Exhibit 10.2


 


EXECUTION COPY




 





 


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.


 


 


	
   

  	
  By:

  	
  /s/ Christopher Minnetian

  
	
   

  	
   

  	
  Name: 

  	
  Christopher Minnetian

  
	
   

  	
   

  	
  Title: 

  	
  President, Treasurer and Secretary of each
  of the loan parties listed on Exhibit A

  



 


[Signature Page to Guarantee & Collateral
Agreement]


 

















 


	
   

  	
  By:

  	
  /s/ Clifford H.R. DuPree

  
	
   

  	
   

  	
  Name:

  	
  Clifford H.R. DuPree

  
	
   

  	
   

  	
  Title:

  	
  Secretary of each of Loan Parties listed on
  Exhibit B

  



 


[SIGNATURE PAGE TO GUARANTEE AND COLLATERAL
AGREEMENT]


 

















 


	
   

  	
  By:

  	
  /s/ Karen E. Andrews

  
	
   

  	
   

  	
  Name:

  	
  Karen E. Andrews

  
	
   

  	
   

  	
  Title:

  	
  Secretary of each of the Loan Parties
  listed on Exhibit C

  



 


[SIGNATURE PAGE TO GUARANTEE AND COLLATERAL
AGREEMENT]


 

















 


	
   

  	
  Solely for purposes of Sections 8.18 and
  8.19:

  
	
   

  	
  RD GERMAN HOLDINGS GmbH

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Werner Neunzig

  
	
   

  	
   

  	
  Name:

  	
  Werner Neunzig

  
	
   

  	
   

  	
  Title:

  	
  Managing Director

  



 


[SIGNATURE PAGE TO GUARANTEE AND COLLATERAL
AGREEMENT]


 

















 


	
   

  	
  By:

  	
  /s/ Randolph H. Elkins

  
	
   

  	
   

  	
  Name:

  	
  Randolph H. Elkins

  
	
   

  	
   

  	
  Title:

  	
  Secretary of each of the Loan Parties
  listed on Exhibit D

  



 


[SIGNATURE PAGE TO GUARANTEE AND COLLATERAL
AGREEMENT]


 

















 


	
   

  	
  JPMORGAN CHASE BANK, N.A., as

  Administrative Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Gary L. Spevack

  
	
   

  	
   

  	
  Name:

  	
  Gary L. Spevack

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  



 


[SIGNATURE PAGE TO GUARANTEE AND COLLATERAL
AGREEMENT]


 
















 


Exhibit A


 


RDA Holding Co.


Doctor
Acquisition Co.


 

















 


Exhibit B


 


The
Reader’s Digest Association, Inc.


Allrecipes.com, Inc.


Ardee
Music Publishing, Inc.


Books
Are Fun, Ltd.


Christmas
Angel Productions, Inc.


Pegasus
Asia Investments, Inc.


Pegasus
Finance Corp.


Pegasus
Investment, Inc.


Pegasus
Sales, Inc.


Pleasantville
Music Publishing, Inc.


QSP, Inc.


Family
Reading Program Corp.


QSP
Distribution Services, LLC


QSP
Products and Programs, LLC


QSP
Sales, LLC


QSP Services, LLC


QSP Ventures, LLC


Fundraising.com, Inc.


Reiman
Media Group, Inc.


Taste
of Home Productions, Inc.


Taste
of Home Media Group, Inc.


World
Wide Country Tours, Inc.


VideOvation, Inc.


R.
D. Manufacturing Corporation


RD
Publications, Inc.


Home
Service Publications, Inc.


RD
Large Edition, Inc.


RD
Trade Shows, Inc.


RD
Walking, Inc.


Retirement
Living Publishing Company, Inc.


Travel
Publications, Inc.


RD
Member Services, Inc.


Reader’s
Digest Children’s Publishing, Ine.


Reader’s
Digest Consumer Services, Inc.


RD
Magazine Value Partners, Inc.


Reader’s
Digest Entertainment, Inc.


Reader’s
Digest Financial Services, Inc.


Taste
of Home Entertaining, Inc.


Reader’s
Digest Latinoamerica S.A.


WAPLA,
LLC


Reader’s
Digest Sales and Services, Inc.


Reader’s
Digest Sub Nine, Inc.


Reader’s
Digest Young Families, Inc.


 

















 


SMDDMS, Inc.


The
Reader’s Digest Association (Russia) Incorporated


W.A.
Publications, LLC


 

















 


Exhibit C


 


WRC
Media Inc.


CompassLearning, Inc.


Weekly
Reader Corporation


Lifetime
Learning Systems, Inc.


World
Almanac Education Group, Inc.


Funk &
Wagnalls Yearbook Corp.


Gareth
Stevens, Inc.


 

















 


Exhibit D


 


Direct
Holdings U.S. Corp.


Direct
Holdings Americas inc.


Direct
Holdings Custom Publishing Inc.


Direct
Holdings Education Inc.


Alex
Inc.


Direct
Holdings Customer Service, Inc.


Direct
Holdings Libraries Inc.


 

















 


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:

  



 






 












 


[Schedules to 


Guarantee and Collateral
Agreement]


 


Schedule 1


Notice Addresses


 


	
  Company Name

  	
   

  	
  Legal
  Address

  
	
   

  	
   

  	
   

  
	
  RDA
  Holding Co.

  	
   

  	
  One
  Rockefeller Plaza, 32nd Floor 

  New York, NY 10020

  
	
   

  	
   

  	
   

  
	
  Doctor
  Acqusition Co.

  	
   

  	
  One
  Rockefeller Plaza, 32nd Floor 

  New York, NY 10020

  
	
   

  	
   

  	
   

  
	
  The
  Reader’s Digest Association, Inc.

  	
   

  	
  Reader’s
  Digest Road 

  Pleasantville, NY 10570

  
	
   

  	
   

  	
   

  
	
  Allrecipes.com, Inc.

  	
   

  	
  3317
  3rd Ave. S, Suite D 

  Seattle, WA 98134

  
	
   

  	
   

  	
   

  
	
  Ardee
  Music Publishing, Inc.

  	
   

  	
  260
  Madison Avenue 

  New York, New York 10016

  
	
   

  	
   

  	
   

  
	
  Books
  Are Fun, Ltd.

  	
   

  	
  1680
  Highway 1 North 

  Fairfield, Iowa 52556

  
	
   

  	
   

  	
   

  
	
  Christmas
  Angel Productions, Inc.

  	
   

  	
  Reader’s
  Digest Road 

  Pleasantville, NY 10570

  
	
   

  	
   

  	
   

  
	
  Family
  Reading Program Corp.

  	
   

  	
  Reader’s
  Digest Road 

  Pleasantville, NY 10570

  
	
   

  	
   

  	
   

  
	
  Home
  Service Publications, Inc.

  	
   

  	
  Reader’s
  Digest Road 

  Pleasantville, NY 10570

  
	
   

  	
   

  	
   

  
	
  Pegasus
  Asia Investments, Inc.

  	
   

  	
  Reader’s
  Digest Road 

  Pleasantville, NY 10570

  
	
   

  	
   

  	
   

  
	
  Pegasus
  Finance Corp.

  	
   

  	
  802
  North West Street 

  Wilmington, DE 19801

  
	
   

  	
   

  	
   

  
	
  Pegasus
  Investment, Inc.

  	
   

  	
  Reader’s
  Digest Road 

  Pleasantville, NY 10570

  
	
   

  	
   

  	
   

  
	
  Pegasus
  Sales, Inc.

  	
   

  	
  Reader’s
  Digest Road 

  Pleasantville, NY 10570

  
	
   

  	
   

  	
   

  
	
  Pleasantville
  Music Publishing, Inc.

  	
   

  	
  Reader’s
  Digest Road 

  Pleasantville, NY 10570

  
	
   

  	
   

  	
   

  
	
  QSP, Inc.

  	
   

  	
  Reader’s
  Digest Road 

  Pleasantville, NY 10570

  
	
   

  	
   

  	
   

  
	
  QSP
  Distribution Services, LLC

  	
   

  	
  2175
  East Park Drive, Suite A 

  Conyers, GA 30013-5743

  
	
   

  	
   

  	
   

  
	
  QSP
  Products and Programs, LLC

  	
   

  	
  Reader’s
  Digest Road 

  Pleasantville, NY 10570

  
	
   

  	
   

  	
   

  
	
  QSP
  Sales, LLC

  	
   

  	
  Reader’s
  Digest Road 

  Pleasantville, NY 10570

  
	
   

  	
   

  	
   

  
	
  QSP
  Services, LLC

  	
   

  	
  Reader’s
  Digest Road 

  Pleasantville, NY 10570

  
	
   

  	
   

  	
   

  
	
  QSP
  Ventures, LLC

  	
   

  	
  Reader’s
  Digest Road 

  Pleasantville, NY 10570

  



 

















 


	
  RD
  Large Edition, Inc.

  	
   

  	
  Reader’s
  Digest Road 

  Pleasantville, NY 10570

  
	
   

  	
   

  	
   

  
	
  RD
  Magazine Value Partners, Inc.

  	
   

  	
  Reader’s
  Digest Road 

  Pleasantville, NY 10570

  
	
   

  	
   

  	
   

  
	
  R. D. Manufacturing Corporation

  	
   

  	
  Reader’s
  Digest Road 

  Pleasantville, NY 10570

  
	
   

  	
   

  	
   

  
	
  RD
  Member Services, Inc.

  	
   

  	
  Reader’s
  Digest Road 

  Pleasantville, NY 10570

  
	
   

  	
   

  	
   

  
	
  RD Publications, Inc.

  	
   

  	
  Reader’s
  Digest Road 

  Pleasantville, NY 10570

  
	
   

  	
   

  	
   

  
	
  RD
  Trade Shows, Inc.

  	
   

  	
  Reader’s
  Digest Road 

  Pleasantville, NY 10570

  
	
   

  	
   

  	
   

  
	
  RD
  Walking, Inc.

  	
   

  	
  Reader’s
  Digest Road 

  Pleasantville, NY 10570

  
	
   

  	
   

  	
   

  
	
  Reader’s
  Digest Children’s Publishing, Inc.

  	
   

  	
  Reader’s
  Digest Road 

  Pleasantville, NY 10570

  
	
   

  	
   

  	
   

  
	
  Reader’s Digest Consumer Services, Inc.

  	
   

  	
  200
  Cahaba Park Circle 

  Birmingham, AL. 35242

  
	
   

  	
   

  	
   

  
	
  Reader’s Digest Entertainment, Inc.

  	
   

  	
  Reader’s
  Digest Road 

  Pleasantville, NY 10570

  
	
   

  	
   

  	
   

  
	
  Reader’s Digest Financial Services, Inc.

  	
   

  	
  Reader’s
  Digest Road 

  Pleasantville, NY 10570

  
	
   

  	
   

  	
   

  
	
  Taste of Home Entertaining, Inc.

  	
   

  	
  20300
  Watertower Blvd 

  Brookfield, WI 53045

  
	
   

  	
   

  	
   

  
	
  Reader’s Digest
  Latinoamerica S.A.

  	
   

  	
  Reader’s
  Digest Road 

  Pleasantville, NY 10570

  
	
   

  	
   

  	
   

  
	
  Reader’s Digest Sales and Services, Inc.

  	
   

  	
  261
  Madison Avenue 

  New York, NY 10016

  
	
   

  	
   

  	
   

  
	
  Fundraising.com, Inc.

  	
   

  	
  Reader’s
  Digest Road 

  Pleasantville, NY 10570

  
	
   

  	
   

  	
   

  
	
  Reader’s
  Digest Sub Nine, Inc.

  	
   

  	
  Reader’s
  Digest Road 

  Pleasantville, NY 10570

  
	
   

  	
   

  	
   

  
	
  Reader’s
  Digest Young Families, Inc.

  	
   

  	
  Reader’s
  Digest Road 

  Pleasantville, NY 10570

  
	
   

  	
   

  	
   

  
	
  Taste
  of Home Media Group, Inc.

  	
   

  	
  5400
  South 60th Street 

  Greendale, Wisconsin 53129

  
	
   

  	
   

  	
   

  
	
  Reiman
  Media Group, Inc.

  	
   

  	
  5400
  South 60th Street 

  Greendale, Wisconsin 53129

  
	
   

  	
   

  	
   

  
	
  Retirement
  Living Publishing Company, Inc.

  	
   

  	
  Reader’s
  Digest Road 

  Pleasantville, NY 10570

  
	
   

  	
   

  	
   

  
	
  SMDDMS, Inc.

  	
   

  	
  Reader’s
  Digest Road 

  Pleasantville, NY 10570

  
	
   

  	
   

  	
   

  
	
  Taste
  of Home Productions, Inc.

  	
   

  	
  5400
  South 60th Street 

  Greendale, Wisconsin 53129

  
	
   

  	
   

  	
   

  
	
  The
  Reader’s Digest Association (Russia) Incorporated

  	
   

  	
  Reader’s
  Digest Road 

  Pleasantville, NY 10570

  



 


2

















 


	
  Travel
  Publications, Inc.

  	
   

  	
  Reader’s
  Digest Road 

  Pleasantville, NY 10570

  
	
   

  	
   

  	
   

  
	
  VideOvation, Inc.

  	
   

  	
  Reader’s
  Digest Road 

  Pleasantville, NY 10570

  
	
   

  	
   

  	
   

  
	
  W.A.
  Publications, LLC

  	
   

  	
  Reader’s
  Digest Road 

  Pleasantville, NY 10570

  
	
   

  	
   

  	
   

  
	
  WAPLA,
  LLC

  	
   

  	
  Reader’s
  Digest Road 

  Pleasantville, NY 10570

  
	
   

  	
   

  	
   

  
	
  World
  Wide Country Tours, Inc.

  	
   

  	
  5400
  South 60th Street 

  Greendale, Wisconsin 53129

  
	
   

  	
   

  	
   

  
	
  Alex
  Inc.

  	
   

  	
  8280
  Willow Oaks Corporate Drive, Suite 800 

  Fairfax, VA 22031

  
	
   

  	
   

  	
   

  
	
  Direct
  Holdings Americas Inc.

  	
   

  	
  8280
  Willow Oaks Corporate Drive, Suite 800 

  Fairfax, VA 22031

  
	
   

  	
   

  	
   

  
	
  Direct
  Holdings Custom Publishing Inc.

  	
   

  	
  8280
  Willow Oaks Corporate Drive, Suite 800 

  Fairfax, VA 22031

  
	
   

  	
   

  	
   

  
	
  Direct
  Holdings Customer Service, Inc.

  	
   

  	
  8280
  Willow Oaks Corporate Drive, Suite 800 

  Fairfax, VA 22031

  
	
   

  	
   

  	
   

  
	
  Direct
  Holdings Education Inc.

  	
   

  	
  8280
  Willow Oaks Corporate Drive, Suite 800 

  Fairfax, VA 22031

  
	
   

  	
   

  	
   

  
	
  Direct
  Holdings Libraries Inc.

  	
   

  	
  8280
  Willow Oaks Corporate Drive, Suite 800 

  Fairfax, VA 22031

  
	
   

  	
   

  	
   

  
	
  Direct
  Holdings U.S. Corp.

  	
   

  	
  8280
  Willow Oaks Corporate Drive, Suite 800 

  Fairfax, VA 22031

  
	
   

  	
   

  	
   

  
	
  WRC
  Media Inc.

  	
   

  	
  512
  Seventh Avenue 

  New York, NY 10018

  
	
   

  	
   

  	
   

  
	
  CompassLearning, Inc.

  	
   

  	
  203
  Colorado Street 

  Austin, TX 78701

  
	
   

  	
   

  	
   

  
	
  Weekly
  Reader Corporation

  	
   

  	
  200
  First Stamford Place P.O. Box 120023 

  Stamford, CT 06912

  
	
   

  	
   

  	
   

  
	
  Lifetime
  Learning Systems, Inc.

  	
   

  	
  200
  First Stamford Place P.O. Box 120023 

  Stamford, CT 06912

  
	
   

  	
   

  	
   

  
	
  World
  Almanac Education Group, Inc.

  	
   

  	
  512
  Seventh Avenue 

  New York, NY 10018

  
	
   

  	
   

  	
   

  
	
  Funk &
  Wagnalls Yearbook Corp.

  	
   

  	
  512
  Seventh Avenue 

  New York, NY 10018

  
	
   

  	
   

  	
   

  
	
  Gareth
  Stevens, Inc.

  	
   

  	
  330
  West Olive Street, Suite 100 

  Milwaukee, WI 53212

  



 


3

















 


Schedule 2


Investment Property


 


Pledged
Debt:


 


	
  Lender

  	
   

  	
  Borrower

  	
   

  	
  Amount

  	
   

  
	
  The Reader’s Digest Association, Inc.

  	
   

  	
  Pegasus Sales, Inc.

  	
   

  	
  $

  	
  5,000,000

  	
   

  
	
  The Reader’s Digest Association, Inc.

  	
   

  	
  Reader’s Digest Children’s
  Publishing, Inc.

  	
   

  	
  $

  	
  3,740,000

  	
   

  
	
  The Reader’s Digest Association, Inc.

  	
   

  	
  Reader’s Digest
  Sales & Services, Inc.

  	
   

  	
  $

  	
  3,000,000

  	
   

  
	
  The Reader’s Digest Association, Inc.

  	
   

  	
  Books Are Fun, Ltd.

  	
   

  	
  $

  	
  330,000,000

  	
   

  



 


Pledged
Equity:(1)


 


Domestic


 


	
  Loan Party

  	
   

  	
  Subsidiary

  	
   

  	
  Subsidiary

  Jurisdiction

  of

  Organization

  	
   

  	
  Ownership Interest

  	
   

  	
  Percent

  Ownership

  	
   

  
	
  RDA Holding Co.

  	
   

  	
  The Reader’s Digest
  Association, Inc.

  	
   

  	
  Delaware

  	
   

  	
  1,000 shares common

  	
   

  	
  100

  	
  %

  
	
  The Reader’s Digest Association, Inc.

  	
   

  	
  Allrecipes.com, Inc.

  	
   

  	
  Washington

  	
   

  	
  10 shares common

  	
   

  	
  100

  	
  %

  
	
  The Reader’s Digest Association, Inc.

  	
   

  	
  Ardee Music
  Publishing, Inc.

  	
   

  	
  Delaware

  	
   

  	
  100 shares common

  	
   

  	
  100

  	
  %

  
	
  The Reader’s Digest Association, Inc.

  	
   

  	
  Books Are Fun, Ltd.

  	
   

  	
  Iowa

  	
   

  	
  100 shares common

  	
   

  	
  100

  	
  %

  
	
  The Reader’s Digest Association, Inc.

  	
   

  	
  Christmas Angel
  Productions, Inc.

  	
   

  	
  Delaware

  	
   

  	
  10 shares common

  	
   

  	
  100

  	
  %

  



 






(1) 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.


 


4

















 


	
  The Reader’s Digest Association, Inc.

  	
   

  	
  Pegasus Asia Investments
  Inc.

  	
   

  	
  Delaware

  	
   

  	
  10 shares common

  	
   

  	
  100

  	
  %

  
	
  The Reader’s Digest Association, Inc.

  	
   

  	
  Pegasus Finance Corp.

  	
   

  	
  Delaware

  	
   

  	
  10 shares common

  	
   

  	
  100

  	
  %

  
	
  The Reader’s Digest Association, Inc.

  	
   

  	
  Pegasus Investment, Inc.

  	
   

  	
  Delaware

  	
   

  	
  10 shares common

  	
   

  	
  100

  	
  %

  
	
  The Reader’s Digest Association, Inc.

  	
   

  	
  Pegasus Sales, Inc.

  	
   

  	
  Delaware

  	
   

  	
  1,000 shares common

  	
   

  	
  100

  	
  %

  
	
  The Reader’s Digest Association, Inc.

  	
   

  	
  Pleasantville Music
  Publishing, Inc.

  	
   

  	
  Delaware

  	
   

  	
  100 shares common

  	
   

  	
  100

  	
  %

  
	
  The Reader’s Digest Association, Inc.

  	
   

  	
  QSP, Inc.

  	
   

  	
  Delaware

  	
   

  	
  10 shares common

  	
   

  	
  100

  	
  %

  
	
  The Reader’s Digest Association, Inc.

  	
   

  	
  R. D. Manufacturing
  Corporation

  	
   

  	
  Delaware

  	
   

  	
  1,000 shares common

  	
   

  	
  100

  	
  %

  
	
  The Reader’s Digest Association, Inc.

  	
   

  	
  RD Publications, Inc.
  (f/k/a Travel Publications, Inc.)

  	
   

  	
  Delaware

  	
   

  	
  10 shares common

  	
   

  	
  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

  	
  %

  
	
  The Reader’s Digest Association, Inc.

  	
   

  	
  Reader’s Digest Consumer
  Services, Inc.

  	
   

  	
  Delaware

  	
   

  	
  10 shares common

  	
   

  	
  100

  	
  %

  
	
  The Reader’s Digest Association, Inc.

  	
   

  	
  Reader’s Digest
  Entertainment, Inc.

  	
   

  	
  Delaware

  	
   

  	
  10 shares common

  	
   

  	
  100

  	
  %

  
	
  The Reader’s Digest Association, Inc.

  	
   

  	
  Reader’s Digest Financial
  Services, Inc.

  	
   

  	
  Delaware

  	
   

  	
  10 shares common

  	
   

  	
  100

  	
  %

  
	
  The Reader’s Digest Association, Inc.

  	
   

  	
  Reader’s
  Digest Latinoamerica S.A.

  	
   

  	
  Delaware

  	
   

  	
  10 shares common

  	
   

  	
  100

  	
  %

  
	
  The Reader’s Digest Association, Inc.

  	
   

  	
  Reader’s Digest Sales and
  Services, Inc.

  	
   

  	
  Delaware

  	
   

  	
  1,000 shares common

  	
   

  	
  100

  	
  %

  
	
  The Reader’s Digest Association, Inc.

  	
   

  	
  Reader’s Digest Sub
  Nine, Inc.

  	
   

  	
  Delaware

  	
   

  	
  10 shares common

  	
   

  	
  100

  	
  %

  
	
  The Reader’s Digest Association, Inc.

  	
   

  	
  Reader’s Digest Young
  Families, Inc.

  	
   

  	
  Delaware

  	
   

  	
  10 shares common

  	
   

  	
  100

  	
  %

  
	
  The Reader’s Digest Association, Inc.

  	
   

  	
  SMDDMS, Inc.

  	
   

  	
  Delaware

  	
   

  	
  10 shares common

  	
   

  	
  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

  	
  %

  
	
  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

  	
  %

  



 


5

















 


	
  The Reader’s Digest Association, Inc.

  	
   

  	
  W.A. Publications, LLC

  	
   

  	
  Delaware

  	
   

  	
  100%

  	
   

  	
  100

  	
  %

  
	
  QSP, Inc.

  	
   

  	
  Family Reading Program
  Corp.

  	
   

  	
  Delaware

  	
   

  	
  10 shares common

  	
   

  	
  100

  	
  %

  
	
  QSP, Inc.

  	
   

  	
  Fundraising.com, Inc.
  (f/k/a Reader’s Digest Sub Eight, Inc.)

  	
   

  	
  Delaware

  	
   

  	
  10 shares common

  	
   

  	
  100

  	
  %

  
	
  QSP, Inc.

  	
   

  	
  QSP Distribution Services,
  LLC

  	
   

  	
  Delaware

  	
   

  	
  10 units limited liability
  interests

  	
   

  	
  100

  	
  %

  
	
  QSP, Inc.

  	
   

  	
  QSP Products and Programs,
  LLC

  	
   

  	
  Delaware

  	
   

  	
  10 units limited liability
  interests

  	
   

  	
  100

  	
  %

  
	
  QSP, Inc.

  	
   

  	
  QSP Sales, LLC

  	
   

  	
  Delaware

  	
   

  	
  10 units limited liability
  interests

  	
   

  	
  100

  	
  %

  
	
  QSP, Inc.

  	
   

  	
  QSP Services, LLC

  	
   

  	
  Delaware

  	
   

  	
  10 units limited liability
  interests

  	
   

  	
  100

  	
  %

  
	
  QSP, Inc.

  	
   

  	
  QSP Ventures, LLC

  	
   

  	
  Delaware

  	
   

  	
  10 units limited liability
  interests

  	
   

  	
  100

  	
  %

  
	
  QSP, Inc.

  	
   

  	
  Reiman Media
  Group, Inc. (f/k/a Reader’s Digest Media Group, Inc.)

  	
   

  	
  Delaware

  	
   

  	
  10 shares common

  	
   

  	
  100

  	
  %

  
	
  QSP, Inc.

  	
   

  	
  VideOvation, Inc.
  (f/k/a Reader’s Digest Sub Three, Inc.)

  	
   

  	
  Delaware

  	
   

  	
  10 shares common

  	
   

  	
  100

  	
  %

  
	
  RD Publications, Inc. (f/k/a Travel Publications, Inc.)

  	
   

  	
  Home Service
  Publications, Inc.

  	
   

  	
  Delaware

  	
   

  	
  10 shares common

  	
   

  	
  100

  	
  %

  
	
  RD Publications, Inc.

  	
   

  	
  RD Large
  Edition, Inc.

  	
   

  	
  Delaware

  	
   

  	
  10 shares common

  	
   

  	
  100

  	
  %

  
	
  RD Publications, Inc.

  	
   

  	
  RD Trade Shows, Inc.

  	
   

  	
  Delaware

  	
   

  	
  10 shares common

  	
   

  	
  100

  	
  %

  
	
  RD Publications, Inc.

  	
   

  	
  RD Walking, Inc.

  	
   

  	
  Delaware

  	
   

  	
  10 shares common

  	
   

  	
  100

  	
  %

  
	
  RD Publications, Inc.

  	
   

  	
  Retirement Living
  Publishing Company, Inc.

  	
   

  	
  Delaware

  	
   

  	
  10 shares common

  	
   

  	
  100

  	
  %

  
	
  RD Publications, Inc.

  	
   

  	
  Travel
  Publications, Inc. (f/k/a RD Publications, Inc.)

  	
   

  	
  Delaware

  	
   

  	
  10 shares common

  	
   

  	
  100

  	
  %

  
	
  Reader’s Digest Consumer Services, Inc.

  	
   

  	
  RD Magazine Value
  Partners, Inc.

  	
   

  	
  Delaware

  	
   

  	
  10 shares common

  	
   

  	
  100

  	
  %

  
	
  Reader’s Digest
  Latinoamerica, S.A.

  	
   

  	
  WAPLA, LLC

  	
   

  	
  Delaware

  	
   

  	
  100 unites limited
  liability interests

  	
   

  	
  100

  	
  %

  



 


6

















 


	
  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

  	
  %

  
	
  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

  	
  %

  
	
  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

  	
  %

  
	
  Travel Publications, Inc.

  	
   

  	
  RD Member
  Services, Inc.

  	
   

  	
  Delaware

  	
   

  	
  10 shares common

  	
   

  	
  100

  	
  %

  
	
  The Reader’s Digest Association, Inc.

  	
   

  	
  Direct Holdings U.S. Corp.

  	
   

  	
  Delaware

  	
   

  	
  200,000 shares common

  	
   

  	
  100

  	
  %

  
	
  Direct Holdings U.S. Corp.

  	
   

  	
  Direct Holdings Americas
  Inc. (f/k/a Time-Life Books Inc.)

  	
   

  	
  Delaware

  	
   

  	
  1,000 shares common

  	
   

  	
  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

  	
  %

  
	
  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

  	
  %

  
	
  Direct Holdings Americas Inc. (f/k/a Time Life Inc.)

  	
   

  	
  Alex Inc.

  	
   

  	
  Delaware

  	
   

  	
  100 shares common

  	
   

  	
  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

  	
  %

  
	
  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

  	
  %

  
	
  The Reader’s Digest Association, Inc.

  	
   

  	
  WRC Media Inc.

  	
   

  	
  Delaware

  	
   

  	
  1,000 shares common

  	
   

  	
  100

  	
  %

  
	
  WRC Media Inc.

  	
   

  	
  CompassLearning, Inc.

  	
   

  	
  Delaware

  	
   

  	
  10,000 shares common

  	
   

  	
  100

  	
  %

  
	
  WRC Media Inc.

  	
   

  	
  Weekly Reader Corporation

  	
   

  	
  Delaware

  	
   

  	
  2,685,670 shares common

  	
   

  	
  94.9

  	
  %

  
	
  Weekly Reader Corporation

  	
   

  	
  Lifetime Learning
  Systems, Inc.

  	
   

  	
  Delaware

  	
   

  	
  1,000 shares common

  	
   

  	
  100

  	
  %

  
	
  Weekly Reader Corporation

  	
   

  	
  World Almanac Education
  Group, Inc.

  	
   

  	
  Delaware

  	
   

  	
  1,000 shares common

  	
   

  	
  100

  	
  %

  



 


7

















 


	
  World Almanac Education Group, Inc.

  	
   

  	
  Funk &
  Wagnalls Yearbook Corp.

  	
   

  	
  Delaware

  	
   

  	
  1,000 shares
  common

  	
   

  	
  100

  	
  %

  
	
  World Almanac Education Group, Inc.

  	
   

  	
  Gareth
  Stevens, Inc.

  	
   

  	
  Wisconsin

  	
   

  	
  2,314,305
  shares common

  	
   

  	
  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

  	
  %(2)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  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

  	
  %(3)

  %(4)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  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

  	
  %(5)

  



 






 (2) Not required to be delivered.


 


 (3) With respect to the Obligations.


 


 (4) With respect to the Obligations of
the German Borrower.


 


 (5) 90% to be transferred to the RD
German Holdings GmbH.


 


8

















 


	
  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.

  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

  	
  %(6)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  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

  	
  %**

  



 






 (6) Certificated, but not
to be delivered given that W.A. Publications, LLC only owns one share.


 


9

















 


	
  Loan Party

  	
   

  	
  No. of

  Shares

  	
   

  	
  Subsidiary / Equity Investment

  	
   

  	
  Country

  of Incorporation

  	
   

  	
  Percent

  Ownership

  	
   

  	
  Equity

  Interest

  Required to

  be Pledged

  	
   

  
	
  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

  	
  %(7)

  	
  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

  	
  %(8)

  	
  65

  	
  %

  



 






 (7) Five shares held by
each of the five directors.


 


 (8) 3 shares held by
individuals.


 


10

















 


	
  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

  	
  %(9)

  	
  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

  	
  %(10)

  	
  65

  	
  %*

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  The Reader’s Digest
  Association, Inc.

  	
   

  	
  25,000

  	
   

  	
  Reader’s Digest
  Deutschland Holding GmbH

  	
   

  	
  Germany

  	
   

  	
  100

  	
  %

  	
  65

  	
  %*

  



 






 (9) 7 shares held by individuals.


 


 (10) 8 shares held by individuals.


 


11

















 


	
  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.

  	
   

  	
  599

  	
   

  	
  Reader’s Digest Hellas
  Publications Company with Limited Liability

  	
   

  	
  Greece

  	
   

  	
  100

  	
  %(11)

  	
  65

  	
  %*

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  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

  	
   

  	
  The 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.

  	
   

  	
  4,500 YTL

  	
   

  	
  Reader’s Digest Secilmis
  Yayincilik Dagitim Pazarlama Ticaret Limited Sirketi

  	
   

  	
  Turkey

  	
   

  	
  90

  	
  %(12)

  	
  65

  	
  %*

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Direct Holdings U.S.
  Corp.

  	
   

  	
  404 shares
  common

  	
   

  	
  Direct Holdings
  International B.V.

  	
   

  	
  Netherlands

  	
   

  	
  100

  	
  %

  	
  65

  	
  %*

  



 






*
Uncertificated.

** Certificated, but not required to be delivered given status as a Foreign
Immaterial Subsidiary.


 


(11)
1 share held by an individual.


 


(12)
10% owned by an individual.


 


12
















 


Schedule 3


Perfection Matters


 


Uniform Commercial Code Filings


 


Delaware Secretary of State

Iowa Secretary of State

New York Secretary of State

Washington Secretary of State

Wisconsin Secretary of State


 


Patent, Trademark and Copyright Filings


 


Intellectual property short form filings.


 


Actions with respect to Pledged Stock


 


Stock delivered at closing of:


 


The Reader’s Digest Association, Inc.

Allrecipes.com, Inc.

Ardee Music Publishing, Inc.

Books Are Fun, Ltd.

Christmas Angel Productions, Inc. 

Family Reading Program Corp.

Home Service Publications, Inc.

Pegasus Asia Investments, Inc.

Pegasus Finance Corp.

Pegasus Investment, Inc.

Pegasus Sales, Inc.

Pleasantville Music Publishing, Inc.

QSP, Inc.

QSP Distribution Services, LLC

QSP Products and Programs, LLC

QSP Sales, LLC

QSP Services, LLC

QSP Ventures, LLC

RD Large Edition, Inc.

RD Magazine Value Partners, Inc.

R. D. Manufacturing Corporation

RD Member Services, Inc.

RD Publications, Inc.

RD Trade Shows, Inc.

RD Walking, Inc.

Reader’s Digest Children’s Publishing, Inc.


 


13

















 


Reader’s Digest Consumer Services, Inc.

Reader’s Digest Entertainment, Inc.

Reader’s Digest Financial Services, Inc.

Taste of Home Entertaining, Inc.

Reader’s Digest Latinoamerica S.A.

Reader’s Digest Sales and Services, Inc.

Fundraising.com, Inc.

Reader’s Digest Sub Nine, Inc,

Reader’s Digest Young Families, Inc.

Taste of Home Media Group, Inc.

Reiman Media Group, Inc.

Retirement Living Publishing Company, Inc.

SMDDMS, Inc.

Taste of Home Productions, Inc.

The Reader’s Digest Association (Russia) Incorporated

Travel Publications, Inc.

VideOvation, Inc.

W.A. Publications, LLC

WAPLA, LLC

World Wide Country Tours, Inc.


 


Direct Holdings U.S. Corp.

Direct Holdings Americas Inc.

Direct Holdings Custom Publishing Inc.

Direct Holdings Education Inc.

Alex Inc.

Direct Holdings Customer Service, Inc.

Direct Holdings Libraries Inc.


 


WRC Media Inc.

CompassLearning, Inc.

Weekly Reader Corporation

Lifetime Learning Systems, Inc.

World Almanac Education Group, Inc.

Funk & Wagnalls Yearbook Corp.

Gareth Stevens, Inc.


 


14

















 


Other Actions


 


Notes delivered at closing of:


 


Pegasus Sales, Inc.

Reader’s Digest Children’s Publishing, Inc.

Reader’s Digest Sales & Services, Inc.

Books Are Fun, Ltd.


 


15

















 


Schedule 4


Jurisdictions of Organization


 


	
  Company
  Name

  	
   

  	
  Jurisdiction

  
	
  The Reader’s Digest Association, Inc.

  	
   

  	
  Delaware

  
	
  Allrecipes.com, Inc.

  	
   

  	
  Washington

  
	
  Ardee Music Publishing, Inc.

  	
   

  	
  Delaware

  
	
  Books Are Fun, Ltd.

  	
   

  	
  Iowa

  
	
  Christmas Angel Productions, Inc.

  	
   

  	
  Delaware

  
	
  Family Reading Program Corp.

  	
   

  	
  Delaware

  
	
  Home Service Publications, Inc.

  	
   

  	
  Delaware

  
	
  Pegasus Asia Investments, Inc.

  	
   

  	
  Delaware

  
	
  Pegasus Finance Corp.

  	
   

  	
  Delaware

  
	
  Pegasus Investment, Inc.

  	
   

  	
  Delaware

  
	
  Pegasus Sales, Inc.

  	
   

  	
  Delaware

  
	
  Pleasantville Music Publishing, Inc.

  	
   

  	
  Delaware

  
	
  QSP, Inc.

  	
   

  	
  Delaware

  
	
  QSP Distribution Services, LLC

  	
   

  	
  Delaware

  
	
  QSP Products and Programs, LLC

  	
   

  	
  Delaware

  
	
  QSP Sales, LLC

  	
   

  	
  Delaware

  
	
  QSP Services, LLC

  	
   

  	
  Delaware

  
	
  QSP Ventures, LLC

  	
   

  	
  Delaware

  
	
  RD Large Edition, Inc.

  	
   

  	
  Delaware

  
	
  RD Magazine Value Partners, Inc.

  	
   

  	
  Delaware

  
	
  R. D. Manufacturing
  Corporation

  	
   

  	
  Delaware

  
	
  RD Member Services, Inc.

  	
   

  	
  Delaware

  
	
  RD Publications, Inc.

  	
   

  	
  Delaware

  
	
  RD Trade Shows, Inc.

  	
   

  	
  Delaware

  
	
  RD Walking, Inc.

  	
   

  	
  Delaware

  
	
  Reader’s Digest Children’s Publishing, Inc.

  	
   

  	
  Delaware

  
	
  Reader’s Digest Consumer
  Services, Inc.

  	
   

  	
  Delaware

  
	
  Reader’s Digest
  Entertainment, Inc.

  	
   

  	
  Delaware

  
	
  Reader’s Digest Financial
  Services, Inc.

  	
   

  	
  Delaware

  
	
  Taste of Home Entertaining, Inc.

  	
   

  	
  Delaware

  
	
  Reader’s
  Digest Latinoamerica S.A.

  	
   

  	
  Delaware

  
	
  Reader’s Digest Sales and
  Services, Inc.

  	
   

  	
  Delaware

  
	
  Fundraising.com, Inc.

  	
   

  	
  Delaware

  
	
  Reader’s Digest Sub Nine, Inc.

  	
   

  	
  Delaware

  
	
  Reader’s Digest Young Families, Inc.

  	
   

  	
  Delaware

  
	
  Taste of Home Media Group, Inc.

  	
   

  	
  Delaware

  
	
  Reiman Media Group, Inc.

  	
   

  	
  Delaware

  
	
  Retirement Living Publishing Company, Inc.

  	
   

  	
  Delaware

  
	
  SMDDMS, Inc.

  	
   

  	
  Delaware

  
	
  Taste of Home Productions, Inc.

  	
   

  	
  Delaware

  



 


16

















 


	
  The Reader’s Digest Association (Russia) Incorporated

  	
   

  	
  Delaware

  
	
  Travel Publications, Inc.

  	
   

  	
  Delaware

  
	
  VideOvation, Inc.

  	
   

  	
  Delaware

  
	
  W.A. Publications, LLC

  	
   

  	
  Delaware

  
	
  WAPLA, LLC

  	
   

  	
  Delaware

  
	
  World Wide Country Tours, Inc.

  	
   

  	
  Delaware

  
	
   

  	
   

  	
   

  
	
  Alex Inc.

  	
   

  	
  Delaware

  
	
  Direct Holdings Americas Inc.

  	
   

  	
  Delaware

  
	
  Direct Holdings Custom Publishing Inc.

  	
   

  	
  Delaware

  
	
  Direct Holdings Customer Service, Inc.

  	
   

  	
  Delaware

  
	
  Direct Holdings Education Inc.

  	
   

  	
  Delaware

  
	
  Direct Holdings Libraries Inc.

  	
   

  	
  New York

  
	
  Direct Holdings U.S. Corp.

  	
   

  	
  Delaware

  
	
   

  	
   

  	
   

  
	
  WRC Media Inc.

  	
   

  	
  Delaware

  
	
  CompassLearning, Inc.

  	
   

  	
  Delaware

  
	
  Weekly Reader Corporation

  	
   

  	
  Delaware

  
	
  Lifetime Learning Systems, Inc.

  	
   

  	
  Delaware

  
	
  World Almanac Education Group, Inc.

  	
   

  	
  Delaware

  
	
  Funk & Wagnalls Yearbook Corp.

  	
   

  	
  Delaware

  
	
  Gareth Stevens, Inc.

  	
   

  	
  Wisconsin

  



 


17
















 


Schedule 5


Inventory and Equipment Locations


 


	
  Loan Party

  	
   

  	
  Inventory and Equipment Location

  
	
  The Reader’s Digest Association, Inc.

  	
   

  	
  The Reader’s Digest Association, Inc.

  Reader’s Digest Road

  Pleasantville, NY 10570

  
	
   

  	
   

  	
   

  
	
  Books Are Fun, Ltd.

  	
   

  	
  Books Are Fun, Ltd.

  1680 Highway
  1

  Fairfield, IA 52556

   

  Books Are Fund, Ltd.

  1801 West Stone

  Fairfield, IA 52556

   

  Dallas Transfer

  2424 N. Westmoreland Road

  Dallas, TX 75212

   

  Innotrac

  6655 Sugar Loaf Parkway

  Duluth, GA 30097

   

  Innotrac

  4910 Langley Lane, Suite 101

  Reno, NV 89502

   

  Innotrac — Chicago

  1180 W. Remington Blvd.

  Romeoville, IL 60446

   

  JV West

  1575 Linda Way, Door #2

  Sparks, NV 89431

   

  Overflow Warehouse

  1450 Beacon Street

  Baltimore, MD 21230

  
	
   

  	
   

  	
   

  
	
  QSP, Inc.

  	
   

  	
  QSP, Inc.

  Reader’s Digest Rd.

  Pleasantville, NY 10570

   

  Exact Packaging

  100 Deerfield Road

  Pontiac, IL 61764

  



 


18

















 


	
   

  	
   

  	
  Alert Terminal Warehouse

  1200 Breedlove

  Memphis, TN 38107

  
	
   

  	
   

  	
   

  
	
  QSP Distribution Services, LLC

  	
   

  	
  EDS

  3600 Army Post Road

  Des Moines, IA 50321

  
	
   

  	
   

  	
   

  
	
  R. D. Manufacturing
  Corporation

  	
   

  	
  Anet

  Riverpoint Enterprise ZC

  Louisville, KY 40258

   

  Putnam

  1 Grosset Drive

  Kirkwood, NY 13795

   

  R. R. Donnelley

  216 Greenfield Road

  Lancaster, PA 17601

  
	
   

  	
   

  	
   

  
	
  Reader’s Digest Children’s Publishing, Inc.

  	
   

  	
  Simon & Schuster

  100 Front Street

  Riverside, NJ 08075

  
	
   

  	
   

  	
   

  
	
  Taste of Home Entertaining, Inc.

  	
   

  	
  Custom Marketing Services, Inc.

  41 N. Industrial Blvd.

  Calera, AL 35040

  
	
   

  	
   

  	
   

  
	
  Reiman Media Group, Inc.

  	
   

  	
  Reiman Media Group, Inc.

  5400 South 60th Street

  Greendale, WI 53129

   

  Reiman Country Store

  5400 S. 60th Street

  Greendale, WI 53129

   

  Lindner Country Store

  6055 S. 6th Street

  Milwaukee, WI 53221

   

  Quad Graphics

  1900 W. Sumner Street

  Hartford, WI 53027

   

  Warren Book Marketing

  1515 Grandview Parkway

  Sturtevant, WI 53177

  



 


19

















 


	
  Direct Holdings Americas Inc.

  	
   

  	
  2600 International Parkway

  Virginia Beach, VA 23452*

   

  1400 East Lackawanna Avenue

  Olyphant, PA 18447*

   

  948 Merifan Lake Drive

  Aurora, IL 60507*

  
	
   

  	
   

  	
   

  
	
  WRC Media Inc.

  	
   

  	
  512 Seventh Avenue

  New York, NY 10018

  
	
   

  	
   

  	
   

  
	
  CompassLearning, Inc.

  	
   

  	
  7878 N. 16th Street, Suite 100

  Phoenix, AZ 85020

   

  203 Colorado Street

  Austin, TX 78701

  
	
   

  	
   

  	
   

  
	
  Weekly Reader Corporation

  	
   

  	
  200 First Stamford Place

  Stamford, CT 06912

   

  1000 Taylors Lane, Unit #8

  Cinnaminson, NJ 08011

  
	
   

  	
   

  	
   

  
	
  World Almanac Education Group, Inc.

  	
   

  	
  23221 Morgan Court, Bldg. 3

  Strongsville, OH 44149

   

  State Rd. 92 West

  Crawfordsville, IN 47853*

   

  649 Alden St.

  Fall River, MA 02722*

   

  Rte. 9-J, 1897 River Rd.

  Rensselaer, NY 12144*

   

  16365 James Madison Highway

  Gordonsville, VA 22942*

   

  1133 County Street

  Taunton, MA 02780*

   

  23221 Morgan Court, Bldg. 3

  Strongsville, OH 44149

  



 






* indicates bailee or warehouseman location


 


20

















 


Schedule 6


Intellectual Property


 


Copyrights/Applications:


 


See attached Copyrights Schedule.


 


Trademarks/Applications:


 


See attached Trademarks Schedule.


 


Patents/Patent Licenses/Applications:


 


See attached Patents Schedule.


 


21

















 


Schedule 7


Commercial Tort Claims


 


None.


 


22
















 


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:

  



 

















 


EXECUTION
COPY


 




 





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, NA., 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 1.01 E
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; 


 


(1)     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
















 


	
   

  	
  JPMORGAN CHASE BANK, N.A.,
  as

  
	
   

  	
  Administrative Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  GARY L. SPEVACK

  
	
   

  	
   

  	
  Name: GARY L. SPEVACK

  
	
   

  	
   

  	
  Title: VICE PRESIDENT

  



 


[SIGNATURE
PAGE TO GUARANTEE AND COLLATERAL AGREEMENT]


 

















 


	
   

  	
  By

  	
  /s/
  Christopher Minnetian

  
	
   

  	
   

  	
  Name:

  	
  Christopher
  Minnetian

  
	
   

  	
   

  	
  Title:

  	
  President,
  Treasurer and

  
	
   

  	
   

  	
   

  	
  Secretary
  of each of the Loan

  
	
   

  	
   

  	
   

  	
  Parties
  listed on Exhibit A

  



 


[SIGNATURE
PAGE TO GUARANTEE AND COLLATERAL AGREEMENT]


 

















 


	
   

  	
  By

  	
  /s/
  Clifford H.R. DuPree

  
	
   

  	
   

  	
  Name:

  	
  Clifford H.R. DuPree

  
	
   

  	
   

  	
  Title:

  	
  Secretary of each of the Loan

  
	
   

  	
   

  	
   

  	
  Parties listed on Exhibit B

  



 


[SIGNATURE
PAGE TO GUARANTEE AND COLLATERAL AGREEMENT]


 

















 


	
   

  	
  By

  	
  /s/
  Karen E. Andrews

  
	
   

  	
   

  	
  Name:

  	
  Karen
  E. Andrews

  
	
   

  	
   

  	
  Title:

  	
  Secretary
  of each of the Loan

  
	
   

  	
   

  	
   

  	
  Parties
  listed on Exhibit C

  



 


[[SIGNATURE
PAGE TO GUARANTEE AND COLLATERAL AGREEMENT]


 

















 


	
   

  	
  By

  	
  /s/
  Randolph H. Elkins

  
	
   

  	
   

  	
  Name:

  	
  Randolph
  H. Elkins

  
	
   

  	
   

  	
  Title:

  	
  Secretary
  of each of the Loan

  
	
   

  	
   

  	
   

  	
  Parties
  listed on Exhibit D

  



 


[SIGNATURE
PAGE TO GUARANTEE AND COLLATERAL AGREEMENT]


 

















 


	
   

  	
  Solely for purposes of Sections 8.18 and 8.19:

  
	
   

  	
  RD GERMAN HOLDINGS GmbH

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Werner
  Neunzig

  
	
   

  	
   

  	
  Name: Werner Neunzig

  
	
   

  	
   

  	
  Title: Managing Director

  



 


[SIGNATURE PAGE TO GUARANTEE AND COLLATERAL AGREEMENT]


 

















 


Exhibit A


 


RDA
Holding Co.

Doctor Acquisition Co.


 

















 


Exhibit B


 


The
Reader’s Digest Association, Inc.


Allrecipes.com, Inc.


Ardee
Music Publishing, Inc.


Books
Are Fun, Ltd.


Christmas
Angel Productions, Inc.


Pegasus
Asia Investments, Inc.


Pegasus
Finance Corp.


Pegasus
Investment, Inc.


Pegasus
Sales, Inc.


Pleasantville
Music Publishing, Inc.


QSP, Inc.


Family
Reading Program Corp.


QSP
Distribution Services, LLC


QSP
Products and Programs, LLC


QSP
Sales, LLC


QSP
Services, LLC


QSP
Ventures, LLC


Fundraising.com, Inc.


Reiman
Media Group, Inc.


Taste
of Home Productions, Inc.


Taste
of Home Media Group, Inc.


World
Wide Country Tours, Inc.


VideOvation, Inc.


R.
D. Manufacturing Corporation


RD
Publications, Inc.


Home
Service Publications, Inc.


RD
Large Edition, Inc.


RD
Trade Shows, Inc.


RD
Walking, Inc.


Retirement
Living Publishing Company, Inc.


Travel
Publications, Inc.


RD
Member Services, Inc.


Reader’s
Digest Children’s Publishing, Inc.


Reader’s
Digest Consumer Services, Inc.


RD
Magazine Value Partners, Inc.


Reader’s
Digest Entertainment, Inc.


Reader’s
Digest Financial Services, Inc.


Taste
of Home Entertaining, Inc.


Reader’s
Digest Latinoamerica S.A.


WAPLA,
LLC


Reader’s
Digest Sales and Services, Inc.


Reader’s
Digest Sub Nine, Inc.


Reader’s
Digest Young Families, Inc.


SMDDMS, Inc.


The
Reader’s Digest Association (Russia) Incorporated


W.A.
Publications, LLC


 

















 


Exhibit C


 


WRC
Media Inc.


CompassLearning, Inc.


Weekly
Reader Corporation


Lifetime
Learning Systems, Inc.


World
Almanac Education Group, Inc.


Funk &
Wagnalls Yearbook Corp.


Gareth
Stevens, Inc.


 

















 


Exhibit D


 


Direct
Holdings U.S. Corp.


Direct
Holdings Americas Inc.


Direct
Holdings Custom Publishing Inc.


Direct
Holdings Education Inc.


Alex
Inc.


Direct
Holdings Customer Service, Inc.


Direct
Holdings Libraries Inc.


 
















 


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


 
















 


[Schedules to


Guarantee and Collateral Agreement]


 


Schedule 1 

Notice Addresses


 


	
  Company Name

  	
   

  	
  Legal Address

  
	
  RDA
  Holding Co.

  	
   

  	
  One
  Rockefeller Plaza, 32nd Floor

  New York, NY 10020

  
	
  Doctor
  Acquisition Co.

  	
   

  	
  One
  Rockefeller Plaza, 32nd Floor

  New York, NY 10020

  
	
  The
  Reader’s Digest Association, Inc.

  	
   

  	
  Reader’s
  Digest Road

  Pleasantville, NY 10570

  
	
  Allrecipes.com, Inc.

  	
   

  	
  3317
  3rd Ave. S, Suite D

  Seattle, WA 98134

  
	
  Ardee
  Music Publishing, Inc.

  	
   

  	
  260
  Madison Avenue

  New York, New York 10016

  
	
  Books
  Are Fun, Ltd.

  	
   

  	
  1680
  Highway 1 North

  Fairfield, Iowa 52556

  
	
  Christmas
  Angel Productions, Inc.

  	
   

  	
  Reader’s
  Digest Road

  Pleasantville, NY 10570

  
	
  Family
  Reading Program Corp.

  	
   

  	
  Reader’s
  Digest Road

  Pleasantville, NY 10570

  
	
  Home
  Service Publications, Inc.

  	
   

  	
  Reader’s
  Digest Road

  Pleasantville, NY 10570

  
	
  Pegasus
  Asia Investments, Inc.

  	
   

  	
  Reader’s
  Digest Road

  Pleasantville, NY 10570

  
	
  Pegasus
  Finance Corp.

  	
   

  	
  802
  North West Street

  Wilmington, DE 19801

  
	
  Pegasus
  Investment, Inc.

  	
   

  	
  Reader’s
  Digest Road

  Pleasantville, NY 10570

  
	
  Pegasus
  Sales, Inc.

  	
   

  	
  Reader’s
  Digest Road

  Pleasantville, NY 10570

  
	
  Pleasantville
  Music Publishing, Inc.

  	
   

  	
  Reader’s
  Digest Road

  Pleasantville, NY 10570

  
	
  QSP, Inc.

  	
   

  	
  Reader’s
  Digest Road

  Pleasantville, NY 10570

  
	
  QSP
  Distribution Services, LLC

  	
   

  	
  2175
  East Park Drive, Suite A

  Conyers, GA 30013-5743

  
	
  QSP
  Products and Programs, LLC

  	
   

  	
  Reader’s
  Digest Road

  Pleasantville, NY 10570

  
	
  QSP
  Sales, LLC

  	
   

  	
  Reader’s
  Digest Road

  Pleasantville, NY 10570

  
	
  QSP
  Services, LLC

  	
   

  	
  Reader’s
  Digest Road

  Pleasantville, NY 10570

  
	
  QSP
  Ventures, LLC

  	
   

  	
  Reader’s
  Digest Road

  Pleasantville, NY 10570

  



 

















 


	
  RD
  Large Edition, Inc.

  	
   

  	
  Reader’s
  Digest Road

  Pleasantville, NY 10570

  
	
  RD
  Magazine Value Partners, Inc.

  	
   

  	
  Reader’s
  Digest Road

  Pleasantville, NY 10570

  
	
  R.
  D. Manufacturing Corporation

  	
   

  	
  Reader’s
  Digest Road

  Pleasantville, NY 10570

  
	
  RD  Member Services, Inc.

  	
   

  	
  Reader’s
  Digest Road

  Pleasantville, NY 10570

  
	
  RD
  Publications, Inc.

  	
   

  	
  Reader’s
  Digest Road

  Pleasantville, NY 10570

  
	
  RD
  Trade Shows, Inc.

  	
   

  	
  Reader’s
  Digest Road

  Pleasantville, NY 10570

  
	
  RD
  Walking, Inc.

  	
   

  	
  Reader’s
  Digest Road

  Pleasantville, NY 10570

  
	
  Reader’s
  Digest Children’s Publishing, Inc.

  	
   

  	
  Reader’s
  Digest Road

  Pleasantville, NY 10570

  
	
  Reader’s
  Digest Consumer Services, Inc.

  	
   

  	
  200
  Cahaba Park Circle

  Birmingham, AL. 35242

  
	
  Reader’s
  Digest Entertainment, Inc.

  	
   

  	
  Reader’s
  Digest Road

  Pleasantville, NY 10570

  
	
  Reader’s
  Digest Financial Services, Inc.

  	
   

  	
  Reader’s
  Digest Road

  Pleasantville, NY 10570

  
	
  Taste
  of Home Entertaining, Inc.

  	
   

  	
  20300
  Watertower Blvd

  Brookfield, WI 53045

  
	
  Reader’s
  Digest Latinoamerica S.A.

  	
   

  	
  Reader’s
  Digest Road

  Pleasantville, NY 10570

  
	
  Reader’s
  Digest Sales and Services, Inc.

  	
   

  	
  261
  Madison Avenue

  New York, NY 10016

  
	
  Fundraising.com, Inc.

  	
   

  	
  Reader’s
  Digest Road

  Pleasantville, NY 10570

  
	
  Reader’s
  Digest Sub Nine, Inc.

  	
   

  	
  Reader’s
  Digest Road

  Pleasantville, NY 10570

  
	
  Reader’s
  Digest Young Families, Inc.

  	
   

  	
  Reader’s
  Digest Road

  Pleasantville, NY 10570

  
	
  Taste
  of Home Media Group, Inc.

  	
   

  	
  5400
  South 60th Street

  Greendale, Wisconsin 53129

  
	
  Reiman
  Media Group, Inc.

  	
   

  	
  5400
  South 60th Street

  Greendale, Wisconsin 53129

  
	
  Retirement
  Living Publishing Company, Inc.

  	
   

  	
  Reader’s
  Digest Road

  Pleasantville, NY 10570

  
	
  SMDDMS, Inc.

  	
   

  	
  Reader’s
  Digest Road

  Pleasantville, NY 10570

  
	
  Taste
  of Home Productions, Inc.

  	
   

  	
  5400
  South 60th Street

  Greendale, Wisconsin 53129

  
	
  The
  Reader’s Digest Association (Russia) Incorporated

  	
   

  	
  Reader’s
  Digest Road

  Pleasantville, NY 10570

  



 


2

















 


	
  Travel
  Publications, Inc.

  	
   

  	
  Reader’s
  Digest Road

  Pleasantville, NY 10570

  
	
  VideOvation, Inc.

  	
   

  	
  Reader’s
  Digest Road

  Pleasantville, NY 10570

  
	
  W.A.
  Publications, LLC

  	
   

  	
  Reader’s
  Digest Road

  Pleasantville, NY 10570

  
	
  WAPLA,
  LLC

  	
   

  	
  Reader’s
  Digest Road

  Pleasantville, NY 10570

  
	
  World
  Wide Country Tours, Inc.

  	
   

  	
  5400
  South 60th Street

  Greendale, Wisconsin 53129

  
	
   

  	
   

  	
   

  
	
  Alex
  Inc.

  	
   

  	
  8280
  Willow Oaks Corporate Drive, Suite 800

  Fairfax, VA 22031

  
	
  Direct
  Holdings Americas Inc.

  	
   

  	
  8280
  Willow Oaks Corporate Drive, Suite 800

  Fairfax, VA 22031

  
	
  Direct
  Holdings Custom Publishing Inc.

  	
   

  	
  8280
  Willow Oaks Corporate Drive, Suite 800

  Fairfax, VA 22031

  
	
  Direct
  Holdings Customer Service, Inc.

  	
   

  	
  8280
  Willow Oaks Corporate Drive, Suite 800

  Fairfax, VA 22031

  
	
  Direct
  Holdings Education Inc.

  	
   

  	
  8280
  Willow Oaks Corporate Drive, Suite 800

  Fairfax, VA 22031

  
	
  Direct
  Holdings Libraries Inc.

  	
   

  	
  8280
  Willow Oaks Corporate Drive, Suite 800

  Fairfax, VA 22031

  
	
  Direct
  Holdings U.S. Corp.

  	
   

  	
  8280
  Willow Oaks Corporate Drive, Suite 800

  Fairfax, VA 22031

  
	
   

  	
   

  	
   

  
	
  WRC
  Media Inc.

  	
   

  	
  512
  Seventh Avenue

  New York, NY 10018

  
	
  CompassLearning, Inc.

  	
   

  	
  203
  Colorado Street

  Austin, TX 78701

  
	
  Weekly
  Reader Corporation

  	
   

  	
  200
  First Stamford Place

  P.O. Box 120023

  Stamford, CT 06912

  
	
  Lifetime
  Learning Systems, Inc.

  	
   

  	
  200
  First Stamford Place

  P.O. Box 120023

  Stamford, CT 06912

  
	
  World
  Almanac Education Group, Inc.

  	
   

  	
  512
  Seventh Avenue

  New York, NY 10018

  
	
  Funk &  Wagnalls Yearbook Corp.

  	
   

  	
  512
  Seventh Avenue

  New York, NY 10018

  
	
  Gareth
  Stevens, Inc.

  	
   

  	
  330
  West Olive Street, Suite 100

  Milwaukee, WI 53212

  



 


3

















 


Schedule 2 

Investment Property


 


Pledged
Debt:


 


	
  Lender

  	
   

  	
  Borrower

  	
   

  	
  Amount

  	
   

  
	
  The Reader’s Digest Association, Inc.

  	
   

  	
  Pegasus Sales, Inc.

  	
   

  	
  $

  	
  5,000,000

  	
   

  
	
  The Reader’s Digest Association, Inc.

  	
   

  	
  Reader’s Digest Children’s
  Publishing, Inc.

  	
   

  	
  $

  	
  3,740,000

  	
   

  
	
  The Reader’s Digest Association, Inc.

  	
   

  	
  Reader’s Digest
  Sales & Services, Inc.

  	
   

  	
  $

  	
  3,000,000

  	
   

  
	
  The Reader’s Digest Association, Inc.

  	
   

  	
  Books Are Fun, Ltd.

  	
   

  	
  $

  	
  330,000,000

  	
   

  



 


Pledged
Equity:(1)


 


Domestic


 


	
  Loan Party

  	
   

  	
  Subsidiary

  	
   

  	
  Subsidiary

  Jurisdiction

  of

  Organization

  	
   

  	
  Ownership Interest

  	
   

  	
  Percent

  Ownership

  	
   

  
	
  RDA
  Holding Co.

  	
   

  	
  The
  Reader’s Digest Association, Inc.

  	
   

  	
  Delaware

  	
   

  	
  1,000
  shares common

  	
   

  	
  100

  	
  %

  
	
  The
  Reader’s Digest Association, Inc.

  	
   

  	
  Allrecipes.com, Inc.

  	
   

  	
  Washington

  	
   

  	
  10
  shares common

  	
   

  	
  100

  	
  %

  
	
  The
  Reader’s Digest Association, Inc.

  	
   

  	
  Ardee
  Music Publishing, Inc.

  	
   

  	
  Delaware

  	
   

  	
  100
  shares common

  	
   

  	
  100

  	
  %

  
	
  The
  Reader’s Digest Association, Inc.

  	
   

  	
  Books
  Are Fun, Ltd.

  	
   

  	
  Iowa

  	
   

  	
  100
  shares common

  	
   

  	
  100

  	
  %

  
	
  The
  Reader’s Digest Association, Inc.

  	
   

  	
  Christmas
  Angel Productions, Inc.

  	
   

  	
  Delaware

  	
   

  	
  10
  shares common

  	
   

  	
  100

  	
  %

  



 






(1) 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.


 


4

















 


	
  The
  Reader’s Digest Association, Inc.

  	
   

  	
  Pegasus
  Asia Investments Inc.

  	
   

  	
  Delaware

  	
   

  	
  10
  shares common

  	
   

  	
  100

  	
  %

  
	
  The
  Reader’s Digest Association, Inc.

  	
   

  	
  Pegasus
  Finance Corp.

  	
   

  	
  Delaware

  	
   

  	
  10
  shares common

  	
   

  	
  100

  	
  %

  
	
  The
  Reader’s Digest Association, Inc.

  	
   

  	
  Pegasus
  Investment, Inc.

  	
   

  	
  Delaware

  	
   

  	
  10
  shares common

  	
   

  	
  100

  	
  %

  
	
  The
  Reader’s Digest Association, Inc.

  	
   

  	
  Pegasus
  Sales, Inc.

  	
   

  	
  Delaware

  	
   

  	
  1,000
  shares common

  	
   

  	
  100

  	
  %

  
	
  The
  Reader’s Digest Association, Inc.

  	
   

  	
  Pleasantville
  Music Publishing, Inc.

  	
   

  	
  Delaware

  	
   

  	
  100
  shares common

  	
   

  	
  100

  	
  %

  
	
  The
  Reader’s Digest Association, Inc.

  	
   

  	
  QSP, Inc.

  	
   

  	
  Delaware

  	
   

  	
  10
  shares common

  	
   

  	
  100

  	
  %

  
	
  The
  Reader’s Digest Association, Inc.

  	
   

  	
  R.
  D. Manufacturing Corporation

  	
   

  	
  Delaware

  	
   

  	
  1,000
  shares common

  	
   

  	
  100

  	
  %

  
	
  The
  Reader’s Digest Association, Inc.

  	
   

  	
  RD
  Publications, Inc. (f/k/a Travel Publications, Inc.)

  	
   

  	
  Delaware

  	
   

  	
  10
  shares common

  	
   

  	
  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

  	
  %

  
	
  The
  Reader’s Digest Association, Inc.

  	
   

  	
  Reader’s
  Digest Consumer Services, Inc.

  	
   

  	
  Delaware

  	
   

  	
  10
  shares common

  	
   

  	
  100

  	
  %

  
	
  The
  Reader’s Digest Association, Inc.

  	
   

  	
  Reader’s
  Digest Entertainment, Inc.

  	
   

  	
  Delaware

  	
   

  	
  10
  shares common

  	
   

  	
  100

  	
  %

  
	
  The
  Reader’s Digest Association, Inc.

  	
   

  	
  Reader’s
  Digest Financial Services, Inc.

  	
   

  	
  Delaware

  	
   

  	
  10
  shares common

  	
   

  	
  100

  	
  %

  
	
  The
  Reader’s Digest Association, Inc.

  	
   

  	
  Reader’s
  Digest Latinoamerica S.A.

  	
   

  	
  Delaware

  	
   

  	
  10
  shares common

  	
   

  	
  100

  	
  %

  
	
  The
  Reader’s Digest Association, Inc.

  	
   

  	
  Reader’s
  Digest Sales and Services, Inc.

  	
   

  	
  Delaware

  	
   

  	
  1,000
  shares common

  	
   

  	
  100

  	
  %

  
	
  The
  Reader’s Digest Association, Inc.

  	
   

  	
  Reader’s
  Digest Sub Nine, Inc.

  	
   

  	
  Delaware

  	
   

  	
  10
  shares common

  	
   

  	
  100

  	
  %

  
	
  The
  Reader’s Digest Association, Inc.

  	
   

  	
  Reader’s
  Digest Young Families, Inc.

  	
   

  	
  Delaware

  	
   

  	
  10
  shares common

  	
   

  	
  100

  	
  %

  
	
  The
  Reader’s Digest Association, Inc.

  	
   

  	
  SMDDMS, Inc.

  	
   

  	
  Delaware

  	
   

  	
  10
  shares common

  	
   

  	
  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

  	
  %

  
	
  The
  Reader’s Digest Association, Inc.

  	
   

  	
  The
  Reader’s Digest Association (Russia) Incorporated (f/k/a

  	
   

  	
  Delaware

  	
   

  	
  10
  shares common

  	
   

  	
  100

  	
  %

  



 


5

















 


	
   

  	
   

  	
  Reader’s
  Digest Sub Four, Inc.)

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  The
  Reader’s Digest Association, Inc.

  	
   

  	
  W.A.
  Publications, LLC

  	
   

  	
  Delaware

  	
   

  	
  100%

  	
   

  	
  100

  	
  %

  
	
  QSP, Inc.

  	
   

  	
  Family
  Reading Program Corp.

  	
   

  	
  Delaware

  	
   

  	
  10
  shares common

  	
   

  	
  100

  	
  %

  
	
  QSP, Inc.

  	
   

  	
  Fundraising.com, Inc.
  (f/k/a Reader’s Digest Sub Eight, Inc.)

  	
   

  	
  Delaware

  	
   

  	
  10
  shares common

  	
   

  	
  100

  	
  %

  
	
  QSP, Inc.

  	
   

  	
  QSP
  Distribution Services, LLC

  	
   

  	
  Delaware

  	
   

  	
  10
  units limited liability interests

  	
   

  	
  100

  	
  %

  
	
  QSP, Inc.

  	
   

  	
  QSP
  Products and Programs, LLC

  	
   

  	
  Delaware

  	
   

  	
  10
  units limited liability interests

  	
   

  	
  100

  	
  %

  
	
  QSP, Inc.

  	
   

  	
  QSP
  Sales, LLC

  	
   

  	
  Delaware

  	
   

  	
  10
  units limited liability interests

  	
   

  	
  100

  	
  %

  
	
  QSP, Inc.

  	
   

  	
  QSP
  Services, LLC

  	
   

  	
  Delaware

  	
   

  	
  10
  units limited liability interests

  	
   

  	
  100

  	
  %

  
	
  QSP, Inc.

  	
   

  	
  QSP
  Ventures, LLC

  	
   

  	
  Delaware

  	
   

  	
  10
  units limited liability interests

  	
   

  	
  100

  	
  %

  
	
  QSP, Inc.

  	
   

  	
  Reiman
  Media Group, Inc. (f/k/a Reader’s Digest Media Group, Inc.)

  	
   

  	
  Delaware

  	
   

  	
  10
  shares common

  	
   

  	
  100

  	
  %

  
	
  QSP, Inc.

  	
   

  	
  VideOvation, Inc.  (f/k/a
  Reader’s Digest Sub Three, Inc.)

  	
   

  	
  Delaware

  	
   

  	
  10
  shares common

  	
   

  	
  100

  	
  %

  
	
  RD
  Publications, Inc. (f/k/a Travel Publications, Inc.)

  	
   

  	
  Home
  Service Publications, Inc.

  	
   

  	
  Delaware

  	
   

  	
  10
  shares common

  	
   

  	
  100

  	
  %

  
	
  RD
  Publications, Inc.

  	
   

  	
  RD
  Large Edition, Inc.

  	
   

  	
  Delaware

  	
   

  	
  10
  shares common

  	
   

  	
  100

  	
  %

  
	
  RD
  Publications, Inc.

  	
   

  	
  RD
  Trade Shows, Inc.

  	
   

  	
  Delaware

  	
   

  	
  10
  shares common

  	
   

  	
  100

  	
  %

  
	
  RD
  Publications, Inc.

  	
   

  	
  RD
  Walking, Inc.

  	
   

  	
  Delaware

  	
   

  	
  10
  shares common

  	
   

  	
  100

  	
  %

  
	
  RD
  Publications, Inc.

  	
   

  	
  Retirement
  Living Publishing Company, Inc.

  	
   

  	
  Delaware

  	
   

  	
  10
  shares common

  	
   

  	
  100

  	
  %

  
	
  RD
  Publications, Inc.

  	
   

  	
  Travel
  Publications, Inc. (f/k/a RD Publications, Inc.)

  	
   

  	
  Delaware

  	
   

  	
  10
  shares common

  	
   

  	
  100

  	
  %

  
	
  Reader’s
  Digest Consumer Services, Inc.

  	
   

  	
  RD
  Magazine Value Partners, Inc.

  	
   

  	
  Delaware

  	
   

  	
  10
  shares common

  	
   

  	
  100

  	
  %

  
	
  Reader’s
  Digest Latinoamerica, S.A.

  	
   

  	
  WAPLA,
  LLC

  	
   

  	
  Delaware

  	
   

  	
  100
  unites limited

  	
   

  	
  100

  	
  %

  



 


6

















 


	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  liability
  interests

  	
   

  	
   

  	
   

  
	
  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

  	
  %

  
	
  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

  	
  %

  
	
  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

  	
  %

  
	
  Travel
  Publications, Inc.

  	
   

  	
  RD
  Member Services, Inc.

  	
   

  	
  Delaware

  	
   

  	
  10
  shares common

  	
   

  	
  100

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  The
  Reader’s Digest Association, Inc.

  	
   

  	
  Direct
  Holdings U.S. Corp.

  	
   

  	
  Delaware

  	
   

  	
  200,000
  shares common

  	
   

  	
  100

  	
  %

  
	
  Direct
  Holdings U.S. Corp.

  	
   

  	
  Direct
  Holdings Americas Inc. (f/k/a Time-Life Books Inc.)

  	
   

  	
  Delaware

  	
   

  	
  1,000
  shares common

  	
   

  	
  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

  	
  %

  
	
  Direct
  Holdings Americas Inc. (f/k/a Time Life Inc.)

  	
   

  	
  Direct
  Holdings Education Inc. (f/Ida Time Life Education Inc.)

  	
   

  	
  Delaware

  	
   

  	
  100
  shares common

  	
   

  	
  100

  	
  %

  
	
  Direct
  Holdings Americas Inc. (f/k/a Time Life Inc.)

  	
   

  	
  Alex
  Inc.

  	
   

  	
  Delaware

  	
   

  	
  100
  shares common

  	
   

  	
  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

  	
  %

  
	
  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

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  The
  Reader’s Digest Association, Inc.

  	
   

  	
  WRC
  Media Inc.

  	
   

  	
  Delaware

  	
   

  	
  1,000
  shares common

  	
   

  	
  100

  	
  %

  
	
  WRC
  Media Inc.

  	
   

  	
  CompassLearning, Inc.

  	
   

  	
  Delaware

  	
   

  	
  10,000
  shares common

  	
   

  	
  100

  	
  %

  
	
  WRC
  Media Inc.

  	
   

  	
  Weekly
  Reader Corporation

  	
   

  	
  Delaware

  	
   

  	
  2,685,670
  shares common

  	
   

  	
  94.9

  	
  %

  
	
  Weekly
  Reader Corporation

  	
   

  	
  Lifetime
  Learning Systems, Inc.

  	
   

  	
  Delaware

  	
   

  	
  1,000
  shares common

  	
   

  	
  100

  	
  %

  
	
  Weekly
  Reader Corporation

  	
   

  	
  World
  Almanac Education Group, Inc.

  	
   

  	
  Delaware

  	
   

  	
  1,000
  shares common

  	
   

  	
  100

  	
  %

  



 


7
















 


	
  World
  Almanac Education Group, Inc.

  	
   

  	
  Funk &
  Wagnalls Yearbook Corp.

  	
   

  	
  Delaware

  	
   

  	
  1,000
  shares common

  	
   

  	
  100

  	
  %

  
	
  World
  Almanac Education Group, Inc.

  	
   

  	
  Gareth
  Stevens, Inc.

  	
   

  	
  Wisconsin

  	
   

  	
  2,314,305
  shares common

  	
   

  	
  100

  	
  %

  



 


Foreign


 


	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Equity

  Interest

  	
   

  
	
   

  	
   

  	
  No. of

  	
   

  	
   

  	
   

  	
  Country

  	
   

  	
  Percent

  	
   

  	
  Required to

  	
   

  
	
  Loan Party

  	
   

  	
  Shares

  	
   

  	
  Subsidiary / Equity Investment

  	
   

  	
  of Incorporation

  	
   

  	
  Ownership

  	
   

  	
  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

  	
  %(2)

  
	
  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

  	
  %(3)

  %(4)

  
	
  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

  	
  %(5)

  



 






(2) Not required to be delivered.


 


(3) With respect to the
Obligations.


 


(4) With respect to the
Obligations of the German Borrower.


 


(5) 90% to be
transferred to the RD German Holdings GmbH.


 


8

















 


	
  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.

  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

  	
  %(6)

  
	
  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

  	
  %**

  



 






(6) Certificated,
but not to be delivered given that W.A. Publications, LLC only owns one share.


 


9

















 


	
  Loan Party

  	
   

  	
  No. of

  Shares

  	
   

  	
  Subsidiary / Equity Investment

  	
   

  	
  Country

  of Incorporation

  	
   

  	
  Percent

  Ownership

  	
   

  	
  Equity

  Interest

  Required to

  be Pledged

  	
   

  
	
  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

  	
  %(7)

  	
  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

  	
  %(8)

  	
  65

  	
  %

  



 






(7) Five shares held
by each of the five directors.


 


(8) 3 shares held by
individuals.


 


10

















 


	
  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.

  	
   

  	
  9,993

  	
   

  	
  Reader’s Digest
  (Thailand) Limited

  	
   

  	
  Thailand

  	
   

  	
  100

  	
  %(9)

  	
  65

  	
  %**

  
	
  The Reader’s Digest
  Association, Inc.

  	
   

  	
  571,996

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  The Reader’s Digest
  Association, Inc.

  	
   

  	
  298,004

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  The Reader’s Digest
  Association, Inc.

  	
   

  	
  201,500,000

  	
   

  	
  The Reader’s Digest
  Association Limited

  	
   

  	
  United Kingdom

  	
   

  	
  100

  	
  %

  	
  65

  	
  %

  
	
  The Reader’s Digest
  Association, Inc.

  	
   

  	
  108,500,000

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  The Reader’s Digest
  Association, Inc.

  	
   

  	
  1,089,573

  	
   

  	
  Reader’s Digest
  Children’s Publishing

  	
   

  	
  United Kingdom

  	
   

  	
  100

  	
  %

  	
  65

  	
  %**

  
	
  The Reader’s Digest
  Association, Inc.

  	
   

  	
  586,692

  	
   

  	
  Limited

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  The Reader’s Digest
  Association, Inc.

  	
   

  	
  1

  	
   

  	
  Reader’s Digest Europe
  Limited

  	
   

  	
  United Kingdom

  	
   

  	
  100

  	
  %

  	
  65

  	
  %**

  
	
  The Reader’s Digest
  Association, Inc.

  	
   

  	
  34

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  The Reader’s Digest
  Association, Inc.

  	
   

  	
  65

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Reader’s Digest
  Latinoamerica, S.A.

  	
   

  	
  11,880 interests

  	
   

  	
  Reader’s Digest
  Argentina, SRL

  	
   

  	
  Argentina

  	
   

  	
  100

  	
  %

  	
  65

  	
  %*

  
	
  WAPLA, LLC

  	
   

  	
  120 interests

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  The Reader’s Digest
  Association, Inc.

  	
   

  	
  500,000

  	
   

  	
  Verlag Das Beste GmbH

  	
   

  	
  Austria

  	
   

  	
  100

  	
  %

  	
  65

  	
  %*

  
	
  W.A. Publications, LLC

  	
   

  	
  1

  	
   

  	
  Reader’s Digest World
  Services, S.A.

  	
   

  	
  Belgium

  	
   

  	
  100

  	
  %

  	
  65

  	
  %*

  
	
  The Reader’s Digest
  Association, Inc.

  	
   

  	
  253,845

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  W.A. Publications, LLC

  	
   

  	
  164,200

  	
   

  	
  Reader’s Digest N.V. -
  S.A.

  	
   

  	
  Belgium

  	
   

  	
  100

  	
  %

  	
  65

  	
  %*

  
	
  The Reader’s Digest
  Association, Inc.

  	
   

  	
  656,800

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  W.A. Publications, LLC

  	
   

  	
  10%

  	
   

  	
  Reader’s Digest Brasil,
  Ltda.

  	
   

  	
  Brazil

  	
   

  	
  100

  	
  %

  	
  65

  	
  %*

  
	
  The Reader’s Digest
  Association, Inc.

  	
   

  	
  90%

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  The Reader’s Digest
  Association, Inc.

  	
   

  	
  193,846,000,000

  	
   

  	
  Reader’s Digest Vyber
  s.r.o.

  	
   

  	
  Czech Republic

  	
   

  	
  100

  	
  %

  	
  65

  	
  %*

  
	
   

  	
   

  	
  CZK (no shares issued)

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  The Reader’s Digest
  Association, Inc.

  	
   

  	
  61,992

  	
   

  	
  Sélection du Reader’s Digest
  S.A.

  	
   

  	
  France

  	
   

  	
  100

  	
  %(10)

  	
  65

  	
  %*

  
	
  The Reader’s Digest
  Association, Inc.

  	
   

  	
  25,000

  	
   

  	
  Reader’s Digest
  Deutschland Holding GmbH

  	
   

  	
  Germany

  	
   

  	
  100

  	
  %

  	
  65

  	
  %*

  



 






(9) 7 shares held by
individuals.


 


(10) 8 shares held by
individuals.


 


11

















 


	
  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.

  	
   

  	
  599

  	
   

  	
  Reader’s Digest Hellas
  Publications Company with Limited Liability

  	
   

  	
  Greece

  	
   

  	
  100

  	
  %(11)

  	
  65

  	
  %*

  
	
  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 piu, S.r.I.

  	
   

  	
  Italy

  	
   

  	
  100

  	
  %

  	
  65

  	
  %*

  
	
  The Reader’s Digest
  Association, Inc.

  	
   

  	
  182

  	
   

  	
  The 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.

  	
   

  	
  4,500 YTL

  	
   

  	
  Reader’s Digest Secilmis
  Yayincilik Dagitim Pazarlama Ticaret Limited Sirketi

  	
   

  	
  Turkey

  	
   

  	
  90

  	
  %(12)

  	
  65

  	
  %*

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Direct Holdings U.S.
  Corp.

  	
   

  	
  404 shares common

  	
   

  	
  Direct Holdings
  International B.V.

  	
   

  	
  Netherlands

  	
   

  	
  100

  	
  %

  	
  65

  	
  %*

  



 






*
Uncertificated.


**
Certificated, but not required to be delivered given status as a Foreign
Immaterial Subsidiary.


 


(11) 1 share held by
an individual.


 


(12) 10% owned
by an individual.


 


12
















 


Schedule 3 

Perfection Matters


 


Uniform Commercial Code Filings


 


Delaware
Secretary of State 

Iowa Secretary of State


New
York Secretary of State 

Washington Secretary of State 

Wisconsin Secretary of State


 


Patent, Trademark and Copyright Filings


 


Intellectual
property short form filings.


 


Actions with respect to Pledged Stock


 


Stock
delivered at closing of:


The
Reader’s Digest Association, Inc.


Allrecipes.com, Inc.


Ardee
Music Publishing, Inc.


Books
Are Fun, Ltd.


Christmas
Angel Productions, Inc.


Family
Reading Program Corp.


Home
Service Publications, Inc.


Pegasus
Asia Investments, Inc.


Pegasus
Finance Corp.


Pegasus
Investment, Inc.


Pegasus
Sales, Inc.


Pleasantville
Music Publishing, Inc.


QSP, Inc.


QSP
Distribution Services, LLC


QSP
Products and Programs, LLC


QSP
Sales, LLC


QSP
Services, LLC


QSP
Ventures, LLC


RD
Large Edition, Inc.


RD
Magazine Value Partners, Inc.


R.
D. Manufacturing Corporation


RD
Member Services, Inc.


RD
Publications, Inc.


RD
Trade Shows, Inc.


RD
Walking, Inc.


Reader’s
Digest Children’s Publishing, Inc.


 


13

















 


Reader’s
Digest Consumer Services, Inc.


Reader’s
Digest Entertainment, Inc.


Reader’s
Digest Financial Services, Inc.


Taste
of Home Entertaining, Inc.


Reader’s
Digest Latinoamerica S.A.


Reader’s
Digest Sales and Services, Inc.


Fundraising.com, Inc.


Reader’s
Digest Sub Nine, Inc,


Reader’s
Digest Young Families, Inc.


Taste
of Home Media Group, Inc.


Reiman
Media Group, Inc.


Retirement
Living Publishing Company, Inc.


SMDDMS, Inc.


Taste
of Home Productions, Inc.


The
Reader’s Digest Association (Russia) Incorporated


Travel
Publications, Inc.


VideOvation, Inc.


W.A.
Publications, LLC


WAPLA,
LLC


World
Wide Country Tours, Inc.


 


Direct
Holdings U.S. Corp.


Direct
Holdings Americas Inc.


Direct
Holdings Custom Publishing Inc.


Direct
Holdings Education Inc.


Alex
Inc.


Direct
Holdings Customer Service, Inc.


Direct
Holdings Libraries Inc.


 


WRC
Media Inc.


CompassLearning, Inc.


Weekly
Reader Corporation


Lifetime
Learning Systems, Inc.


World
Almanac Education Group, Inc.


Funk &
Wagnalls Yearbook Corp.


Gareth
Stevens, Inc.


 


14

















 


Other Actions


 


Notes
delivered at closing of:


Pegasus
Sales, Inc.


Reader’s
Digest Children’s Publishing, Inc.


Reader’s
Digest Sales & Services, Inc.


Books
Are Fun, Ltd.


 


15

















 


Schedule 4 

Jurisdictions of Organization


 


	
  Company Name

  	
   

  	
  Jurisdiction

  
	
  The
  Reader’s Digest Association, Inc.

  	
   

  	
  Delaware

  
	
  Allrecipes.com, Inc.

  	
   

  	
  Washington

  
	
  Ardee
  Music Publishing, Inc.

  	
   

  	
  Delaware

  
	
  Books
  Are Fun, Ltd.

  	
   

  	
  Iowa

  
	
  Christmas
  Angel Productions, Inc.

  	
   

  	
  Delaware

  
	
  Family
  Reading Program Corp.

  	
   

  	
  Delaware

  
	
  Home
  Service Publications, Inc.

  	
   

  	
  Delaware

  
	
  Pegasus
  Asia Investments, Inc.

  	
   

  	
  Delaware

  
	
  Pegasus
  Finance Corp.

  	
   

  	
  Delaware

  
	
  Pegasus
  Investment, Inc.

  	
   

  	
  Delaware

  
	
  Pegasus
  Sales, Inc.

  	
   

  	
  Delaware

  
	
  Pleasantville
  Music Publishing, Inc.

  	
   

  	
  Delaware

  
	
  QSP, Inc.

  	
   

  	
  Delaware

  
	
  QSP
  Distribution Services, LLC

  	
   

  	
  Delaware

  
	
  QSP
  Products and Programs, LLC

  	
   

  	
  Delaware

  
	
  QSP
  Sales, LLC

  	
   

  	
  Delaware

  
	
  QSP
  Services, LLC

  	
   

  	
  Delaware

  
	
  QSP
  Ventures, LLC

  	
   

  	
  Delaware

  
	
  RD
  Large Edition, Inc.

  	
   

  	
  Delaware

  
	
  RD
  Magazine Value Partners, Inc.

  	
   

  	
  Delaware

  
	
  R.
  D. Manufacturing Corporation

  	
   

  	
  Delaware

  
	
  RD
  Member Services, Inc.

  	
   

  	
  Delaware

  
	
  RD
  Publications, Inc.

  	
   

  	
  Delaware

  
	
  RD
  Trade Shows, Inc.

  	
   

  	
  Delaware

  
	
  RD
  Walking, Inc.

  	
   

  	
  Delaware

  
	
  Reader’s
  Digest Children’s Publishing, Inc.

  	
   

  	
  Delaware

  
	
  Reader’s
  Digest Consumer Services, Inc.

  	
   

  	
  Delaware

  
	
  Reader’s
  Digest Entertainment, Inc.

  	
   

  	
  Delaware

  
	
  Reader’s
  Digest Financial Services, Inc.

  	
   

  	
  Delaware

  
	
  Taste
  of Home Entertaining, Inc.

  	
   

  	
  Delaware

  
	
  Reader’s
  Digest Latinoamerica S.A.

  	
   

  	
  Delaware

  
	
  Reader’s
  Digest Sales and Services, Inc.

  	
   

  	
  Delaware

  
	
  Fundraising.com, Inc.

  	
   

  	
  Delaware

  
	
  Reader’s
  Digest Sub Nine, Inc.

  	
   

  	
  Delaware

  
	
  Reader’s
  Digest Young Families, Inc.

  	
   

  	
  Delaware

  
	
  Taste
  of Home Media Group, Inc.

  	
   

  	
  Delaware

  
	
  Reiman
  Media Group, Inc.

  	
   

  	
  Delaware

  
	
  Retirement
  Living Publishing Company, Inc.

  	
   

  	
  Delaware

  
	
  SMDDMS, Inc.

  	
   

  	
  Delaware

  
	
  Taste
  of Home Productions, Inc.

  	
   

  	
  Delaware

  



 


16

















 


	
  The
  Reader’s Digest Association (Russia) Incorporated

  	
   

  	
  Delaware

  
	
  Travel
  Publications, Inc.

  	
   

  	
  Delaware

  
	
  VideOvation, Inc.

  	
   

  	
  Delaware

  
	
  W.A.
  Publications, LLC

  	
   

  	
  Delaware

  
	
  WAPLA,
  LLC

  	
   

  	
  Delaware

  
	
  World
  Wide Country Tours, Inc.

  	
   

  	
  Delaware

  
	
   

  	
   

  	
   

  
	
  Alex
  Inc.

  	
   

  	
  Delaware

  
	
  Direct
  Holdings Americas Inc.

  	
   

  	
  Delaware

  
	
  Direct
  Holdings Custom Publishing Inc.

  	
   

  	
  Delaware

  
	
  Direct
  Holdings Customer Service, Inc.

  	
   

  	
  Delaware

  
	
  Direct
  Holdings Education Inc.

  	
   

  	
  Delaware

  
	
  Direct
  Holdings Libraries Inc.

  	
   

  	
  New York

  
	
  Direct
  Holdings U.S. Corp.

  	
   

  	
  Delaware

  
	
   

  	
   

  	
   

  
	
  WRC
  Media Inc.

  	
   

  	
  Delaware

  
	
  CompassLearning, Inc.

  	
   

  	
  Delaware

  
	
  Weekly
  Reader Corporation

  	
   

  	
  Delaware

  
	
  Lifetime
  Learning Systems, Inc.

  	
   

  	
  Delaware

  
	
  World
  Almanac Education Group, Inc.

  	
   

  	
  Delaware

  
	
  Funk &
  Wagnalls Yearbook Corp.

  	
   

  	
  Delaware

  
	
  Gareth
  Stevens, Inc.

  	
   

  	
  Wisconsin

  



 


17

















 


Schedule 5

Inventory and Equipment Locations


 


	
  Loan Party

  	
   

  	
  Inventory and Equipment Location

  
	
  The
  Reader’s Digest Association, Inc.

  	
   

  	
  The Reader’s Digest Association, Inc.

  Reader’s Digest Road

  Pleasantville, NY 10570

  
	
   

  	
   

  	
   

  
	
  Books
  Are Fun, Ltd.

  	
   

  	
  Books Are Fun, Ltd.

  1680 Highway 1

  Fairfield, IA 52556



  Books Are Fund, Ltd. 

  1801 West Stone 

  Fairfield, IA 52556



  Dallas Transfer

  2424 N. Westmoreland Road

  Dallas, TX 75212



  Innotrac

  6655 Sugar Loaf Parkway

  Duluth, GA 30097



  Innotrac

  4910 Langley Lane, Suite 101

  Reno, NV 89502

  Innotrac — Chicago

  1180 W. Remington Blvd.

  Romeoville, IL 60446



  JV West

  1575 Linda Way, Door #2

  Sparks, NV 89431



  Overflow Warehouse

  1450 Beacon Street

  Baltimore, MD 21230

  
	
   

  	
   

  	
   

  
	
  QSP, Inc.

  	
   

  	
  QSP, Inc.

  Reader’s Digest Rd.

  Pleasantville, NY 10570



  Exact Packaging

  100 Deerfield Road

  



 


18

















 


	
   

  	
   

  	
  Pontiac, IL 61764

  

  Alert Terminal Warehouse

  1200 Breedlove

  Memphis, TN 38107

  
	
   

  	
   

  	
   

  
	
  QSP
  Distribution Services, LLC

  	
   

  	
  EDS

  3600 Army Post Road

  Des Moines, IA 50321

  
	
   

  	
   

  	
   

  
	
  R.
  D. Manufacturing Corporation

  	
   

  	
  Anet

  Riverpoint Enterprise ZC

  Louisville, KY 40258



  Putnam

  1 Grosset Drive

  Kirkwood, NY 13795



  R. R. Donnelley

  216 Greenfield Road

  Lancaster, PA 17601

  
	
   

  	
   

  	
   

  
	
  Reader’s
  Digest Children’s Publishing, Inc.

  	
   

  	
  Simon & Schuster

  100 Front Street

  Riverside, NJ 08075

  
	
   

  	
   

  	
   

  
	
  Taste
  of Home Entertaining, Inc.

  	
   

  	
  Custom Marketing Services, Inc.

  41 N. Industrial Blvd.

  Calera, AL 35040

  
	
   

  	
   

  	
   

  
	
  Reiman
  Media Group, Inc.

  	
   

  	
  Reiman Media Group, Inc.

  5400 South 60th Street

  Greendale, WI 53129



  Reiman Country Store

  5400 S. 60th Street

  Greendale, WI 53129



  Lindner Country Store

  6055 S. 6th Street

  Milwaukee, WI 53221



  Quad Graphics

  1900 W. Sumner Street

  Hartford, WI 53027



  Warren Book Marketing

  1515 Grandview Parkway

  Sturtevant, WI 53177

  



 


19

















 


	
  Direct
  Holdings Americas Inc.

  	
   

  	
  2600
  International Parkway

  Virginia Beach, VA 23452*



  1400
  East Lackawanna Avenue

  Olyphant, PA 18447*



  948
  Merifan Lake Drive 

  Aurora, IL 60507*

  
	
   

  	
   

  	
   

  
	
  WRC
  Media Inc.

  	
   

  	
  512
  Seventh Avenue 

  New York, NY 10018

  
	
   

  	
   

  	
   

  
	
  CompassLearning, Inc.

  	
   

  	
  7878
  N. 16th Street, Suite 100 

  Phoenix, AZ 85020



  203
  Colorado Street 

  Austin, TX 78701

  
	
   

  	
   

  	
   

  
	
  Weekly
  Reader Corporation

  	
   

  	
  200
  First Stamford Place 

  Stamford, CT 06912



  1000
  Taylors Lane, Unit #8 

  Cinnaminson, NJ 08011

  
	
   

  	
   

  	
   

  
	
  World
  Almanac Education Group, Inc.

  	
   

  	
  23221
  Morgan Court, Bldg. 3 

  Strongsville, OH 44149



  State
  Rd. 92 West 

  Crawfordsville, IN 47853*



  649
  Alden St.

  Fall River, MA 02722*



  Rte.
  9-J, 1897 River Rd. 

  Rensselaer, NY 12144*



  16365
  James Madison Highway 

  Gordonsville, VA 22942*



  1133
  County Street 

  Taunton, MA 02780*



  23221
  Morgan Court, Bldg. 3 

  Strongsville, OH 44149

  



 






*
indicates bailee or warehouseman location


 


20

















 


Schedule 6 

Intellectual Property


 


Copyrights/Applications:


 


See
attached Copyrights Schedule.


 


Trademarks/Applications:


 


See
attached Trademarks Schedule.


 


Patents/Patent
Licenses/Applications:


 


See
attached Patents Schedule.


 


21

















 


Schedule 7

Commercial Tort Claims


 


None.


 


22
















 


Schedule 8


PERFECTION CERTIFICATE


 


Reference
is made to the Credit Agreement dated as of March 2, 2007 (as amended, and
restated, 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 herein defined), the “Company”), RDA Holding
Co., a Delaware corporation (“Holdings”), The Reader’s
Digest Association, Inc. (“Reader’s Digest”), the Overseas
Borrowers from time to time party thereto (together with the Company, the “Borrowers”) the lenders
from time to time party thereto (the “Lenders”), 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. Capitalized
terms used but not defined herein have the meanings assigned in the Credit
Agreement or the Guarantee and Security Agreement referred to therein, as
applicable.


 


The
undersigned associate general counsel or chief legal officer of Reader’s Digest
hereby certifies, on behalf of the Reader’s Digest, and not in his or her
personal capacity, to the Administrative Agent and each other Secured Party as
follows:


 


1.                Names. (a) The exact
legal name of each Grantor, as such name appears in its respective certificate
of incorporation, certificate of formation or equivalent document, is set forth
in Schedule 1(a). Each Grantor is the type of entity disclosed next to its name
in Schedule 1(a). Also set forth in Schedule 1(a) is the organizational
identification number, if any, of each Grantor that is a registered
organization and the jurisdiction of formation or incorporation of each
Grantor.


 


(b)              Set
forth below on Schedule 1(b) is each other corporate name each Grantor has
had in the past year, together with the date of the relevant change.


 


(c)               Except
as set forth in Schedule 1(c) hereto, no Grantor has changed its identity
or corporate structure in any way within the past year. Changes in identity or
corporate structure would include mergers, consolidations and acquisitions, as
well as any change in the form, nature or jurisdiction of corporate
organization. If any such change has occurred, include in Schedule 1 the
information required by Section 1 of this certificate as to each acquiree
or constituent party to a merger or consolidation.


 


2.                File Search
Reports. File search reports have been obtained from the Uniform Commercial
Code filing offices where each Grantor is incorporated or formed.


 


3.                UCC Filings. Financing
statements on Form UCC-1 in substantially the form of Schedule 3 hereto
have been prepared for filing in the Uniform Commercial Code filing office in
each jurisdiction of formation or incorporation of each Grantor.


 


4.                Intellectual
Property. Attached hereto as Schedule 4(A) in
proper form for filing with the United States Patent and Trademark Office is a
schedule setting forth each Patent, Patent License and Trademark owned by any
Grantor (in each case, that is registered in the United States or for which
application for registration in the United States has been filed), including
the name of the registered owner and the registration number of each such
Patent, Patent License and Trademark. Attached hereto as Schedule 4(B) in
proper form for filing with the United States Copyright Office is a schedule
setting forth


 

















 


each
Copyright owned by any Grantor (in each case, that is registered in the United
States or for which application for registration in the United States has been
filed), including the name of the registered owner and the registration number
of such Copyright.


 


5.                Schedule of
Filings. Attached hereto as Schedule 5 is a schedule setting forth, with
respect to the filings described in Section 3 above, each filing and the
filing office in which such filing is to be made.


 


6.                Stock Ownership
and other Equity Interests. Attached hereto as
Schedule 6 is a true and correct list of all the Equity Interests of or owned
by any Loan Party and the record and beneficial owners of such Equity
Interests. Also set forth on Schedule 6 is each equity investment of Company,
Holdings and the other Loan Parties that represent 50% or less of the equity of
the entity in which such investment was made. Each such entry on Schedule 6
includes (a) an indication of whether such Equity Interests or equity
investments are currently certificated or uncertificated and (b) with
respect to Equity Interests of Foreign Subsidiaries added to Schedule 6 after
the Closing Date, the percentage of the Company’s consolidated total assets and
consolidated revenues represented by such Equity Interests.


 


7.                Debt
Instruments. Attached hereto as Schedule 7 is a true and
correct list of all promissory notes and other evidence of indebtedness held by
Holdings, the Company and each Subsidiary that are required to be pledged under
the Collateral and Guarantee Requirement, including all intercompany notes
between Loan Parties.


 


8.                Mortgage
Filings. Attached hereto as Schedule 8 is a schedule setting forth, with
respect to each Mortgaged Property, (a) the exact name of the Person that
owns such property as such name appears in its certificate of incorporation,
certificate of formation or equivalent document, (b) if different from the
name identified pursuant to clause (a), the exact name of the current record
owner of such property reflected in the records of the filing office for such
property identified pursuant to the following clause and (c) the filing
office in which a Mortgage with respect to such property must be filed or
recorded in order for the Administrative Agent to obtain a perfected security
interest therein.


 


9.                Commercial Tort
Claims. Attached hereto as Schedule 9 is a true and correct list of
commercial tort claims in excess of $5,000,000 held by any Grantor, including a
brief description thereof.


 


[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]


 

















 


IN
WITNESS WHEREOF, the undersigned has duly executed this certificate on this 2nd day of March 2007.


 


 


	
   

  	
  THE
  READER’S DIGEST ASSOCIATION, INC.

  



 


 


[SIGNATURE PAGE TO PERFECTION CERTIFICATE]