company and the Administrative Agent, or, if an Event
of Default has occurred and is continuing, at any time at the Administrative
Agent’s election, the Administrative Agent shall apply all or any part of
Proceeds required to be included in Collateral, whether or not held in any
Collateral Account, and any proceeds of the guarantee set forth in Section 2,
in payment of the Obligations in accordance with Section 8.04 of the
Credit Agreement, and any part of such funds which the Administrative Agent
elects not so to apply and deems not required as collateral security for the
Obligations shall be paid over from time to time by the Administrative Agent to
the Company or to whosoever may be lawfully entitled to receive the same.  Any balance of such Proceeds remaining after
the Obligations shall have been paid in full, no Letters of Credit shall be
outstanding and the Commitments shall have terminated shall be paid over to the
Company or to whomsoever may be lawfully entitled to receive the same.


 


6.6.                              Code
and Other Remedies.  If an Event of
Default occurs and is continuing, the Administrative Agent, on behalf of the
Lenders, may exercise, in addition to all other rights and remedies granted to
them in this Agreement and in any other instrument or agreement securing,
evidencing or relating to the Obligations, all rights and remedies of a secured
party under the New York UCC or any other applicable law.  Without limiting the generality of the
foregoing, if an Event of Default occurs and is continuing, the Administrative
Agent, without demand of performance or other demand, presentment, protest,
advertisement or notice of any kind (except any notice required by law referred
to below) to or upon any Grantor or any other Person (all and each of which
demands, defenses, advertisements and notices are 


 


21

















 


hereby waived),
may in such circumstances forthwith collect, receive, appropriate and realize
upon the Collateral, or any part thereof, and/or may forthwith sell, lease,
assign, give option or options to purchase, or otherwise dispose of and deliver
the Collateral or any part thereof (or contract to do any of the foregoing), in
one or more parcels at public or private sale or sales, at any exchange, broker’s
board or office of the Administrative Agent or any Lender or elsewhere upon
such terms and conditions as it may deem advisable and at such prices as it may
deem best, for cash or on credit or for future delivery without assumption of
any credit risk.  The Administrative
Agent or any Lender shall have the right upon any such public sale or sales,
and, to the extent permitted by law, upon any such private sale or sales, to
purchase the whole or any part of the Collateral so sold, free of any right or
equity of redemption in any Grantor, which right or equity is hereby waived and
released.  Each Grantor further agrees,
at the Administrative Agent’s request following and during the continuance of
an Event of Default, to assemble the Collateral and make it available to the Administrative
Agent at places which the Administrative Agent shall reasonably select, whether
at such Grantor’s premises or elsewhere. 
The Administrative Agent shall apply the net proceeds of any action
taken by it pursuant to this Section 6.6, after deducting all reasonable
out-of-pocket costs and expenses of every kind incurred in connection therewith
or incidental to the care or safekeeping of any of the Collateral or in any way
relating to the Collateral or the rights of the Administrative Agent and the
Lenders hereunder, including, without limitation, reasonable attorneys’ fees
and disbursements, to the payment in whole or in part of the Obligations, in
such order as the Administrative Agent may elect, and only after such
application and after the payment by the Administrative Agent of any other
amount required by any provision of law, including, without limitation, Section 9-615(a)(3) of
the New York UCC, need the Administrative Agent account for the surplus, if
any, to any Grantor.  To the extent permitted
by applicable law, each Grantor waives all claims, damages and demands it may
acquire against the Administrative Agent or any Lender arising out of the
exercise by them of any rights hereunder. 
If any notice of a proposed sale or other disposition of Collateral
shall be required by law, such notice shall be deemed reasonable and proper if
given at least 10 days before such sale or other disposition.


 


6.7.                              Registration Rights.  (a)  If the Administrative Agent shall
determine to exercise its rights to sell all or any of the Pledged Equity
pursuant to Section 6.6, and if, in the opinion of the Administrative
Agent, it is necessary or advisable to have the Pledged Equity, or that portion
thereof to be sold, registered under the provisions of the Securities Act, the
relevant Grantor will cause the Issuer thereof to (i) execute and deliver,
and cause the directors and officers of such Issuer to execute and deliver, all
such instruments and documents, and do or cause to be done all such other acts
as may be, in the opinion of the Administrative Agent, necessary or advisable
to register the Pledged Equity, or that portion thereof to be sold, under the
provisions of the Securities Act, (ii) use its best efforts to cause the
registration statement relating thereto to become effective and to remain
effective for a period of one year from the date of the first public offering
of the Pledged Equity, or that portion thereof to be sold, and (iii) make
all amendments thereto and/or to the related prospectus which, in the opinion
of the Administrative Agent, are necessary or advisable, all in conformity with
the requirements of the Securities Act and the rules and regulations of
the Securities and Exchange Commission applicable thereto.  Each Grantor agrees to cause such Issuer to
comply with the provisions of the securities or “Blue Sky” laws of any and all
jurisdictions which the Administrative Agent shall designate and to make
available to its security holders, as soon as practicable, an earnings
statement (which need not be audited) which will satisfy the provisions of Section 11(a) of
the Securities Act.


 


22

















 


(b)         Each Grantor recognizes that the Administrative Agent may be
unable to effect a public sale of any or all the Pledged Equity, by reason of
certain prohibitions contained in the Securities Act and applicable state
securities laws or otherwise, and may be compelled to resort to one or more
private sales thereof to a restricted group of purchasers which will be obliged
to agree, among other things, to acquire such securities for their own account
for investment and not with a view to the distribution or resale thereof.  Each Grantor acknowledges and agrees that any
such private sale may result in prices and other terms less favorable than if
such sale were a public sale and, notwithstanding such circumstances, agrees
that any such private sale shall be deemed to have been made in a commercially
reasonable manner.  The Administrative
Agent shall be under no obligation to delay a sale of any of the Pledged Equity
for the period of time necessary to permit the Issuer thereof to register such
securities for public sale under the Securities Act, or under applicable state
securities laws, even if such Issuer would agree to do so.


 


(c)          Each Grantor agrees to use its best efforts to do or cause
to be done all such other acts as may be necessary to make such sale or sales
of all or any portion of the Pledged Equity pursuant to this Section 6.7
valid and binding and in compliance with any and all other applicable Law.  Each Grantor further agrees that a breach of
any of the covenants contained in this Section 6.7 will cause irreparable
injury to the Administrative Agent and the Lenders, that the Administrative
Agent and the Lenders have no adequate remedy at law in respect of such breach
and, as a consequence, that each and every covenant contained in this Section 6.7
shall be specifically enforceable against such Grantor, and such Grantor hereby
waives, to the fullest extent permitted by applicable law, and agrees not to
assert any defenses against an action for specific performance of such
covenants except for a defense that no Event of Default has occurred and is
continuing under the Credit Agreement.


 


6.8.                              Deficiency.  Each Grantor shall remain liable for any
deficiency if the proceeds of any sale or other disposition of the Collateral
are insufficient to pay its Obligations and the reasonable fees and
disbursements of any attorneys employed by the Administrative Agent or any Lender
to collect such deficiency.


 


SECTION 7.                                THE
ADMINISTRATIVE AGENT


 


7.1.                              Administrative
Agent’s Appointment as Attorney-in-Fact, etc.  (a)  Each Grantor hereby irrevocably
constitutes and appoints the Administrative Agent and any officer or agent
thereof, with full power of substitution, as its true and lawful
attorney-in-fact with full irrevocable power and authority in the place and
stead of such Grantor and in the name of such Grantor or in its own name, for
the purpose of carrying out the terms of this Agreement, to take any and all
appropriate action and to execute any and all documents and instruments which
may be necessary or desirable to accomplish the purposes of this Agreement,
and, without limiting the generality of the foregoing, each Grantor hereby
gives the Administrative Agent the power and right, on behalf of such Grantor,
without notice to or assent by such Grantor, to do any or all of the following:


 


(i)                                     in
the name of such Grantor or its own name, or otherwise, take possession of and
indorse and collect any checks, drafts, notes, acceptances or other instruments
for the payment of moneys due under any Receivable required to be included


 


23

















 


in Collateral
hereunder or with respect to any other Collateral and file any claim or take
any other action or proceeding in any court of law or equity or otherwise
deemed appropriate by the Administrative Agent for the purpose of collecting
any and all such moneys due under any such Receivable or with respect to any
other Collateral whenever payable;


 


(ii)                                  in
the case of any Intellectual Property required to be included in Collateral
hereunder, execute and deliver, and have recorded, any and all agreements,
instruments, documents and papers as the Administrative Agent may request to
evidence the Administrative Agent’s and the Lenders’ security interest in such
Intellectual Property and the goodwill and general intangibles of such Grantor
relating thereto or represented thereby;


 


(iii)                               pay
or discharge taxes and Liens levied or placed on or threatened against the
Collateral, effect any repairs or any insurance called for by the terms of this
Agreement and pay all or any part of the premiums therefor and the costs
thereof;


 


(iv)                              execute,
in connection with any sale provided for in Section 6.6 or 6.7, any
indorsements, assignments or other instruments of conveyance or transfer with
respect to the Collateral; and


 


(v)                                 (1) direct
any party liable for any payment under any of the Collateral to make payment of
any and all moneys due or to become due thereunder directly to the
Administrative Agent or as the Administrative Agent shall direct; (2) ask
or demand for, collect, and receive payment of and receipt for, any and all
moneys, claims and other amounts due or to become due at any time in respect of
or arising out of any Collateral; (3) sign and indorse any invoices,
freight or express bills, bills of lading, storage or warehouse receipts,
drafts against debtors, assignments, verifications, notices and other documents
in connection with any of the Collateral; (4) commence and prosecute any
suits, actions or proceedings at law or in equity in any court of competent
jurisdiction to collect the Collateral or any portion thereof and to enforce
any other right in respect of any Collateral; (5) defend any suit, action
or proceeding brought against such Grantor with respect to any Collateral; (6) settle,
compromise or adjust any such suit, action or proceeding and, in connection
therewith, give such discharges or releases as the Administrative Agent may
reasonably deem appropriate; (7) subject to any licenses (and the rights
granted therein) existing at the time of such assignment, assign any Copyright,
Patent or Trademark (along with the goodwill of the business to which any such
Copyright, Patent or Trademark pertains), throughout the world for such term or
terms, on such conditions, and in such manner, as the Administrative Agent
shall in its sole discretion determine; and (8) generally, sell, transfer,
pledge and make any agreement with respect to or otherwise deal with any of the
Collateral as fully and completely as though the Administrative Agent were the
absolute owner thereof for all purposes, and do, at the Administrative Agent’s
option and such Grantor’s expense, at any time, or from time to time, all acts
and things which the Administrative Agent deems necessary to protect, preserve
or realize upon the Collateral and the Administrative Agent’s and the Lenders’
security interests therein and to effect the intent of this Agreement, all as
fully and effectively as such Grantor might do.


 


24

















 


Anything in this Section 7.1(a) to
the contrary notwithstanding, the Administrative Agent agrees that it will not
exercise any rights under the power of attorney provided for in this Section 7.1(a) unless
an Event of Default shall have occurred and be continuing.


 


(b)         If any Grantor fails to perform or comply with any of its
agreements contained herein, the Administrative Agent, at its option, but
without any obligation so to do, may perform or comply, or otherwise cause
performance or compliance, with such agreement.


 


(c)          The reasonable out-of-pocket expenses of the Administrative
Agent incurred in connection with actions undertaken as provided in this Section 7.1,
together with interest thereon at a rate per annum equal to the highest rate
per annum at which interest would then be payable on any category of past due
Base Rate Loans under the Credit Agreement, from the date of payment by the
Administrative Agent to the date reimbursed by the relevant Grantor, shall be
payable by such Grantor to the Administrative Agent on demand.


 


(d)         Each Grantor hereby ratifies all that said attorneys shall
lawfully do or cause to be done by virtue hereof.  All powers, authorizations and agencies
contained in this Agreement are coupled with an interest and are irrevocable
until this Agreement is terminated and the security interests created hereby
are released.


 


7.2.                              Duty
of Administrative Agent.  The Administrative
Agent’s sole duty with respect to the custody, safekeeping and physical
preservation of the Collateral in its possession, under Section 9-207 of
the New York UCC or otherwise, shall be to deal with it in the same manner as
the Administrative Agent deals with similar property for its own account.  Neither the Administrative Agent, any Lender
nor any of their respective officers, directors, employees or agents shall be
liable for failure to demand, collect or realize upon any of the Collateral or
for any delay in doing so or shall be under any obligation to sell or otherwise
dispose of any Collateral upon the request of any Grantor or any other Person
or to take any other action whatsoever with regard to the Collateral or any
part thereof.  The powers conferred on
the Administrative Agent and the Lenders hereunder are solely to protect the
Administrative Agent’s and the Lenders’ interests in the Collateral and shall
not impose any duty upon the Administrative Agent or any Lender to exercise any
such powers.  The Administrative Agent
and the Lenders shall be accountable only for amounts that they actually
receive as a result of the exercise of such powers, and neither they nor any of
their officers, directors, employees or agents shall be responsible to any
Grantor for any act or failure to act hereunder, except for their own gross
negligence or willful misconduct.


 


7.3.                              Execution
of Financing Statements.  Pursuant to
any applicable law, each Grantor authorizes the Administrative Agent to file or
record financing statements and other filing or recording documents or
instruments with respect to the Collateral without the signature of such
Grantor in such form and in such offices as the Administrative Agent determines
appropriate to perfect the security interests of the Administrative Agent under
this Agreement.  Each Grantor authorizes
the Administrative Agent to use the collateral description “all personal
property” or “all assets” in any such financing statements.  Each Grantor hereby ratifies and authorizes
the filing by the Administrative Agent of any financing statement with respect
to the Collateral made prior to the date hereof; provided that, at the
reasonable request of any Grantor,


 


25

















 


the Administrative
Agent shall amend any such statement (and any other financing statement filed
by the Administrative Agent in connection with this Agreement) to exclude any
property that is released from, or otherwise not included in, the Collateral.  The Administrative Agent agrees promptly to
furnish copies of all such filings to the Company.


 


7.4.                              Authority
of Administrative Agent.  Each
Grantor acknowledges that the rights and responsibilities of the Administrative
Agent under this Agreement with respect to any action taken by the
Administrative Agent or the exercise or non-exercise by the Administrative
Agent of any option, voting right, request, judgment or other right or remedy
provided for herein or resulting or arising out of this Agreement shall, as
between the Administrative Agent and the Lenders, be governed by the Credit
Agreement and by such other agreements with respect thereto as may exist from
time to time among them, but, as between the Administrative Agent and the
Grantors, the Administrative Agent shall be conclusively presumed to be acting
as agent for the Lenders with full and valid authority so to act or refrain
from acting, and no Grantor shall be under any obligation, or entitlement, to
make any inquiry respecting such authority.


 


SECTION 8.                                MISCELLANEOUS


 


8.1.                              Amendments
in Writing.  None of the terms or
provisions of this Agreement may be waived, amended, supplemented or otherwise
modified except in accordance with Section 10.01 of the Credit Agreement.


 


8.2.                              Notices.  All notices, requests and demands to or upon
the Administrative Agent or any Grantor hereunder shall be effected in the
manner provided for in Section 10.02 of the Credit Agreement; provided
that any such notice, request or demand to or upon any Guarantor shall be
addressed to such Guarantor at its notice address set forth on Schedule 1.


 


8.3.                              No
Waiver by Course of Conduct; Cumulative Remedies.  Neither the Administrative Agent nor any
Lender shall by any act (except by a written instrument pursuant to Section 8.1),
delay, indulgence, omission or otherwise be deemed to have waived any right or
remedy hereunder or to have acquiesced in any Default or Event of Default.  No failure to exercise, nor any delay in
exercising, on the part of the Administrative Agent or any Lender, any right,
power or privilege hereunder shall operate as a waiver thereof.  No single or partial exercise of any right,
power or privilege hereunder shall preclude any other or further exercise
thereof or the exercise of any other right, power or privilege.  A waiver by the Administrative Agent or any
Lender of any right or remedy hereunder on any one occasion shall not be
construed as a bar to any right or remedy which the Administrative Agent or
such Lender would otherwise have on any future occasion.  The rights and remedies herein provided are
cumulative, may be exercised singly or concurrently and are not exclusive of
any other rights or remedies provided by law.


 


8.4.                              Enforcement
Expenses; Indemnification.  (a) 
Each Guarantor agrees to pay or reimburse each Lender and the Administrative
Agent for all its reasonable out-of-pocket costs and expenses incurred in
collecting against such Guarantor under the guarantee contained in Section 2
or otherwise enforcing or preserving any rights under this Agreement and the other
Loan Documents to which such Guarantor is a party, including, without
limitation, the reasonable fees and disbursements of counsel to the
Administrative Agent.


 


26

















 


(b)         Each Guarantor agrees to pay, and to save the Administrative
Agent and the Lenders harmless from, any and all liabilities with respect to,
or resulting from any delay in paying, any and all stamp, excise, sales or
other taxes which may be payable or determined to be payable with respect to
any of the Collateral or in connection with any of the transactions
contemplated by this Agreement.


 


(c)          Each Guarantor agrees to pay, and to save the Administrative
Agent and the Lenders harmless from, any and all liabilities, obligations,
losses, damages, penalties, claims, demands, actions, judgments and suits and
related reasonable out-of-pocket expenses (including Attorney Costs) of any
kind or nature whatsoever with respect to the execution, delivery, enforcement,
performance and administration of this Agreement to the extent the Company
would be required to do so pursuant to Section 10.05 of the Credit
Agreement.


 


(d)         The agreements in this Section 8.4 shall survive
repayment of the Obligations and all other amounts payable under the Credit
Agreement and the other Loan Documents.


 


8.5.                              Successors
and Assigns.  This Agreement shall be
binding upon the permitted successors and assigns of each Grantor and shall
inure to the benefit of the Administrative Agent and the Lenders and their
permitted successors and assigns; provided that no Grantor may, except
pursuant to a merger or consolidation permitted by the Credit Agreement,
assign, transfer or delegate any of its rights or obligations under this
Agreement without the prior written consent of the Administrative Agent.


 


8.6.                              Setoff.  In addition to any rights and remedies of the
Lenders provided by Law, upon the occurrence and during the continuance of any
Event of Default, each Lender and its Affiliates is authorized at any time and
from time to time, without prior notice to any Grantor, any such notice being
waived by each Grantor to the fullest extent permitted by applicable Law, to
set off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held by, and other Indebtedness at any time
owing by, such Lender and its Affiliates to or for the credit or the account of
any Grantor against any and all Obligations owing to such Lender and its
Affiliates hereunder or under any other Loan Document, now or hereafter
existing, irrespective of whether or not such Agent or such Lender or Affiliate
shall have made demand under this Agreement or any other Loan Document and
although such Obligations may be contingent or unmatured or denominated in a
currency different from that of the applicable deposit or Indebtedness; provided that, in the case of any such deposits or other
Indebtedness for the credit or the account of any Foreign Subsidiary, such set
off may only be against any Obligations of Foreign Subsidiaries.  Each Lender agrees promptly to notify such
Grantor and the Administrative Agent after any such set off and application
made by such Lender; provided, that
the failure to give such notice shall not affect the validity of such setoff
and application.  The rights of the
Administrative Agent and each Lender under this Section 8.6 are in
addition to other rights and remedies (including other rights of setoff) that
the Administrative Agent and such Lender may have.


 


8.7.                              Counterparts.  This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.  Delivery by telecopier of an executed
counterpart of a signature


 


27
















 


page to this
Agreement shall be effective as delivery of an original executed counterpart of
this Agreement.


 


8.8.                              Severability.  If any provision of this Agreement is held to
be illegal, invalid or unenforceable, the legality, validity and enforceability
of the remaining provisions of this Agreement shall not be affected or impaired
thereby.  The invalidity of a provision
in a particular jurisdiction shall not invalidate or render unenforceable such
provision in any other jurisdiction.


 


8.9.                              Section Headings.  The Section headings used in this
Agreement are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation
hereof.


 


8.10.                        Integration.  This Agreement, together with the other Loan
Documents, comprises the complete and integrated agreement of the parties on
the subject matter hereof and thereof and supersedes all prior agreements,
written or oral, on such subject matter.


 


8.11.                     GOVERNING
LAW.  THIS
AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF
THE STATE OF NEW YORK.


 


8.12.                        Submission
To Jurisdiction; Waivers.  (a) 
Any legal action or proceeding arising under any Loan Document or in any way
connected with or related or incidental to the dealings of the parties hereto
or any of them with respect to any Loan Document, or the transactions related
thereto, in each case whether now existing or hereafter arising, may be brought
in the courts of the State of New York sitting in New York City or of the United
States for the Southern District of such State, and by execution and delivery
of this Agreement, each Grantor and the Administrative Agent consents, for
itself and in respect of its property, to the non-exclusive jurisdiction of
those courts.  Each Grantor and the
Administrative Agent irrevocably waives any objection, including any objection
to the laying of venue or based on the grounds of forum non conveniens, which
it may now or hereafter have to the bringing of any action or proceeding in
such courts in respect of any Loan Document or other document related thereto.


 


(b)  Each Grantor
hereby irrevocably and unconditionally:


 


(i)                                     agrees
that service of process in any such action or proceeding may be effected by
mailing a copy thereof by registered or certified mail (or any substantially
similar form of mail), postage prepaid, to such Grantor at its address referred
to in Section 8.2 or at such other address of which the Administrative
Agent shall have been notified pursuant thereto;


 


(ii)                                  agrees
that nothing herein shall affect the right to effect service of process in any
other manner permitted by law or shall limit the right to sue in any other
jurisdiction; and


 


28

















 


(iii)                               waives,
to the maximum extent not prohibited by law, any right it may have to claim or
recover in any legal action or proceeding referred to in this Section any
special, exemplary, punitive or consequential damages.


 


8.13.                        Acknowledgments.  Each Grantor hereby acknowledges that:


 


(a)          it
has been advised by counsel in the negotiation, execution and delivery of this
Agreement and the other Loan Documents to which it is a party;


 


(b)         neither
the Administrative Agent nor any Lender has any fiduciary relationship with or
duty to any Grantor arising out of or in connection with this Agreement or any
of the other Loan Documents, and the relationship between the Grantors, on the
one hand, and the Administrative Agent and the Lenders, on the other hand, in
connection herewith or therewith is solely that of debtor and creditor; and


 


(c)          no
joint venture is created hereby or by the other Loan Documents or otherwise
exists by virtue of the transactions contemplated hereby among the Lenders or
among the Grantors and the Lenders.


 


8.14.                        Additional
Guarantors and Grantors.  Each
Subsidiary of the Company that is required to become a party to this Agreement
pursuant to Section 6.10 of the Credit Agreement shall become a Guarantor
and a Grantor for all purposes of this Agreement upon execution and delivery by
such Subsidiary of a Security Agreement Supplement in the form of Annex 1
hereto.


 


8.15.                        Releases.  (a)  At such time as the Loans and the
other Obligations (other than contingent indemnification and contingent expense
reimbursement obligations, Obligations in respect of Secured Hedge Agreements
and Cash Management Obligations) shall have been paid in full, the Commitments
have been terminated and no Letters of Credit shall be outstanding, the
Collateral shall be released from the Liens created hereby, and this Agreement
and all obligations (other than those expressly stated to survive such
termination) of the Administrative Agent and each Grantor hereunder shall
terminate, all without delivery of any instrument or performance of any act by
any party, and all rights to the Collateral shall revert to the Grantors.  At the request and sole expense of any
Grantor following any such termination, the Administrative Agent shall deliver
to such Grantor any Collateral held by the Administrative Agent hereunder and
execute and deliver to such Grantor such documents as such Grantor shall
reasonably request to evidence such termination.


 


(b)         If any of the Collateral shall be sold, transferred or
otherwise disposed of by any Grantor in a transaction permitted by the Credit
Agreement, then (i) the Liens created hereby on such Collateral shall
automatically be released and (ii) the Administrative Agent, at the
request and sole expense of such Grantor, shall execute and deliver to such
Grantor all releases or other documents reasonably necessary or desirable for
the release of the Liens created hereby on such Collateral.  If any of the Collateral shall become
Specified Assets described in clause (b) of the definition thereof (taking
into account the proviso thereto), then (A) the Liens created hereby on
such Collateral shall automatically be released and (ii) the
Administrative Agent, at the request and sole expense of the Company, shall
execute and deliver to the Company or the 


 


29

















 


relevant Grantor all
releases or other documents reasonably necessary or desirable for the release
of the Liens created hereby on such Collateral. 
In addition, at the request and at the sole expense of the Company, the
Administrative Agent agrees to (x) provide to each Grantor a power of
attorney to execute any document reasonably required to permit any sale
permitted by the Credit Agreement of any asset, the perfection of which is
governed by a certificate-of-title statute, free of the Liens created by the
Security Documents and (y) with respect to any jurisdiction in which
releases executed pursuant to such power of attorney are insufficient to
release such Liens, (1) execute in blank any document reasonably required
to permit any sale permitted by the Credit Agreement of any asset, the
perfection of which is governed by a certificate-of-title statute, free of the
Liens created by the Security Documents and (2) authorize such Grantor to
fill in the relevant information to release such Lien.  At the request and sole expense of the
Company, a Subsidiary Guarantor shall be released from its obligations
hereunder in the event that all the Equity Interests of such Subsidiary
Guarantor shall be sold, transferred or otherwise disposed of in a transaction
permitted by the Credit Agreement; provided that the Company shall have
delivered to the Administrative Agent, at least five Business Days prior to the
date of the proposed release, a written request for release identifying the
relevant Subsidiary Guarantor and the terms of the sale or other disposition in
reasonable detail, including the price thereof and any expenses in connection
therewith, together with a certification by the Company stating that such
transaction is in compliance with the Credit Agreement and the other Loan
Documents.


 


8.16.                     WAIVER OF
JURY TRIAL.  EACH GRANTOR
HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION
OR CAUSE OF ACTION ARISING UNDER ANY LOAN DOCUMENT OR IN ANY WAY CONNECTED WITH
OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM
WITH RESPECT TO ANY LOAN DOCUMENT, OR THE TRANSACTIONS RELATED THERETO, IN EACH
CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER FOUNDED IN CONTRACT
OR TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH
CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL
WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS SECTION 10.17 WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENT OF THE SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHT
TO TRIAL BY JURY.


 


8.17.                        Effectiveness
of the Merger; Assignment and Delegation to and Assumption by Reader’s Digest.  Reader’s Digest and its Subsidiaries shall
have no rights or obligations hereunder until the consummation of the Merger
and any representations and warranties of Reader’s Digest or any of its
Subsidiaries hereunder shall not become effective until such time.  Upon consummation of the Merger, Reader’s
Digest shall succeed to all the rights and obligations of Doctor Acquisition
Co. under this Agreement and all rights, obligations, representations and
warranties of Reader’s Digest and its Subsidiaries shall become effective as of
the date hereof, without any further action by any Person.


 


8.18.                        German
Borrower Security.  Notwithstanding
any provision to the contrary in any Loan Document or any Secured Hedge
Agreement, any guarantees, security interests or other security provided under
or in connection with this Agreement or any other 


 


30

















 


Loan Document or
any Secured Hedge Agreement (“Security”) shall at all times exclude
direct or indirect access to Specified Assets other than Specified Assets of
the German Borrower (in particular, no security in rem (dingliche
Sicherheit) in Specified Assets other than Specified Assets of the
German Borrower shall be created (or, in the event such exclusion is not
possible under applicable law, no such security in rem shall be enforceable),
and no disposal restriction (Verfügungsbeschränkung)
and no submission to immediate foreclosure (Unterwerfung unter die
sofortige Zwangsvollstreckung) regarding Specified Assets other than
Specified Assets of the German Borrower shall apply with respect to any
contractual claim (schuldrechtlicher Anspruch)
in favor of any Secured Party).  The
restriction set forth in this Section 8.18 shall be applicable if and only
to the extent that (and only for so long as) (a) such Security secures
Obligations of the German Borrower and (b) direct or indirect access to
such Specified Assets would result in adverse tax consequences to Holdings and
its Subsidiaries as a consequence of § 8a of the German Corporate Income Tax
Act (Körperschaftsteuergesetz) as amended from
time to time or of any future rules replacing § 8a of the German Corporate
Income Tax Act (Körperschaftsteuergesetz).


 


8.19.                        Parallel
Obligations


 


.  (a)  Solely for purposes of the validity
and enforcement of any security interest granted to the Secured Parties in any
Equity Interests or other assets governed by German law, each of the parties hereto agrees (and each
Secured Party by its execution of the Credit Agreement or its Assignment and
Assumption agrees), and each of the Loan Parties acknowledges by way of an
abstract acknowledgement of debt (abstraktes
Schuldanerkenntnis as effective under German law) (the “Acknowledgement”),
that the Obligations of such Loan Party (and each of their respective permitted
successors and assigns) (the “Original Obligations”) shall also be owing
in full to the Administrative Agent (and its permitted successors and assigns),
and that accordingly the Administrative Agent will have its own independent
right to demand performance by the respective Loan Party of the Obligations of
such Loan Party (such Obligations owed to the Administrative Agent, the “Parallel
Obligations”).  Any payment by any
Loan Party of its Parallel Obligations shall to the same extent reduce and be a
good discharge of the corresponding Original Obligations of such Loan Party
owing to the relevant Secured Parties, and payment by any Loan Party of its
Original Obligations to the relevant Secured Parties shall to the same extent
reduce and be a good discharge of the Parallel Obligations owing by it to the
Administrative Agent.  The Administrative
Agent undertakes to each Loan Party that in the case of any discharge of any
such obligation owing to one of the Administrative Agent or a Secured Party, it
will, to the same extent, not make a claim against such Loan Party under the
Acknowledgement at any time, provided that any such claims can be made against
such Loan Party if such discharge is made by virtue of any set off,
counterclaim or similar defense invoked by such Loan Party vis-a-vis the
Administrative Agent other than with respect to claims arising under the Loan
Documents.


 


(b) 
Without limiting or affecting the Administrative Agent’s rights against the
Loan Parties (whether under this Section 8.19 or under any other provision
of the Loan Documents), the Administrative Agent agrees with each other Secured
Party that it will not exercise its rights under the Acknowledgement with
respect to Obligations owed to such Secured Party except with the consent of
such Secured Party, which consent is hereby deemed given by its execution of
the Credit Agreement or its Assignment and Assumption.  Nothing in the 


 


31

















 


previous
sentence shall in any way limit the Administrative Agent’s right to act in the
protection or preservation of rights under or to enforce any Collateral
Document (or to do any act reasonably incidental to the foregoing).


 


32

















 


IN WITNESS WHEREOF, each of the undersigned
has caused this Guarantee and Collateral Agreement to be duly executed and
delivered as of the date first above written.


 


 


	
   

  	
  RDA HOLDING CO.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  



 


 


[Signature Page to Guarantee & Collateral
Agreement]


 

















 


	
   

  	
  DOCTOR ACQUISITION CO.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  



 


 


[SIGNATURE PAGE TO GUARANTEE AND COLLATERAL
AGREEMENT]


 

















 


	
   

  	
  THE READER’S DIGEST ASSOCIATION, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  



 


 


[SIGNATURE PAGE TO GUARANTEE AND COLLATERAL
AGREEMENT]


 

















 


	
   

  	
  Solely for purposes of Sections 8.18 and 8.19:

  
	
   

  	
  RD GERMAN HOLDINGS GmbH

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  



 


 


[SIGNATURE PAGE TO GUARANTEE AND COLLATERAL
AGREEMENT]


 

















 


	
   

  	
  [CERTAIN SUBSIDIARIES OF THE READER’S DIGEST ASSOCIATION, INC.]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  



 


 


[SIGNATURE
PAGE TO GUARANTEE AND COLLATERAL AGREEMENT]


 
















 


	
   

  	
  JPMORGAN CHASE BANK, N.A., as Administrative Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  



 


 


[SIGNATURE PAGE TO GUARANTEE AND COLLATERAL AGREEMENT]


 

















 


ACKNOWLEDGMENT AND CONSENT***


 


The undersigned hereby acknowledges receipt
of a copy of the Guarantee and Collateral Agreement dated as of March 2,
2007 (the “Agreement”), made by the Grantors parties thereto for the
benefit of JPMORGAN CHASE BANK, N.A., as Administrative Agent.  The undersigned agrees for the benefit of the
Administrative Agent and the Lenders as follows:


 


1.               The undersigned
will be bound by the terms of the Agreement and will comply with such terms
insofar as such terms are applicable to the undersigned.


 


2.               The undersigned
will notify the Administrative Agent promptly in writing of the occurrence of
any of the events described in Section 5.6(a) of the Agreement.


 


3.               The terms of
Sections 6.3(c) and 6.7 of the Agreement shall apply to it, mutatis
mutandis, with respect to all actions that may be required of it
pursuant to Section 6.3(c) or 6.7 of the Agreement.


 


	
   

  	
  [NAME OF ISSUER]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  Address for Notices:

  
	
   

  	
                                                                                                       

  
	
   

  	
                                                                                                       

  
	
   

  	
                                                                                                       

  
	
   

  	
   

  
	
   

  	
  Fax:

  
				



 






	
  ***

  	
  This consent
  is necessary only with respect to any Issuer which is not also a Grantor. This
  consent may be modified or eliminated with respect to any Issuer that is not
  controlled by a Grantor.

  



 

















 


Annex 1 to


Guarantee and
Collateral Agreement


 


ASSUMPTION AGREEMENT, dated as of
                             ,
20    , made by                                                           ,
a
                            
corporation (the “Additional Grantor”), in favor of JPMORGAN CHASE BANK,
N.A., as administrative agent (in such capacity, the “Administrative Agent”),
for the lending and other financial institutions (the “Lenders”) parties
to the Credit Agreement referred to below. 
All capitalized terms not defined herein shall have the meaning ascribed
to them in such Credit Agreement.


 


W  I  T  N  E  S
S  E  T  H :


 


WHEREAS, RDA HOLDING CO., a Delaware corporation
(“Holdings”), THE READER’S DIGEST ASSOCIATION, INC., a Delaware
corporation (the “Company”), the Overseas Borrowers, the Lenders and the
Administrative Agent have entered into a Credit Agreement, dated as of March 2,
2007 (as amended, supplemented or otherwise modified from time to time, the “Credit
Agreement”);


 


WHEREAS, in connection with the Credit
Agreement, Holdings, the Company and certain of the Company’s Subsidiaries
(other than the Additional Grantor) have entered into the Guarantee and Collateral
Agreement, dated as of March 2, 2007 (as amended, supplemented or
otherwise modified from time to time, the “Guarantee and Collateral
Agreement”) in favor of the Administrative Agent for the benefit of the
Lenders;


 


WHEREAS, the Credit Agreement requires the
Additional Grantor to become a party to the Guarantee and Collateral Agreement;
and


 


WHEREAS, the Additional Grantor has agreed to
execute and deliver this Assumption Agreement in order to become a party to the
Guarantee and Collateral Agreement;


 


NOW, THEREFORE, IT IS AGREED:


 


1.                                       Guarantee and
Collateral Agreement.  By executing
and delivering this Assumption Agreement, the Additional Grantor, as provided
in Section 8.14 of the Guarantee and Collateral Agreement, hereby becomes
a party to the Guarantee and Collateral Agreement as a Guarantor and a Grantor
thereunder with the same force and effect as if originally named therein as a
Guarantor and a Grantor and, without limiting the generality of the foregoing,
hereby expressly assumes all obligations and liabilities of a Guarantor and a
Grantor thereunder.  The information set
forth in Annex 1-A hereto is hereby added to the information set forth in
the Schedules to the Guarantee and Collateral Agreement.  The Additional Grantor hereby represents and
warrants that each of the representations and warranties contained in Section 4
of the Guarantee and Collateral Agreement is true and correct on and as the
date hereof (after giving effect to this Assumption Agreement) as if made on
and as of such date.


 

















 


2.              GOVERNING LAW.  THIS ASSUMPTION AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.


 


IN WITNESS WHEREOF, the undersigned has
caused this Assumption Agreement to be duly executed and delivered as of the
date first above written.


 


	
   

  	
  [ADDITIONAL GRANTOR]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  



 

















 


Annex 1-A to


Assumption Agreement


 


Supplement to Schedule 1


 


Supplement to Schedule 2


 


Supplement to Schedule 3


 


Supplement to Schedule 4


 


Supplement to Schedule 5


 


Supplement to Schedule 6


 


Supplement to Schedule 7


 
















 


EXHIBIT G


 


	
  Document Number

  	
  Document Title

  	
   

  
	
   

  	
   

  
	
  Mortgage, Security Agreement, Assignment of Leases
  and Rents, and Fixture Filing

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Recording Area

  
	
   

  	
   

  
	
   

  	
  Name and Return Address:

  
	
   

  	
   

  
	
   

  	
  After recording please
  return to:

  
	
   

  	
   

  
	
   

  	
  Simpson Thacher & Bartlett LLP

  
	
   

  	
  425 Lexington Avenue

  
	
   

  	
  New York, New York 10017

  
	
   

  	
  Attention: Christopher Garcia

  
	
   

  	
   

  
	
   

  	
  648-0016-020

  	
   

  
	
   

  	
  (Parcel Identification Number)

  	
   

  



 


 


As required by Wisconsin Statutes Chapter 59.43(5),
this document has been drafted by Yulia Rubin, Simpson Thacher &
Bartlett LLP, 425 Lexington Avenue, New York, New York 10017.


 

















 


	
  After
  recording please return to:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Simpson
  Thacher & Bartlett LLP

  	
   

  	
  [WISCONSIN]

  
	
  425
  Lexington Avenue

  	
   

  	
   

  
	
  New
  York, New York 10017

  	
   

  	
   

  
	
  Attention:
  Christopher Garcia

  	
   

  	
   

  



 




 





MORTGAGE, SECURITY AGREEMENT, ASSIGNMENT OF
LEASES AND RENTS,

AND FIXTURE FILING


 


made by




REIMAN MEDIA GROUP, INC.,


 


Mortgagor,


 


to


 


JPMORGAN CHASE BANK, N.A.,

as Administrative Agent, Mortgagee


 


Dated as of March 2, 2007




 





 


THIS INSTRUMENT IS TO BE INDEXED AS BOTH A

MORTGAGE AND A FIXTURE FILING FILED AS A FINANCING STATEMENT


 

















 


TABLE OF CONTENTS


 


	
   

  	
   

  	
   

  	
   

  	
  Page

  
	
  Background

  	
   

  	
  2

  
	
   

  	
   

  	
   

  
	
  Granting
  Clauses

  	
   

  	
  3

  
	
   

  	
   

  	
   

  
	
  Terms
  and Conditions

  	
   

  	
  5

  
	
  1.

  	
   

  	
  Defined
  Terms

  	
   

  	
  5

  
	
  2.

  	
   

  	
  Warranty
  of Title

  	
   

  	
  6

  
	
  3.

  	
   

  	
  Payment
  of Obligations

  	
   

  	
  6

  
	
  4.

  	
   

  	
  Requirements

  	
   

  	
  6

  
	
  5.

  	
   

  	
  Payment
  of Taxes and Other Impositions

  	
   

  	
  6

  
	
  6.

  	
   

  	
  Insurance

  	
   

  	
  7

  
	
  7.

  	
   

  	
  Restrictions
  on Liens and Encumbrances

  	
   

  	
  7

  
	
  8.

  	
   

  	
  Due
  on Sale and Other Transfer Restrictions

  	
   

  	
  8

  
	
  9.

  	
   

  	
  Condemnation/Eminent
  Domain

  	
   

  	
  8

  
	
  10.

  	
   

  	
  Leases

  	
   

  	
  8

  
	
  11.

  	
   

  	
  Further
  Assurances

  	
   

  	
  8

  
	
  12.

  	
   

  	
  Mortgagee’s
  Right to Perform

  	
   

  	
  8

  
	
  13.

  	
   

  	
  Remedies

  	
   

  	
  8

  
	
  14.

  	
   

  	
  Right
  of Mortgagee to Credit Sale

  	
   

  	
  9

  
	
  15.

  	
   

  	
  Appointment
  of Receiver

  	
   

  	
  10

  
	
  16.

  	
   

  	
  Extension,
  Release, etc

  	
   

  	
  10

  
	
  17.

  	
   

  	
  Security
  Agreement under Uniform Commercial Code; Fixture Filing

  	
   

  	
  11

  
	
  18.

  	
   

  	
  Assignment
  of Rents

  	
   

  	
  11

  
	
  19.

  	
   

  	
  Additional
  Rights

  	
   

  	
  12

  
	
  20.

  	
   

  	
  Notices

  	
   

  	
  12

  
	
  21.

  	
   

  	
  No
  Oral Modification

  	
   

  	
  13

  
	
  22.

  	
   

  	
  Partial
  Invalidity

  	
   

  	
  13

  
	
  23.

  	
   

  	
  Mortgagor’s
  Waiver of Rights

  	
   

  	
  13

  
	
  24.

  	
   

  	
  Remedies
  Not Exclusive

  	
   

  	
  14

  
	
  25.

  	
   

  	
  Multiple
  Security

  	
   

  	
  14

  
	
  26.

  	
   

  	
  Successors
  and Assigns

  	
   

  	
  15

  
	
  27.

  	
   

  	
  No
  Waivers, etc.

  	
   

  	
  15

  
	
  28.

  	
   

  	
  Governing
  Law, etc.

  	
   

  	
  15

  
	
  29.

  	
   

  	
  Certain
  Definitions

  	
   

  	
  16

  
	
  30.

  	
   

  	
  Duty
  of Mortgagee; Authority of Mortgagee

  	
   

  	
  16

  
	
  31.

  	
   

  	
  Last
  Dollars Secured; Priority

  	
   

  	
  17

  
	
  32.

  	
   

  	
  Enforcement
  Expenses; Indemnification

  	
   

  	
  17

  
	
  33.

  	
   

  	
  Release

  	
   

  	
  17

  
	
  34.

  	
   

  	
  Shortened
  Redemption Election

  	
   

  	
  17

  
	
  35.

  	
   

  	
  Receivership

  	
   

  	
  18

  
	
  36.

  	
   

  	
  Revolving
  Loans

  	
   

  	
  18

  
						



 

















 


MORTGAGE, SECURITY AGREEMENT,

ASSIGNMENT OF LEASES AND RENTS, AND FIXTURE FILING


 


THIS
MORTGAGE, SECURITY AGREEMENT, ASSIGNMENT OF LEASES AND RENTS, AND FIXTURE
FILING, dated as of March 2, 2007 is made by REIMAN MEDIA GROUP, INC. (f/k/a
READER’S DIGEST MEDIA GROUP, INC.), a Delaware corporation (“Mortgagor”), whose address is 5400 South 60th Street,
Greendale, Wisconsin 53129, to JPMORGAN CHASE BANK, N.A., as Administrative
Agent (in such capacity, “Mortgagee”) whose address is 270 Park Avenue, New York,
New York 10017. References to this “Mortgage” shall mean this instrument and any and all
renewals, modifications, amendments, supplements, extensions, consolidations,
substitutions, spreaders and replacements of this instrument.


 


Background


 


A.            Doctor Acquisition
Co. (to be merged with and into Reader’s Digest, “Borrower,” together with RD German Holdings GmbH and
the other Overseas Borrowers, collectively, “Borrowers”), a
Delaware corporation, RDA Holding Co., a Delaware corporation, The Reader’s
Digest Association, Inc., a Delaware corporation, Mortgagee, the several
banks and other financial institutions or entities from time to time parties
thereto (the “Lenders”), Citicorp North America, Inc. and Merrill
Lynch, Pierce, Fenner & Smith Incorporated, as Co- Syndication Agents,
and The Royal Bank of Scotland plc, as Documentation Agent, are parties to that
certain Credit Agreement, dated as of March 2, 2007 (as amended,
supplemented, restated, replaced, substituted, or otherwise modified from time
to time, the “Credit Agreement”). The terms of the Credit Agreement are incorporated by reference in
this Mortgage as if the terms thereof were fully set forth herein;


 


B.            Pursuant to the
Credit Agreement, the Lenders have severally agreed to make extensions of
credit to the Borrowers upon the terms and subject to the conditions set forth
therein;


 


C.            The Borrowers are
members of an affiliated group of companies that includes Mortgagor;


 


D.            The proceeds of the
extensions of credit under the Credit Agreement will be used in part to enable
the Borrowers to make valuable transfers to Mortgagor in connection with the
operation of its business;


 


E.             The Borrowers and
Mortgagor are engaged in related businesses, and Mortgagor will derive
substantial direct and indirect benefit from the making of the extensions of
credit under the Credit Agreement;


 


F.             It is a condition
precedent to the obligation of the Lenders to make their respective extensions
of credit to the Borrowers under the Credit Agreement that Mortgagor shall have
executed and delivered this Mortgage to Mortgagee for the ratable benefit of
the Secured Parties;


 


2

















 


G.              Mortgagor (i) is
the owner of the fee simple estate in the parcel(s) of real property, if
any, described on Schedule A attached hereto (the “Land”); and (ii) owns,
leases or otherwise has the right to use all of the buildings, improvements,
structures, and fixtures now or subsequently located on the Land (the “Improvements;”
the Land and the Improvements being collectively referred to as the “Real
Estate”); and


 


H.              In consideration
of the premises and to induce Mortgagee and the Lenders to enter into the
Credit Agreement, and to induce the Lenders to make their respective extensions
of credit to the Borrowers, Mortgagor hereby agrees with Mortgagee, for the
ratable benefit of the Secured Parties, as follows:


 


Granting Clauses


 


For
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Mortgagor agrees that to secure the payment of all
obligations and liabilities of Mortgagor which may arise under or in connection
with the Guarantee and Collateral Agreement (including, without limitation, Section 2
thereof) or any other Loan Document or any Secured Hedge Agreement to which
Mortgagor is a party, in each case whether on account of guarantee obligations,
reimbursement obligations, fees, indemnities, costs, expenses or otherwise
(including, without limitation, all Attorney Costs and disbursements of counsel
to Mortgagee or to any Secured Party that are required to be paid by Mortgagor
pursuant to the terms of this Mortgage or any other Loan Document)
(collectively, the “Obligations”);


 


MORTGAGOR
HEREBY GRANTS TO MORTGAGEE A LIEN UPON AND A SECURITY INTEREST IN, AND HEREBY
MORTGAGES AND WARRANTS, GRANTS, ASSIGNS, TRANSFERS AND SETS OVER TO MORTGAGEE,
WITH MORTGAGE COVENANTS:


 


(a)             the
Land;


 


(b)             all
right, title and interest Mortgagor now has or may hereafter acquire in and to
the Improvements or any part thereof and all the estate, right, title, claim or
demand whatsoever of Mortgagor, in possession or expectancy, in and to the Real
Estate or any part thereof;


 


(c)             all
tight, title and interest of Mortgagor in, to and under all easements, rights
of way, licenses, operating agreements, abutting strips and gores of land,
streets, ways, alleys, passages, sewer rights, waters, water courses, water and
flowage rights, development rights, air rights, mineral and soil rights,
plants, standing and fallen timber, and all estates, rights, titles, interests,
privileges, licenses, tenements, hereditaments and appurtenances belonging,
relating or appertaining to the Real Estate, and any reversions, remainders,
rents, issues, profits and revenue thereof and all land lying in the bed of any
street, road or avenue, in front of or adjoining the Real Estate to the center
line thereof;


 


(d)             all
of the fixtures, chattels, business machines, machinery, apparatus, equipment,
furnishings, fittings, appliances and articles of personal property of every
kind and nature whatsoever, and all appurtenances and additions thereto and
substitutions or replacements thereof (together with, in each case,
attachments, components, parts and accessories) currently owned or subsequently
acquired by Mortgagor and now or subsequently attached to, or contained in or
used or usable in any way in connection with


 


3

















 


any
operation or letting of the Real Estate, including but without limiting the
generality of the foregoing, all screens, awnings, shades, blinds, curtains,
draperies, artwork, carpets, rugs, storm doors and windows, furniture and
furnishings, heating, electrical, and mechanical equipment, lighting,
switchboards, plumbing, ventilating, air conditioning and air-cooling
apparatus, refrigerating, and incinerating equipment, escalators, elevators,
loading and unloading equipment and systems, stoves, ranges, laundry equipment,
cleaning systems (including window cleaning apparatus), telephones,
communication systems (including satellite dishes and antennae), televisions,
computers, sprinkler systems and other fire prevention and extinguishing
apparatus and materials, security systems, motors, engines, machinery, pipes,
pumps, tanks, conduits, appliances, fittings and fixtures of every kind and
description (all of the foregoing in this paragraph (e) being referred to
as the “Equipment”);


 


(e)           all
right, title and interest of Mortgagor in and to all substitutes and
replacements of, and all additions and improvements to, the Real Estate and the
Equipment, subsequently acquired by or released to Mortgagor or constructed,
assembled or placed by Mortgagor on the Real Estate, immediately upon such
acquisition, release, construction, assembling or placement, including, without
limitation, any and all building materials whether stored at the Real Estate or
offsite, and, in each such case, without any further deed, conveyance,
assignment or other act by Mortgagor;


 


(f)            all
right, title and interest of Mortgagor in, to and under all leases, subleases,
underlettings, concession agreements, management agreements, licenses and other
agreements relating to the use or occupancy of the Real Estate or the Equipment
or any part thereof, now existing or subsequently entered into by Mortgagor and
whether written or oral and all guarantees of any of the foregoing
(collectively, as any of the foregoing may be amended, restated, extended,
renewed or modified from time to time, the “Leases”), and all rights of
Mortgagor in respect of cash and securities deposited thereunder and the right
to receive and collect the revenues, income, rents, issues and profits thereof,
together with all other rents, royalties, issues, profits, revenue, income and
other benefits arising from the use and enjoyment of the Mortgaged Property (as
defined below) (collectively, the “Rents”);


 


(g)           all
unearned premiums under insurance policies now or subsequently obtained by
Mortgagor relating to the Real Estate or Equipment and Mortgagor’s interest in
and to all proceeds of any such insurance policies (including title insurance
policies) including the right to collect and receive such proceeds, subject to
the provisions relating to insurance generally set forth below; and all awards
and other compensation, including the interest payable thereon and the right to
collect and receive the same, made to the present or any subsequent owner of
the Real Estate or Equipment for the taking by eminent domain, condemnation or otherwise,
of all or any part of the Real Estate or any easement or other right therein;


 


(h)           to
the extent not prohibited under the applicable contract, consent, license or
other item unless the appropriate consent has been obtained, all right, title
and interest of Mortgagor in and to (i) all contracts from time to time
executed by Mortgagor or any manager or agent on its behalf relating to the
ownership, construction, maintenance, repair, operation, occupancy, sale or
financing of the Real Estate or Equipment or any


 


4

















 


part thereof and all agreements and options relating
to the purchase or lease of any portion of the Real Estate or any property
which is adjacent or peripheral to the Real Estate, together with the right to
exercise such options and all leases of Equipment, (ii) all consents,
licenses, building permits, certificates of occupancy and other governmental
approvals relating to construction, completion, occupancy, use or operation of
the Real Estate or any part thereof, and (iii) all drawings, plans,
specifications and similar or related items relating to the Real Estate; and


 


(i)            all
proceeds, both cash and noncash, of the foregoing;


 


(All of the foregoing property and rights and
interests now owned or held or subsequently acquired by Mortgagor and described
in the foregoing clauses (a) through (c) are collectively referred to
as the “Premises”, and those described in the foregoing clauses (a) through
(i) are collectively referred to as the “Mortgaged Property”).


 


TO HAVE AND TO HOLD the Mortgaged Property and the
rights and privileges hereby mortgaged unto Mortgagee, its successors and
assigns for the uses and purposes set forth, until the Obligations are fully
paid and performed, provided, however, that the condition of this Mortgage is
such that if the Obligations (other than contingent indemnification and
contingent expense reimbursement obligations, any Obligations in respect of
Secured Hedge Agreements, and Cash Management Obligations) are fully paid and
performed, then the estate hereby granted shall cease, terminate and become
void but shall otherwise remain in full force and effect.


 


This Mortgage covers present and future advances and
re-advances, in the aggregate amount of the obligations secured hereby, made by
the Secured Parties for the benefit of Mortgagor, and the lien of such future
advances and re-advances shall relate back to the date of this Mortgage.


 


Pursuant to Wisconsin Statutes Section 706.11,
the lien of this Mortgage with respect to any future advances, modifications,
extensions, and renewals referred to herein and made from time to time shall
have the same priority to which this Mortgage otherwise would be entitled as of
the date this Mortgage is executed and recorded without regard to the fact that
any such future advance, modification, extension, or renewal may occur after
the Mortgage is executed.


 


Terms and Conditions


 


Mortgagor further represents, warrants, covenants
and agrees with Mortgagee and the Secured Parties as follows:


 


1.                                      Defined Terms. Capitalized terms
used herein (including in the “Background” and “Granting Clauses” sections
above) and not otherwise defined herein shall have the meanings ascribed
thereto in the Credit Agreement. References herein to the “Secured Parties”
shall mean the collective reference to (i) Mortgagee, as Administrative
Agent, (ii) the other Agents, (iii) the L/C Issuers, (iv) the
Lenders, (v) the Hedge Banks, (vi) any Affiliate of a Lender, (vii) the
Supplemental Administrative Agent, and (viii) each co-agent or sub-agent
appointed by Mortgagee from time to time pursuant to Section 9.01(c) of
the Credit Agreement, to which Borrower Obligations (as defined in the Credit
Agreement) or Guarantor Obligations (as defined in the Credit Agreement), as
applicable, are owed.


 


5

















 


2.                                 Warranty of Title. Mortgagor warrants that it has good record
title in fee simple to, or a valid leasehold interest in, the Real Estate, and
good title to, or a valid leasehold interest in, the rest of the Mortgaged
Property, subject only to the matters that are set forth in Schedule B  of the title insurance policy or
policies, if any, being issued to Mortgagee to insure the lien of this Mortgage
and any other lien or encumbrance as permitted by Section 7.01 of the
Credit Agreement (collectively, the “Permitted Exceptions”). Mortgagor
shall warrant, defend and preserve such title and the lien of this Mortgage
against all claims of all persons and entities (not including the holders of
the Permitted Exceptions). Mortgagor represents and warrants that it has the
right to mortgage the Mortgaged Property.


 


3.                                 Payment of Obligations. Mortgagor shall pay and perform the
Obligations at the times and places and in the manner specified in the Loan
Documents.


 


4.                                 Requirements. Mortgagor shall comply with all covenants,
restrictions and conditions now or later of record which may be applicable to
any of the Mortgaged Property, or to the use, manner of use, occupancy,
possession, operation, maintenance, alteration, repair or reconstruction of any
of the Mortgaged Property, except where a failure to do so could not reasonably
be expected to have a material adverse effect (considered both individually and
together with other such failures) on (i) the current business, operations
or condition (financial or otherwise) of Mortgagor, (ii) the current use
of the Mortgaged Property or (iii) the value of the Mortgaged Property
(assuming its current use).


 


5.                                 Payment of Taxes and Other Impositions. (a) Prior to the date on which any
fine, penalty, interest or cost may be added thereto or imposed, Mortgagor
shall pay and discharge all taxes, charges and assessments of every kind and
nature, all charges for any easement or agreement maintained for the benefit of
any of the Real Estate, all general and special assessments, levies, permits,
inspection and license fees, all water and sewer rents and charges, vault taxes
and all other public charges even if unforeseen or extraordinary, imposed upon
or assessed against or which may become a lien on any of the Real Estate, or
arising in respect of the occupancy, use or possession thereof, together with
any penalties or interest on any of the foregoing (all of the foregoing are
collectively referred to herein as the “Impositions”), except where (i) the
validity or amount thereof is being contested in good faith by appropriate
proceedings, and (ii) Mortgagor has set aside on its books adequate
reserves with respect thereto in accordance with GAAP. Upon request by Mortgagee,
Mortgagor shall deliver to Mortgagee evidence reasonably acceptable to
Mortgagee showing the payment of any such Imposition. If by law any Imposition,
at Mortgagor’s option, may be paid in installments (whether or not interest
shall accrue on the unpaid balance of such Imposition), Mortgagor may elect to
pay such Imposition in such installments and shall be responsible for the
payment of such installments with interest, if any.


 


(b)           Nothing herein shall
affect any right or remedy of Mortgagee under this Mortgage or otherwise,
without notice or demand to Mortgagor, to pay any Imposition after the date
such Imposition shall have become delinquent, and add to the Obligations the
amount so paid, together with interest from the time of payment at the Default
Rate. Any sums paid by Mortgagee in discharge of any Impositions shall be (i) a
lien on the Premises secured hereby prior to any right or title to, interest
in, or claim upon the Premises subordinate to the lien of this Mortgage, and (ii) payable
on demand by Mortgagor to Mortgagee together with interest at the Default Rate
as set forth above.


 


6

















 


6.                                 Insurance. (a) Mortgagor
shall maintain, with financially sound and reputable companies, insurance
policies (i) insuring the Real Estate against loss by fire, explosion,
theft and such other casualties as may be reasonably satisfactory to Mortgagee,
and (ii) insuring Mortgagor, Mortgagee and the other Secured Parties
against liability for personal injury and property damage relating to such Real
Estate, such policies to be in such form and amounts and having such coverage
as may be reasonably satisfactory to Mortgagee. All such insurance shall (i) provide
that no cancellation, material reduction in amount or material change in
coverage thereof shall be effective until at least thirty (30) days or, in the
case of insurance existing as of the date hereof, at least ten (10) days
after receipt by Mortgagee of written notice thereof, (ii) name Mortgagee
as an additional insured party or loss payee, and (iii) include
deductibles consistent with past practice or consistent with industry practice
or otherwise reasonably satisfactory to Mortgagee.


 


(b)             If
any portion of the Premises is located in an area identified as a special flood
hazard area by the Federal Emergency Management Agency or other applicable
agency, Mortgagor shall maintain or cause to be maintained, flood insurance in
an amount reasonably satisfactory to Mortgagee, but in no event less than the
maximum limit of coverage available under the National Flood Insurance Act of
1968, as amended.


 


(c)             Mortgagor
promptly shall comply with and conform in all material respects to (i) all
provisions of each such insurance policy, and (ii) all requirements of the
insurers applicable to Mortgagor or to any of the Mortgaged Property or to the
use, manner of use, occupancy, possession, operation, maintenance, alteration
or repair of any of the Mortgaged Property. Mortgagor shall not use or permit
the use of the Mortgaged Property in any manner which would permit any insurer
to cancel any insurance policy or void coverage required to be maintained by
this Mortgage.


 


(d)             If
Mortgagor is in default of its obligations to insure or deliver any such
prepaid policy or policies, then Mortgagee, at its option upon five (5) days’
notice to Mortgagor, may effect such insurance from year to year at rates
substantially similar to the rate at which Mortgagor had insured the Premises,
and pay the premium or premiums therefor, and Mortgagor shall pay to Mortgagee
on demand such premium or premiums so paid by Mortgagee with interest from the
time of payment at the Default Rate.


 


(e)             If
the Mortgaged Property, or any part thereof, shall be destroyed or damaged and
the reasonably estimated cost thereof would exceed $500,000, Mortgagor shall
give prompt notice thereof to Mortgagee. All insurance proceeds paid or payable
in connection with any damage or casualty to the Real Estate shall be deemed
proceeds from a Casualty Event and applied in the manner specified in the
Credit Agreement.


 


(f)              In
the event of foreclosure of this Mortgage or other transfer of title to the
Mortgaged Property, all right, title and interest of Mortgagor in and to any
insurance policies then in force shall pass to the purchaser or grantee.


 


7.                                      Restrictions on
Liens and Encumbrances. Except for the lien of this Mortgage and the
Permitted Exceptions, Mortgagor shall not further mortgage, nor otherwise
encumber the Mortgaged Property nor create or suffer to exist any lien, charge or encumbrance on the


 


7

















 


Mortgaged Property, or any part thereof, whether
superior or subordinate to the lien of this Mortgage and whether recourse or
non-recourse.


 


8.                                      Due on Sale and
Other Transfer Restrictions. Except as expressly permitted under Section 7.05
of the Credit Agreement, Mortgagor shall not sell, transfer, convey or assign
all or any portion of, or any interest in, the Mortgaged Property.


 


9.                                      Condemnation/Eminent
Domain.
Promptly upon obtaining knowledge of the institution of any proceedings for the
condemnation of the Mortgaged Property, or any material portion thereof,
Mortgagor will notify Mortgagee of the pendency of such proceedings. All awards
and proceeds relating to such condemnation shall be deemed proceeds from a
Casualty Event and applied in the manner specified in the Credit Agreement.


 


10.                                Leases. Except as
expressly permitted under the Credit Agreement, Mortgagor shall not (a) execute
an assignment or pledge of any Lease relating to all or
any
portion of the Mortgaged Property other than in favor of Mortgagee, or (b) execute
or permit to exist any Lease of any of the Mortgaged Property.


 


11.                                Further Assurances. To further assure
Mortgagee’s rights under this Mortgage, Mortgagor agrees promptly upon demand
of Mortgagee to do any act or execute any additional documents (including, but
not limited to, security agreements on any personalty included or to be
included in the Mortgaged Property and a separate assignment of each Lease in recordable
form) as may be reasonably required by Mortgagee to confirm the lien of this
Mortgage and all other rights or benefits conferred on Mortgagee by this
Mortgage.


 


12.                                Mortgagee’s Right
to Perform.
If Mortgagor fails to perform any of the covenants or agreements of Mortgagor
in the Loan Documents, within the applicable grace period, if any, provided for
in the Credit Agreement, Mortgagee, without waiving or releasing Mortgagor from
any obligation or default under this Mortgage, may, at any time upon five (5) days’
notice to Mortgagor (but shall be under no obligation to) pay or perform the
same, and the amount or cost thereof, with interest at the Default Rate, shall
immediately be due from Mortgagor to Mortgagee and the same shall be secured by
this Mortgage and shall be a lien on the Mortgaged Property prior to any right,
title to, interest in, or claim upon the Mortgaged Property attaching
subsequent to the lien of this Mortgage. No payment or advance of money by
Mortgagee under this Section shall be deemed or construed to cure
Mortgagor’s default or waive any right or remedy of Mortgagee.


 


13.                                Remedies. (a) Upon the
occurrence and during the continuance of any Event of Default, Mortgagee may
immediately take such action, without notice or demand, as it deems advisable
to protect and enforce its rights against Mortgagor and in and to the Mortgaged
Property, including, but not limited to, the following actions, each of which
may be pursued concurrently or otherwise, at such time and in such manner as Mortgagee
may determine, in its sole discretion, without impairing or otherwise affecting
the other rights and remedies of Mortgagee:


 


(i)            Mortgagee may, to the extent
permitted by applicable law, (A) institute and maintain an action of
mortgage foreclosure against all or any part of the Mortgaged Property, (B) institute
and maintain an action on the Credit


 


8

















 


Agreement, the Guarantee and Collateral Agreement or
any other Loan Document, (C) sell all or part of the Mortgaged Property
(Mortgagor expressly granting to Mortgagee the power of sale), or (D) take
such other action at law or in equity for the enforcement of this Mortgage or
any of the Loan Documents as the law may allow. Mortgagee may proceed in any such
action to final judgment and execution thereon for all sums due hereunder,
together with interest thereon at the Default Rate and all costs of suit,
including, without limitation, reasonable attorneys’ fees and disbursements.
Interest at the Default Rate shall be due on any judgment obtained by Mortgagee
from the date of judgment until actual payment is made of the full amount of
the judgment; and


 


(ii)           Mortgagee may personally, or by its
agents, attorneys and employees and without regard to the adequacy or
inadequacy of the Mortgaged Property or any other collateral as security for
the Obligations enter into and upon the Mortgaged Property and each and every
part thereof and exclude Mortgagor and its agents and employees therefrom
without liability for trespass, damage or otherwise (Mortgagor hereby agreeing
to surrender possession of the Mortgaged Property to Mortgagee upon demand at
any such time) and use, operate, manage, maintain and control the Mortgaged
Property and every part thereof. Following such entry and taking of possession,
Mortgagee shall be entitled, without limitation, (x) to lease all or any
part or parts of the Mortgaged Property for such periods of time and upon such
conditions as Mortgagee may, in its discretion, deem proper, (y) to enforce,
cancel or modify any Lease as Mortgagee may in its discretion deem proper, and (z) generally
to execute, do and perform any other act, deed, matter or thing concerning the
Mortgaged Property as Mortgagee shall deem appropriate as fully as Mortgagor
might do.


 


(b)             In
case of a foreclosure sale, the Real Estate may be sold, at Mortgagee’s
election, in one parcel or in more than one parcel and Mortgagee is
specifically empowered (without being required to do so, and in its sole and
absolute discretion) to cause successive sales of portions of the Mortgaged
Property to be held.


 


(c)             In
the event of any breach of any of the covenants, agreements, terms or
conditions contained in this Mortgage, Mortgagee shall be entitled to enjoin
such breach and obtain specific performance of any covenant, agreement, term or
condition and Mortgagee shall have the right to invoke any equitable right or
remedy as though other remedies were not provided for in this Mortgage.


 


(d)             It
is agreed that if an Event of Default shall occur and be continuing, any and
all proceeds of the Mortgaged Property received by Mortgagee shall be held by
Mortgagee for the benefit of the Secured Parties as collateral security for the
Obligations (whether matured or unmatured), and shall be applied in payment of
the Obligations in the manner and in the order set forth in Section 6.5 of
the Guarantee and Collateral Agreement.


 


14.           Right
of Mortgagee to Credit Sale. Upon the occurrence of any sale made under this
Mortgage, whether made under the power of sale or by virtue of judicial
proceedings or of a judgment or decree of foreclosure and sale, Mortgagee may
bid for and acquire the Mortgaged Property or any part thereof. In lieu of
paying cash therefor, Mortgagee may make settlement for


 


9
















 


the
purchase price by crediting upon the Obligations or other sums secured by this
Mortgage, the net sales price after deducting therefrom the expenses of sale
and the cost of the action and any other sums which Mortgagee is authorized to
deduct under this Mortgage. In such event, this Mortgage, the Credit Agreement,
the Guarantee and Collateral Agreement and documents evidencing expenditures
secured hereby may be presented to the person or persons conducting the sale in
order that the amount so used or applied may be credited upon the Obligations
as having been paid.


 


15.           Appointment of
Receiver. If an Event of Default shall have occurred and be continuing,
Mortgagee as a matter of right and without notice to Mortgagor, unless
otherwise required by applicable law, and without regard to the adequacy or
inadequacy of the Mortgaged Property or any other collateral or the interest of
Mortgagor therein as security for the Obligations, shall have the right to
apply to any court having jurisdiction to appoint a receiver or receivers or
other manager of the Mortgaged Property, without requiring the posting of a
surety bond, and without reference to the adequacy or inadequacy of the value
of the Mortgaged Property or the solvency or insolvency of Mortgagor or any other
party obligated for payment of all or any part of the Obligations, and whether
or not waste has occurred with respect to the Mortgaged Property, and Mortgagor
hereby irrevocably consents to such appointment and waives notice of any
application therefor (except as may be required by law). Any such receiver or
receivers or manager shall have all the usual powers and duties of receivers in
like or similar cases and all the powers and duties of Mortgagee in case of
entry as provided in this Mortgage, including, without limitation and to the
extent permitted by law, the right to enter into leases of all or any part of
the Mortgaged Property, and shall continue as such and exercise all such powers
until the date of confirmation of sale of the Mortgaged Property unless such
receivership is sooner terminated.


 


16.           Extension,
Release, etc. (a) Without affecting the lien or charge of this
Mortgage upon any portion of the Mortgaged Property not then or theretofore
released as security for the full amount of the Obligations, Mortgagee may,
from time to time and without notice, agree to (i) release any person
liable for the indebtedness borrowed or guaranteed under the Loan Documents, (ii) extend
the maturity or alter any of the terms of the indebtedness borrowed or guaranteed
under the Loan Documents or any other guaranty thereof, (iii) grant other
indulgences, (iv) release or reconvey, or cause to be released or
reconveyed at any time at Mortgagee’s option any parcel, portion or all of the Mortgaged Property, (v) take
or release any other or additional security for any obligation herein
mentioned, or (vi) make compositions or other arrangements with debtors in
relation thereto.


 


(b)           No recovery of any
judgment by Mortgagee and no levy of an execution under any judgment upon the
Mortgaged Property or upon any other property of Mortgagor shall affect the
lien of this Mortgage or any liens, rights, powers or remedies of Mortgagee
hereunder, and such liens, rights, powers and remedies shall continue
unimpaired.


 


(c)           If Mortgagee shall
have the right to foreclose this Mortgage or to direct a power of sale,
Mortgagor authorizes Mortgagee at its option to foreclose the lien of this
Mortgage (or direct the sale of the Mortgaged Property, as the case may be)
subject to the rights of any tenants of the Mortgaged Property. The failure to
make any such tenants parties defendant to any such foreclosure proceeding and
to foreclose their rights, or to provide notice to such tenants as required in
any statutory procedure governing a sale of the Mortgaged Property,


 


10

















 


or
to terminate such tenant’s rights in such sale will not be asserted by
Mortgagor as a defense to any proceeding instituted by Mortgagee to collect the
Obligations or to foreclose the lien of this Mortgage.


 


(d)           Unless expressly
provided otherwise, in the event that ownership of this Mortgage and title to
the Mortgaged Property or any estate therein shall become vested in the same
person or entity, this Mortgage shall not merge in such title but shall
continue as a valid lien on the Mortgaged Property for the amount secured
hereby.


 


17.           Security
Agreement under Uniform Commercial Code; Fixture Filing. (a) It is the
intention of the parties hereto that this Mortgage shall constitute a security
agreement within the meaning of the Uniform Commercial Code (the “Code”)
of the State in which the Mortgaged Property is located. If an Event of Default
shall occur and be continuing, then in addition to having any other right or
remedy available at law or in equity, Mortgagee shall have the option of either
(i) proceeding under the Code and exercising such rights and remedies as
may be provided to a secured party by the Code with respect to all or any
portion of the Mortgaged Property which is personal property (including,
without limitation, taking possession of and selling such property) or (ii) treating
such property as real property and proceeding with respect to both the real and
personal property constituting the Mortgaged Property in accordance with
Mortgagee’s rights, powers and remedies with respect to the real property (in
which event the default provisions of the Code shall not apply). If Mortgagee
shall elect to proceed under the Code, then ten (10) days’ notice of sale
of the personal property shall be deemed reasonable notice and the reasonable
expenses of retaking, holding, preparing for sale, selling and the like
incurred by Mortgagee shall include, but not be limited to, attorneys’ fees and
legal expenses. At Mortgagee’s request, Mortgagor shall assemble the personal
property and make it available to Mortgagee at a place designated by Mortgagee
which is reasonably convenient to both parties.


 


(b)           Certain portions of
the Mortgaged Property are or will become “fixtures” (as that term is defined
in the Code) on the Land, and this Mortgage, upon being filed for record in the
real estate records of the county wherein such fixtures are situated, shall
operate also as a financing statement filed as a fixture filing in accordance with
the applicable provisions of said Code upon such portions of the Mortgaged
Property that are or become fixtures. The real property to which the fixtures
relate is described in Schedule A hereto. The record owner of the real
property described in Schedule A hereto, if any, is Mortgagor. The name,
type of organization and jurisdiction of organization of the debtor for
purposes of this financing statement are the name, type of organization and
jurisdiction of organization of Mortgagor set forth in the first paragraph of
this Mortgage, and the name of the secured party for purposes of this financing
statement is the name of Mortgagee set forth in the first paragraph of this
Mortgage. The mailing address of Mortgagor/debtor is the address of Mortgagor
set forth in the first paragraph of this Mortgage. The mailing address of
Mortgagee/secured party from which information concerning the security interest
hereunder may be obtained is the address of Mortgagee set forth in the first
paragraph of this Mortgage. Mortgagor’s organizational identification number is
146599.


 


18.           Assignment of
Rents. (a) Mortgagor hereby assigns to Mortgagee the Rents as further
security for the payment of and performance of the Obligations, and Mortgagor
grants to Mortgagee the right to enter the Mortgaged Property for the purpose
of collecting the same and to let the Mortgaged Property or any part thereof,
and to apply the Rents on account of the


 


11

















 


Obligations. The foregoing assignment and grant is
present and absolute and shall continue in effect until the Obligations are
fully paid and performed, but Mortgagee hereby waives the right to enter the
Mortgaged Property for the purpose of collecting the Rents and Mortgagor shall
be entitled to collect, receive, use and retain the Rents until the occurrence
of an Event of Default; such right of Mortgagor to collect, receive, use and
retain the Rents may be revoked by Mortgagee upon the occurrence and during the
continuance of any Event of Default by giving not less than five (5) days’
written notice of such revocation to Mortgagor; in the event such notice is
given, Mortgagor shall pay over to Mortgagee, or to any receiver appointed to
collect the Rents, any lease security deposits, and shall pay monthly in
advance to Mortgagee, or to any such receiver, the fair and reasonable rental
value as determined by Mortgagee for
the use and occupancy of such part of the
Mortgaged Property as may be in the possession of Mortgagor or any affiliate of
Mortgagor, and upon default in any such payment Mortgagor and any such
affiliate will vacate and surrender the possession of the Mortgaged Property to
Mortgagee or to such receiver, and in default thereof may be evicted by summary
proceedings or otherwise. Mortgagor shall not accept prepayments of
installments of Rent to become due for a period of more than one month in
advance (except for security deposits and estimated payments of percentage
rent, if any).


 


(b)           Mortgagor
has not affirmatively done any act which would prevent Mortgagee from, or limit
Mortgagee in, acting under any of the provisions of the foregoing assignment.


 


(c)           Except
for any matter disclosed in the Credit Agreement, no action has been brought
or, so far as is known to Mortgagor, is threatened, which would interfere in any way with the right of
Mortgagor to execute the foregoing assignment and perform all of Mortgagor’s
obligations contained in this Section and in the Leases.


 


(d)           The
Assignment of Rents set forth therein shall constitute an assignment of rents
as set forth in Wisconsin Statute Section 708.11, and as provided therein,
will create a security interest in the Rents that will be perfected upon the
recording of this Mortgage.


 


19.           Additional
Rights. The holder of any subordinate lien or
subordinate deed of trust on the Mortgaged Property shall have no right to
terminate any Lease whether or not such Lease is subordinate to this Mortgage
nor shall Mortgagor consent to any holder of any subordinate lien or
subordinate deed of trust joining any tenant under any Lease in any action to
foreclose the lien or modify, interfere with, disturb or terminate the rights
of any tenant under any Lease. By recordation of this Mortgage all subordinate
lienholders and the mortgagees and beneficiaries under subordinate mortgages
are subject to and notified of this provision, and any action taken by any such
lienholder or beneficiary contrary to this provision shall be null and void.
Any such application shall not be construed to cure or waive any Default or
Event of Default or invalidate any act taken by Mortgagee on account of such
Default or Event of Default.


 


20.           Notices. All notices, requests and demands to or upon Mortgagee or Mortgagor
hereunder shall be effected in the manner provided for in Section 10.02 of
the Credit Agreement; provided that any such notice, request or demand to or
upon Mortgagor shall be addressed to Mortgagor at its address set forth above.


 


12

















 


21.           No Oral
Modification. This Mortgage may not be amended, supplemented or otherwise
modified except in accordance with the provisions of Section 10.01 of the
Credit Agreement. Any agreement made by Mortgagor and Mortgagee after the date
of this Mortgage relating to this Mortgage shall be superior to the rights of
the holder of any intervening or subordinate lien or encumbrance.


 


22.           Partial
Invalidity. In the event any one or more of the provisions contained in
this Mortgage shall for any reason be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision hereof, but each shall be construed as if
such invalid, illegal or unenforceable provision had never been included.
Notwithstanding to the contrary anything contained in this Mortgage or in any
provisions of any Loan Document, the obligations of Mortgagor and of any other
obligor under any Loan Document shall be subject to the limitation that
Mortgagee shall not charge, take or receive, nor shall Mortgagor or any other
obligor be obligated to pay to Mortgagee, any amounts constituting interest in
excess of the maximum rate permitted by law to be charged by Mortgagee.


 


23.           Mortgagor’s
Waiver of Rights. (a) Mortgagor hereby voluntarily and knowingly
releases and waives any and all rights to retain possession of the Mortgaged
Property after the occurrence of an Event of Default and any and all rights of
redemption from sale under any order or decree of foreclosure (whether full or
partial), pursuant to rights, if any, therein granted, as allowed under any
applicable law, on its own behalf, on behalf of all persons claiming or having
an interest (direct or indirectly) by, through or under each constituent of
Mortgagor and on behalf of each and every person acquiring any interest in the
Mortgaged Property subsequent to the date hereof, it being the intent hereof
that any and all such rights or redemption of each constituent of Mortgagor and
all such other persons are and shall be deemed to be hereby waived to the fullest
extent permitted by applicable law or replacement statute. Each constituent of
Mortgagor shall not invoke or utilize any such law or laws or otherwise hinder,
delay, or impede the execution of any right, power, or remedy herein or
otherwise granted or delegated to Mortgagee, but shall permit the execution of
every such right, power, and remedy as though no such law or laws had been made
or enacted.


 


(b)           To the fullest
extent permitted by law, Mortgagor waives the benefit of all laws now existing
or that may subsequently be enacted providing for (i) any appraisement
before sale of any portion of the Mortgaged Property, (ii) any extension
of the time for the enforcement of the collection of the Obligations or the
creation or extension of a period of redemption from any sale made in
collecting such debt and (iii) exemption of the Mortgaged Property from
attachment, levy or sale under execution or exemption from civil process. To
the full extent Mortgagor may do so, Mortgagor agrees that Mortgagor will not
at any time insist upon, plead, claim or take the benefit or advantage of any
law now or hereafter in force providing for any appraisement, valuation, stay,
exemption, extension or redemption, or requiring foreclosure of this Mortgage
before exercising any other remedy granted hereunder and Mortgagor, for
Mortgagor and its successors and assigns, and for any and all persons ever
claiming any interest in the Mortgaged Property, to the extent permitted by
law, hereby waives and releases all rights of redemption, valuation,
appraisement, stay of execution, notice of election to mature (except as
expressly provided in the Credit Agreement) or declare due the whole of the
secured indebtedness and marshalling in the event of exercise by Mortgagee of
the foreclosure rights, power of sale, or other rights hereby created.


 


13

















 


24.           Remedies
Not Exclusive. Mortgagee shall be entitled to enforce payment and
performance of the Obligations and to exercise all rights and powers under this
Mortgage or under any of the other Loan Documents or other agreement or any
laws now or hereafter in force,
notwithstanding some or all of the Obligations may now or hereafter be
otherwise secured, whether by deed of trust, mortgage, security agreement,
pledge, lien, assignment or otherwise. Neither the acceptance of this Mortgage
nor its enforcement, shall prejudice or in any manner affect Mortgagee’s rights
to realize upon or enforce any other security now or hereafter held by
Mortgagee, it being agreed that Mortgagee shall be entitled to enforce this
Mortgage and any other security now or hereafter held by Mortgagee in such
order and manner as Mortgagee may determine in its absolute discretion. No
remedy herein conferred upon or reserved to Mortgagee is intended to be
exclusive of any other remedy herein or by law provided or permitted, but each
shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by statute. Every
power or remedy given by any of the Loan Documents to Mortgagee or to which
either may otherwise be entitled, may be exercised, concurrently or
independently, from time to time and as often as may be deemed expedient by
Mortgagee, as the case may be. In no event shall Mortgagee, in the exercise of
the remedies provided in this Mortgage (including, without limitation, in
connection with the assignment of Rents to Mortgagee, or the appointment of a
receiver and the entry of such receiver on to all or any part of the Mortgaged
Property), be deemed a “mortgagee in possession,” and Mortgagee shall not in
any way be made liable for any act, either of commission or omission, in
connection with the exercise of such remedies.


 


25.           Multiple
Security. If (a) the Premises shall consist of one or more parcels,
whether or not contiguous and whether or not located in the same county, or
(b) in addition to this Mortgage, Mortgagee shall now or hereafter hold or
be the beneficiary of one or more additional mortgages, liens, deeds of trust
or other security (directly or indirectly) for the Obligations upon other
property in the State in which the Premises are located (whether or not such
property is owned by Mortgagor or by others) or (c) both the circumstances
described in clauses (a) and (b) shall be true, then to the fullest
extent permitted by law, Mortgagee may, at its election, commence or
consolidate in a single foreclosure action all foreclosure proceedings against
all such collateral securing the Obligations (including the Mortgaged
Property), which action may be brought or consolidated in the courts of, or
sale conducted in, any county in which any of such collateral is located.
Mortgagor acknowledges that the right to maintain a consolidated foreclosure
action is a specific inducement to Mortgagee to extend the indebtedness
borrowed pursuant to or guaranteed by the Loan Documents, and Mortgagor
expressly and irrevocably waives any objections to the commencement or
consolidation of the foreclosure proceedings in a single action and any
objections to the laying of venue or based on the grounds of forum non
conveniens which it may now or hereafter have. Mortgagor further agrees that if
Mortgagee shall be prosecuting one or more foreclosure or other proceedings
against a portion of the Mortgaged Property or against any collateral other
than the Mortgaged Property, which collateral directly or indirectly secures
the Obligations, or if Mortgagee shall have obtained a judgment of foreclosure
and sale or similar judgment against such collateral, then, whether or not such
proceedings are being maintained or judgments were obtained in or outside the
State in which the Premises are located, Mortgagee may commence or continue any
foreclosure proceedings and exercise its other remedies granted in this
Mortgage against all or any part of the Mortgaged Property and Mortgagor waives
any objections to the commencement or continuation of a foreclosure of this
Mortgage or exercise of any other remedies hereunder based on such other proceedings
or judgments, and waives any right to seek to dismiss, stay, remove, transfer


 


14

















 


or consolidate either any action under this Mortgage
or such other proceedings on such basis. Neither the commencement nor
continuation of proceedings to foreclose this Mortgage, nor the exercise of any
other rights hereunder nor the recovery of any judgment by Mortgagee in any
such proceedings or the occurrence of any sale in any such proceedings shall
prejudice, limit or preclude Mortgagee’s right to commence or continue one or
more foreclosure or other proceedings or obtain a judgment against any other
collateral (either in or outside the State in which the Premises are located)
which directly or indirectly secures the Obligations, and Mortgagor expressly
waives any objections to the commencement of, continuation of, or entry of a
judgment in such other sales or proceedings or exercise of any remedies in such
sales or proceedings based upon any action or judgment connected to this
Mortgage, and Mortgagor also waives any right to seek to dismiss, stay, remove,
transfer or consolidate either such other sales or proceedings or any sale or
action under this Mortgage on such basis. It is expressly understood and agreed
that to the fullest extent permitted by law, Mortgagee may, at its election,
cause the sale of all collateral which is the subject of a single foreclosure
action at either a single sale or at multiple sales conducted simultaneously
and take such other measures as are appropriate in order to effect the
agreement of the parties to dispose of and administer all collateral securing
the Obligations (directly or indirectly) in the most economical and least
time-consuming manner.


 


26.           Successors
and Assigns. All covenants of
Mortgagor contained in this Mortgage are imposed solely and exclusively for the
benefit of Mortgagee, and its successors and assigns, and no other person or
entity shall have standing to require compliance with such covenants or be
deemed, under any circumstances, to be a beneficiary of such covenants, any or
all of which may be freely waived in whole or in part by Mortgagee at any time
if in the sole discretion of either of them such a waiver is deemed advisable.
All such covenants of Mortgagor shall run with the land and bind Mortgagor, the
successors and assigns of Mortgagor (and each of them) and all subsequent
owners, encumbrancers and tenants of the Mortgaged Property, and shall inure to
the benefit of Mortgagee and its successors and assigns. The word “Mortgagor”
shall be construed as if it read “Mortgagors” whenever the sense of this
Mortgage so requires, and if there shall be more than one Mortgagor, the
obligations of Mortgagors shall be joint and several.


 


27.           No
Waivers, etc. Any failure by Mortgagee
to insist upon the strict performance by Mortgagor of any of the terms and
provisions of this Mortgage shall not be deemed to be a waiver of any of the
terms and provisions hereof, and Mortgagee, notwithstanding any such failure,
shall have the right thereafter to insist upon the strict
performance by Mortgagor of any and all of the terms and provisions of this
Mortgage to be performed by Mortgagor. Mortgagee may release, regardless of
consideration and without the necessity for any notice to or consent by the
holder of any subordinate lien on the Mortgaged Property, any part of the
security held for the obligations secured by this Mortgage without, as to the
remainder of the security, in any way impairing or affecting the lien of this
Mortgage or the priority of such lien over any subordinate lien or deed of
trust.


 


28.           Governing
Law, etc. This Mortgage shall be
governed by and construed and interpreted in accordance with the laws of the
State in which the Mortgaged Property is located, except that Mortgagor
expressly acknowledges that by their respective terms the Credit Agreement and
the Guarantee and Collateral Agreement shall be governed and construed in
accordance with the laws of the State of New York, and for purposes of
consistency, Mortgagor agrees that in any in personam proceeding related to
this Mortgage the rights of the parties to this


 


15

















 


Mortgage
shall also be governed by and construed in accordance with the laws of the
State of New York governing contracts made and to be performed in that State.


 


Anything
elsewhere herein contained to the contrary notwithstanding, in the event that
any provision in this Mortgage shall be inconsistent with any provision of
Wisconsin Statutes Chapter 846 (the “Act”), the provisions of the Act
shall take precedence over the provisions of this Mortgage, but shall not
invalidate or render unenforceable any other provision of this Mortgage that
can be construed in a manner consistent with the Act.


 


29.           Certain Definitions.
Unless the context clearly indicates a contrary intent or unless otherwise
specifically provided herein, words used in this Mortgage shall be used
interchangeably in singular or plural form and the word “Mortgagor” shall mean
“each Mortgagor or any subsequent owner or owners of the Mortgaged Property or
any part thereof or interest therein,” the word “Mortgagee” shall mean
“Mortgagee or any successor agent for the Lenders,” the word “Person” shall
include any individual, corporation, partnership, limited liability company,
trust, unincorporated association, government, governmental authority, or other
entity, and the words “Mortgaged Property” shall include any portion of the
Mortgaged Property or interest therein. Whenever the context may require, any
pronouns used herein shall include the corresponding masculine, feminine or
neuter forms, and the singular form of nouns and pronouns shall include the
plural and vice versa. The captions in this Mortgage are for convenience or
reference only and in no way limit or amplify the provisions hereof.


 


30.           Duty of Mortgagee;
Authority of Mortgagee. (a) Mortgagee’s sole duty with respect to the
custody, safekeeping and physical preservation of the Mortgaged Property which
is in its possession, or otherwise, shall be to deal with it in the same manner
as Mortgagee deals with similar property for its own account. Neither
Mortgagee, any Secured Party nor any of their respective officers, directors,
employees or agents shall be liable for failure to demand, collect or realize
upon any of the Mortgaged Property or for any delay in doing so or shall be
under any obligation to sell or otherwise dispose of any Mortgaged Property
upon the request of Mortgagor or any other Person or to take any other action
whatsoever with regard to the Mortgaged Property or any part thereof. The
powers conferred on Mortgagee and the Secured Parties hereunder are solely to
protect Mortgagee’s and the Secured Parties’ interests in the Mortgaged
Property and shall not impose any duty upon Mortgagee or any Secured Party to
exercise any such powers. Mortgagee and the Secured Parties shall be
accountable only for amounts that they actually receive as a result of the
exercise of such powers, and neither they nor any of their officers, directors,
employees or agents shall be responsible to Mortgagor for any act or failure to
act hereunder, except for their own gross negligence or willful misconduct.


 


(b)           Mortgagor
acknowledges that the rights and responsibilities of Mortgagee under this
Mortgage with respect to any action taken by Mortgagee or the exercise or
non-exercise by Mortgagee of any option, voting right, request, judgment or
other right or remedy provided for herein or resulting or arising out of this
Mortgage shall, as between Mortgagee and the Secured Parties, be governed by
the Credit Agreement and by such other agreements with respect thereto as may
exist from time to time among them, but, as between Mortgagee and Mortgagor,
Mortgagee shall be conclusively presumed to be acting as agent for the Secured
Parties with full and valid authority so to act or refrain from acting, and
Mortgagor shall be under no obligation, or entitlement, to make any inquiry
respecting such authority.


 


16

















 


31.           Last
Dollars Secured; Priority. To the extent that this Mortgage secures only a portion
of the indebtedness owing or which may become owing by Mortgagor to the Secured
Parties, the parties agree that any payments or repayments of such indebtedness
shall be and be deemed to be applied first to the portion of the indebtedness
that is not secured hereby, it being the parties’ intent that the portion of
the indebtedness last remaining unpaid shall be secured hereby. If at any time
this Mortgage shall secure less than all of the principal amount of the
Obligations, it is expressly agreed that any repayments of the principal amount
of the Obligations shall not reduce the amount of the lien of this Mortgage
until the lien amount shall equal the principal amount of the Obligations
outstanding.


 


32.           Enforcement Expenses; Indemnification.
(a) Mortgagor agrees to pay, or
reimburse each Secured Party and Mortgagee for, all its reasonable
out-of-pocket costs and expenses incurred in collecting against Mortgagor or
otherwise enforcing or preserving any rights under this Mortgage and the other
Loan Documents to which Mortgagor is a party, including, without limitation,
the reasonable fees and disbursements of counsel to each Secured Party and of
counsel to Mortgagee.


 


(b)           Mortgagor
agrees to pay, and to save Mortgagee and the Secured Parties harmless from, any
and all liabilities with respect to, or resulting from any delay in paying, any
and all stamp, excise, sales or other taxes which may be payable or determined
to be payable with respect to any of the Mortgaged Property or in connection
with any of the transactions contemplated by this Mortgage.


 


(c)           Mortgagor
agrees to pay, and to save Mortgagee and the Secured Parties harmless from, any
and all liabilities, obligations, losses, damages, penalties, claims, demands,
actions, judgments, and suits and related reasonable out-of-pocket expenses
(including Attorney Costs) of any kind or nature whatsoever with respect to the
execution, delivery, enforcement, performance and administration of this
Mortgage to the extent the Borrowers would be required to do so pursuant to
Section 10.05 of the Credit Agreement.


 


(d)           The
agreements in this Section shall survive repayment of
the Obligations and all other amounts payable under the Credit Agreement and
the other Loan Documents.


 


33.           Release.
If any of the Mortgaged Property shall be sold, transferred or otherwise disposed
of by any Mortgagor in a transaction permitted by the Credit Agreement and the
Net Cash Proceeds are applied in accordance with the terms of the Credit
Agreement, then Mortgagee, at the request and sole expense of such Mortgagor,
shall execute and deliver to such Mortgagor all releases or other documents
reasonably necessary or desirable for the release of the Liens created hereby
on such Mortgaged Property. Mortgagor shall deliver to Mortgagee, at least five
(5) Business Days prior to the
date of the proposed release, a written request for release identifying the sale or other disposition in reasonable detail, including
the price thereof and any expenses in connection therewith, together with a
certification by Mortgagor stating that such transaction is in compliance with,
and permitted by, the Credit Agreement and the other Loan Documents.


 


34.           Shortened
Redemption Election. Mortgagor agrees to the provisions of Section 846.103
of the Wisconsin Statutes, or any successor provision, permitting Mortgagee, at
its


 


17

















 


option
upon waiving the right to judgment for deficiency, to hold a foreclosure sale
of real estate three (3) months after a foreclosure judgment is entered.


 


35.           Receivership.
Any receiver appointed under this Mortgage shall have all of the usual powers
and duties of receivers pursuant to Wisconsin common and statutory law,
including, but not limited to, Wisconsin Statutes Section 813.16, et al.,
as amended, modified and/or replaced from time to time.


 


36.           Revolving Loans.
Notwithstanding anything contained in this Mortgage or the other Loan Documents
to the contrary, this Mortgage shall secure: (i) a maximum principal
amount of $2,110,000,000, exclusive of any items described in (ii) below,
including any additional advances made from time to time after the date hereof
pursuant to the Loan Documents whether made as part of the secured indebtedness
secured hereby, made at the option of Mortgagee and/or the Lenders, made after
a reduction to a zero (0) or other balance, or made otherwise, and (ii) all
other amounts payable by Mortgagor, or advanced by Mortgagee or the Lenders for
the account, or on behalf, of Borrowers, pursuant to the Loan Documents,
including amounts advanced with respect to the Property for the payment of
taxes, assessments, insurance premiums and other costs and impositions incurred
for the protection of the Property to the same extent as if the future
obligations and advances were made on the date of execution of the Mortgage.


 


18

















 


This
Mortgage has been duly executed by Mortgagor as of the date first above written
and is intended to be effective as of such date.


 


 


	
   

  	
  REIMAN
  MEDIA GROUP, INC.,

  
	
   

  	
  a
  Delaware corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  



 


[SIGNATURE PAGE TO WISCONSIN MORTGAGE]


 

















 


STATE
OF  New York                                                 )


 


) ss


 


Westchester COUNTY             )


 


On
this             day
of March, 2007, before me a Notary Public in and for the State of New York, personally
appeared to me personally known, who being by me first duly sworn, did say that
he/she is the Vice President & Treasurer of Reiman Media Group, Inc.
and as said Vice President & Treasurer acknowledged said instrument to be
the free act and deed of Reiman Media Group, Inc.


 


 


	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Notary
  Public, State of

  	
                                                       

  
	
   

  	
  My
  Commission expires

  	
                                                    

  
				



 


[SIGNATURE PAGE TO WISCONSIN MORTGAGE]


 
















 


TITLE AFFIDAVIT, AFFIDAVIT OF NO CHANGES AND GAP INDEMNITY


 


 


STATE
OF                                 
,  )


                                                        )          ss.:


COUNTY
OF                                 )


 


The undersigned,                          ,
in his/her capacity as                ,
of Reiman Media Group, Inc., f/k/a Reader’s Digest Media Group, Inc.,
a Delaware corporation (“Reiman”), intending that Reiman (and not the
undersigned individually) shall be bound hereby, being duly sworn, deposes and
says:


 


(1)   Reiman is the record owner of the real property known as and by
the street address 5400 South 60th Street, Greendale, WI (the “Property”) which
is more particularly identified in the title commitment bearing commitment Case
Number WA261291, Other Company File Number NCS 120162 (the “Title Commitment”)
issued by LandAmerica Lawyers Title Insurance Corporation (the “Title
Company”). The undersigned is familiar with the Property and with the facts set
forth herein.


 


(2)   To the best of my knowledge, Reiman has paid all real estate
taxes, special assessments, water and sewer charges and management fees, if
any, with respect to the Property which would be delinquent if not paid on or
prior to the date hereof (and to the extent that any of the foregoing has not
been paid by the date hereof, same will be paid within 30 days of the date
hereof).


 


(3)   A survey of the Property dated April 4, 2002 was made by Paul
A. Kubicek (the “Survey”). To the best of my knowledge, no improvements or
changes, which would be reflected in a current survey, have been made to the
surveyed Property since the performance of the Survey, and the Survey
accurately represents the existing condition of the surveyed Property.


 


(4)   To the best of my knowledge, no labor has been supplied to the
Property and no materials have been delivered to the Property that might become
the subject of a labor, mechanic’s or materialmen’s lien on the Property,
except for labor and/or materials which will be paid for in the ordinary course
of business.


 


(5)   There are no existing tenancies, leases or other occupancy
agreements affecting the Property.


 


(6)   To the best of my knowledge, there are no judgments, decrees or
orders before any court or judicial officer against Reiman for the


 


[[2683760]]


 

















 


payment of money and no proceedings before any court
or officer of the United States or any state affecting Reiman or the Property
which are likely to result in such an order, judgment or decree except in each
case for orders, judgments or decrees which will be paid in the ordinary course
of business by Reiman after Reiman exhausts or waives any and all rights it may
have to appeal the same.


 


(7)   In order to effectuate a New York-style
closing, Reiman agrees, with respect to the Property, that it will not in any
way encumber the Property from the date of the Commitment forward to the date
that the Mortgage, Security Agreement, Assignment of Leases and Rents, and
Fixture Filing (the “Mortgage”) to be insured pursuant to the Title Commitment
and to be dated as of the date of the closing (“Closing”) under the “Credit
Agreement” (as defined in the Mortgage), which Mortgage was made by Reiman in
favor of JPMorgan Chase Bank, N.A. (“JPMorgan”), acting as Administrative
Agent, is recorded, and Reiman hereby agrees to indemnify and hold the Title
Company harmless from any loss, cost, claim or damage that the Title Company
may sustain or incur by reason of any encumbrance of the Property by Reiman
from this date to the date the Mortgage is recorded against the Property.


 


(8)   This Affidavit is made for the purpose of
inducing the Title Company to issue, pursuant to the Title Commitment, a
lender’s policy of title insurance with respect to the Mortgage in connection
with the Closing.


 


(9)   Reiman hereby indemnifies and agrees to hold
the Title Company harmless from and against any damages or expenses, including
reasonable attorney’s fees sustained by the Title Company as a result of the
falsity of any statement contained herein.


 


 


	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  in his/her official capacity as

  Vice President & Treasurer  of

  
	
   

  	
  Reiman Media Group, Inc. f/k/a

  Readers Digest Media Group, Inc.

  (not intending to be personally liable

  hereunder).

  



 


Sworn to before me this            


       day
of                          ,
2007.


 

















 


Schedule A


 


Description of the Land


 


OUTLOT A OF CERTIFIED SURVEY MAP NO. 5875, RECORDED AUGUST
31, 1993, ON REEL 3109, IMAGE 1422, AS DOCUMENT NUMBER 6820334, BEING
A REDIVISION OF ALL OF PARCEL 3 OF CERTIFIED
SURVEY MAP NO. 5801, BEING IN THE
SOUTHWEST 1/4 OF THE SOUTHWEST 1/4 OF SECTION 26, TOWNSHIP 6 NORTH, RANGE
21 EAST, IN THE VILLAGE OF GREENDALE, COUNTY OF MILWAUKEE, STATE OF WISCONSIN.


 


ALSO;


 


PARCEL 1 OF CERTIFIED SURVEY MAP NO. 4015, RECORDED APRIL 27,
1981, ON REEL 1371, IMAGE 198, AS DOCUMENT NUMBER 5471063, BEING A REDIVISION
OF PART OF LOTS 6, 7, 8, 19 AND 20 IN THE REIGH AND SALENTINE CO’S SUBDIVISON
NO. 1 AND PART OF PARCEL 1 IN CERTIFIED SURVEY MAP NO. 719 AND LANDS IN
THE NORTHWEST 1/4, SOUTHWEST 1/4 AND THE
SOUTHEAST 1/4 OF THE SOUTHWEST 1/4 OF SECTION 26,
TOWNSHIP 6 NORTH, RANGE 21 EAST, IN THE VILLAGE OF GREENDALE AND IN THE CITY OF
GREENFIELD, COUNTY OF MILWAUKEE, STATE OF WISCONSIN.


 


ALSO;


 


THAT PART OF THE SOUTHWEST 1/4 OF SECTION 26, IN
TOWNSHIP 6 NORTH, RANGE 21 EAST, IN THE VILLAGE OF GREENDALE, COUNTY OF
MILWAUKEE, STATE OF WISCONSIN, DESCRIBED AS FOLLOWS: BEGINNING 145.34 FEET
NORTH 0°45’ 12” WEST AND 187.20 FEET NORTH 88°29’
49” EAST OF THE SOUTHWEST CORNER OF
THE SOUTHWEST 1/4, AS MEASURED ALONG THE WEST LINE AND PARALLEL WITH THE SOUTH
LINE OF THE SOUTHWEST 1/4; THENCE NORTH 88° 29’ 49” EAST 501.86 FEET; THENCE
NORTH 39°21’ 18” EAST 324.14 FEET; THENCE NORTH 50°38’ 42” WEST 117.25 FEET TO
THE SOUTH LINE OF CERTIFIED SURVEY MAP NO. 4015; THENCE SOUTH 79°51’ 25” WEST
411.56 FEET; THENCE SOUTH 38°30’ 57” WEST
339.54 FEET TO THE POINT OF BEGINNING.


 


ALSO;


 


PARCEL 4 OF CERTIFIED SURVEY MAP NO. 5801, BEING A REDIVISION
OF PARCELS 1, 2 AND  3
OF  CERTIFIED SURVEY MAP NO. 4721, AND
LANDS ALL IN THE NORTH WEST 1/4, SOUTH WEST 1/4 AND THE SOUTH EAST 1/4 OF THE
SOUTH WEST 1/4 OF SECTION 26, TOWNSHIP 6 NORTH, RANGE 21 EAST, IN THE
VILLAGE OF GREENDALE, COUNTY OF MILWAUKEE, STATE OF WISCONSIN, RECORDED ON
FEBRUARY 3, 1993, AS DOCUMENT NO. 6725380. AFFIDAVIT OF CORRECTION
RECORDED APRIL 26, 1993, IN REEL 3020, IMAGE
780, AS DOCUMENT NUMBER 6757193.


 


TOGETHER WITH EASEMENT FOR EMERGENCY EGRESS CONTAINED IN
EASEMENT AGREEMENT RECORDED ON DECEMBER
8, 1993 IN  REEL
3178, IMAGE 230, AS DOCUMENT NUMBER 6868082.


 


PARCEL NO. 648-0016-020


 
















 


OPEN-END MORTGAGE, SECURITY
AGREEMENT, ASSIGNMENT OF LEASES

AND RENTS, AND FIXTURE FILING


 


Preparer Information:


Yulia Rubin, 425 Lexington Avenue, New York,
New York 10017

Telephone number: (212) 455-2646


 


After Recording, Please Return Document to:


Simpson Thacher & Bartlett LLP, 425
Lexington Avenue, New York, New York 10017

Attention: Christopher Garcia


 


Name of Taxpayer:


Books Are Fun, Ltd., 1680 Highway 1 North,
Fairfield, Iowa 52556


 


Name of Mortgagor: 


Books Are Fun, Ltd.


 


Address of Mortgagor:


1680 Highway 1 North,
Fairfield, Iowa 52556


 


Name of Mortgagee: 


JPMorgan Chase Bank, N.A.


 


Address of Mortgagee:


270 Park Avenue, New York, New York 10017


 


Legal Description: See attached Schedule A.


 


ATTENTION COUNTY CLERK: THIS INSTRUMENT COVERS
GOODS THAT ARE OR ARE TO BECOME FIXTURES ON THE REAL PROPERTY DESCRIBED HEREIN
AND IS TO BE FILED IN THE COUNTY RECORDS WHERE MORTGAGES ON REAL PROPERTY ARE
RECORDED. ADDITIONALLY, THIS INSTRUMENT SHOULD BE APPROPRIATELY INDEXED, NOT
ONLY AS A MORTGAGE, BUT ALSO AS A FINANCING STATEMENT COVERING GOODS THAT ARE
OR ARE TO BECOME FIXTURES ON THE REAL PROPERTY DESCRIBED HEREIN. THE MAILING ADDRESSES OF THE
BORROWER/MORTGAGOR (GRANTOR OR DEBTOR) AND OF THE BENEFICIARY/MORTGAGEE
(SECURED PARTY) ARE SET FORTH ABOVE AND ON THE FIRST PAGE OF THE
MORTGAGE/FIXTURE FILING.


 

















 


TABLE OF CONTENTS


 


	
   

  	
  Page

  
	
   

  	
   

  
	
  Background

  	
  2

  
	
   

  	
   

  
	
  Granting
  Clauses

  	
  3

  
	
   

  	
   

  
	
  Terms
  and Conditions

  	
  5

  
	
  1.

  	
  Defined
  Terms

  	
  5

  
	
  2.

  	
  Warranty
  of Title

  	
  6

  
	
  3.

  	
  Payment
  of Obligations

  	
  6

  
	
  4.

  	
  Requirements

  	
  6

  
	
  5.

  	
  Payment
  of Taxes and Other Impositions

  	
  6

  
	
  6.

  	
  Insurance

  	
  7

  
	
  7.

  	
  Restrictions
  on Liens and Encumbrances

  	
  8

  
	
  8.

  	
  Due
  on Sale and Other Transfer Restrictions

  	
  8

  
	
  9.

  	
  Condemnation/Eminent
  Domain

  	
  8

  
	
  10.

  	
  Leases

  	
  8

  
	
  11.

  	
  Further
  Assurances

  	
  8

  
	
  12.

  	
  Mortgagee’s
  Right to Perform

  	
  8

  
	
  13.

  	
  Remedies

  	
  8

  
	
  14.

  	
  Right
  of Mortgagee to Credit Sale

  	
  10

  
	
  15.

  	
  Appointment
  of Receiver

  	
  10

  
	
  16.

  	
  Extension,
  Release, etc

  	
  10

  
	
  17.

  	
  Security
  Agreement under Uniform Commercial Code; Fixture Filing

  	
  11

  
	
  18.

  	
  Assignment
  of Rents

  	
  12

  
	
  19.

  	
  Additional
  Rights

  	
  12

  
	
  20.

  	
  Notices

  	
  12

  
	
  21.

  	
  No
  Oral Modification

  	
  13

  
	
  22.

  	
  Partial
  Invalidity

  	
  13

  
	
  23.

  	
  Mortgagor’s
  Waiver of Rights

  	
  13

  
	
  24.

  	
  Remedies
  Not Exclusive

  	
  14

  
	
  25.

  	
  Multiple
  Security

  	
  14

  
	
  26.

  	
  Successors
  and Assigns

  	
  15

  
	
  27.

  	
  No
  Waivers, etc

  	
  16

  
	
  28.

  	
  Governing
  Law, etc

  	
  16

  
	
  29.

  	
  Certain
  Definitions

  	
  16

  
	
  30.

  	
  Duty
  of Mortgagee; Authority of Mortgagee

  	
  16

  
	
  31.

  	
  Last
  Dollars Secured; Priority

  	
  17

  
	
  32.

  	
  Enforcement
  Expenses; Indemnification

  	
  17

  
	
  33.

  	
  Redemption

  	
  18

  
	
  34.

  	
  No
  Agricultural Use

  	
  18

  
	
  35.

  	
  Brokers

  	
  18

  
	
  36.

  	
  Release

  	
  19

  



 

















 


NOTICE: THIS OPEN-END MORTGAGE SECURES CREDIT IN THE
AGGREGATE PRINCIPAL AMOUNT OF $2,110,000,000. LOANS AND ADVANCES UP TO THIS
AMOUNT, TOGETHER WITH INTEREST, ARE SENIOR TO INDEBTEDNESS TO OTHER CREDITORS
UNDER SUBSEQUENTLY RECORDED OR FILED MORTGAGES AND LIENS


 


OPEN-END MORTGAGE,
SECURITY AGREEMENT,

ASSIGNMENT OF LEASES AND RENTS, AND FIXTURE FILING


 


THIS OPEN-END MORTGAGE, SECURITY AGREEMENT,
ASSIGNMENT OF LEASES AND RENTS, AND FIXTURE FILING, dated as of March 2,
2007 is made by BOOKS ARE FUN, LTD., an Iowa corporation (“Mortgagor”),
whose address is 1680 Highway 1 North, Fairfield, Iowa 52556, to JPMORGAN CHASE
BANK, N.A., as Administrative Agent (in such capacity, “Mortgagee”)
whose address is 270 Park Avenue, New York, New York 10017. References to this “Mortgage”
shall mean this instrument and any and all renewals, modifications, amendments,
supplements, extensions, consolidations, substitutions, spreaders and
replacements of this instrument.


 


Background


 


A.                              Doctor Acquisition
Co. (to be merged with and into Reader’s Digest, “Borrower,” together
with RD German Holdings GmbH and the other Overseas Borrowers, collectively, “Borrowers”),
a Delaware corporation, RDA Holding Co., a Delaware corporation, The Reader’s
Digest Association, Inc., a Delaware corporation, Mortgagee, the several
banks and other financial institutions or entities from time to time parties
thereto (the “Lenders”), Citicorp North America, Inc. and Merrill
Lynch, Pierce, Fenner & Smith Incorporated, as Co-Syndication Agents,
and The Royal Bank of Scotland plc, as Documentation Agent, are parties to that
certain Credit Agreement, dated as of March 2, 2007 (as amended,
supplemented, restated, replaced, substituted, or otherwise modified from time
to time, the “Credit Agreement”). The terms of the Credit Agreement are
incorporated by reference in this Mortgage as if the terms thereof were fully
set forth herein;


 


B.                                Pursuant to the
Credit Agreement, the Lenders have severally agreed to make extensions of
credit to the Borrowers upon the terms and subject to the conditions set forth
therein;


 


C.                                The Borrowers are
members of an affiliated group of companies that includes Mortgagor;


 


D.                               The proceeds of the
extensions of credit under the Credit Agreement will be used in part to enable
the Borrowers to make valuable transfers to Mortgagor in connection with the
operation of its business;


 


E.                                 The Borrowers and
Mortgagor are engaged in related businesses, and Mortgagor will derive
substantial direct and indirect benefit from the making of the extensions of
credit under the Credit Agreement;


 


2

















 


F.                                 It is a condition precedent to the obligation
of the Lenders to make their respective extensions of credit to the Borrowers
under the Credit Agreement that Mortgagor shall have executed and delivered
this Mortgage to Mortgagee for the ratable benefit of the Secured Parties;


 


G.                                Mortgagor (i) is the owner of the fee
simple estate in the parcel(s) of real property, if any, described on Schedule
A attached hereto (the “Land”); and (ii) owns, leases or
otherwise has the right to use all of the buildings, improvements, structures,
and fixtures now or subsequently located on the Land (the “Improvements;”
the Land and the Improvements being collectively referred to as the “Real
Estate”); and


 


H.                               In consideration of the premises and to
induce Mortgagee and the Lenders to enter into the Credit Agreement, and to
induce the Lenders to make their respective extensions of credit to the
Borrowers, Mortgagor hereby agrees with Mortgagee, for the ratable benefit of
the Secured Parties, as follows:


 


Granting Clauses


 


For good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Mortgagor agrees that to secure the payment of
all obligations and liabilities of Mortgagor which may arise under or in
connection with the Guarantee and Collateral Agreement (including, without
limitation, Section 2 thereof) or any other Loan Document or any Secured
Hedge Agreement to which Mortgagor is a party, in each case whether on account
of guarantee obligations, reimbursement obligations, fees, indemnities, costs,
expenses or otherwise (including, without limitation, all Attorney Costs and
disbursements of counsel to Mortgagee or to any Secured Party that are required
to be paid by Mortgagor pursuant to the terms of this Mortgage or any other
Loan Document) (collectively, the “Obligations”);


 


MORTGAGOR
HEREBY GRANTS TO MORTGAGEE A LIEN UPON AND A SECURITY INTEREST IN, AND HEREBY
MORTGAGES AND WARRANTS, GRANTS, ASSIGNS, TRANSFERS AND SETS OVER TO MORTGAGEE,
WITH MORTGAGE COVENANTS:


 


(a)                             the Land;


 


(b)                            all right, title and interest Mortgagor now
has or may hereafter acquire in and to the Improvements or any part thereof and
all the estate, right, title, claim or demand whatsoever of Mortgagor, in possession
or expectancy, in and to the Real Estate or any part thereof;


 


(c)                             all right, title and interest of Mortgagor
in, to and under all easements, rights of way, licenses, operating agreements,
abutting strips and gores of land, streets, ways, alleys, passages, sewer
rights, waters, water courses, water and flowage rights, development rights,
air rights, mineral and soil rights, plants, standing and fallen timber, and
all estates, rights, titles, interests, privileges, licenses, tenements,
hereditaments and appurtenances belonging, relating or appertaining to the Real
Estate, and any reversions, remainders, rents, issues, profits and revenue
thereof and all land lying in the bed of any street, road or avenue, in front
of or adjoining the Real Estate to the center line thereof;


 


3

















 


(d)                            all of the
fixtures, chattels, business machines, machinery, apparatus, equipment,
furnishings, fittings, appliances and articles of personal property of every
kind and nature whatsoever, and all appurtenances and additions thereto and
substitutions or replacements thereof (together with, in each case,
attachments, components, parts and accessories) currently owned or subsequently
acquired by Mortgagor and now or subsequently attached to, or contained in or
used or usable in any way in connection with any operation or letting of the
Real Estate, including but without limiting the generality of the foregoing,
all screens, awnings, shades, blinds, curtains, draperies, artwork, carpets,
rugs, storm doors and windows, furniture and furnishings, heating, electrical,
and mechanical equipment, lighting, switchboards, plumbing, ventilating, air
conditioning and air-cooling apparatus, refrigerating, incinerating equipment,
escalators, elevators, loading and unloading equipment and systems, stoves,
ranges, laundry equipment, cleaning systems (including window cleaning
apparatus), telephones, communication systems (including satellite dishes and
antennae), televisions, computers, sprinkler systems and other fire prevention
and extinguishing apparatus and materials, security systems, motors, engines,
machinery, pipes, pumps, tanks, conduits, appliances, fittings and fixtures of
every kind and description (all of the foregoing in this paragraph (e) being
referred to as the “Equipment”);


 


(e)                             all right, title
and interest of Mortgagor in and to all substitutes and replacements of, and
all additions and improvements to, the Real Estate and the Equipment,
subsequently acquired by or released to Mortgagor or constructed, assembled or
placed by Mortgagor on the Real Estate, immediately upon such acquisition,
release, construction, assembling or placement, including, without limitation,
any and all building materials whether stored at the Real Estate or offsite,
and, in each such case, without any further deed, conveyance, assignment or
other act by Mortgagor;


 


(f)                               all right, title
and interest of Mortgagor in, to and under all leases, subleases,
underlettings, concession agreements, management agreements, licenses and other
agreements relating to the use or occupancy of the Real Estate or the Equipment
or any part thereof, now existing or subsequently entered into by Mortgagor and
whether written or oral and all guarantees of any of the foregoing (collectively,
as any of the foregoing may be amended, restated, extended, renewed or modified
from time to time, the “Leases”), and all rights of Mortgagor in respect of cash and
securities deposited thereunder and the right to receive and collect the
revenues, income, rents, issues and profits thereof, together with all other
rents, royalties, issues, profits, revenue, income and other benefits arising
from the use and enjoyment of the Mortgaged Property (as defined below)
(collectively, the “Rents”);


 


(g)                            all unearned
premiums under insurance policies now or subsequently obtained by Mortgagor
relating to the Real Estate or Equipment and Mortgagor’s interest in and to all
proceeds of any such insurance policies (including title insurance policies)
including the right to collect and receive such proceeds, subject to the
provisions relating to insurance generally set forth below; and all awards and
other compensation, including the interest payable thereon and the right to
collect and receive the same, made to the present or any subsequent owner of
the Real Estate or Equipment for the taking by eminent domain, condemnation or
otherwise, of all or any part of the Real Estate or any easement or other right
therein;


 


4

















 


(h)                            to the extent not
prohibited under the applicable contract, consent, license or other item unless
the appropriate consent has been obtained, all right, title and interest of
Mortgagor in and to (i) all contracts from time to time executed by
Mortgagor or any manager or agent on its behalf relating to the ownership,
construction, maintenance, repair, operation, occupancy, sale or financing of
the Real Estate or Equipment or any part thereof and all agreements and options
relating to the purchase or lease of any portion of the Real Estate or any
property which is adjacent or peripheral to the Real Estate, together with the
right to exercise such options and all leases of Equipment, (ii) all
consents, licenses, building permits, certificates of occupancy and other
governmental approvals relating to construction, completion, occupancy, use or
operation of the Real Estate or any part thereof, and (iii) all drawings,
plans, specifications and similar or related items relating to the Real Estate;
and


 


(i)                                all proceeds, both
cash and noncash, of the foregoing;


 


(All of the foregoing property and rights and
interests now owned or held or subsequently acquired by Mortgagor and described
in the foregoing clauses (a) through (c) are collectively referred to
as the “Premises”, and those described in the foregoing clauses (a) through
(i) are collectively referred to as the “Mortgaged Property”).


 


TO HAVE AND TO HOLD the Mortgaged Property
and the rights and privileges hereby mortgaged unto Mortgagee, its successors
and assigns for the uses and purposes set forth, until the Obligations are
fully paid and performed, provided, however, that the condition of this
Mortgage is such that if the Obligations (other than contingent indemnification
and contingent expense reimbursement obligations, any Obligations in respect of
Secured Hedge Agreements, and Cash Management Obligations) are fully paid and
performed, then the estate hereby granted shall cease, terminate and become
void but shall otherwise remain in full force and effect.


 


This Mortgage covers present and future
advances and re-advances, in the aggregate amount of the obligations secured
hereby, made by the Secured Parties for the benefit of Mortgagor, and the lien
of such future advances and re-advances shall relate back to the date of this
Mortgage.


 


The maturity date of the Obligations is March 2,
2013 with respect to the Revolving Credit Facility, and March 2, 2014 with
respect to the Term Loans.


 


Terms and
Conditions


 


Mortgagor further represents, warrants,
covenants and agrees with Mortgagee and the Secured Parties as follows:


 


1.                                            Defined Terms. Capitalized terms
used herein (including in the “Background” and “Granting Clauses” sections
above) and not otherwise defined herein shall have the meanings ascribed
thereto in the Credit Agreement. References herein to the “Secured Parties”
shall mean the collective reference to (i) Mortgagee, as Administrative
Agent, (ii) the other Agents, (iii) the L/C Issuers, (iv) the
Lenders, (v) the Hedge Banks, (vi) any Affiliate of a Lender, (vii) the
Supplemental Administrative Agent, and (viii) each co-agent or sub-agent
appointed by Mortgagee from time to time pursuant to Section 9.01(c) of
the Credit Agreement, to which


 


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Borrower Obligations (as defined in the Credit
Agreement) or Guarantor Obligations (as defined in the Credit Agreement), as
applicable, are owed.


 


2.                                       Warranty of Title. Mortgagor
warrants that it has good record title in fee simple to, or a valid leasehold
interest in, the Real Estate, and good title to, or a valid leasehold interest
in, the rest of the Mortgaged Property, subject only to the matters that are
set forth in Schedule B of the title insurance policy or policies, if any,
being issued to Mortgagee to insure the lien of this Mortgage and any other
lien or encumbrance as permitted by Section 7.01 of the Credit Agreement
(collectively, the “Permitted Exceptions”). Mortgagor shall warrant,
defend and preserve such title and the lien of this Mortgage against all claims
of all persons and entities (not including the holders of the Permitted
Exceptions). Mortgagor represents and warrants that it has the right to
mortgage the Mortgaged Property.


 


3.                                       Payment of
Obligations. Mortgagor shall pay and perform the Obligations at the times and places
and in the manner specified in the Loan Documents.


 


4.                                       Requirements. Mortgagor shall
comply with all covenants, restrictions and conditions now or later of record
which may be applicable to any of the Mortgaged Property, or to the use, manner
of use, occupancy, possession, operation, maintenance, alteration, repair or
reconstruction of any of the Mortgaged Property, except where a failure to do
so could not reasonably be expected to have a material adverse effect
(considered both individually and together with other such failures) on (i) the
current business, operations or condition (financial or otherwise) of
Mortgagor, (ii) the current use of the Mortgaged Property or (iii) the
value of the Mortgaged Property (assuming its current use).


 


5.                                       Payment of Taxes
and Other Impositions. (a) Prior to the date on which any fine,
penalty, interest or cost may be added thereto or imposed, Mortgagor shall pay
and discharge all taxes, charges and assessments of every kind and nature, all
charges for any easement or agreement maintained for the benefit of any of the
Real Estate, all general and special assessments, levies, permits, inspection
and license fees, all water and sewer rents and charges, vault taxes and all
other public charges even if unforeseen or extraordinary, imposed upon or
assessed against or which may become a lien on any of the Real Estate, or
arising in respect of the occupancy, use or possession thereof, together with
any penalties or interest on any of the foregoing (all of the foregoing are
collectively referred to herein as the “Impositions”), except where (i) the
validity or amount thereof is being contested in good faith by appropriate
proceedings, and (ii) Mortgagor has set aside on its books adequate
reserves with respect thereto in accordance with GAAP. Upon request by
Mortgagee, Mortgagor shall deliver to Mortgagee evidence reasonably acceptable
to Mortgagee showing the payment of any such Imposition. If by law any
Imposition, at Mortgagor’s option, may be paid in installments (whether or not
interest shall accrue on the unpaid balance of such Imposition), Mortgagor may
elect to pay such Imposition in such installments and shall be responsible for
the payment of such installments with interest, if any.


 


(b)                            Nothing herein
shall affect any right or remedy of Mortgagee under this Mortgage or otherwise,
without notice or demand to Mortgagor, to pay any Imposition after the date
such Imposition shall have become delinquent, and add to the Obligations the
amount so paid, together with interest from the time of payment at the Default
Rate. Any sums paid by Mortgagee in discharge of any Impositions shall be (i) a
lien on the Premises secured hereby


 


6

















 


prior to any right or title to, interest in, or
claim upon the Premises subordinate to the lien of this Mortgage, and (ii) payable
on demand by Mortgagor to Mortgagee together with interest at the Default Rate
as set forth above.


 


6.                                       Insurance. (a) Mortgagor
shall maintain, with financially sound and reputable companies, insurance
policies (i) insuring the Real Estate against loss by fire, explosion,
theft and such other casualties as may be reasonably satisfactory to Mortgagee,
and (ii) insuring Mortgagor, Mortgagee and the other Secured Parties
against liability for personal injury and property damage relating to such Real
Estate, such policies to be in such form and amounts and having such coverage
as may be reasonably satisfactory to Mortgagee. All such insurance shall (i) provide
that no cancellation, material reduction in amount or material change in
coverage thereof shall be effective until at least thirty (30) days or, in the
case of insurance existing as of the date hereof, at least ten (10) days
after receipt by Mortgagee of written notice thereof, (ii) name Mortgagee
as an additional insured party or loss payee, and (iii) include
deductibles consistent with past practice or consistent with industry practice
or otherwise reasonably satisfactory to Mortgagee.


 


(b)                            If any portion of
the Premises is located in an area identified as a special flood hazard area by
the Federal Emergency Management Agency or other applicable agency, Mortgagor
shall maintain or cause to be maintained, flood insurance in an amount
reasonably satisfactory to Mortgagee, but in no event less than the maximum
limit of coverage available under the National Flood Insurance Act of 1968, as
amended.


 


(c)                             Mortgagor promptly
shall comply with and conform in all material respects to (i) all
provisions of each such insurance policy, and (ii) all requirements of the
insurers applicable to Mortgagor or to any of the Mortgaged Property or to the
use, manner of use, occupancy, possession, operation, maintenance, alteration
or repair of any of the Mortgaged Property. Mortgagor shall not use or permit
the use of the Mortgaged Property in any manner which would permit any insurer
to cancel any insurance policy or void coverage required to be maintained by
this Mortgage.


 


(d)                            If Mortgagor is in
default of its obligations to insure or deliver any such prepaid policy or
policies, then Mortgagee, at its option upon five (5) days’ notice to
Mortgagor, may effect such insurance from year to year at rates substantially
similar to the rate at which Mortgagor had insured the Premises, and pay the
premium or premiums therefor, and Mortgagor shall pay to Mortgagee on demand
such premium or premiums so paid by Mortgagee with interest from the time of
payment at the Default Rate.


 


(e)                             If the Mortgaged
Property, or any part thereof, shall be destroyed or damaged and the reasonably
estimated cost thereof would exceed $500,000, Mortgagor shall give prompt
notice thereof to Mortgagee. All insurance proceeds paid or payable in
connection with any damage or casualty to the Real Estate shall be deemed
proceeds from a Casualty Event and applied in the manner specified in the
Credit Agreement.


 


(f)                               In the event of
foreclosure of this Mortgage or other transfer of title to the Mortgaged
Property, all right, title and interest of Mortgagor in and to any insurance
policies then in force shall pass to the purchaser or grantee.


 


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7.                                  Restrictions on
Liens and Encumbrances. Except for the lien of this Mortgage and the
Permitted Exceptions, Mortgagor shall not further mortgage, nor otherwise
encumber the Mortgaged Property nor create or suffer to exist any lien, charge
or encumbrance on the Mortgaged Property, or any part thereof, whether superior
or subordinate to the lien of this Mortgage and whether recourse or non-recourse.


 


8.                                  Due on Sale and
Other Transfer Restrictions. Except as expressly permitted under Section 7.05
of the Credit Agreement, Mortgagor shall not sell, transfer, convey or assign
all or any portion of, or any interest in, the Mortgaged Property.


 


9.                                  Condemnation/Eminent
Domain. Promptly upon obtaining knowledge of the institution of any proceedings
for the condemnation of the Mortgaged Property, or any material portion
thereof; Mortgagor will notify Mortgagee of the pendency of such proceedings. All
awards and proceeds relating to such condemnation shall be deemed proceeds from
a Casualty Event and applied in the manner specified in the Credit Agreement.


 


10.                            Leases. Except as
expressly permitted under the Credit Agreement, Mortgagor shall not (a) execute
an assignment or pledge of any Lease relating to all or any portion of the
Mortgaged Property other than in favor of Mortgagee, or (b) execute or
permit to exist any Lease of any of the Mortgaged Property.


 


11.                            Further Assurances. To further assure
Mortgagee’s rights under this Mortgage, Mortgagor agrees promptly upon demand
of Mortgagee to do any act or execute any additional documents (including, but
not limited to, security agreements on any personalty included or to be
included in the Mortgaged Property and a separate assignment of each Lease in
recordable form) as may be reasonably required by Mortgagee to confirm the lien
of this Mortgage and all other rights or benefits conferred on Mortgagee by
this Mortgage.


 


12.                            Mortgagee’s Right
to Perform. If Mortgagor fails to perform any of the covenants or agreements of Mortgagor in the Loan
Documents, within the applicable grace period, if any, provided for in the
Credit Agreement, Mortgagee, without waiving or releasing Mortgagor from any
obligation or default under this Mortgage, may, at any time upon ten (10) days’
notice to Mortgagor (but shall be under no obligation to) pay or perform the
same, and the amount or cost thereof, with interest at the Default Rate, shall
immediately be due from Mortgagor to Mortgagee and the same shall be secured by
this Mortgage and shall be a lien on the Mortgaged Property prior to any right,
title to, interest in, or claim upon the Mortgaged Property attaching
subsequent to the lien of this Mortgage. No payment or advance of money by
Mortgagee under this Section shall be deemed or construed to cure
Mortgagor’s default or waive any right or remedy of Mortgagee.


 


13.                            Remedies. (a) Upon the
occurrence and during the continuance of any Event of Default, Mortgagee may
immediately take such action, without notice or demand, as it deems advisable
to protect and enforce its rights against Mortgagor and in and to the Mortgaged
Property, including, but not limited to, the following actions, each of which
may be pursued concurrently or otherwise, at such time and in such manner as
Mortgagee may determine, in its sole discretion, without impairing or otherwise
affecting the other rights and remedies of Mortgagee:


 


8

















 


(i)                                Mortgagee may, to the extent permitted by
applicable law, (A) institute and maintain an action of mortgage
foreclosure against all or any part of the Mortgaged Property, (B) institute and maintain an action on the
Credit Agreement, the Guarantee and Collateral Agreement or any other Loan
Document, (C) sell all or part of the Mortgaged Property (Mortgagor
expressly granting to Mortgagee the power of sale, to the extent permitted by
applicable law), or (D) take such other
action at law or in equity for the enforcement of this Mortgage or any of the
Loan Documents as the law may allow. Mortgagee may proceed in any such action
to final judgment and execution thereon for all sums due hereunder, together
with interest thereon at the Default Rate and all costs of suit, including,
without limitation, reasonable attorneys’ fees and disbursements. Interest at
the Default Rate shall be due on any judgment obtained by Mortgagee from the
date of judgment until actual payment is made of the full amount of the
judgment; and


 


(ii)                             Mortgagee may personally, or by its agents,
attorneys and employees and without regard to the adequacy or inadequacy of the
Mortgaged Property or any other collateral as security for the Obligations
enter into and upon the Mortgaged Property and each and every part thereof and
exclude Mortgagor and its agents and employees therefrom without liability for
trespass, damage or otherwise (Mortgagor hereby agreeing to surrender
possession of the Mortgaged Property to Mortgagee upon demand at any such time)
and use, operate, manage, maintain and control the Mortgaged Property and every
part thereof. Following such entry and taking of possession, Mortgagee shall be
entitled, without limitation, (x) to lease all or any part or parts of the
Mortgaged Property for such periods of time and upon such conditions as
Mortgagee may, in its discretion, deem proper, (y) to enforce, cancel or
modify any Lease as Mortgagee may in its discretion deem proper, and (z) generally
to execute, do and perform any other act, deed, matter or thing concerning the
Mortgaged Property as Mortgagee shall deem appropriate as fully as Mortgagor
might do.


 


(b)                            In case of a foreclosure sale, the Real
Estate may be sold, at Mortgagee’s election, in one parcel or in more than one
parcel and Mortgagee is specifically empowered (without being required to do
so, and in its sole and absolute discretion) to cause successive sales of
portions of the Mortgaged Property to be held.


 


(c)                             In the event of any breach of any of the
covenants, agreements, terms or conditions contained in this Mortgage,
Mortgagee shall be entitled to enjoin such breach and obtain specific
performance of any covenant, agreement, term or condition and Mortgagee shall
have the right to invoke any equitable right or remedy as though other remedies
were not provided for in this Mortgage.


 


(d)                            It is agreed that if an Event of Default
shall occur and be continuing, any and all proceeds of the Mortgaged Property
received by Mortgagee shall be held by Mortgagee for the benefit of the Secured
Parties as collateral security for the Obligations (whether matured or
unmatured), and shall be applied in payment of the Obligations in the manner
and in the order set forth in Section 6.5 of the Guarantee and Collateral
Agreement.


 


9
















 


14.         Right of Mortgagee to Credit Sale. Upon the occurrence of any sale made under
this Mortgage, whether made under the power of sale, to the extent permitted by
applicable law, or by virtue of judicial proceedings or of a judgment or decree
of foreclosure and sale, Mortgagee may bid for and acquire the Mortgaged
Property or any part thereof. In lieu of paying cash therefor, Mortgagee may
make settlement for the purchase price by crediting upon the Obligations or
other sums secured by this Mortgage, the net sales price after deducting
therefrom the expenses of sale and the cost of the action and any other sums
which Mortgagee is authorized to deduct under this Mortgage. In such event,
this Mortgage, the Credit Agreement, the Guarantee and Collateral Agreement and
documents evidencing expenditures secured hereby may be presented to the person
or persons conducting the sale in order that the amount so used or applied may
be credited upon the Obligations as having been paid.


 


15.         Appointment of Receiver. If an Event of Default shall have occurred
and be continuing, Mortgagee as a matter of right and without notice to
Mortgagor, unless otherwise required by applicable law, and without regard to
the adequacy or inadequacy of the Mortgaged Property or any other collateral or
the interest of Mortgagor therein as security for the Obligations, shall have
the right to apply to any court having jurisdiction to appoint a receiver or
receivers or other manager of the Mortgaged Property, without requiring the
posting of a surety bond, and without reference to the adequacy or inadequacy
of the value of the Mortgaged Property or the solvency or insolvency of
Mortgagor or any other party obligated for payment of all or any part of the
Obligations, and whether or not waste has occurred with respect to the
Mortgaged Property, and Mortgagor hereby irrevocably consents to such
appointment and waives notice of any application therefor (except as may be
required by law). Any such receiver or receivers or manager shall have all the
usual powers and duties of receivers in like or similar cases and all the
powers and duties of Mortgagee in case of entry as provided in this Mortgage,
including, without limitation and to the extent permitted by law, the right to
enter into leases of all or any part of the Mortgaged Property, and shall
continue as such and exercise all such powers until the date of confirmation of
sale of the Mortgaged Property unless such receivership is sooner terminated.


 


16.         Extension, Release, etc. (a) Without affecting the lien or
charge of this Mortgage upon any portion of the Mortgaged Property not then or
theretofore released as security for the full amount of the Obligations,
Mortgagee may, from time to time and without notice, agree to (i) release
any person liable for the indebtedness borrowed or guaranteed under the Loan
Documents, (ii) extend the maturity or alter any of the terms of the
indebtedness borrowed or guaranteed under the Loan Documents or any other
guaranty thereof, (iii) grant other indulgences, (iv) release or
reconvey, or cause to be released or reconveyed at any time at Mortgagee’s
option any parcel, portion or all of the Mortgaged Property, (v) take or
release any other or additional security for any obligation herein mentioned,
or (vi) make compositions or other arrangements with debtors in relation
thereto.


 


(b)         No recovery of any judgment by Mortgagee and
no levy of an execution under any judgment upon the Mortgaged Property or upon
any other property of Mortgagor shall affect the lien of this Mortgage or any
liens, rights, powers or remedies of Mortgagee hereunder, and such liens,
rights, powers and remedies shall continue unimpaired.


 


(c)          If Mortgagee shall have the right to
foreclose this Mortgage or to direct a power of sale, to the extent permitted
by applicable law, Mortgagor authorizes Mortgagee at its


 


10

















 


option to foreclose the lien of this Mortgage (or
direct the sale of the Mortgaged Property, as the case may be) subject to the
rights of any tenants of the Mortgaged Property. The failure to make any such
tenants parties defendant to any such foreclosure proceeding and to foreclose
their rights, or to provide notice to such tenants as required in any statutory
procedure governing a sale of the Mortgaged Property, or to terminate such
tenant’s rights in such sale will not be asserted by Mortgagor as a defense to
any proceeding instituted by Mortgagee to collect the Obligations or to
foreclose the lien of this Mortgage.


 


(d)           Unless expressly provided otherwise, in the
event that ownership of this Mortgage and title to the Mortgaged Property or
any estate therein shall become vested in the same person or entity, this
Mortgage shall not merge in such title but shall continue as a valid lien on
the Mortgaged Property for the amount secured hereby.


 


17.           Security Agreement
under Uniform Commercial Code; Fixture Filing. (a) It is 
the intention of the parties hereto that this Mortgage shall constitute
a security agreement within the meaning of the Uniform Commercial Code (the “Code”)
of the State in which the Mortgaged Property is located. If an Event of Default
shall occur and be continuing, then in addition to having any other right or
remedy available at law or in equity, Mortgagee shall have the option of either
(i) proceeding under the Code and exercising such rights and remedies as
may be provided to a secured party by the Code with respect to all or any
portion of the Mortgaged Property which is personal property (including,
without limitation, taking possession of and selling such property) or (ii) treating
such property as real property and proceeding with respect to both the real and
personal property constituting the Mortgaged Property in accordance with
Mortgagee’s rights, powers and remedies with respect to the real property (in
which event the default provisions of the Code shall not apply). If Mortgagee
shall elect to proceed under the Code, then ten (10) days’ notice of sale
of the personal property shall be deemed reasonable notice and the reasonable
expenses of retaking, holding, preparing for sale, selling and the like incurred
by Mortgagee shall include, but not be limited to, attorneys’ fees and legal
expenses. At Mortgagee’s
request, Mortgagor shall assemble the personal property and make it available
to Mortgagee at a place designated by Mortgagee which is reasonably convenient
to both parties.


 


(b)           Certain portions of the Mortgaged Property
are or will become “fixtures” (as that term is defined in the Code) on the
Land, and this Mortgage, upon being filed for record in the real estate records
of the county wherein such fixtures are situated, shall operate also as a
financing statement filed as a fixture filing in accordance with the applicable
provisions of said Code upon such portions of the Mortgaged Property that are
or become fixtures. The real property to which the fixtures relate is described
in Schedule
A
hereto. The record owner of the real property described in Schedule A hereto, if any, is
Mortgagor. The name, type of organization and jurisdiction of organization of
the debtor for purposes of this financing statement are the name, type of
organization and jurisdiction of organization of Mortgagor set forth in the
first paragraph of this Mortgage, and the name of the secured party for
purposes of this financing statement is the name of Mortgagee set forth in the
first paragraph of this Mortgage. The mailing address of Mortgagor/debtor is
the address of Mortgagor set forth in the first paragraph of this Mortgage. The
mailing address of Mortgagee/secured party from which information concerning
the security interest hereunder may be obtained is the address of Mortgagee set
forth in the first paragraph of this Mortgage. Mortgagor’s organizational
identification number is 146599.


 


11

















 


18.           Assignment of Rents. (a) Mortgagor
hereby assigns to Mortgagee the Rents as further security for the payment of
and performance of the Obligations, and Mortgagor grants to Mortgagee the right
to enter the Mortgaged Property for the purpose of collecting the same and to
let the Mortgaged Property or any part thereof, and to apply the Rents on
account of the Obligations. The foregoing assignment and grant is present and
absolute and shall continue in effect until the Obligations are fully paid and
performed, but Mortgagee hereby waives the right to enter the Mortgaged
Property for the purpose of collecting the Rents and Mortgagor shall be
entitled to collect, receive, use and retain the Rents until the occurrence of
an Event of Default; such right of Mortgagor to collect, receive, use and
retain the Rents may be revoked by Mortgagee upon the occurrence and during the
continuance of any Event of Default by giving not less than ten (10) days’
written notice of such revocation to Mortgagor; in the event such notice is
given, Mortgagor shall pay over to Mortgagee, or to any receiver appointed to
collect the Rents, any lease security deposits, and shall pay monthly in
advance to Mortgagee, or to any such receiver, the fair and reasonable rental
value as determined by Mortgagee for the use and occupancy of such part of the
Mortgaged Property as may be in the possession of Mortgagor or any affiliate of
Mortgagor, and upon default in any such payment Mortgagor and any such
affiliate will vacate and surrender the possession of the Mortgaged Property to
Mortgagee or to such receiver, and in default thereof may be evicted by summary
proceedings or otherwise. Mortgagor shall not accept prepayments of
installments of Rent to become due for a period of more than one month in
advance (except for security deposits and estimated payments of percentage
rent, if any).


 


(b)           Mortgagor has not affirmatively done any act
which would prevent Mortgagee from, or limit Mortgagee in, acting under any of
the provisions of the foregoing assignment.


 


(c)           Except for any matter disclosed in the Credit
Agreement, no action has been brought or, so far as is known to Mortgagor, is
threatened, which would interfere in any way with the right of Mortgagor to
execute the foregoing assignment and perform all of Mortgagor’s obligations
contained in this Section and in the Leases.


 


19.           Additional Rights. The holder of any
subordinate lien or subordinate deed of trust on the Mortgaged Property shall
have no right to terminate any Lease whether or not such Lease is subordinate
to this Mortgage nor shall Mortgagor consent to any holder of any subordinate
lien or subordinate deed of trust joining any tenant under any Lease in any
action to foreclose the lien or modify, interfere with, disturb or terminate
the rights of any tenant under any Lease. By recordation of this Mortgage all
subordinate lienholders and the mortgagees and beneficiaries under subordinate
mortgages are subject to and notified of this provision, and any action taken
by any such lienholder or beneficiary contrary to this provision shall be null
and void. Any such application shall not be construed to cure or waive any
Default or Event of Default or invalidate any act taken by Mortgagee on account
of such Default or Event of Default.


 


20.           Notices. All notices,
requests and demands to or upon Mortgagee or Mortgagor hereunder shall be
effected in the manner provided for in Section 10.02 of the Credit
Agreement; provided that any such notice, request or demand to or upon
Mortgagor shall be addressed to Mortgagor at its address set forth above.


 


12

















 


21.           No Oral
Modification. This Mortgage may not be amended, supplemented or otherwise modified
except in accordance with the provisions of Section 10.01 of the Credit
Agreement. Any agreement made by Mortgagor and Mortgagee after the date of this
Mortgage relating to this Mortgage shall be superior to the rights of the
holder of any intervening or subordinate lien or encumbrance.


 


22.           Partial Invalidity. In the event any
one or more of the provisions contained in this Mortgage shall for any reason
be held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other provision
hereof, but each shall be construed as if such invalid, illegal or
unenforceable provision had never been included. Notwithstanding to the
contrary anything contained in this Mortgage or in any provisions of any Loan Document,
the obligations of Mortgagor and of any other obligor under any Loan Document
shall be subject to the limitation that Mortgagee shall not charge, take or
receive, nor shall Mortgagor or any other obligor be obligated to pay to
Mortgagee, any amounts constituting interest in excess of the maximum rate
permitted by law to be charged by Mortgagee.


 


Mortgagor agrees that notwithstanding the
fact that the Mortgage contains matters which may not be appropriate, available
or enforceable in Iowa, the inclusion of such matters does not affect the
validity or enforceability of the Mortgage as appropriate and available under
Iowa law. To the extent the laws of the State of Iowa limit (i) the
availability of the exercise of any of the remedies set forth herein, including,
without limitation, remedies such as a power of sale and taking possession of
the property, or (ii) the enforcement of waivers and indemnities made by
Mortgagor, such remedies, waivers, or indemnities shall be exercisable or
enforceable, any provisions in this Mortgage to the contrary notwithstanding,
if, and to the extent, permitted by the laws in force at the time of the
exercise of such remedies or the enforcement of such waivers or indemnities
without regard to the enforceability of such remedies, waiver or indemnities at
the time of the execution and delivery of this Mortgage.


 


23.           Mortgagor’s Waiver
of Rights. (a) Mortgagor hereby voluntarily and knowingly releases and waives
any and all rights to retain possession of the Mortgaged Property after the
occurrence of an Event of Default and any and all rights of redemption from
sale under any order or decree of foreclosure (whether full or partial),
pursuant to rights, if any, therein granted, as allowed under any applicable
law, on its own behalf, on behalf of all persons claiming or having an interest
(direct or indirectly) by, through or under each constituent of Mortgagor and
on behalf of each and every person acquiring any interest in the Mortgaged
Property subsequent to the date hereof, it being the intent hereof that any and
all such rights or redemption of each constituent of Mortgagor and all such
other persons are and shall be deemed to be hereby waived to the fullest extent
permitted by applicable law or replacement statute. Each constituent of
Mortgagor shall not invoke or utilize any such law or laws or otherwise hinder,
delay, or impede the execution of any right, power, or remedy herein or
otherwise granted or delegated to Mortgagee, but shall permit the execution of
every such right, power, and remedy as though no such law or laws had been made
or enacted.


 


(b)           To the fullest extent permitted by law,
Mortgagor waives the benefit of all laws now existing or that may subsequently
be enacted providing for (i) any appraisement before sale of any portion
of the Mortgaged Property, (ii) any extension of the time for the
enforcement of the collection of the Obligations or the creation or extension
of a period of redemption from any sale made in collecting such debt and (iii) exemption
of the Mortgaged Property from


 


13

















 


attachment, levy or sale under execution or
exemption from civil process. To the full extent Mortgagor may do so, Mortgagor
agrees that Mortgagor will not at any time insist upon, plead, claim or take
the benefit or advantage of any law now or hereafter in force providing for any
appraisement, valuation, stay, exemption, extension or redemption, or requiring
foreclosure of this Mortgage before exercising any
other
remedy granted hereunder and Mortgagor, for Mortgagor and its successors and
assigns, and for any and all persons ever claiming any interest in the
Mortgaged Property, to the extent permitted by law, hereby waives and releases
all rights of redemption, valuation, appraisement, stay of execution, notice of
election to mature (except as expressly provided in the Credit Agreement) or
declare due the whole of the secured indebtedness and marshalling in the event
of exercise by Mortgagee of the foreclosure rights, power of sale, to the
extent permitted by applicable law, or other rights hereby created.


 


24.         Remedies Not
Exclusive. Mortgagee shall be entitled to enforce payment and performance of the
Obligations and to exercise all rights and powers under this Mortgage or under
any of the other Loan Documents or other agreement or any laws now or hereafter
in force, notwithstanding some or all of the Obligations may now or hereafter
be otherwise secured, whether by deed of trust, mortgage, security agreement,
pledge, lien, assignment or otherwise. Neither the acceptance of this Mortgage
nor its enforcement, shall prejudice or in any manner affect Mortgagee’s rights
to realize upon or enforce any other security now or hereafter held by
Mortgagee, it being agreed that Mortgagee shall be entitled to enforce this
Mortgage and any other security now or hereafter held by Mortgagee in such
order and manner as Mortgagee may determine in its absolute discretion. No
remedy herein conferred upon or reserved to Mortgagee is intended to be exclusive
of any other remedy herein or by law provided or permitted, but each shall be
cumulative and shall be in addition to every other remedy given hereunder or
now or hereafter existing at law or in equity or by statute. Every power or
remedy given by any of the Loan Documents to Mortgagee or to which either may
otherwise be entitled, may be exercised, concurrently or independently, from
time to time and as often as may be deemed expedient by Mortgagee, as the case
may be. In no event shall Mortgagee, in the exercise of the remedies provided
in this Mortgage (including, without limitation, in connection with the
assignment of Rents to Mortgagee, or the appointment of a receiver and the
entry of such receiver on to all or any part of the Mortgaged Property), be
deemed a “mortgagee in possession,” and Mortgagee shall not in any way be made
liable for any act, either of commission or omission, in connection with the
exercise of such remedies.


 


25.         Multiple Security. If (a) the
Premises shall consist of one or more parcels, whether or not contiguous and
whether or not located in the same county, or (b) in addition to this
Mortgage, Mortgagee shall now or hereafter hold or be the beneficiary of one or
more additional mortgages, liens, deeds of trust or other security (directly or
indirectly) for the Obligations upon other property in the State in which the
Premises are located (whether or not such property is owned by Mortgagor or by
others) or (c) both the circumstances described in clauses (a) and (b) shall
be true, then to the fullest extent permitted by law, Mortgagee may, at its
election, commence or consolidate in a single foreclosure action all
foreclosure proceedings against all such collateral securing the Obligations
(including the Mortgaged Property), which action may be brought or consolidated
in the courts of, or sale conducted in, any county in which any of such
collateral is located. Mortgagor acknowledges that the right to maintain a
consolidated foreclosure action is a specific inducement to Mortgagee to extend
the indebtedness borrowed pursuant to or guaranteed by the Loan Documents, and
Mortgagor expressly and irrevocably waives any objections to the commencement
or consolidation of the foreclosure


 


14

















 


proceedings
in a single action and any objections to the laying of venue or based on the
grounds of forum non conveniens which it may now or hereafter have. Mortgagor
further agrees that if Mortgagee shall be prosecuting one or more foreclosure
or other proceedings against a portion of the Mortgaged Property or against any
collateral other than the Mortgaged Property, which collateral directly or
indirectly secures the Obligations, or if Mortgagee shall have obtained a
judgment of foreclosure and sale or similar judgment against such collateral,
then, whether or not such proceedings are being maintained or judgments were
obtained in or outside the State in which the Premises are located, Mortgagee
may commence or continue any foreclosure proceedings and exercise its other
remedies granted in this Mortgage against all or any part of the Mortgaged
Property and Mortgagor waives any objections to the commencement or
continuation of a foreclosure of this Mortgage or exercise of any other
remedies hereunder based on such other proceedings or judgments, and waives any
right to seek to dismiss, stay, remove, transfer or consolidate either any
action under this Mortgage or such other proceedings on such basis. Neither the
commencement nor continuation of proceedings to foreclose this Mortgage, nor
the exercise of any other rights hereunder nor the recovery of any judgment by
Mortgagee in any such proceedings or the occurrence of any sale in any such
proceedings shall prejudice, limit or preclude Mortgagee’s right to commence or
continue one or more foreclosure or other proceedings or obtain a judgment
against any other collateral (either in or outside the State in which the
Premises are located) which directly or indirectly secures the Obligations, and
Mortgagor expressly waives any objections to the commencement of, continuation
of, or entry of a judgment in such other sales or proceedings or exercise of
any remedies in such sales or proceedings based upon any action or judgment
connected to this Mortgage, and Mortgagor also waives any right to seek to
dismiss, stay, remove, transfer or consolidate either such other sales or
proceedings or any sale or action under this Mortgage on such basis. It is
expressly understood and agreed that to the fullest extent permitted by law,
Mortgagee may, at its election, cause the sale of all collateral which is the
subject of a single foreclosure action at either a single sale or at multiple
sales conducted simultaneously and take such other measures as are appropriate
in order to effect the agreement of the parties to dispose of and administer
all collateral securing the Obligations (directly or indirectly) in the most
economical and least time-consuming manner.


 


In the event of foreclosure of this Mortgage, Mortgagor hereby agrees
that the court may, and requests the court to, enter a special order directing
the clerk to enter and record the judgment contained in the foreclosure decree
on the Credit Agreement secured by this Mortgage without requiring that the
Credit Agreement be first filed with the clerk of the court for cancellation.
Mortgagor further agrees, because the Credit Agreement secured by this Mortgage
is also secured by other mortgages and will be necessary to a foreclosure of
those mortgages, that notwithstanding Iowa Rule of Civil Procedure 228, as
presently enacted or as hereinafter amended or replaced, the clerk of the court
may, in the event of foreclosure of this Mortgage, enter and record the
judgment contained in the foreclosure decree on the Credit Agreement secured by
this Mortgage without requiring that the Credit Agreement be first filed with
the clerk of court for cancellation.


 


26.         Successors and Assigns. All covenants of Mortgagor contained in
this Mortgage are imposed solely and exclusively for the benefit of Mortgagee,
and its successors and assigns, and no other person or entity shall have
standing to require compliance with such covenants or be deemed, under any
circumstances, to be a beneficiary
of such covenants, any or all of
which may be freely waived in whole or in part by Mortgagee at any time if in
the sole discretion of


 


15

















 


either
of them such a waiver is deemed advisable. All such covenants of Mortgagor
shall run with the land and bind Mortgagor, the successors and assigns of
Mortgagor (and each of them) and all subsequent owners, encumbrancers and
tenants of the Mortgaged Property, and shall inure to the benefit of Mortgagee
and its successors and assigns. The word “Mortgagor” shall be construed as if it
read “Mortgagors” whenever the sense of this Mortgage so requires, and if there
shall be more than one Mortgagor, the obligations of Mortgagors shall be joint
and several.


 


27.         No Waivers, etc. Any failure by Mortgagee to insist upon the
strict performance by Mortgagor of any of the terms and provisions of this
Mortgage shall not be deemed to be a waiver of any of the terms and provisions
hereof, and Mortgagee, notwithstanding any such failure, shall have the right
thereafter to insist upon the strict performance by Mortgagor of any and all of
the terms and provisions of this Mortgage to be performed by Mortgagor.
Mortgagee may release, regardless of consideration and without the necessity
for any notice to or consent by the holder of any subordinate lien on the
Mortgaged Property, any part of the security held for the obligations secured
by this Mortgage without, as to the remainder of the security, in any way
impairing or affecting the lien of this Mortgage or the priority of such lien
over any subordinate lien or deed of trust.


 


28.         Governing Law, etc. This Mortgage shall be governed by and
construed and interpreted in accordance with the laws of the State in which the
Mortgaged Property is located, except that Mortgagor expressly acknowledges
that by their respective terms the Credit Agreement and the Guarantee and
Collateral Agreement shall be governed and construed in accordance with the
laws of the State of New York, and for purposes of consistency, Mortgagor
agrees that in any in personam proceeding related to this Mortgage the rights of the parties to this Mortgage shall also be
governed by and construed in accordance with the laws of the State of New York
governing contracts made and to be performed in that State.


 


29.         Certain Definitions. Unless the context clearly indicates a
contrary intent or unless otherwise specifically provided herein, words used in
this Mortgage shall be used interchangeably in singular or plural form and the
word “Mortgagor” shall mean “each Mortgagor or any subsequent owner or owners
of the Mortgaged Property or any part thereof or interest therein,” the word “Mortgagee”
shall mean “Mortgagee or any successor agent for the Lenders,” the word “Person”
shall include any individual, corporation, partnership, limited liability company,
trust, unincorporated association, government, governmental authority, or other
entity, and the words “Mortgaged Property” shall include any portion of the
Mortgaged Property or interest therein. Whenever the context may require, any
pronouns used herein shall include the corresponding masculine, feminine or
neuter forms, and the singular form of nouns and pronouns shall include the
plural and vice versa. The captions in this Mortgage are for convenience or
reference only and in no way limit or amplify the provisions hereof.


 


30.         Duty of Mortgagee; Authority of Mortgagee. (a) Mortgagee’s sole duty with respect
to the custody, safekeeping and physical preservation of the Mortgaged Property
which is in its possession, or otherwise, shall be to deal with it in the same
manner as Mortgagee deals with similar property for its own account. Neither
Mortgagee, any Secured Party nor any of their respective officers, directors,
employees or agents shall be liable for failure to demand, collect or realize
upon any of the Mortgaged Property
or for any delay in doing so or shall be under any obligation to sell or otherwise dispose of any Mortgaged Property
upon the request of Mortgagor or any other Person or to take any other action
whatsoever with regard to the Mortgaged Property


 


16

















 


or any part thereof. The powers conferred on
Mortgagee and the Secured Parties hereunder are solely to protect Mortgagee’s
and the Secured Parties’ interests in the Mortgaged Property and shall not
impose any duty upon Mortgagee or any Secured Party to exercise any such
powers. Mortgagee and the Secured Parties shall be accountable only for amounts
that they actually receive as a result of the exercise of such powers, and
neither they nor any of their officers, directors, employees or agents shall be
responsible to Mortgagor for any act or failure to act hereunder, except for
their own gross negligence or willful misconduct.


 


(b)           Mortgagor acknowledges that the rights and
responsibilities of Mortgagee under this Mortgage with respect to any action
taken by Mortgagee or the exercise or non-exercise by Mortgagee of any option,
voting right, request, judgment or other right or remedy provided for herein or
resulting or arising out of this Mortgage shall, as between Mortgagee and the
Secured Parties, be governed by the Credit Agreement and by such other
agreements with respect thereto as may exist from time to time among them, but,
as between Mortgagee and Mortgagor, Mortgagee shall be conclusively presumed to
be acting as agent for the Secured Parties with full and valid authority so to
act or refrain from acting, and Mortgagor shall be under no obligation, or
entitlement, to make any inquiry respecting such authority.


 


31.         Last Dollars
Secured; Priority. To the extent that this Mortgage secures only a portion of the
indebtedness owing or which may become owing by Mortgagor to the Secured
Parties, the parties agree that any payments or repayments of such indebtedness
shall be and be deemed to be applied first to the portion of the indebtedness
that is not secured hereby, it being the parties’ intent that the portion of
the indebtedness last remaining unpaid shall be secured hereby. If at any time
this Mortgage shall secure less than all of the principal amount of the
Obligations, it is expressly agreed that any repayments of the principal amount
of the Obligations shall not reduce the amount of the lien of this Mortgage
until the lien amount shall equal the principal amount of the Obligations outstanding.


 


32.         Enforcement Expenses; Indemnification. (a) Mortgagor agrees to pay or reimburse each
Secured Party and Mortgagee for all its reasonable out-of-pocket costs and
expenses incurred in collecting against Mortgagor or otherwise enforcing or
preserving any rights under this Mortgage and the other Loan Documents to which
Mortgagor is a party, including, without limitation, the reasonable fees and
disbursements of counsel to each Secured Party and of counsel to Mortgagee.


 


(b)           Mortgagor agrees to pay, and to save
Mortgagee and the Secured Parties harmless from, any and all liabilities with
respect to, or resulting from any delay in paying, any and all stamp, excise,
sales or other taxes which may be payable or determined to be payable with
respect to any of the Mortgaged Property or in connection with any of the
transactions contemplated by this Mortgage.


 


(c)           Mortgagor agrees to pay, and to save
Mortgagee and the Secured Parties harmless from, any and all liabilities,
obligations, losses, damages, penalties, claims, demands, actions, judgments
and suits and related reasonable out-of-pocket expenses (including Attorney
Costs) of any kind or nature whatsoever with respect to the execution,
delivery, enforcement, performance and administration of this Mortgage to the
extent the Borrowers would be required to do so pursuant to Section 10.05
of the Credit Agreement.


 


17

















 


(d)           The agreements in this Section shall
survive repayment of the Obligations and all other amounts payable under the
Credit Agreement and the other Loan Documents.


 


33.         Redemption. It is agreed that, if this Mortgage covers less than ten (10) acres
of land, in the event of the foreclosure of this Mortgage and sale of the
Mortgaged Property by sheriff’s sale in such foreclosure proceedings, the time
of one (1) year for redemption from said sale provided by the statutes of
the State of Iowa shall be reduced to six (6) months; provided Mortgagee
in such action files an election to waive any deficiency judgment against
Mortgagor which may arise out of the foreclosure proceedings; all to be
consistent with the provisions of Section 628.26
and of Chapter 628, Iowa Code. If the redemption period is so reduced,
Mortgagor or its successors in interest or the owner shall have the exclusive
right to redeem for the first three (3) months after such sale, and the
time periods in Sections 628.5, 628.15 and 628.16 of the Iowa Code shall be
reduced to four (4) months. It is further agreed that the period of
redemption after a foreclosure of this Mortgage shall be reduced to sixty (60)
days if all of the three (3) following contingencies exist: (1) the
Mortgaged Property is less than ten (10) acres in size; (2) the court
finds affirmatively that said real estate has been abandoned by the owners and
those persons personally liable under this Mortgage at the time of such
foreclosure; and (3) Mortgagee in such action files an election to waive
any deficiency judgment against Mortgagor or its successors in interest in such
action, all to be consistent with the provisions of Section 628.27 and of
Chapter 628, Iowa Code. If the redemption period is so reduced, Mortgagor or
its successors in interest or the owner shall have the exclusive right to
redeem for the first thirty (30) days after such sale, and the time provided
for redemption by creditors as provided in Sections 628.5, 628.15 and 628.16,
Iowa Code, shall be reduced to forty (40) days. Entry of appearance by pleading
or docket entry by or on behalf of Mortgagor shall give rise to a presumption
that the Premises are not abandoned. Any such short redemption period shall be
consistent with all of the provisions of Chapter 628, Iowa Code, as amended;
provided, however, that any statement in this Section or elsewhere to the
contrary notwithstanding, Mortgagor does, if permitted by law at the time of
foreclosure, waive any and all rights of redemption. In addition to the above-described
provisions regarding the possible reduction of the redemption period applicable
in the event of foreclosure of this Mortgage by Mortgagee, Mortgagor and
Mortgagee agree that in the event of the foreclosure of this Mortgage and sale
of the real estate included within the Mortgaged Property by sheriff’s sale in
such foreclosure proceedings, the time of one hundred eighty (180) days for
redemption from said sale provided by the statutes shall be reduced to ninety
(90) days provided Mortgagee waives in such foreclosure proceedings any rights
to a deficiency judgment against Mortgagor which may arise out of the
foreclosure proceedings; all to be consistent with all provisions of Section 628.28
and of Chapter 628, Iowa Code.


 


34.         No Agricultural Use. Mortgagor warrants that the Premises is not
used for agricultural purposes as defined in Iowa Code Section 535.13 and
is not agricultural land as defined in Iowa Code Section 9H. 1. Mortgagor
further warrants the Premises is not a one-family or two-family dwelling.
Mortgagor hereby waives and renounces all homestead and similar exemption
rights with respect to the Mortgaged Property provided for by the Constitution
and the laws of the United States and the State of Iowa.


 


35.         Brokers. Mortgagor further represents and warrants to Mortgagee that no loan
broker as defined in Iowa Code Chapter 535C was involved either directly or
indirectly in connection with the transactions contemplated by the Mortgage.


 


18

















 


36.         Release. If any of the
Mortgaged Property shall be sold, transferred or otherwise disposed of by any
Mortgagor in a transaction permitted by the Credit Agreement and the Net Cash
Proceeds are applied in accordance with the terms of the Credit Agreement, then
Mortgagee, at the request and sole expense of such Mortgagor, shall execute and
deliver to such Mortgagor all releases or other documents reasonably necessary or desirable for the release of the
Liens created hereby on such Mortgaged Property. Mortgagor shall deliver to
Mortgagee, at least five (5) Business Days prior to the date of the
proposed release, a written request for release identifying the sale or other
disposition in reasonable detail, including the price thereof and any expenses
in connection therewith, together with a certification by Mortgagor stating
that such transaction is in compliance with, and permitted by, the Credit
Agreement and the other Loan Documents.


 


IMPORTANT: READ BEFORE SIGNING. THE TERM OF THIS
AGREEMENT SHOULD BE READ CAREFULLY BECAUSE ONLY THOSE TERMS IN WRITING ARE
ENFORCEABLE. NO OTHER TERMS OR ORAL PROMISES NOT CONTAINED IN THIS WRITTEN
CONTRACT MAY BE LEGALLY ENFORCED. YOU MAY CHANGE THE TERMS OF THIS
AGREEMENT ONLY BY ANOTHER WRITTEN AGREEMENT.


 


19

















 


This Mortgage has been duly
executed by Mortgagor as of the date first above written and is intended to be
effective as of such date.


 


 


	
   

  	
  BOOKS ARE FUN, LTD.,

  
	
   

  	
  an Iowa corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  



 


[SIGNATURE
PAGE TO IOWA MORTGAGE]


 

















 


	
  STATE OF New York

  	
  )

  
	
   

  	
   

  
	
   

  	
  : SS.:

  
	
   

  	
   

  
	
  COUNTY OF Westchester

  	
  )

  



 


On the             day
of March, in the year 2007, before me, the undersigned, personally appeared
personally known to me or proved to me on the
basis of satisfactory evidence to be the individual whose name is subscribed to
the within instrument and acknowledged to me that s/he executed the same in
his/her capacity, and that by his/her signature on the instrument, the
individual, the person or entity upon behalf of which the individual acted,
executed the instrument.


 


 


	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Notary Public  

  [affix stamp and seal]

  	
   

  	
   

  
				



 


[SIGNATURE
PAGE TO IOWA MORTGAGE]


 
















 


TITLE AFFIDAVIT AND GAP INDEMNITY


 


	
  STATE
  OF                    ,

  	
  )

  
	
   

  	
  )     SS.:

  
	
  COUNTY
  OF

  	
  )

  



 


The undersigned,                                                  ,
in his/her capacity as                                   ,
of Books Are Fun, Ltd., an Iowa corporation (“Books”), intending that Books
(and not the undersigned individually) shall be bound hereby, being duly sworn,
deposes and says:


 


(1)          Books is the record owner of three real properties located in Firfield,
Iowa, known, respectively, as and by the street addresses 111 North Main
Street, 123 North Main Street and 1680 Highway 1 (collectively the “Properties”)
which Properties are more particularly identified in the title commitment
bearing Commitment No. 214639 (the “Title Commitment”) issued by LandAmerica
Lawyers Title Insurance Corporation (the “Title Company”). The undersigned is
familiar with the Properties and with the facts set forth herein.


 


(2)          To the best of my knowledge, Books has paid all real estate taxes,
special assessments, water and sewer charges and management fees, if any, with
respect to the Properties which would be delinquent if not paid on or prior to
the date hereof (and to the extent that any of the foregoing has not been paid
by the date hereof, same will be paid within 30 days of the date hereof).


 


(3)          To the best of my knowledge, no labor has been supplied to the
Properties and no materials have been delivered to the Properties that might
become the subject of a labor, mechanic’s or materialmen’s lien on the
Properties, except for labor and/or materials which will be paid for in the
ordinary course of business.


 


(4)          There are no existing tenancies, leases or other occupancy agreements
affecting the Properties.


 


(5)          To the best of my knowledge, there are no judgments,  decrees or orders before any court or judicial officer against Books
for the payment of money and no proceedings before any court or officer of the
United States or any state affecting Books or the Properties which are likely
to result in such an order, judgment or decree except in each case for orders,
judgments or decrees which will be paid in the ordinary course of business by
Books after Books exhausts or waives any and all rights it may have to appeal
the same.


 


[[2683796]]


 

















 


(6)          In
order to effectuate a New York-style closing, Books agrees, with respect to the
Properties, that it will not in any way encumber the Properties from the date
of the Commitment forward to the date that the Mortgage, Security Agreement,
Assignment of Leases and Rents, and Fixture Filing (the “Mortgage”) to be
insured pursuant to the Title Commitment and to be dated as of the date of the
closing (“Closing”) under the “Credit Agreement” (as defined in the Mortgage),
which Mortgage was made by Books in favor of JPMorgan Chase Bank, N.A. (“JPMorgan”),
acting as Administrative Agent, is recorded, and Books hereby agrees to
indemnify and hold the Title Company harmless from any loss, cost, claim or
damage that the Title Company may sustain or incur by reason of any encumbrance
of the Properties by Books from this date to the date the Mortgage is recorded
against the Properties.


 


(7)          This
Affidavit is made for the purpose of inducing the Title Company to issue,
pursuant to the Title Commitment, a lender’s policy of title insurance with
respect to the Mortgage in connection with the Closing.


 


(8)          Books
hereby indemnifies and agrees to hold the Title Company harmless from and
against any damages or expenses, including reasonable attorney’s fees sustained
by the Title Company as a result of the falsity of any statement contained
herein.


 


	
   

  	
   

  
	
   

  	
  Name: 

  
	
   

  	
  in his/her official capacity as

  
	
   

  	
  Vice President and Treasurer of

  
	
   

  	
  Books Are Fun, Ltd. (not
  intending

  
	
   

  	
  to be personally liable
  hereunder).

  



 


Sworn to before me this


        day
of         , 2007.


 


	
   

  	
   

  
	
  Notary Public

  	
   

  



 

















 


Schedule A


 


Description of the Land


 


Parcel
1:


 


The North Forty-Four (44) feet of Lots Three (3) and Four (4) in
Block Eight (8) of the Old Plat to the City of Fairfield, Jefferson
County, Iowa, and a strip of land which is part of the former right of way of
Briggs and Main Streets adjacent to the North 44 feet of Lots Three (3) and
Four (4) in Block Eight (8), Old Plat to the City of Fairfield, Jefferson
County, Iowa, described as follows:


 


Beginning at the Northeast Corner of Lot 3, Block 8, Old Plat; thence
West 59.9 feet to the Point of Beginning; thence North 1.4 feet; thence West 72.4 feet; thence South 45.4 feet; thence East .3 feet; thence
North 44 feet to the Northwest Corner of Lot 4, Block 8, Old Plat; thence East 72.1 feet to the Place of Beginning, situated in Jefferson
County, Iowa.


 


Parcel
2:


 


The West Two-Thirds (2/3) of Lot Five (5), Block Eight (8) of Old Plat of the City of Fairfield,
Jefferson County, Iowa.


 


Parcel
3:


 


Auditor’s designated parcel “A”  of
the East Half of the Southeast
Quarter of Section 2, Township 72 North, Range 10 West of the Fifth
Principal Meridian in Jefferson County, Iowa, more particularly described as
follows:


 


Commence at the Southeast Corner of said Section 2; thence run
North 00 degrees 42 minutes 22 seconds East along the East line of the
Southeast Quarter of said Section 2 for 767.01 feet; thence run North 90
degrees 00 minutes 00 seconds West for 128.65 feet to the Westerly right-of-way
line of Iowa Highway No. 1 and the Point of Beginning; thence continue
North 90 degrees 00 minutes 00
seconds West for 200.00 feet;
thence run South 00 degrees 00 minutes 00 seconds West for 65.00 feet; thence
run South 90 degrees 00 minutes 00 seconds West for 839.03 feet; thence run North 00 degrees 00 minutes 00 seconds East for 1038.30 feet; thence run
South 90 degrees 00 minutes 00 seconds East for 1036.12 feet to the Westerly
right-of-way line of Iowa Highway No. 1; thence  run South
10 degrees 28 minutes 28 seconds East along said right-of-way line for 132.68
feet; thence run South 01 degrees 47 minutes 25 seconds West along said
right-of-way line for 299.60 feet to the beginning of a tangent
circular curve; thence run Southerly for 543.51 feet along an arc of a curve
concave Easterly with a radius of 28,770 feet and a chord of 543.50 feet
bearing South 01 degrees 14 minutes 57 seconds West to the Point of Beginning.


 
















 


EXHIBIT H-1


 


[FORM OF]


CRAVATH, SWAINE & MOORE LLP


 




	
   

  	
   

  	
   

  	
  March 2, 2007

  






 


RDA Holding Co. 

Credit Agreement dated as of March 2, 2007


 


Ladies and Gentlemen:


 


We have acted as special New York counsel to RDA
Holding Co., a Delaware corporation (“Holdings”), in connection with the
Credit Agreement dated as of the date hereof (the “Credit Agreement”),
among Holdings, Doctor Acquisition Co., a Delaware corporation (to be merged
with and into Reader’s Digest (as defined below), the “Borrower”), The
Reader’s Digest Association, Inc., a Delaware corporation (“Reader’s
Digest”), RD German Holdings GmbH, a company organized under the laws of
Germany (the “German Borrower”), the lending institutions party thereto
(the “Lenders”), JPMorgan Chase Bank, N.A., as administrative agent for
the Lenders (the “Administrative Agent”), Citicorp North America, Inc.
and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as
co-syndication agents for the Lenders (the “Co-Syndication Agents”), and
The Royal Bank of Scotland PLC, as documentation agent for the Lenders (the “Documentation
Agent”). This opinion is being delivered to you pursuant to Section 4.01(a)(v)(u) of
the Credit Agreement. Capitalized terms used but not defined herein have the
meanings assigned to them in the Credit Agreement.


 


In that connection, we have examined originals, or
copies certified or otherwise identified to our satisfaction, of such
documents, corporate records and other instruments as we have deemed necessary
or appropriate for purposes of this opinion, including:


 


(i)        the Credit Agreement,


 


(ii)       the Guarantee and Collateral Agreement dated as of the date hereof (the “Security
Agreement”), made by Holdings, the Borrower, Reader’s Digest and the
entities listed on Schedule I hereto (together with the German


 

















 


Borrower, each a “Loan Party” and
collectively, the “Loan Parties”), in favor of the Administrative Agent,


 


(iii)     the Mortgages identified on Schedule II hereto,


 


(iv)     the agreements identified on Schedule III hereto (collectively, the “Specified
Agreements”),


 


(v)      the UCC-1 financing statement listed on Schedule IV hereto, together with
all schedules and exhibits to such financing statement, to be filed in the
Office of the Secretary of State of the State of New York (the “New York
Filing Office”) (the “New York Financing Statement”),


 


(vi)     the Certificate of Incorporation of Direct Holdings Libraries Inc., a
corporation organized under the laws of the State of New York (the “New York
Loan Party”), as amended,


 


(vii)    the By laws of the New York Loan Party,


 


(viii)   resolutions adopted by the Board of Directors of the New York Loan Party
on March 2, 2007, and


 


(ix)      a certificate dated as of the date hereof, from officers of each of the
Loan Parties (the “Officer’s Certificate”), attached as Exhibit A
hereto.


 


The documents described in clauses (i), (ii) and
(iii) of the immediately preceding sentence are sometimes referred to
herein as the “Agreements”, and the documents described in clauses (ii) and
(iii) are sometimes referred to herein as the “Collateral Agreements”.
We have also relied, with respect to certain factual matters, on the
representations and warranties of each Loan Party contained in the Agreements
and have assumed compliance by each Loan Party with the terms of the
Agreements.


 


In rendering our opinion, we have assumed (a) the
genuineness of all signatures, (b) the due existence of each Loan Party
not organized under the laws of the State of New York (each, a “Non-New York
Loan Party”), (c) that each Non-New York Loan Party has all necessary
power, authority and legal right to execute and deliver the Agreements to which
it is a party and to perform its obligations thereunder, (d) the due
authorization, execution and delivery of the Agreements by all parties thereto
other than the New York Loan Party, (e) the authenticity of all documents
submitted to us as originals, (f) the conformity to original documents of
all documents submitted to us as copies, (g) that the choice of New York
law contained in the Agreements is legal and valid under  the laws of
Germany and that insofar as any obligation under any Agreement is to be
performed in, or by a party organized under the laws of, any jurisdiction
outside the State of New York, its performance will not be illegal or
ineffective in any jurisdiction by virtue of the law of that jurisdiction and (h) that
the First Supplemental Indenture dated as of February 8, 2007, among The
Reader’s Digest Association, Inc. and The Bank of New York, as successor
trustee, to the Indenture dated as of March 3, 2004,


 


2

















 


between The Reader’s Digest Association, Inc.
and The Bank of New York, as successor trustee, is effective and has become
operative in accordance with the terms thereof.


 


Based on the foregoing and subject to the
qualifications hereinafter set forth, we are  of opinion as follows:


 


1.   Based solely on a certificate from the Secretary of State of the State of
New York, the New York Loan Party is a subsisting corporation under the laws of
the State of New York. The New York Loan Party has all necessary corporate power  and
authority to execute and deliver the Agreements to which it is a party and to
perform its obligations thereunder.


 


2.   (a) The execution and delivery by the New York Loan Party of the
Agreements to which it is a party, the performance by the New  York
Loan Party of its obligations thereunder and the grant by the New York Loan
Party of security interests pursuant to the Collateral Agreements to which it
is a party (i) have been duly authorized by all requisite corporate action
on the part of the New York Loan Party and (ii) do not violate the
Certificate of Incorporation or By-laws of the New York Loan Party.


 


(b) The execution and delivery by each
Loan Party of the Agreements to which it is a party, the performance by each
Loan Party of its obligations thereunder and the grant by each Loan Party of
security interests pursuant to the Collateral Agreements to which it is a party
(i) do not violate any law, rule or regulation of the United States
of America or the State of New York and (ii) do not result in a breach of
or constitute a default under the express terms and conditions of the Specified
Agreements. Our opinion in clause (ii) of the preceding sentence relating
to the Specified Agreements does not extend to compliance with any financial
ratio or any limitation in any contractual restriction expressed as a dollar
amount (or an amount expressed in another currency) or to performance under any
contractual restriction in the Agreements to the extent it restricts actions
required under the Specified Agreements.


 


3.   The Agreements to which the New York Loan Party is a party have each been
duly executed and delivered by the New York Loan Party. To the extent governed
by New York law, each Agreement constitutes a legal, valid and binding
obligation of each Loan Party party thereto, enforceable against such Loan
Party in accordance with its terms, subject in each case to applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and
other similar laws relating to or affecting creditors’ rights generally from
time to time in effect and to general principles of equity (including, without
limitation, concepts of materiality, reasonableness, good faith and fair
dealing), regardless of whether considered in a proceeding in equity or at law.
The foregoing opinion is subject to the following qualifications: (i) certain
provisions of the Collateral Agreements are or may be unenforceable in whole or
part under the laws of the State of New York, but the inclusion of such
provisions does not affect the validity of the Collateral Agreements
or the liens and security interests purported to be created
by the Collateral Agreements, and the Collateral Agreements contain adequate
provisions for the practical realization of the principal rights and benefits
intended to be afforded thereby, (ii) insofar as provisions contained in
the


 


3

















 


Agreements provide for indemnification or
limitations on liability, the enforceability thereof may be limited by public
policy considerations, (iii) the availability of a decree for specific
performance or an injunction is subject to the discretion of the court
requested to issue any such decree or injunction and (iv) we express  no
opinion as to the effect of the laws of any jurisdiction other than the State
of New York where any Lender may be located or where enforcement of the
Agreements may be sought that limit the rates of interest legally chargeable or
collectible.


 


4.   No authorization, approval or other action by, and no notice to, consent
of, order of or filing with, any United States Federal or New York State
governmental authority is required to be made or obtained by any Loan Party in
connection with the execution, delivery and performance by any Loan Party of
the Agreements to which it is a party or the grant by each Loan Party of the
security interests under the Collateral Agreements to which it is a party,
other than (i) such reports to United States governmental authorities
regarding international capital and foreign currency transactions as may be
required pursuant to 31 C.F.R. Part 128, (ii) those that have been
made or obtained and are in full force and effect or as to which the failure to
be made or obtained or to be in full force and effect should not result,
individually or in the aggregate, in a material adverse effect on Holdings and
its Subsidiaries, taken as a whole, (iii) such registrations, filings and
approvals under Federal or state laws as may be necessary in connection with
the exercise of remedies or sale of collateral or the granting of additional
security interests or guarantees pursuant  to the Agreements, (iv) such  registrations,
filings or approvals that are required in order to perfect or record security
interests granted under the Agreements and (v) such registrations, filings
and approvals that may be required because of the legal or regulatory status of
any Lender or because of any other facts specifically pertaining to any Lender.


 


5.   Assuming that the Borrower and the German Borrower comply with the
provisions of the Credit Agreement relating to the use of proceeds of the
Loans, the making of the Loans under the Credit Agreement on the date hereof
does not violate Regulation T, U or X of the Board of Governors of the Federal
Reserve System.


 


6.   Based solely on the Officer’s Certificate, none of the Loan Parties is
required to register as an “investment company” as such term is defined in the
Investment Company Act of 1940, as amended.


 


7.   The provisions of the Security Agreement are sufficient to create in
favor of the Administrative Agent for the benefit of the Secured Parties a
security interest in all right, title and interest of each Loan Party party
thereto in such of the Collateral (as defined therein) as constitutes “accounts”,
“chattel paper”, “deposit accounts” , “documents”, “equipment”, “general
intangibles”, “instruments”, “inventory”, “investment property” and “letter-of-credit
rights” within the meaning of the Uniform Commercial Code of the State of New
York as in effect on the date hereof (the “New York UCC”) (such of the
Collateral being hereinafter referred to as the “Specified UCC Collateral”
and the Specified UCC Collateral other than any Collateral that constitutes “deposit
accounts”, “letter-of-credit rights” or “fixtures” (as defined in Section 9-102
of the New York UCC) being hereinafter referred to as the “UCC Filing
Collateral”), to the


 


4

















 


extent that the creation of security interests in
the Specified UCC Collateral is governed by the New York UCC.


 


8.   The New York Financing Statement is in proper form for filing in the
State of New York. Upon the filing and proper indexing of the New York
Financing Statement in the New York Filing Office, describing the UCC Filing
Collateral, the security interest granted to the Administrative Agent in the
UCC Filing Collateral described in the New York Financing Statement will be
perfected, to the extent perfection is governed by the New York UCC and may be
accomplished by the filing in the State of New York of financing statements
under the New York UCC.


 


The opinion expressed in this paragraph 8 is based
on the assumption that all filings and recordings necessary to maintain the
effectiveness of the New York Financing Statement will be made, including
without limitation (i) continuation statements and (ii) such other
statements as may be required by (x) any change in name, identity or
corporate structure of the New York Loan Party or the Administrative Agent, or (y) any
change in the location of the New York Loan Party.


 


9.   Upon delivery to and the continued possession by the Administrative Agent
for the benefit of the Secured Parties, in each case in the State of New York,
of all certificates evidencing the Pledged Equity (as defined in the Security
Agreement) in registered form and described in Schedule 2 attached to the
Security Agreement and pledged on the date hereof under the Security Agreement
that constitute certificated securities within the meaning of Article 8 of
the New York UCC (the “Pledged Certificates”), issued or endorsed in the
name of the Administrative Agent or in blank or together with stock powers
properly executed in the name of the Administrative Agent or in blank with
respect thereto, the security interest in favor of the Administrative Agent for
the benefit of the Secured Parties in such Pledged Certificates will be
perfected, which security interest in such Pledged Certificates will be prior
to any security interest, lien, charge or encumbrance that must be perfected by
possession or filing under the New York UCC, to the extent that the creation
and perfection of security interests in such Pledged Certificates is governed
by the New York UCC.


 


The opinion expressed in this paragraph 9 is based
on the assumption that the Administrative Agent has obtained control (for
purposes of Article 9 of the New York UCC) of, and the Secured Parties
have acquired their security interest in, the Pledged Certificates for value.
For purposes of the foregoing sentence, the term “value” shall have the meaning
given to such term in the New York UCC.


 


10. Our opinions expressed in paragraphs 7, 8 and 9 are further qualified as
follows:


 


(a)       we express no opinion as to (i) rights in or title to the Pledged
Certificates or any Collateral held by any Loan Party or (ii) the
completeness or accuracy of the description in such documents of any
Collateral;


 


5

















 


(b)      we express no opinion as to
the creation or perfection of any security interests (i) in any item of
Collateral other than (as to creation and perfection) the Pledged Certificates,
and (as to creation and, solely with respect to the UCC Filing Collateral
described in the New York Financing Statement, perfection) the Specified UCC
Collateral, (ii) in any item of Collateral that is expressly excluded from
the application of the New York UCC pursuant to Section 9-109 thereof or (iii) in
any item of Collateral that is subject to (x) a statute or treaty of the
United States that provides for a national or international registration or a
national or international certificate of title for the perfection of a security
interest therein or that specifies a place of filing different from that
specified in the New York UCC for filing to perfect such security interest or (y) a
certificate of title statute;


 


(c)       we express no opinion as to the perfection of any security interest in
any “proceeds” (as such term is defined in the New York UCC) and note that the creation
or perfection of any such interest is limited to the extent set forth in
Section 9-315 of the New York UCC;


 


(d)      except as specifically set forth in paragraph 9, we express no opinion as
to the priority of any security interest created under the Agreements, and we
express no opinion in paragraph 9 as to the relative priority of the security
interest in the Pledged Certificates as against (i) any claim or lien in
favor of the United States of America or any agency or instrumentality thereof
(including, without limitation, Federal tax liens and liens under Title IV of
the Employee Retirement Income Security Act of 1974, as amended), (ii) the
claim of a lien creditor to the extent set forth in Section 9-317 or 9-323
of the New York UCC, (iii) another secured party with a perfected security
interest in other property of any Loan Party to the extent any item of
Collateral constitutes proceeds of such other creditor’s property to the extent
set forth in Section 9-322 of the New York UCC or (iv) in the case of
certificated securities, negotiable documents or instruments (as defined in
Section 9-102(a)(47) of the New York UCC), another secured party with a
security interest perfected without filing or the taking of possession to the
extent set forth in Section 9-312(e) of the New York UCC;


 


(e)       in the case of property that becomes Collateral after the date hereof,
Section 552 of Title 11 of the United States Code (the “Bankruptcy Code”)
limits the extent to which property acquired by a debtor after the commencement
of a case under the Bankruptcy Code may be subject to a security interest
arising from a security agreement entered into by the debtor before the
commencement of such case;


 


(f)       we express no opinion as to the validity or enforceability of any security
interest in goods (as defined in the New York UCC) that have been bought by a
buyer in the ordinary course of business (as defined in Section 1-201 of
the New York UCC);


 


6

















 


(g)      we express no opinion as to perfection of any security interest in
“deposit accounts”, “letter of credit rights” or “fixtures”;


 


(h)      we express no opinion regarding any copyrights, patents, trademarks,
service marks or other intellectual property, the proceeds thereof, or money due
with respect to the lease, license or use thereof except to the extent
Article 9 of the New York UCC may be applicable to the foregoing, and we
express no opinion as to the effect of any Federal laws relating to copyrights,
patents, trademarks, service marks or other intellectual property on the
opinions expressed herein;


 


(i)        we express no opinion as to security interests in any item of collateral
subject to any restriction on or prohibition against assignment or transfer
contained in or otherwise applicable to such item of collateral or any
contract, agreement, license, permit, security, instrument or document
constituting, evidencing or relating to such item, except to the extent that
any such restriction or prohibition is rendered ineffective pursuant to any of
Sections 9-406 through 9-409, inclusive, of the New York UCC. We note that even
though the New York UCC may render such a restriction or prohibition
ineffective for purposes of creation or perfection of a security interest,
nonetheless, in many cases, such a security interest may represent only limited
rights in the related items of collateral and be subject to various
restrictions (including restrictions on rights of use, assignment and
enforcement);


 


(j)        we express no opinion as to any Collateral constituting claims against
any government or governmental agency, including any Collateral that is subject
to the Federal Assignment of Claims Act; and


 


(k)       we note that certain issuers of the Pledged Certificates are organized
under the laws of jurisdictions outside the United States of America, and,
accordingly, it may be necessary to comply with the laws of such jurisdictions
properly to create, perfect, maintain, enforce or preserve the priority of a
security interest in any such Pledged Certificates and we express no opinion
with respect to whether or to what extent the New York UCC would govern the
creation, perfection or priority of a security interest in any such Pledged
Certificates or the effect, if any, of the laws of such jurisdictions on the
rights of a secured party in such Pledged Certificates.


 


We
express no opinion herein as to any provision in any Agreement that (a) relates
to the subject matter jurisdiction of any Federal court of the United States of
America, or any Federal appellate court, to adjudicate any controversy related
to the Agreements (such as the provision found in Section 10.16(b) of
the Credit Agreement), (b) contains a waiver of an inconvenient forum
(such as the provision found in Section 10.16(b) of the Credit
Agreement), (c) relates to a right of setoff in respect of purchases of
interests in loans (such as the provision found in Section 2.13 of the
Credit Agreement) or with respect to parties that may not hold mutual debts
(such as the provision found in Section 10.09 of the Credit Agreement), (d) provides
for liquidated


 


7

















 


damages
or penalty interest, (e) relates to the waiver of rights to jury trial
(such as the provision found in Section 10.17 of the Credit Agreement), (f) relates
to governing law to the extent that it purports to affect the choice of law
governing perfection and the effect of perfection and non-perfection of
security interests or (g) relates to any arrangement or similar fee
payable to any arranger (including the Arrangers and the Administrative Agent)
of the commitments or loans under the Credit Agreement or any fee not set forth
in the Agreements. We also express no opinion as to (i) the enforceability
of the provisions of any Agreement to the extent that such provisions
constitute a waiver of
illegality as a defense to performance of contract obligations or any other
defense to performance which cannot, as a matter of law, be effectively waived,
(ii) whether a state court outside the State of New York or a Federal
court of the United States would give effect to the choice of New York law
provided for in the Agreements or (iii) Section 8.06 or 10.24 of the
Credit Agreement or Section 8.18 or 8.19 of the Security Agreement.


 


Courts
in the United States have not customarily rendered judgments for money damages
denominated in any currency other than United States dollars. Section 27(b) of
the Judiciary Law of the State of New York provides, however, that a judgment
or decree in an action based upon an obligation denominated in a currency other
than United States dollars shall be rendered in the foreign currency of the
underlying obligation and converted into United States dollars at the rate of
exchange prevailing on the date of the entry of the judgment or decree. We
express no opinion as to whether a Federal court would render a judgment other
than in United States dollars.


 


We
note that the Specified Agreements purport to restrict assignment by a party
without the consent of the other parties thereto and we express no view in
paragraph 2 above as to the granting of security interests in the rights of
Loan Parties under the Specified Agreements or the exercise of the rights or
remedies of the Administrative Agent under
the Collateral Agreements with respect to the Specified Agreements.


 


We
understand that you are satisfying yourselves as to the status under Section 548
of the Bankruptcy Code and applicable state fraudulent conveyance laws of the
obligations of each Loan Party and the security interests of the Administrative
Agent and the Lenders under the Agreements, and we express no opinion thereon.


 


We
are admitted to practice only in the State of New York, and we express no
opinion as to matters governed by any laws other than the laws of the State of
New York and the Federal law of the United States of America. In particular, we
do not purport to pass on any matter governed by the laws of Germany. Our
opinions relating to security interests are limited to Article 8 and Article 9
of the New York UCC and do not address (i) laws of jurisdictions other
than New York, and laws of New York except for Article 8 or Article 9,
as the case may be, (ii) collateral of a type not subject to Article 8
or Article 9 of the New York UCC, (iii) what law governs perfection
and the effect of perfection or
non-perfection of such security interests or (iv) the effect, if any, of
laws of jurisdictions other than New York on the creation, perfection or
priority of such security interests.


 


8

















 


This
opinion is rendered only to the Administrative Agent, the Co-Syndication
Agents, the Documentation Agent and the Lenders under the Credit Agreement and
is solely for their benefit in connection with the above transactions. In
addition, we hereby consent to reliance on this opinion by a permitted assign
of a Lender’s interest in the Credit Agreement, provided that such
permitted assign becomes a Lender on or prior to the 30th day after the date of
this opinion. We are opining as to the matters herein only as of the date
hereof, and, while you are authorized to deliver copies of this opinion to such
permitted assigns and they are permitted to rely on this opinion, the rights to
do so do not imply any obligation on our part to update this opinion. This
opinion may not be relied upon by any other person or for any other purpose or
used, circulated, quoted or otherwise referred to for any other purpose.


 


	
   

  	
  Very truly yours,

  



 


JPMorgan
Chase Bank, N.A.,


as
Administrative Agent,


Citicorp
North America, Inc. and


Merrill
Lynch, Pierce, Fenner & Smith Incorporated,


as
Co-Syndication Agents,


The
Royal Bank of Scotland PLC,


as
Documentation Agent,


under
the Credit Agreement referred


to
above, and the Lenders party


to
the Credit Agreement


 


In
care of:


JPMorgan
Chase Bank, N.A.


270
Park Avenue


New
York, New York 10017


 


9
















EXHIBIT H-2


 


[FORM OF]


RICHARDS, LAYTON & FINGER

A PROFESSIONAL ASSOCIATION

ONE RODNEY SQUARE

920 NORTH KING STREET

WILMINGTON, DELAWARE 19801

(302) 651-7700

FAX (302) 651-7701

WWW.RLF.COM


 


March 2, 2007


 


To
Each of the Persons Listed

on Schedule A Attached Hereto


 


Re:                               The Reader’s
Digest Association, Inc.


 


Ladies
and Gentlemen:


 


We
have acted as special Delaware counsel for Ripplewood Holdings L.L.C., a
Delaware limited liability company, in connection with (i) the Credit
Agreement, dated as of March 2, 2007 (the “Credit Agreement”), among
Doctor Acquisition Co., a Delaware corporation (“Acquisition Co.”), RDA Holding
Co., a Delaware corporation (“Holding Co.”), The Reader’s Digest Association, Inc.,
a Delaware corporation (“Reader’s Digest”), the Overseas Borrowers (as defined
therein) from time to time party thereto, JPMorgan Chase Bank, N.A., as
administrative agent (the “Administrative Agent”), the lenders from time to
time party thereto, Citicorp North America, Inc. and Merrill Lynch,
Pierce, Fenner & Smith Incorporated, as co-syndication agents, and The
Royal Bank of Scotland plc, as documentation agent; and (ii) the matters
set forth herein relating to each of the Delaware corporations listed on
Schedule B attached hereto (each, a “Delaware Corporation” and collectively,
the “Delaware Corporations”) and each of the Delaware limited liability
companies listed on Schedule C attached hereto (each, a “Delaware LLC” and
collectively, the “Delaware LLCs”). At your request, this opinion is being
furnished to you.


 


For
purposes of giving the opinions hereinafter set forth, our examination of
documents has been limited to the examination of executed or conformed
counterparts, or copies otherwise proved to our satisfaction, of the following:


 


(a)                                  The Certificate
of Incorporation of Holding Co., dated October 24, 2006, as filed in the
office of the Secretary of State of the State of Delaware (the “Secretary of
State”) on October 24, 2006, as amended by the Certificate of Amendment of
Certificate of Incorporation of Holding Co., dated January 5, 2007, as
filed in the office of the Secretary of State on January 5, 2007, as
further amended by the Certificate of Amendment of Certificate of Incorporation
of Holding Co., dated February 9, 2007, as filed in the office of the
Secretary of State on February 9, 2007 (as so amended, the “Holding Co.
Certificate of Incorporation”);


 


(b)                                 Each of the
documents listed on Schedule D attached hereto (collectively, the “Subsidiary
Certificates of Incorporation”);


 

















 


(c)                                  The bylaws of each
of the Delaware Corporations, as amended through the date hereof (each, “Bylaws”
and collectively, the “Delaware Corporations Bylaws”);


 


(d)                                 Resolutions
adopted by the unanimous written consent of the board of directors of each of
the Delaware Corporations, each dated March 2, 2007;


 


(e)                                  Each of the
documents listed on Schedule E attached hereto (collectively, the “LLC
Certificates”);


 


(f)                                    Each of the
documents listed on Schedule F attached hereto (each, an “LLC Agreement” and
collectively, the “LLC Agreements”);


 


(g)                                 Resolutions
adopted by the written consent of the sole member of each of the Delaware LLCs,
each dated March 2, 2007;


 


(h)                                 A certificate
of the secretary of each of the Delaware Corporations and the Delaware LLCs
(collectively, the “Delaware Companies”), dated March 2, 2007, as to
certain matters;


 


(i)                                     The Credit
Agreement;


 


(j)                                     The Guarantee
and Collateral Agreement, dated as of March 2, 2007 (the “Collateral
Agreement”), made by each of the Delaware Companies and certain other grantors
identified therein in favor of the Administrative Agent;


 


(k)                                  The financing
statements on form UCC-1, naming each of the Delaware Companies as a debtor and
the Administrative Agent as secured party, each in the form attached hereto and
marked as Exhibit “A” (collectively, the “Financing Statements”), to be
filed with the Secretary of State (Uniform Commercial Code Section) (the “Division”);
and


 


(1)                                  A Certificate
of Good Standing for each of the Delaware Companies, each dated March 2,
2007, obtained from the Secretary of State.


 


Initially
capitalized terms used herein and not otherwise defined are used as defined in
the Collateral Agreement. The Holding Co. Certificate of Incorporation and the
Subsidiary Certificates of Incorporation are hereinafter referred to each, as a
“Certificate of Incorporation” and collectively, as the “Certificates of
Incorporation.” The Certificates of Incorporation and the LLC Certificates are
hereinafter referred to collectively as the “Certificates.” The Credit
Agreement and the Collateral Agreement are hereinafter referred to jointly as
the “Transaction Documents.”


 


For
purposes of this opinion, we have not reviewed any documents other than the
documents listed in paragraphs (a) through (1) above. In particular,
we have not reviewed any document (other than the documents listed in
paragraphs (a) through (1) above) that is referred to


 


2

















 


in
or incorporated by reference into any document reviewed by us. We have assumed
that there exists no provision in any document that we have not reviewed that
is inconsistent with the opinions stated herein. We have conducted no
independent factual investigation of our own but rather have relied solely upon
the foregoing documents, the statements and information set forth therein and
the additional matters recited or assumed herein, all of which we have assumed
to be true, complete and accurate in all material respects.


 


With
respect to all documents examined by us, we have assumed that (i) all
signatures on documents examined by us are genuine, (ii) all documents
submitted to us as originals are authentic, and (iii) all documents
submitted to us as copies conform with the original copies of those documents.


 


For
purposes of this opinion, we have assumed (i) that each of the LLC
Agreements constitutes the entire agreement among the parties thereto with
respect to the subject matter thereof, including with respect to the admission
of members to, and the creation, operation, management and termination of, the
relevant Delaware LLC, and that each of the LLC Agreements, the Certificates
and the Delaware Corporations Bylaws are in full force and effect, have not
been amended, and, except as may be contemplated by the M&A Transactions
(as defined below), no amendments of such documents are pending or have been
proposed, (ii) that any amendment or restatement of any document reviewed
by us has been accomplished in accordance with, and was permitted by, the
relevant provisions of said document prior to its amendment or restatement from
time to time, (iii) that at all times since its formation, WAPLA (as
defined in Schedule E attached hereto) has had at least one member, (iv) that
except for the M&A Transactions, there are no proceedings pending for (A) the
merger, consolidation, conversion, dissolution, liquidation or termination of
any of the Delaware Companies, or (B) any of the Delaware Companies’
transfer to or domestication in any other jurisdiction, (v) except to the
extent provided in paragraphs 1 and 6 below, the due organization, formation or
creation, as the case may be, and valid existence in good standing of each
party to the documents examined by us under the laws of the jurisdiction
governing its organization, formation or creation, (vi) the legal capacity
of natural persons who are signatories to the documents examined by us, (vii) except
to the extent provided in paragraphs 2 and 7 below, that each of the parties to
the documents examined by us has the power and authority to execute and
deliver, and to perform its obligations under, such documents, (viii) except
to the extent provided in paragraphs 3 and 8 below, the due authorization,
execution and delivery by all parties thereto of all documents examined by us, (ix) that
each of the documents examined by us constitutes a valid and binding obligation
of the parties thereto, and is enforceable against the parties thereto, in
accordance with its terms, (x) that all of the members of the board of
directors of each of the Delaware Corporations meet any applicable
qualifications contained in the Bylaws of such Delaware Corporation, (xi) that
the restrictions on “business combinations” established in Section 203(a) of
the General Corporation Law of the State of Delaware (8 Del. C. § 101, et
seq.) (the “DGCL”) are not applicable to the transactions contemplated
by the Transaction Documents, (xii) that the execution, delivery and
performance by each of the Delaware Corporations of each of the Transaction
Documents to which it is a party is necessary and convenient to the conduct,


 


3

















 


promotion
or attainment of the business of each such Delaware Corporation, (xiii) that
each of the Delaware Companies (other than the Excluded Entities (as defined in
Schedule D attached hereto)) derives no income from or connected with sources
within the State of Delaware and has no assets, activities (other than the
maintenance of a registered office and registered agent in the State of
Delaware and the filing of documents with the Secretary of State) or employees
in the State of Delaware, (xiv) that each of the Excluded Entities (other than
QSP (as defined in Schedule D attached hereto)) has no assets or employees in
the State of Delaware, and (xv) that there have been obtained such authorizations,
consents, approvals and orders as are customarily required in the conduct of
the business of each of the Delaware Companies. We have not participated in the
preparation of any offering material relating to any of the Delaware Companies
and assume no responsibility for the contents of any such material. In
addition, we assume no responsibility for the filing of the Financing
Statements (or any continuation statements or amendments with respect thereto)
with the Division or any other governmental office or agency.


 


This
opinion is limited to the laws of the State of Delaware (excluding the
insurance, securities and blue sky laws of the State of Delaware), and we have
not considered and express no opinion on the laws of any other jurisdiction, including
federal laws and rules and regulations relating thereto. Our opinions are
rendered only with respect to Delaware laws and rules, regulations and orders
thereunder that are currently in effect.


 


Based
upon the foregoing, and upon our examination of such questions of law and
statutes of the State of Delaware as we have considered necessary or
appropriate, and subject to the assumptions, qualifications, limitations and
exceptions set forth herein, we are of the opinion that:


 


1.                                       Each of the
Delaware Corporations has been duly incorporated and is validly existing in
good standing as a corporation under the DGCL.


 


2.                                       Each of the
Delaware Corporations has all necessary corporate power and authority under the
DGCL and under its respective Certificate of Incorporation and Bylaws to
execute and deliver, and to perform its obligations under, the Transaction
Documents to which it is a party.


 


3.                                       The execution
and delivery by each of the Delaware Corporations of the Transaction Documents
to which it is a party, and the performance by each of the Delaware
Corporations of its obligations thereunder, have been duly authorized by all
necessary corporate action on the part of each of the Delaware Corporations
under the DGCL and under its respective Certificate of Incorporation and
Bylaws.


 


4.                                       The execution,
delivery and performance by each of the Delaware Corporations of the
Transaction Documents to which it is a party do not violate (i) its
respective Certificate of Incorporation or Bylaws, or (ii) the DGCL.


 


4

















 


5.                                       No
authorization, consent, approval or order of any Delaware court or any Delaware
governmental or administrative body is required to be obtained by any of the
Delaware Corporations solely as a result of the execution and delivery by any
such Delaware Corporation of the Transaction Documents to which it is a party,
or the performance by any such Delaware Corporation of its obligations
thereunder.


 


6.                                       Each of the
Delaware LLCs has been duly formed and is validly existing in good standing as
a limited liability company under the Delaware Limited Liability Company Act (6
Del. C. § 18-101, et  seq.) (the “Act”).


 


7.                                       Each of the
Delaware LLCs has all necessary limited liability company power and authority
under the Act and under its respective LLC Agreement to execute and deliver,
and to perform its obligations under, the Collateral Agreement.


 


8.                                       The execution
and delivery by each of the Delaware LLCs of the Collateral Agreement, and the
performance by each of the Delaware LLCs of its obligations thereunder, have
been duly authorized by all necessary limited liability company action on the
part of each of the Delaware LLCs under the Act and under its respective LLC
Agreement.


 


9.                                       The execution,
delivery and performance by each of the Delaware LLCs of the Collateral
Agreement do not violate (i) its respective LLC Agreement, or (ii) the
Act.


 


10.                                 No
authorization, consent, approval or order of any Delaware court or any Delaware
governmental or administrative body is required to be obtained by any of the
Delaware LLCs solely as a result of the execution and delivery by any such
Delaware LLC of the Collateral Agreement, or the performance by any such
Delaware LLC of its obligations thereunder.


 


11.                                 Each of the
Financing Statements is in an appropriate form for filing with the Division.


 


12.                                 Insofar as Article 9
of the Uniform Commercial Code as in effect in the State of Delaware on the
date hereof (the “Delaware UCC”) is applicable (without regard to conflict of
laws principles), upon the filing of the Financing Statements with the
Division, the Administrative Agent will have a perfected security interest in
the Delaware Companies’ rights in that portion of the Collateral in which a
security interest may be perfected by the filing of a UCC financing statement
with the Division (the “Filing Collateral”) and the proceeds (as defined in Section 9-102(a)(64)
of the Delaware UCC) thereof.


 


The
opinions expressed above are subject to the following additional assumptions,
qualifications, limitations and exceptions:


 


A.                                   We have assumed
that (i) each of the Delaware Companies has sufficient rights in the
Collateral and has received sufficient value and consideration in connection
with the


 


5

















 


security
interests granted under the Collateral Agreement for the security interests of
the Administrative Agent to attach, and we express no opinion as to the nature
or extent of any of the Delaware Companies’ rights in, or title to, any portion
of the Collateral, and (ii) the Collateral Agreement reasonably identifies
the Collateral. Accordingly, we have assumed that the security interests in the
Filing Collateral and the proceeds (as defined in Section 9-102(a)(64) of the
Delaware UCC) thereof have been duly created and have attached. In addition, we
have assumed that none of the Filing Collateral consists of a type of
collateral described in Section 9-501(a)(1) of the Delaware UCC. Further, we
have assumed that the Delaware Companies have authorized the filing of the
Financing Statements with the Division.


 


B.                                     The opinions
set forth in paragraphs 11 and 12 above are limited to Article 9 of the
Delaware UCC, and therefore such opinions do not address (i) laws of
jurisdictions other than the State of Delaware, and of the State of Delaware
except for Article 9 of the Delaware UCC, (ii) collateral of a type
not subject to Article 9 of the Delaware UCC, and (iii) what law
governs perfection of the security interests granted in the collateral covered
by this opinion.


 


C.                                     We note that
further filings under the Delaware UCC may be necessary to preserve and
maintain (to the extent established and perfected by the filing of the
Financing Statements as described herein) the perfection of the security
interests of the Administrative Agent in the Filing Collateral, including,
without limitation, the following:


 


(i)                                appropriate
continuation filings to be made within the period of six months prior to the
expiration of five year anniversary dates from the date of the original filing
of the Financing Statements;


 


(ii)                             filings
required with respect to proceeds of collateral under Section 9-315(d) of
the Delaware UCC;


 


(iii)                          filings
required within four months of the change of name, identity or structure made
by or with respect to any of the Delaware Companies, to the extent set forth in
Sections 9-507 and 9-508 of the Delaware UCC;


 


(iv)                         filings
required within four months of a change by any of the Delaware Companies of its
location to another jurisdiction, to the extent set forth in Sections 9-301 and
9-316 of the Delaware UCC; and


 


(v)                            filings
required within one year after the transfer of collateral to a person or entity
that becomes a debtor and is located in another jurisdiction, to the extent set
forth in Section 9-316 of the Delaware UCC.


 


D.                                    We do not
express any opinion as to the perfection of any security interest in any
portion of the Collateral in which a security interest cannot be perfected by
the filing of a financing statement with the Division. In addition, no opinion
is expressed herein concerning (i)


 


6

















 


any
collateral other than the Filing Collateral and the proceeds (as defined in Section 9-102(a)(64)
of the Delaware UCC) thereof, (ii) any portion of the Filing Collateral
that constitutes a “commercial tort claim” (as defined in Section 9-102(a)(13)
of the Delaware UCC), (iii) any consumer transaction, or (iv) any
security interest in goods covered by a certificate of title statute. Further,
we do not express any opinion as to the perfection of any security interest in (i) Filing
Collateral acquired by any of the Delaware Companies after the date hereof, or (ii) proceeds
(as defined in Section 9-102(a)(64) of the Delaware UCC) of the Filing
Collateral, except to the extent that such proceeds consist of cash proceeds
(as defined in Section 9-102(a)(9) of the Delaware UCC) that are
identifiable cash proceeds (as contemplated by Sections 9-315(b) and (d) of
the Delaware UCC), subject, however, to the limitations of Section 9-315
of the Delaware UCC.


 


E.                                      We do not
express any opinion as to the priority of any security interest.


 


F.                                      We call to your
attention that under the Delaware UCC, actions taken by a secured party (e.g.,
releasing or assigning the security interest, delivering possession of the
collateral to the debtor or another person and voluntarily subordinating a
security interest) may affect the validity, perfection or priority of a
security interest.


 


G.                                     The opinion
expressed in paragraph 12 above is subject to the effect of (i) bankruptcy,
insolvency, moratorium, receivership, reorganization, liquidation, fraudulent
conveyance and transfer and other similar laws relating to or affecting the
rights and remedies of creditors generally, and (ii) principles of equity
(regardless of whether considered and applied in a proceeding in equity or at
law).


 


H.                                    In rendering
the opinions expressed in paragraphs 11 and 12 above, we have assumed that the
word “Copy” imprinted on the UCC-1 cover page of each of the Financing Statements
attached hereto as Exhibit “A” will be removed prior to the filing of the
Financing Statements with the Division.


 


I.                                         We note that
notwithstanding any covenants to the contrary contained in the Transaction
Documents: (i) the stockholders of any of the Delaware Corporations may
dissolve such Delaware Corporation under Section 275(c) of the DGCL
upon the consent of all the stockholders entitled to vote thereon; (ii) a
stockholder owning at least 90% of the outstanding shares of each class of
stock of any of the Delaware Corporations entitled to vote thereon may effect a
merger with such Delaware Corporation under Section 253 of the DGCL; and (iii) the
stockholders of each of the Delaware Corporations may amend the Bylaws of such
Delaware Corporation.


 


J.                                        We understand
that (i) pursuant to the Agreement and Plan of Merger, dated as of November 16,
2006, among Holding Co. (formerly known as Doctor Acquisition Holding Co.),
Acquisition Co. and Reader’s Digest, Acquisition Co. proposes to merge with and
into Reader’s Digest; (ii) pursuant to the Agreement and Plan of Merger,
dated as of January 23, 2007, WRC (as defined on Schedule D hereto) will
be acquired by Holding Co.; (iii) pursuant to


 


7

















 


the
Stock Acquisition Agreement, dated January 23, 2007, Direct Holdings U.S.
(as defined on Schedule D hereto) will be acquired by Holding Co.; and (iv) Holding
Co. will take additional actions that will ultimately result in WRC, Direct
Holdings U.S. and their respective subsidiaries becoming direct or indirect
subsidiaries of Reader’s Digest (collectively, the “M&A Transactions”),
such M&A Transactions being effective on or about the date hereof but after
the delivery of this opinion. Accordingly, the opinions expressed above are
rendered prior to the effective time of the M&A Transactions.


 


We
understand that you will rely as to matters of Delaware law upon this opinion
in connection with the transactions contemplated by the Transaction Documents.
In addition, your successors and assigns may rely as to matters of Delaware law
upon this opinion in connection with the matters set forth herein, subject to
the understanding that the opinions rendered herein are given on the date
hereof and such opinions are rendered only with respect to facts existing on
the date hereof and laws, rules and regulations currently in effect. In
connection with the foregoing, we hereby consent to your and your successors’
and assigns’ relying as to matters of Delaware law upon this opinion. Except as
stated above, without our prior written consent, this opinion may not be
furnished or quoted to, or relied upon by, any other person or entity for any
purpose.


 


 


Very
truly yours,


 


 


8
















 


EXHIBIT H-3


 


[FORM OF]


[THE READER’S DIGEST ASSOCIATION, INC.]




	
  CLIFFORD H.R. DUPREE 

  Vice President, Corporate Secretary 

  and Associate General Counsel

  	
   

  	
  TELEPHONE: (914)
  244-5622

  FAX: (914) 244-5007

  clifford_dupree@rd.com

  



 


March 2, 2007


 


	
  To

  	
  The
  Lenders and the Agents referred to below

  
	
   

  	
  c/o
  JPMorgan Chase Bank, N.A., as Administrative Agent

  



 


Ladies
and Gentlemen:


 


I am Associate General Counsel of The Reader’s
Digest Association, Inc., a Delaware corporation (“Reader’s Digest”),
and have acted as counsel to the entities listed on Schedule 1 attached hereto
(each, a “Loan Party” and collectively, the “Loan Parties”) in
connection with the preparation, execution and delivery of (i) the Credit
Agreement dated as of the date hereof (the “Credit Agreement”), among
RDA Holding Co., a Delaware corporation (“Holdings”), Doctor Acquisition
Co., a Delaware corporation (the “Borrower”), Reader’s Digest, the
Lenders from time to time party thereto, JPMorgan Chase Bank, N.A., as
administrative agent for the Lenders (the “Administrative Agent”),
Citicorp North America, Inc. and Merrill Lynch, Pierce, Fenner &
Smith Incorporated, as co-syndication agents for the Lenders (the “Co-Syndication
Agents”), and The Royal Bank of Scotland plc, as documentation agent for
the Lenders (the “Documentation Agent” and, together with the
Administrative Agent and the Co-Syndication Agents, the “Agents”), (ii) the
Guarantee and Collateral Agreement dated as of the date hereof (the “Guarantee
and Collateral Agreement”), made by Holdings, the Borrower, Reader’s Digest
and the other Loan Parties in favor of the Administrative Agent, (iii) the
Perfection Certificate dated as of the date hereof, (vii) the Mortgages
identified on Schedule 2 attached hereto (the “Mortgages”), (viii) the
[foreign security documents] (the “Foreign Security Agreement”) and (viii) the
other Loan Documents executed in connection with the above documents. Unless
otherwise indicated, capitalized terms used and not defined in this opinion are
used herein as defined in the Credit Agreement. This opinion is being rendered
to you at the request of the Loan Parties and pursuant to Section 4.01(a)(v)(z) of
the Credit Agreement.


 


For
the purposes of this opinion, I have reviewed the following documents:


 


(a)                                       the Credit
Agreement;


 


(b)                                      the Guarantee
and Collateral Agreement;


 


(c)                                       the Perfection
Certificate;


 

















 


(d)                                      the Mortgages;


 


(e)                                       the Foreign
Security Agreement; and


 


(f)                                         such other
documents as I have deemed necessary or appropriate as a basis for the opinions
set forth below.


 


The
documents listed in clauses (a) - (e) above are referred to herein
collectively as the “Loan Documents”. The document listed in
clause (b) above are referred to herein collectively as the “Collateral
Document”.


 


I
have examined originals or copies, certified or otherwise identified to our
satisfaction, of such documents, corporate records, certificates of public
officials and other instruments and have conducted such other investigations of
fact and law as I have deemed necessary or advisable for purposes of the
opinions expressed below. In such examination, I have assumed the genuineness
of all signatures, the authenticity of all documents submitted to me as
originals, the conformity to authentic original documents of all documents
submitted to me as copies and the legal capacity of all individuals executing
such documents. As to questions of fact material to this opinion, which I did
not independently establish or verify, I have, with your consent, relied upon
the statements, certificates and representations of officers and other
representatives of the Loan Parties and on the representations and warranties
of each Loan Party contained in the Loan Documents. In addition, I have
obtained and relied upon such certificates and assurances from public officials,
as I have deemed necessary.


 


I
have also assumed the valid authorization, execution, and delivery of each of
the Loan Documents by each party thereto, and I have assumed that each such
party has been duly organized and is validly existing and in good standing
under its jurisdiction of organization, and that each such party has the legal
capacity, power and authority to perform its obligations thereunder, and that
each Loan Document constitutes the valid and binding obligation of all parties
party thereto, enforceable against them in accordance with its terms.


 


I
am a member of the Bar of the State of New York, and I have not considered, and
I express no opinion as to, the laws of any jurisdiction other than the laws of
the State of New York, the General Corporation Law of the State of Delaware and
the laws of the United States of America, in each case as in effect on the date
hereof.


 


Based
upon the foregoing, and subject to the comments and qualifications set forth
below, it is my opinion that:


 


1.             The execution,
delivery and performance of each of the Loan Documents by the Loan  Parties party
thereto, the borrowings by Reader’s Digest under the Credit Agreement and the
grant of the security interests in the Collateral by any Loan Party under the
Collateral Document, (a) will not (i) materially be in conflict with,
contravene, result in a breach of or constitute (alone or with notice or lapse
of time or both) a material default under, or give rise to any right to
accelerate or to require the prepayment, repurchase or redemption


 


2

















 


of
any obligation under any provisions of any order binding upon any Loan Party of
any Governmental Authority of the State of New York, the State of Delaware or,
to my knowledge, any other state, or the United States of America or any
material agreement, note, deed of trust, license, franchise, permit, agreement,
contract, indenture, mortgage, lease, or other instrument (a “Material
Agreement”) to which any Loan Party is a party or by which it
or any of its property is or may be bound or (ii) result in the creation
or imposition of any Lien upon or with respect to any property or assets now
owned or hereafter acquired by any of the Loan Parties pursuant to any such
Material Agreement (other than any Lien created under the Loan Documents).


 


2.             To the best of
my knowledge, there is no action, litigation, proceeding, or governmental
investigation pending or threatened by or against any Loan Party or against any
of its properties or revenues which questions the validity of any Loan Document
or any action taken or to be taken pursuant to any Loan Document.


 


The
opinions expressed above are subject to the following qualifications and
comments:


 


(A)                         In connection
with the foregoing, I point out that certain of the Material Agreements are or
may be governed by laws other than the laws of the State of New York. For
purposes of the opinion expressed in paragraph 1 above with respect to Material
Agreements, my opinion is based solely upon my understanding, or the
understanding of lawyers working under my supervision, of the plain language of
such Material Agreements, and I do not express any opinion as to the
validity, binding nature or enforceability of any such Material Agreement, and
I do not assume any responsibility with respect to the effect on my opinion of
any interpretation thereof which may be inconsistent with such understanding.
My opinion also does not extend to compliance by any Loan Party with any
financial ratio or limitation in any Material Agreement expressed as a dollar
amount (or an amount expressed in another currency).


 


(B)                           Except as
expressly covered in this opinion, I am not expressing any opinion as to the
effect of compliance by any Secured Party with any state or federal laws or
regulations applicable to the transactions because of the nature of any of its
businesses.


 


This
opinion is being furnished only to you and is solely for the benefit of the
addressees. In addition, I hereby consent to reliance on this opinion by a permitted
assign of a Lender’s interest in the Credit Agreement, provided that such
permitted assign becomes a Lender on or prior to the 30th day after the date of
this opinion. I am opining as to the matters herein only as of the date hereof,
and, while you are authorized to deliver copies of this opinion to such


 


3

















 


permitted
assigns and they are permitted to rely on this opinion, the rights to do so do
not imply any obligation on my part to update this opinion. This opinion may
not to be used, circulated, quoted, relied upon, or otherwise referred to by
any other person or for any other purpose without my prior written consent.


 


	
   

  	
  Very
  truly yours,

  



 


4
















 


EXHIBIT H-4


 


[FORM OF WRC MEDIA]


 


Karen
E. Andrews


 


March 2, 2007


 


	
  To

  	
  The
  Lenders and the Agents referred to below

  
	
   

  	
  c/o
  JPMorgan Chase Bank, N.A., as Administrative Agent

  



 


Ladies
and Gentlemen:


 


I
am General Counsel of WRC Media Inc., a Delaware corporation (“WRC Media”).
I have been asked to give certain opinions regarding the entities listed on
Schedule 1 attached hereto (each, a “Loan Party” and
collectively, the “Loan Parties”) in connection with the
preparation, execution and delivery of (1) the Credit Agreement dated as
of the date hereof (the “Credit Agreement”), among RDA
Holding Co., a Delaware corporation (“Holdings”), Doctor
Acquisition Co., a Delaware corporation (“Acquisition Co”), The
Reader’s Digest Association, Inc., a Delaware corporation (“Reader’s
Digest”), the Overseas Borrowers party thereto, the Lenders
from time to time party thereto, JPMorgan Chase Bank, N.A., as administrative
agent for the Lenders (the “Administrative Agent”), Citicorp North
America, Inc. and Merrill Lynch, Pierce, Fenner & Smith
Incorporated, as co-syndication agents for the Lenders (the “Co-Syndication
Agents”), and The Royal Bank of Scotland plc, as documentation agent for the
Lenders (the “Documentation Agent” and, together
with the Administrative Agent and the Co- Syndication Agents, the “Agents”), (ii) the
Guarantee and Collateral Agreement dated as of the date hereof (the “Guarantee
and Collateral Agreement”), made by Holdings,
Acquisition Co, Reader’s Digest and the other Loan Parties in favor of the
Administrative Agent, and (iii) the other Loan Documents executed in
connection with the above documents. Unless otherwise indicated, capitalized
terms used and not defined in this opinion are used herein as defined in the
Credit Agreement. This opinion is being rendered to you at the request of the
Loan Parties and pursuant to Section 4.01(a)(v)(y) of the Credit
Agreement.


 

















 


For
the purposes of this opinion, I have reviewed the following documents:


 


(a)                 the Credit
Agreement;


 


(b)                the Guarantee
and Collateral Agreement; and


 


(c)                 such other
documents as I have deemed necessary or appropriate as a basis for the opinions
set forth below.


 


The
documents listed in clauses (a) - (b) above are referred to herein
collectively as the “Loan Documents”. The document listed in
clause (b) above are referred to herein collectively as the “Collateral
Document”.


 


I
have examined originals or copies, certified or otherwise identified to our
satisfaction, of such documents, corporate records, certificates of public
officials and other instruments and have conducted such other investigations of
fact and law as I have deemed necessary or advisable for purposes of the
opinions expressed below. In such examination, I have assumed the genuineness
of all signatures, the authenticity of all documents submitted to me as
originals, the conformity to authentic original documents of all documents
submitted to me as copies and the legal capacity of all individuals executing
such documents. As to questions of fact material to this opinion, which I did
not independently establish or verify, I have, with your consent, relied upon
the statements, certificates and representations of officers and other
representatives of the Loan Parties and on the representations and warranties
of each Loan Party contained in the Loan Documents. In addition, I have
obtained and relied upon such certificates and assurances from public
officials, as I have deemed necessary.


 


I
have also assumed the valid authorization, execution, and delivery of each of
the Loan Documents by each party thereto and I have assumed that each such
party has been duly organized and is validly existing and in good standing
under its jurisdiction of organization, and that each such party has the legal
capacity, power and authority to perform its obligations thereunder, and that
each Loan Document constitutes the valid and binding obligation of all parties
party thereto, enforceable against them in accordance with its terms.


 


I
am a member of the Bar of the State of New York, and I have not considered, and
I express no opinion as to, the laws of any jurisdiction other than the laws of
the State of New York and the laws of the United States of America, in each
case as in effect on the date hereof.


 


Based
upon the foregoing, and subject to the comments and qualifications set forth
below, it is my opinion that:


 


2

















 


1.                                 The execution,
delivery and performance of each of the Loan Documents by the Loan Parties
party thereto and the grant of the security interests in the Collateral by any
Loan Party under the Collateral Document, (a) will not (i) materially be
in conflict with, contravene, result in a breach of or constitute (alone or
with notice or lapse of time or both) a default under, or give rise to any
right to accelerate or to require the prepayment, repurchase or redemption of
any obligation under any provisions of any order binding upon any Loan Party of
any Governmental Authority of the State of New York or, to my knowledge, any
other state, or the United States of America or any material agreement, note,
deed of trust, license, franchise, permit, agreement, contract, indenture,
mortgage, lease, or other instrument (a “Material Agreement”) to which
any Loan Party is a party or by which it or any of its property is or may be
bound or (ii) result in the creation or imposition of any Lien upon or
with respect to any property or assets now owned or hereafter acquired by any
of the Loan Parties pursuant to any such Material Agreement (other than any
Lien created under the Loan Documents).


 


2.                                 To the best of
my knowledge, there is no action, litigation, proceeding, or governmental
investigation pending or threatened by or against any Loan Party or against any
of its properties or revenues which questions the validity of any Loan Document
or any action taken or to be taken pursuant to any Loan Document.


 


The
opinions expressed above are subject to the following qualifications and
comments:


 


(A)                             In connection
with the foregoing, I point out that certain of the Material Agreements are or
may be governed by laws other than the laws of the State of New York. For
purposes of the opinion expressed in paragraph 1 above with respect to Material
Agreements, my opinion is based solely upon my understanding, or the understanding
of lawyers working under my supervision, of the plain language of such Material
Agreements, and I do not express any opinion as to the validity, binding nature
or enforceability of any such Material Agreement, and I do not assume any
responsibility with respect to the effect on my opinion of any interpretation
thereof which may be inconsistent with such understanding. My opinion also does
not extend to compliance by any Loan Party with any financial ratio or
limitation in any Material Agreement expressed as a dollar amount (or an amount
expressed in another currency).


 


(B)                               Except as
expressly covered in this opinion, I am not expressing any opinion as to the
effect of compliance by any Secured Party with any state or federal laws or
regulations applicable to the transactions because of the nature of any of its
businesses.


 


3

















 


(C)                               I note that
certain leases of the Loan Parties purport to restrict assignment by, or pledge
of a security interest in the rights thereunder of, a Loan Party without the
consent of the other parties thereto and I express no view in paragraph 1 above
as to the granting of security interests in the rights of Loan Parties under
such leases or the exercise of the rights or remedies of the Administraive
Agent under the Collateral Documents with respect to such leases.


 


This
opinion is being furnished only to you and is solely for the benefit of the
addressees. In addition, I hereby consent to reliance on this opinion by a
permitted assign of a Lender’s interest in the Credit Agreement, provided
that such permitted assign becomes a Lender on or prior to the 30th day after
the date of this opinion. I am opining as to the matters herein only as of the
date hereof, and, while you are authorized to deliver copies of this opinion to
such permitted assigns and they are permitted to rely on this opinion, the
rights to do so do not imply any obligation on my part to update this opinion.
This opinion may not to be used, circulated, quoted, relied upon, or otherwise
referred to by any other person or for any other purpose without my prior
written consent.


 


	
   

  	
  Very
  truly yours,

  



 


4

















 


EXHIBIT H-5


 


[FORM OF]


DIRECT HOLDINGS U.S. CORP.

8280 WILLOW OAKS CORPORATE DRIVE

FAIRFAX, VA 22031


 


March 2,
2007


 


	
  To

  	
  The
  Lenders and the Agents referred to below

  
	
   

  	
  c/o
  JPMorgan Chase Bank, N.A., as Administrative Agent

  



 


Ladies
and Gentlemen:


 


I
am General Counsel of Direct Holdings U.S. Corp., a Delaware corporation (“DHUS”),
and have been asked to give certain opinions regarding the entities listed on
Schedule 1 attached hereto (each, a “Loan Party” and collectively, the “Loan
Parties”) in connection with the execution and delivery of (i) the
Credit Agreement dated as of the date hereof (the “Credit Agreement”),
among RDA Holding Co., a Delaware corporation (“Holdings”), Doctor
Acquisition Co., a Delaware corporation (“Acquisition Co”), The Reader’s
Digest Association, Inc., a Delaware corporation (“Reader’s Digest”),
the Overseas Borrowers party thereto, the Lenders from time to time party
thereto, JPMorgan Chase Bank, N.A., as administrative agent for the Lenders
(the “Administrative Agent”), Citicorp North America, Inc. and
Merrill Lynch, Pierce, Fenner & Smith Incorporated, as co-syndication
agents for the Lenders (the “Co-Syndication Agents”), and The Royal Bank
of Scotland plc, as documentation agent for the Lenders (the “Documentation
Agent” and, together with the Administrative Agent and the Co-Syndication
Agents, the “Agents”), (ii) the Guarantee and Collateral Agreement
dated as of the date hereof (the “Guarantee and Collateral Agreement”),
made by Holdings, Acquisition Co, Reader’s Digest and the other Loan Parties in
favor of the Administrative Agent, and (iii) the other Loan Documents
executed in connection with the above documents. Unless otherwise indicated,
capitalized terms used and not defined in this opinion are used herein as
defined in the Credit Agreement. This opinion is being rendered to you at the
request of the Loan Parties and pursuant to Section 4.01(a)(v)(z) of
the Credit Agreement.


 


For
the purposes of this opinion, I have reviewed the following documents:


 


(a)                  the Credit Agreement;


 


(b)                 the Guarantee and Collateral Agreement; and


 


(c)                  such other documents as I have deemed
necessary or appropriate as a basis for the opinions set forth below.


 

















 


The
documents listed in clauses (a) - (b) above are referred to herein
collectively as the “Loan Documents”. The document listed in clause (b) above
is referred to herein as the “Collateral Document”.


 


I
have examined originals or copies, certified or otherwise identified to our
satisfaction, of such documents, corporate records, certificates of public
officials and other instruments and have conducted such other investigations of
fact and law as I have deemed necessary or advisable for purposes of the
opinions expressed below. In such examination, I have assumed the genuineness
of all signatures, the authenticity of all documents submitted to me as
originals, the conformity to authentic original documents of all documents
submitted to me as copies and the legal capacity of all individuals executing
such documents. As to questions of fact material to this opinion, which I did
not independently establish or verify, I have, with your consent, relied upon
the statements, certificates and representations of officers and other
representatives of the Loan Parties and on the representations and warranties
of each Loan Party contained in the Loan Documents. In addition, I have
obtained and relied upon such certificates and assurances from public
officials, as I have deemed necessary.


 


I
have also assumed the valid authorization, execution, and delivery of each of
the Loan Documents by each party thereto and I have assumed that each such
party has been duly organized and is validly existing and in good standing
under its jurisdiction of organization, and that each such party has the legal
capacity, power and authority to perform its obligations thereunder, and that
each Loan Document constitutes the valid and binding obligation of all parties
party thereto, enforceable against them in accordance with its terms.


 


I
am a member of the Bar of the Commonwealth of Virginia, and I have not
considered, and I express no opinion as to, the laws of any jurisdiction other
than the laws of the Commonwealth of Virginia and the laws of the United States
of America, in each case as in effect on the date hereof.


 


Based
upon the foregoing, and subject to the comments and qualifications set forth
below, it is my opinion that:


 


1.                                 The execution,
delivery and performance of each of the Loan Documents by the Loan Parties
party thereto and the grant of the security interests in the Collateral by any
Loan Party under the Collateral Document, (a) will not (i) materially
be in conflict with, contravene, result in a breach of or constitute (alone or
with notice or lapse of time or both) a default under, or give rise to any
right to accelerate or to require the prepayment, repurchase or redemption of
any obligation under any provisions of any order binding upon any Loan Party of
any Governmental Authority of the Commonwealth of Virginia or, to my knowledge,
any other state, or the United States of America or any material agreement,
note, deed of trust, license, franchise, permit, agreement, contract,
indenture, mortgage, lease, or other instrument (a “Material Agreement”)
to which any Loan Party is a party or by which it or any of its property is or
may be bound or (ii) result in the creation or imposition of any Lien upon
or with respect to any property or assets now


 


2

















 


owned
or hereafter acquired by any of the Loan Parties pursuant to any such Material
Agreement (other than any Lien created under the Loan Documents).


 


2.                                 To the best of
my knowledge, there is no action, litigation, proceeding, or governmental
investigation pending or threatened by or against any Loan Party or against any
of its properties or revenues which questions the validity of any Loan Document
or any action taken or to be taken pursuant to any Loan Document.


 


The
opinions expressed above are subject to the following qualifications and
comments:


 


(A)                             In connection
with the foregoing, I point out that certain of the Material Agreements are or
may be governed by laws other than the laws of the Commonwealth of Virginia.
For purposes of the opinion expressed in paragraph 1 above with respect to
Material Agreements, my opinion is based solely upon my understanding, or the
understanding of lawyers working under my supervision, of the plain language of
such Material Agreements, and I do not express any opinion as to the validity,
binding nature or enforceability of any such Material Agreement, and I do not
assume any responsibility with respect to the effect on my opinion of any
interpretation thereof which may be inconsistent with such understanding. My
opinion also does not extend to compliance by any Loan Party with any financial
ratio or limitation in any Material Agreement expressed as a dollar amount (or
an amount expressed in another currency).


 


(B)                              Except as
expressly covered in this opinion, I am not expressing any opinion as to the
effect of compliance by any Secured Party with any state or federal laws or
regulations applicable to the transactions because of the nature of any of its
businesses.


 


(C)                              I note that
certain leases of the Loan Parties purport to restrict assignment by, or pledge
of a security interest in the rights thereunder of, a Loan Party without the
consent of the other parties thereto and I express no view in paragraph 1 above
as to the granting of security interests in the rights of Loan Parties under
such leases or the exercise of the rights or remedies of the Administrative
Agent under the Collateral Document with respect to such leases.


 


This opinion is being furnished only to you and is
solely for the benefit of the addressees. In addition, I hereby consent to
reliance on this opinion by a permitted assign of a Lender’s interest in the
Credit Agreement, provided that such permitted assign
becomes a Lender on or prior to the 30th day after the date of this opinion. I
am opining as to the matters herein only as of the date hereof, and, while you
are authorized to deliver copies of this opinion to such permitted assigns and
they are permitted to rely on


 


3

















 


this
opinion, the rights to do so do not imply any obligation on my part to update
this opinion. This opinion may not to be used, circulated, quoted, relied upon,
or otherwise referred to by any other person or for any other purpose without
my prior written consent.


 


	
   

  	
  Very
  truly yours,

  



 


4
















 


Exhibit I


 


	
  Application for

  	
  Commercial

  	
  

  
	
  Letter of
  Credit

  	
   

  



 


This application and the Letter of Credit issued
hereunder are subject to and governed by the CONTINUING
AGREEMENT FOR COMMERCIAL & STANDBY LETTERS OF CREDIT
executed by the undersigned in favor of JPMorgan Chase Bank, N.A. on                        (the “Agreement”).


 


When transmitting this application by facsimile all pages must
be transmitted.


 


To:
JPMorgan Chase Bank, N.A. and/or its subsidiaries and/or affiliates.  Date:


 


I. Pursuant to the
Terms and Conditions contained herein, please issue an IRREVOCABLE DOCUMENTARY
COMMERCIAL Letter of Credit (together with any replacements, extensions or
modifications, the “Credit”) and transmit it by:


 


	
  o   Teletransmission

  	
  o   Courier

  	
  o   Air
  Mail (Domestic addresses only)

  



 


If completing in Microsoft Word, please enter
data by ‘clicking’ on the gray boxes.


 




	
  Applicant/Obligor (Full name and
  address):

  	
   

  	
  o

  	
  Credit is
  transferable. (Issuer is authorized to include its standard
  transfer conditions and is authorized to nominate a Transferring Bank.)

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Partial
  Shipment

  	
   

  	
  Transhipment

  
	
  [Signature lines are on
  last page].

  	
   

  	
  o

  	
  Not
  Allowed (if blank, allowed)

  	
  o

  	
  Not
  Allowed (if blank, allowed)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Account
  Party (Full name and address of entity to be named in Letter of Credit if
  different than the above Applicant/Obligor):

  	
   

  	
  Shipment:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Shipment from:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  For Transportation to:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Latest Shipment Date:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Credit
  available:

  	
   

  	
   

  
	
  Advising
  Bank-Optional (If blank, issuer will select its branch or
  affiliate or correspondent in the domicile of the beneficiary):

  	
   

  	
  o

  	
  At
  sight.

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  o

  	
  By
  deferred payment at:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  o

  	
  By
  acceptance of drafts at:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  o

  	
  Discount
  Charges, if any, for the account of the

  
	
   

  	
   

  	
   

  	
    (specify
  only if credit is available by acceptance)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  o  Beneficiary

  	
  o  Applicant

  
	
  Beneficiary (Full name and
  address):

  	
   

  	
  Against
  the documents detailed herein and Beneficiary’s draft(s) drawn on Issuer
  or Issuer’s branch or affiliate or correspondent (at Issuer’s option) for
  100% or         % of the invoice value.

  
	
   

  	
   

  	
   

  
	
  Amount (In Figures):

  	
   

  	
  Insurance:

  
	
   

  	
   

  	
  o

  	
  Insurance
  effected by us. We agree to keep insurance
  in force until this transaction is complete (no document required if
  checked).

  
	
  Amount (In words):

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  If above
  is not checked, the following documents are required:

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Indicate
  plus or minus percentage if applicable

  	
   

  	
  o

  	
  Negotiable
  Insurance Policy or Certificate covering the following risks:

  
	
   

  	
   

  	
   

  	
   

  
	
  o  Plus     o   Minus      %

  	
   

  	
  o

  	
  All
  Risks   o  War  o  SR&CC  o  Other
  Risks (specify)

  
	
   

  	
   

  	
   

  	
   

  
	
  Expiry
  Date:

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Place of Expiry Unless the undersigned or Issuer nominates
  a bank which is authorized to pay, to accept, to incur a deferred payment
  undertaking, or to negotiate, the Credit will be freely negotiable. Issuer
  may nominate such a bank in its sole discretion or stipulate that the Credit
  is available with Issuer only.

  If the Credit is freely negotiable, it will be
  considered to be freely negotiable by any bank anywhere. (Issuer in its sole

  	
   

  	
  o

   

  o

  	
  Indicate
  if a full set is required.

   

  Insurance
  coverage for        % (Unless
  otherwise specified the minimum amount of insurance must be for 100% of the
  CIF or CIP value plus 10%. If the CIF or CIP value cannot be determined from
  the documents on their face, insurance must be for a minimum amount of 110%
  of the drawing amount or 110% of the gross invoice amount, whichever is
  greater.)

  






 


Rev. 04/07/2005


 


1

















 


Exhibit J


 


	
  Application for

  	
   

  	
  

  
	
  Standby
  Letter of Credit

  	
   

  



 


This application and the Letter
of Credit issued hereunder are subject to and governed by the CONTINUING AGREEMENT FOR COMMERCIAL & STANDBY LETTERS OF
CREDIT executed by the undersigned in favor of JPMorgan Chase Bank,
N.A. on                          (the
“Agreement”).


 


When Transmitting this application by facsimile all pages must
be transmitted.


 


To: JPMorgan Chase Bank, N.A. and/or its subsidiaries and/or
affiliates.           Date:


 


I. Pursuant to the
Terms and Conditions contained herein, please issue an IRREVOCABLE STANDBY
Letter of Credit (together with any replacements, extensions or modifications,
the “Credit”) and transmit it by:


 


	
  o   Teletransmission

  	
  o   Courier

  	
  o   Air
  Mail (Domestic addresses only)

  



 


If completing in Microsoft Word, please
enter data by ‘clicking’
on the gray boxes.


 




	
  Applicant/Obligor
  (Full name and address- jointly and severally if more than one,
  individually and collectively, “Applicant/Obligor”):

  	
   

  	
  Beneficiary (Full name and
  address):

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  [Signature
  lines are on last page].

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Account
  Party (Full name and address of entity to be named in Letter of Credit if
  different than the above Applicant/Obligor):

  	
   

  	
  Advising
  Bank-Optional (If blank, Issuer
  will select its branch or affiliate or correspondent in the domicile of the
  beneficiary):

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Amount:

  Up to an aggregate amount of 

  If not USD, indicate currency

  	
   

  	
  Expiry
  Date: Demands/claims must be presented to the counters of the Issuing bank
  not later than

  
	
   

  	
   

  	
   

  
	
  Complete
  only if Automatic Extension of the expiry date is required.

  
	
   

  	
   

  	
   

  
	
  Credit to contain Automatic Extension clause with
  extension period of o one year/o other                                                 (please
  specify).

   

  No less than                                        calendar
  days non-extension notice to the beneficiary.

   

  Automatic
  Extension final expiration date:                                                                             (the
  date after which the Credit will no longer be subject to Automatic
  Extension).

  
	
   

  	
   

  	
   

  
	
  AVAILABLE
  BY (indicate A, B or C)

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  o

  	
  A.   Beneficiary’s
  dated statement referencing JPMorgan Chase Bank, N.A. Letter of Credit Number
  indicating amount of demand/claim and purportedly signed by an authorized
  person reading as follows (Please state within the quotation marks the wording
  to appear on the statement to be presented):

  
	
   

  	
   

  
	
   

  	
  “
  (insert appropriate reason for drawing)

  
				






 


Rev. 04/27/2006


 


1

















 


Exhibit K


 


JPMorgan Chase Bank, N.A.


 


March 2, 2007


 


CONTINUING AGREEMENT FOR

COMMERCIAL & STANDBY LETTERS OF CREDIT BETWEEN


 


THE READER’S DIGEST ASSOCIATION, INC.


 


AND


 


JPMORGAN CHASE BANK, N.A.


 


To induce JPMorgan Chase Bank, N.A. and/or
any of its domestic or foreign subsidiaries or affiliates (individually and
collectively, “Bank”), in its sole discretion, to issue
for the account of the Applicant or for the account of the Account Party named
in the Application, one or more standby or commercial letters of credit or
other independent undertakings, from time to time at the request of the
undersigned (individually and collectively, “Applicant”; jointly and severally, if more than
one), Applicant agrees as to each letter of credit or undertaking (together
with any replacements, extensions or modifications, a “Credit”, collectively, “Credits”) as follows.


 


All Credits issued pursuant to this
Continuing Agreement (the “Agreement”) are issued under and pursuant to the
terms, provisions and covenants of the Credit Agreement (as amended, extended,
restated or otherwise modified from time to time, the “Credit Agreement”) dated as of March 2, 2007 among Doctor Acquisition Co., RDA
Holding Co., The Reader’s Digest Association, Inc., the Lenders party
thereto, and JPMorgan Chase Bank, N.A. as Administrative Agent. Capitalized
terms used herein and not otherwise defined have the meaning assigned to them
in the Credit Agreement. Unless otherwise indicated herein, all references made
herein to Sections shall be construed to refer to Sections of the Credit
Agreement.


 


The provisions relating to letters of credit
set forth in the Credit Agreement, including without limitation, rights and
remedies of the Bank as issuing bank and lender shall apply to the Credit(s) and
will be secured by Collateral (if any), described in the Credit Agreement and
other loan documents as such terms are defined in the Credit Agreement.
Notwithstanding anything herein or in the applications referenced below, in the
event of any conflict between (a) the terms of this Agreement, any
application for a commercial letter of credit or any application for a standby
letter of credit and (b) the terms of the Credit Agreement, the terms of
the Credit Agreement shall govern. In no event shall any such application or
this Agreement impose any additional obligations or liabilities on any Loan
Party, except as set forth in Section 9 below.


 


1.     Definitions: The following terms shall have the meanings
set forth below:


 


“Application”
means each request to issue a Credit.


 


“Good Faith” means honesty in fact in the conduct of the
transaction concerned.


 


“Instructions” means inquiries, communications and
instructions (whether oral, telephonic, written, telegraphic, facsimile,
electronic or other) regarding a Credit; each Application and this Agreement
are each referred to herein as “Instructions” (and the term “Application” is
subsumed within the term “Instruction”).


 


“ISP” means International Standby Practices 1998
(International Chamber of Commerce Publication No.590) and any subsequent
revision thereof adhered to by Bank on the date such Credit is issued.


 


“LOI’s” means steamship
guarantees, releases or letters
of indemnity in favor of a carrier issued by Bank upon Instruction of
Applicant.


 


“Obligations” means all
obligations and liabilities of
Applicant to Bank in respect of any and all Credits and LOI’s issued hereunder
(if any) and under this Agreement, whether matured or unmatured, absolute or
contingent, now existing or hereafter incurred.


 


“Property” means all property
of any kind whatsoever (now
existing or hereafter acquired) including, without limitation, any and all
right, title and interest of Applicant in any goods, equipment, inventory,
money, documents, letters of credit, warehouse receipts,


 

















 


instruments,
securities, security entitlements, financial assets, investment property, precious
and base metals, chattel paper, electronic chattel paper, accounts, commercial
tort claims, deposit accounts, general intangibles (including any claims for
breach of contract, breach of warranty claims and any insurance policies and
proceeds), letter of credit rights, choses in action and the proceeds of any
and all thereof (including any and all of the aforesaid referred to in any
Credit or the drawing documents relating thereto).


 


“Released
Merchandise” means all Property referred to in or relating to
the applicable Credit, released (including pursuant to a forwarders cargo
receipt or by any other means whatsoever) or consigned to Applicant or any
Person designated by Applicant in connection with such Credit or a LOI.


 


“Standard
Letter of Credit Practice” means, for Bank, any domestic or foreign law
or letter of credit practices applicable in the city in which Bank issued the
applicable Credit or for its branch or correspondent, such laws and practices
applicable in the city in which it has advised, confirmed or negotiated such
Credit, as the case may be. Such practices shall be (i) of banks that
regularly issue Credits in the particular city and (ii) required or
permitted under the UCP or the ISP, as chosen in the applicable Credit.


 


“UCP” means Uniform
Customs and Practice for Documentary Credits (1993 Revision), International
Chamber of Commerce Publication No.500 and any subsequent revision thereof
adhered to by Bank on the date such Credit is issued.


 


“UN
Convention” means the United Nations Convention on Independent Guarantees and
Standby Letters of Credit.


 


2.     Applications/Instructions. Each Application
shall be irrevocable once the relevant Credit is issued, amended, extended,
modified or renewed per the relevant Application and shall be in such form as
Bank shall from time to time require or agree to accept (including any type of
electronic form or means of communication). Bank’s records of the content of
any Instruction shall be conclusive absent manifest error. Bank may transmit a
Credit and any amendment
thereto by S.W.I.F.T. message and thereby bind Applicant directly and as
indemnitor to the S.W.I.F.T. rules, including rules obligating Applicant
or Bank to pay charges. Terms regarding LOI’s are set forth on Annex I.


 


3.     Amendment;  Waiver. Bank shall not be deemed to have
amended or modified any term hereof, or waived any of its rights unless Bank
consents in writing to such amendment, modification or waiver. No such waiver,
unless expressly stated therein, shall be effective as to any transaction which
occurs subsequent to such waiver, nor as to any continuance of a breach after
such waiver. Bank’s consent to any amendment, waiver, or modification does not
mean that Bank shall consent or has consented to any other or subsequent
Instruction to amend, modify, or waive a term of this Agreement or any Credit.


 


4.     Indemnification; Limitation
of Liability.


 


a)     Without
limiting any other provisions of this Agreement or the Credit Agreement, Bank
and each other Indemnitee (as defined in the Credit Agreement), shall not be
responsible to Applicant for, and Bank’s rights and remedies against Applicant
and Applicant’s obligation to reimburse the Bank under the Credit Agreement
shall not be impaired by: (i) honor of a presentation under any Credit
which on its face substantially complies with the terms of such Credit; (ii) honor
of a presentation of any drawing documents which appear on their face to have
been signed, presented or issued (X) by any purported successor or
transferee of any beneficiary or other party required to sign, present or issue
the drawing documents or (Y) under a new name of the beneficiary; (iii) acceptance
as a draft of any written or electronic demand or request for payment under a
Credit, even if nonnegotiable or not in the form of a draft, and may disregard
any requirement that such draft, demand or request bear any or adequate
reference to the Credit; (iv) the identity or authority of any presenter
or signer of any drawing document or the form, accuracy, genuineness, or legal
effect of any presentation under any Credit or of any drawing documents; (v) disregard
of any non-documentary conditions stated in any Credit; (vi) acting upon
any Instruction which it, in Good Faith, believes to have been given by a
Person or entity authorized to give such Instruction; (vii) any errors,
omissions, interruptions or delays in transmission or delivery of any message,
advice or document (regardless of how sent or transmitted) or for errors in
interpretation of technical terms or in translation; (xiii) any delay in giving
or failing to give any notice; (ix) any acts, omissions or fraud by, or
the solvency of, any beneficiary, any nominated Person or any other Person; (x) any
breach of contract between the beneficiary and Applicant or any of the parties
to the underlying transaction; (xi) assertion or waiver of any provision of the
UCP or ISP which primarily benefits an issuer of a letter of credit, including,
any requirement that any drawing document be presented to it at a particular
hour or place; (xii) payment to any paying or negotiating bank (designated or
permitted by the terms of the applicable Credit) claiming that it rightfully
honored or is entitled to reimbursement or indemnity under the Standard Letter
of Credit Practice applicable to it; (xiii) dishonor of any presentation upon
or during any Event of Default or for which Applicant is unable or unwilling to
reimburse or indemnify Bank (provided that Applicant acknowledges that
if Bank shall later be required to honor the presentation, Applicant shall be
liable therefor in accordance with Section 2.03 (e) of the Credit
Agreement); or acting or failing to act as required or permitted under Standard
Letter of Credit Practice applicable to where it has issued, confirmed, advised
or negotiated such Credit, as the case may be; provided that the
foregoing shall not excuse the Bank from liability to the Applicant to the
extent of any direct damages (as opposed to consequential damages, claims in
respect of which are waived by the Applicant to the extent permitted by
applicable Law) suffered by the Applicant that are caused by the Bank’s gross
negligence or willful misconduct when determining whether drafts and other
documents presented under a Credit comply with the terms thereof.


 

















 


b)     Without
limiting Section 10.05 of the Credit Agreement, such Section 10.05
shall apply to the Bank and each related Indemnitee notwithstanding the
occurrence of any of the events specified in clause (a) of this Section 4
subject to the proviso set forth in such Section 10.05.


 


c)     If
a Credit is to be governed by a law other than that of the State of New York,
Bank shall not be liable for any costs resulting from any act or omission by
Bank in accord with the UCP or the ISP, as applicable, and Applicant shall
indemnify Bank for all such costs.


 


5.     Compliance with Laws. Applicant will comply with all Laws
(including the USA Patriot Act, foreign exchange control regulations, foreign
asset control regulations and other trade-related regulations) now or hereafter
applicable to each Credit, the transactions underlying such Credit or Applicant’s
execution, delivery and performance of this Agreement, except if the failure to
comply therewith could not reasonably be expected to have a Material Adverse
Effect.


 


6.     Representations and
Warranties. Applicant hereby
represents and warrants that this Agreement constitutes the legal, valid and
binding obligation of Applicant enforceable against it in accordance with its
terms (except as such enforceability may be limited by Debtor Relief Laws and
by general principles of equity, regardless of whether considered in a
proceeding in equity or at law) and makes each of the representations and
warranties set forth in the Credit Agreement as of the date of this Agreement
(and with each request for the issuance of a Credit represents and warrants the
same as of the date of such issuance); provided that, on the Closing
Date, only the Specified Representations shall be made as to the Applicant and
its Subsidiaries, and the
Specified Representations shall be made by Acquisition Co only).


 


7.     Assertion of Rights. To the extent Bank honors a presentation for
which Bank remains unpaid, Bank may assert rights of Applicant and Applicant
shall cooperate with Bank in its assertion of Applicant’s rights, if any,
against the beneficiary, the beneficiary’s rights against Applicant and any
other rights that Bank may have by subordination, subrogation, reimbursement,
indemnity or assignment.


 


8.     Electronic Transmissions. Bank is authorized to accept and process any
Application and any amendments, transfers, assignments of proceeds,
Instructions, consents, waivers and all documents relating to the Credit or the
Application which are sent to Bank by electronic transmission, including SWIFT,
electronic mail, telex, telecopy, telefax, courier, mail or other computer
generated telecommunications and such electronic communication shall have the
same legal effect as if written and shall be binding upon and enforceable
against the Applicant. Bank may, but shall not be obligated to, require
authentication of such electronic transmission or that Bank receives original
documents prior to acting on such electronic transmission. If it is a condition
of the Credit that payment may be made upon receipt by Bank of an electronic transmission
advising negotiation, Applicant hereby agrees to reimburse Bank on demand for
the amount indicated in such electronic transmission advice, and further agrees
to hold Bank harmless if the documents fail to arrive, or if, upon the arrival
of the documents, Bank should determine that the documents do not comply with
the terms and conditions of the Credit.


 


9.     COMMERCIAL CREDITS


 


Acceptance
of Drawing Documents; No Waiver. Subject
to the proviso in Section 4(a), Applicant’s acceptance or retention of a
drawing document presented under or in connection with any Credit (whether or
not the document is genuine) or of any Released Merchandise shall ratify Bank’s
honor of the presentation and preclude Applicant from raising a defense,
set-off or claim with respect to Bank’s honor of such Credit. Bank shall not be
required to seek any waiver of discrepancies from Applicant or to grant any
waiver of discrepancies which Applicant approves or requests.


 


Possession
of Drawing Documents. If
Bank shall agree to honor (accept) drawing documents under a Credit on a time
draft or deferred payment basis, Applicant shall not take possession of the
drawing documents or the underlying Property except for the purpose of loading,
unloading, storing, shipping, transshipping, manufacturing, processing or
otherwise dealing with such Property in a manner preliminary to its sale or
exchange. An Instruction to release any such drawing document or Property shall be deemed a representation by
Applicant to Bank that Applicant seeks such release for one of said purposes.
In each such case, Applicant immediately shall apply the sale proceeds of such
Property to the Obligations relating to the applicable Credit.


 


Absence of
Written Instructions. In the
absence of written instructions to the contrary, the Applicant agrees that (a) if
the Credit authorizes drawings and/or shipments in installments and any
installment is not drawn and/or shipped within the period allowed for that
installment but the Applicant waives such discrepancy, the Bank is authorized
to honor any subsequent installments so long as documents for such installments
are presented within the period allowed for such installments; and (b) each
negotiation Credit shall expire at the counters of the nominated person even if
notice of the presentation or any documents contained in the presentation is
not received by the Bank until after the expiry date of the Credit or any
installment thereof.


 


Release of
Documents or Claiming of Goods from the Carrier. In the event Bank, upon Applicant’s request,
agrees to deliver to Applicant, a customs broker or any other person designated
by the Applicant, any of the documents of title relating to the Credit, prior
to having received payment in full of all the Obligations, Applicant agrees to
obtain possession of any goods represented by such documents within twenty-one
days after the date of delivery of such documents, and if Applicant fails to do
so, Applicant agrees to


 

















 


return such
documents or to have them returned to Bank prior to the expiration of the
twenty-one day period. Applicant further agrees to execute and deliver to Bank
receipts for such documents and the goods represented thereby identifying and
describing such documents and goods. If Applicant claims from the carrier any
goods identified in the shipping documents required under the Credit, (by
virtue of a steamship release, air release, letter of indemnity or any other
means), with or without the assistance of Bank, and such goods have been
released to Applicant or a customs broker or agent acting on Applicant’s
behalf, the Applicant hereby
authorizes Bank to immediately, and without further inquiry and consideration,
debit any account of Applicant in an amount equal to the fair market value of
such goods, that have been released, together with any reasonable out-of-pocket
charges or expenses owing to the Bank.


 


10.  Waiver of Defense; Joint and
Several Liability. Applicant waives any defense whatsoever which might constitute a defense
available to, or discharge of, a surety or a guarantor. If more than one Person
signs this Agreement or an Application hereunder, each of them shall be jointly
and severally liable hereunder and thereunder and all the terms and provisions
regarding liabilities, obligations and Property of such Persons shall apply to
any liabilities, obligations and Property of any and all of them.


 


11.  Continuing Agreement. This Agreement is
a continuing agreement and may not be terminated by Applicant except upon (i) thirty
(30) days’ prior written notice of such termination by Applicant to Bank at the
address of Bank set forth on the most recent Credit issued hereunder, (ii) payment
of all Obligations and (iii) the expiration or cancellation of all Credits
issued hereunder. Notwithstanding the foregoing sentence, if a Credit is issued
in favor of a sovereign or commercial entity, which is to issue a guarantee or
undertaking on Applicant’s behalf in connection therewith, or is issued as
support for such a guarantee, the Applicant shall remain liable with respect to
such Credit until Bank is fully released in writing by such entity.


 


12.  Commencement of Action. Any action or
proceeding in respect of any matter arising under or in connection with
Credits, the Applications or this Agreement may be brought by Applicant against
the Bank within the time period specified in Section 5-115 of the Uniform
Commercial Code.


 


13.  Jurisdiction; Waiver of Jury
Trial; Applicable Law. Applicant agrees to be bound by the provisions in the
Credit Agreement relating to jurisdiction, venue, and waiver of jury trial and
that such provisions shall also apply to this Agreement. This Agreement
shall be construed in accordance with and governed by the law of the State of
New York.


 


14.  No Third Party Benefits;
Successor; Integration; Delivery by Facsimile; Notices. This Agreement
shall be binding upon and inure to the benefit of Bank and Applicant and their
respective successors and permitted assigns. This Agreement shall not confer
any right or benefit upon any Person other than the parties to this Agreement,
the Indemnified Persons and their respective successors and permitted assigns.
Applicant may not assign this Agreement without the prior written consent of
Bank. This Agreement may be signed and delivered by facsimile transmission.
Notices to Bank shall be sent to the address of Bank as set forth on the Credit
and shall be delivered by hand, overnight courier or certified mail, return
receipt requested. Notices to Applicant shall be sent to the address set forth
below the signature line hereto. THIS
AGREEMENT AND THE CREDIT AGREEMENT CONSTITUTE THE ENTIRE CONTRACT AND FINAL
AGREEMENT AMONG THE PARTIES RELATING TO THE SUBJECT MATTER AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES.


 
















 


THE
UNDERSIGNED HEREBY AGREES TO ALL THE TERMS AND CONDITIONS SET FORTH HEREIN, ALL
OF WHICH HAVE BEEN READ AND UNDERSTOOD BY THE UNDERSIGNED.


 


 


	
   

  	
   

  	
   

  
	
   

  	
  (Applicant/Obligor)

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (Authorized Signature/Title)

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (Phone)

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (Fax)

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (Date)

  	
   

  



 


THE
FOLLOWING IS TO BE EXECUTED IF THE CREDIT IS TO BE ISSUED FOR THE ACCOUNT OF A
PERSON OTHER THAN THE PERSON SIGNING ABOVE:


 


AUTHORIZATION
AND AGREEMENT OF ADDITIONAL PARTY NAMED AS ACCOUNT PARTY


 


To:
THE ISSUER OF THE CREDIT


 


We
join in the above Agreement, naming us as Account Party, for the issuance of
the Credit and, in consideration thereof, we irrevocably agree (i) that the
above Applicant has sole right to give instructions and make agreements with
respect to this Agreement and the Credit, and the disposition of documents, and
we have no right or claim against you, any of your affiliates or subsidiaries,
or any correspondent in respect of any matter arising in connection with any of
the foregoing and (ii) to be bound by the Agreement and all obligations of the
Applicant thereunder as if we were a party thereto. The Applicant is authorized
to assign or transfer to you all or any part of any security held by the
Applicant for our obligations arising in connection with this transaction and,
upon any such assignment or transfer, you shall be vested with all powers and
rights in respect of the security transferred or assigned to you and you may
enforce your rights under this Agreement against us or our Property in
accordance with the terms hereof.


 


 


	
   

  	
   

  	
   

  
	
   

  	
  (Account Party)

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (Authorized Signature/Title)

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (Phone)

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (Fax)

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
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Appendix
A


To
the Continuing Agreement for Commercial & Standby Letters of Credit

(To be completed
by Account Party/Applicant/Correspondent Bank)


 


This Appendix will remain
in effect until further notice in writing is received by the JPMorgan Chase
Bank, N.A. from the Account Party/Applicant/Correspondent Bank. Changes to this
Appendix require a new Appendix A to be executed and delivered to JPMorgan
Chase Bank, N A.


 


A)     In the event JPMorgan Chase Bank, N.A. issues or
amends a Commercial or a Standby Letter of Credit (“Credit”), any one of the
following individual(s) shall be authorized to sign on the behalf of:


 




 





(Print Name of Account
Party/Applicant/Correspondent Bank)


 


 


	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (Printed Name)

  	
   

  	
  (Title)

  	
   

  	
  (Authorized Signature)

  	
   

  	
  (Date)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (Printed Name)

  	
   

  	
  (Title)

  	
   

  	
  (Authorized Signature)

  	
   

  	
  (Date)

  



 


B)       In regards to any “Credit”, JPMorgan
Chase Bank, N.A. may accept and rely on instructions including without
limitation, (a) waiving of discrepancies, (b) mailings/returning shipping
documents, (c) changing Credit terms and conditions prior to issuance, and
amendments to Credits which do not extend, increase or change the tenor of the
draft(s) transmitted by the following authorized representatives of:


 


 




(Print Name of Account
Party/Applicant/Correspondent Bank)





 


 


	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (Printed Name)

  	
   

  	
  (Title)

  	
   

  	
  (Authorized Signature)

  	
   

  	
  (Date)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (Printed Name)

  	
   

  	
  (Title)

  	
   

  	
  (Authorized Signature)

  	
   

  	
  (Date)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (Printed Name)

  	
   

  	
  (Title)

  	
   

  	
  (Authorized Signature)

  	
   

  	
  (Date)

  



 


C)       Signature Verification  (To be completed by “Bank”):


The above individual(s) is/are
authorized to execute and sign applications, amendments and instructions on
behalf of the Account Party/Applicant/Correspondent Bank.


 


 


	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (Print Relationship
  Manager “RM” Name)

  	
   

  	
  (“RM” Title)

  	
   

  	
  (“RM” Authorized
  Signature)

  	
   

  	
  (Date)

  



 

















 


ANNEX
I TO AGREEMENT FOR COMMERCIAL LETTERS OF CREDIT ISSUED BY

JPMORGAN CHASE BANK, N.A.


 


If
Bank issues a LOI or
endorses a bill of lading at the Instruction of Applicant or otherwise pursuant
hereto, Applicant agrees as follows:


 


Except as otherwise set
forth in this Annex I or expressly set forth elsewhere in this Agreement, LOI’s
shall be deemed issued by Bank subject to the same terms and conditions set
forth herein for Credits, including, without limitation, payment obligations,
indemnification provisions and limitations of liability benefiting Bank and
other Indemnified Persons. Applicant shall be liable for payments made under
any LOI on demand and otherwise subject to paragraph 2. Bank shall have the
right in its sole discretion and without notice to or approval of Applicant, to
pay, settle or adjust any claim or demand made against or upon Bank in
connection therewith without inquiry or determination, on Bank’s part, of the
circumstances, merits or validity of any claim or demand. Applicant shall take
whatever steps are necessary to obtain the shipping documents concerning the
Released Merchandise. Upon Applicant’s receipt of such shipping documents,
Applicant shall deliver them to the carrier, duly endorsed by all parties whose
endorsement is required by the carrier, and obtain from the carrier and deliver
to Bank, the LOI and a release of Bank’s liability to the carrier. Bank may
make payments against any drawing under the Credit related to an LOI, whether
or not the drawing shall comply with the terms and conditions of such Credit,
without any liability whatsoever to Bank. Applicant expressly acknowledges that
Applicant may be required to reimburse Bank for payments made by Bank under
both the LOI and such Credit with respect to the same Released Merchandise.
Applicant shall account by delivering to Bank, immediately upon the receipt
thereof by Applicant, the proceeds of the sale of the Released Merchandise or
the documents related thereto in whatever form received (with Applicant’s
endorsement where necessary) to be applied by Bank to the payment of any
drawing under the Credit. If any proceeds shall be notes, accounts,
acceptances, or in any form other than cash, they shall not be applied by Bank
until paid in cash. Bank shall have the option at any time to sell or discount
these items and so apply the net proceeds, conditionally upon final payment of
these items. Applicant shall pay all charges in connection with the Released
Merchandise and shall at all times hold it separate and apart from the Property
of Applicant and shall definitively show such separation in all its records and
entries. Applicant shall at all times keep the Released Merchandise fully
insured at Applicant’s expense in favor of, and to the satisfaction of, Bank
against loss by fire, theft, and any other risk to which it may be subject.
Applicant shall deposit the insurance policies with Bank upon its demand. If
for any reason any of such policies fail to provide for payment of the loss
thereunder to Bank as its interest may appear, Applicant hereby (1) assigns and
makes the loss payable under any of such policies payable to Bank as its
interest may appear, (2) assigns to Bank all of the avails and proceeds of any
and all of such policies, and (3) agrees to accept such avails and proceeds in
trust for Bank and to forthwith deliver the same to Bank in the exact form
received (with the endorsement of Applicant where necessary). Bank shall have
no responsibility for the existence, quantity, quality, condition, value or
delivery of any Released Merchandise or the correctness, validity or
genuineness of the documents purporting to represent Released Merchandise.


 

















 


Exhibit L


 


Form
of German Tax Confirmation


 


(a)                                  If, at any time after Closing Date, [the
German Facility Borrower] determines that a confirmation by each of [the German
Facility Lenders] substantially in the form of the Decree issued by the German
Federal Ministry of Finance as of October 20, 2005 (substantially in the form
of Exhibit M, the “Tax Confirmation”) is required under
the decrees to § 8a of the German Corporate Income Tax Act (Körperschaftsteuergesetz or KStG) dated July
15, 2004, July 22, 2005, and October 20, 2005 (as in effect on the date hereof,
the “Decrees”) with respect to [the German
Facility], the Borrower may prepare and deliver to [the German Facility
Lenders] (through the Administrative Agent) a complete and accurate draft Tax
Confirmation listing in particular all guarantees and security interests
securing the claims of [the German Facility Lenders] under the Loan Documents
and provide to [the German Facility Lenders] any further information which may
be required by the Administrative Agent or any [German Facility Lender] to
issue the Tax Confirmation (based on the then applicable practice of the German
tax authorities).


 


(b)                                 The Tax Confirmation shall only include
factual but not legal statements to be issued by [the German Facility Lenders].
The Tax Confirmation shall not contain any statement that any [German Facility
Lender] is not permitted to issue by law, administrative rule or regulation of
the jurisdiction to which the relevant [German Facility Lender] is subject.


 


(c)                                  Each [German Facility Lender] (including
any Person that becomes a German Facility Lender subsequent to the date hereof
pursuant to Section 10.07) authorizes the Administrative Agent on behalf of
such [German Facility Lender] to issue a Tax Confirmation within 20 Business
Days after such [German Facility Lender’s] receipt of the following (which
receipt shall be deemed to have occurred upon the Administrative Agent’s
posting of the following to Intralinks or other similar information
transmission system):


 


(i)            [the German Facility Borrower’s] request
therefor,


 


(ii)           a complete and accurate draft of such Tax
Confirmation listing all guarantees and security interests pursuant to clause (a)
above, and


 


(iii)          all further information required pursuant
to clause (a) above to enable [the German Facility Lenders] to complete such
Tax Confirmation,


 


unless such [German
Facility Lender] notifies the Administrative Agent within such 20-Business Day
period that (x) it is prohibited from doing so by law, administrative rule or
regulation of the jurisdiction to which such [German Facility Lender] is
subject or (y) it has determined that the factual information provided by the
Borrower is not correct or not complete or, in the view of such [German
Facility Lender] (acting in good faith), is misleading.


 


(d)                                 The Borrower agrees to pay or reimburse
the Administrative Agent and each [German Facility Lender] for all costs and
expenses incurred in connection with any Tax Confirmation, including all legal
fees, expenses and disbursements. The Borrower shall indemnify and hold
harmless each Indemnitee from and against any and all liabilities, obligations,
losses, damages, penalties, claims, demands, actions, judgments and suits and related
expenses (including all legal fees, expenses and disbursements) or any kind or
nature whatsoever which may at any time be imposed on, incurred by or asserted
against any such Indemnitee in any way relating to or arising out of or in
connection with any Tax Confirmation. The agreements in this clause (d) shall
survive the resignation of the Administrative Agent, the replacement of any
Lender, the


 

















 


termination of the
Aggregate Commitments and repayment, satisfaction or discharge of all other
Obligations.


 


(e)                                  The Borrowers confirm to the
Administrative Agent and each [German Facility Lender] that (i) [the German
Facility Lenders] will issue their respective Tax Confirmations exclusively at
the request of [the German Facility Borrower] and solely for the purposes of
this Section [    ] pursuant to the
Decrees with respect to the Loan Documents, (ii) [the German Facility Lenders]
are not responsible for examining any Borrower’s tax position or for achieving
any certain tax treatment with respect to any Borrower and (iii) no Loan Party
will raise any claims against the Administrative Agent or any [German Facility
Lender] based on, or in connection with, any Tax Confirmation and no [German
Facility Lender] will have any liability to any Loan Party with respect to any
Tax Confirmation.


 


(f)                                    It is the common understanding of the
parties hereto that no party is providing any legal and/or tax advice to any
other party with respect to this Agreement or, in particular, with respect to
the application of § 8a KStG and the interpretation of § 8a KStG in the
Decrees, and that it is the responsibility of each party, in particular each
Loan Party, to consult with its own legal/tax advisers.