**Exhibit 10.1**

 

EXECUTION COPY

 

 

CREDIT AGREEMENT

 

Dated as of March 2, 2007

 

among

 

DOCTOR ACQUISITION CO.,

 

RDA HOLDING CO.,

 

THE READER’S DIGEST ASSOCIATION, INC.,

 

THE OVERSEAS BORROWERS PARTY HERETO,

 

The Lenders Party Hereto

 

JPMORGAN CHASE BANK, N.A.,as Administrative Agent

 

CITICORP NORTH AMERICA, INC. andMERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED,as Co-Syndication Agents,

 

and

 

THE ROYAL BANK OF SCOTLAND PLC,as Documentation Agent

 

 

 

 

J.P. MORGAN SECURITIES INC.,CITIGROUP GLOBAL MARKETS INC.,MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATEDand RBS SECURITIES CORPORATION,as Co-Lead Arrangers and Joint Bookrunners

 

----

 

**TABLE OF CONTENTS**

 
|                                                         |                                                                                      | **Page**   |
|--------------------------------------------------------------|-------------------------------------------------------------------------------------------|------------|
|                                                         |                                                                                      | ** ** |
| ARTICLE I DEFINITIONS AND ACCOUNTING TERMS                   | 2                                                                                         |
|                                                         |                                                                                      |
| SECTION 1.01.                                           | Defined Terms                                                                             | 2          |
| SECTION 1.02.                                           | Other Interpretive Provisions                                                             | 48         |
| SECTION 1.03.                                           | Accounting Terms                                                                          | 48         |
| SECTION 1.04.                                           | Rounding                                                                                  | 48         |
| SECTION 1.05.                                           | References to Agreements, Laws, Etc                                                       | 49         |
| SECTION 1.06.                                           | Times of Day                                                                              | 49         |
| SECTION 1.07.                                           | Timing of Payment of Performance                                                          | 49         |
| SECTION 1.08.                                           | Currency Equivalents Generally                                                            | 49         |
| SECTION 1.09.                                           | Change of Currency                                                                        | 50         |
|                                                         |                                                                                      |       |
| ARTICLE II THE COMMITMENTS AND CREDIT EXTENSIONS             | 50                                                                                        |
|                                                         |                                                                                      |
| SECTION 2.01.                                           | The Loans                                                                                 | 50         |
| SECTION 2.02.                                           | Borrowings, Conversions and Continuations of Loans                                        | 51         |
| SECTION 2.03.                                           | Letters of Credit                                                                         | 52         |
| SECTION 2.04.                                           | Swing Line Loans                                                                          | 59         |
| SECTION 2.05.                                           | Prepayments                                                                               | 61         |
| SECTION 2.06.                                           | Termination or Reduction of Commitments                                                   | 64         |
| SECTION 2.07.                                           | Repayment of Loans                                                                        | 65         |
| SECTION 2.08.                                           | Interest                                                                                  | 65         |
| SECTION 2.09.                                           | Fees                                                                                      | 66         |
| SECTION 2.10.                                           | Computation of Interest and Fees                                                          | 66         |
| SECTION 2.11.                                           | Evidence of Indebtedness                                                                  | 66         |
| SECTION 2.12.                                           | Payments Generally                                                                        | 67         |
| SECTION 2.13.                                           | Sharing of Payments                                                                       | 69         |
| SECTION 2.14.                                           | Incremental Credit Extensions                                                             | 70         |
| SECTION 2.15.                                           | Overseas Borrower Costs                                                                   | 73         |
|                                                         |                                                                                      |       |
| ARTICLE III TAXES, INCREASED COSTS PROTECTION AND ILLEGALITY | 73                                                                                        |
|                                                         |                                                                                      |
| SECTION 3.01.                                           | Taxes                                                                                     | 73         |
| SECTION 3.02.                                           | Illegality                                                                                | 76         |
| SECTION 3.03.                                           | Inability to Determine Rates                                                              | 76         |
| SECTION 3.04.                                           | Increased Cost and Reduced  Return; Capital Adequacy; Reserves on Eurocurrency Rate Loans | 76         |
| SECTION 3.05.                                           | Funding Losses                                                                            | 78         |
| SECTION 3.06.                                           | Matters Applicable to All Requests for Compensation                                       | 78         |
| SECTION 3.07.                                           | Replacement of Lenders under Certain Circumstances                                        | 79         |
| SECTION 3.08.                                           | Survival                                                                                  | 80         |
|                                                         |                                                                                      |       |
| ARTICLE IV CONDITIONS PRECEDENT TO CREDIT EXTENSIONS         | 80                                                                                        |
|                                                         |                                                                                      |
| SECTION 4.01.                                           | Conditions of Initial Credit Extension                                                    | 80         |
| SECTION 4.02.                                           | Conditions to All Credit Extensions                                                       | 83         |
| SECTION 4.03.                                           | Conditions of Initial Credit Extension to Overseas Borrower                               | 84         |
|                                                              |                                                                                           |            |  |

 

i

----

 
| ARTICLE V REPRESENTATIONS AND WARRANTIES | 85                                                       |
|------------------------------------------|----------------------------------------------------------|
|                                     |                                                     |
| SECTION 5.01.                       | Existence, Qualification and Power; Compliance with Laws | 85 |
| SECTION 5.02.                       | Authorization; No Contravention                          | 85 |
| SECTION 5.03.                       | Governmental Authorization; Other Consents               | 85 |
| SECTION 5.04.                       | Binding Effect                                           | 86 |
| SECTION 5.05.                       | Financial Statements; No Material Adverse Effect         | 86 |
| SECTION 5.06.                       | Litigation                                               | 87 |
| SECTION 5.07.                       | No Default                                               | 87 |
| SECTION 5.08.                       | Ownership of Property; Liens                             | 87 |
| SECTION 5.09.                       | Environmental Compliance                                 | 87 |
| SECTION 5.10.                       | Taxes                                                    | 88 |
| SECTION 5.11.                       | ERISA Compliance                                         | 88 |
| SECTION 5.12.                       | Subsidiaries; Equity Interests                           | 89 |
| SECTION 5.13.                       | Margin Regulations; Investment Company Act               | 89 |
| SECTION 5.14.                       | Disclosure                                               | 89 |
| SECTION 5.15.                       | Intellectual Property; Licenses, Etc                     | 89 |
| SECTION 5.16.                       | Solvency                                                 | 90 |
| SECTION 5.17.                       | Labor Matters                                            | 90 |
| SECTION 5.18.                       | Collateral                                               | 90 |
|                                     |                                                     |   |
| ARTICLE VI AFFIRMATIVE COVENANTS         | 91                                                       |
|                                     |                                                     |
| SECTION 6.01.                       | Financial Statements                                     | 91 |
| SECTION 6.02.                       | Certificates; Other Information                          | 92 |
| SECTION 6.03.                       | Notices                                                  | 94 |
| SECTION 6.04.                       | Payment of Obligations                                   | 94 |
| SECTION 6.05.                       | Preservation of Existence, Etc                           | 94 |
| SECTION 6.06.                       | Maintenance of Properties                                | 94 |
| SECTION 6.07.                       | Maintenance of Insurance                                 | 95 |
| SECTION 6.08.                       | Compliance with Laws                                     | 95 |
| SECTION 6.09.                       | Inspection Rights                                        | 95 |
| SECTION 6.10.                       | Covenant to Guarantee Obligations and Give Security      | 95 |
| SECTION 6.11.                       | Compliance with Environmental Laws                       | 97 |
| SECTION 6.12.                       | Further Assurances                                       | 98 |
| SECTION 6.13.                       | Use of Proceeds                                          | 99 |
| SECTION 6.14.                       | Interest Rate Protection                                 | 99 |
| SECTION 6.15.                       | Designation of Subsidiaries                              | 99 |
| SECTION 6.16.                       | Ownership of Overseas Borrowers                          | 99 |
| SECTION 6.17.                       | Post-Closing Covenants                                   | 99 |
|                                     |                                                     |   |
| ARTICLE VII NEGATIVE COVENANTS           | 100                                                      |
|                                     |                                                     |
| SECTION 7.01.                       | Liens                                                    | 100 |
| SECTION 7.02.                       | Investments                                              | 103 |
| SECTION 7.03.                       | Indebtedness                                             | 107 |
| SECTION 7.04.                       | Fundamental Changes                                      | 110 |
| SECTION 7.05.                       | Dispositions                                             | 112 |
| SECTION 7.06.                       | Restricted Payments                                      | 113 |
| SECTION 7.07.                       | Change in Nature of Business                             | 115 |
| SECTION 7.08.                       | Transactions with Affiliates                             | 115 |

 

ii

----

 
| SECTION 7.09.                               | Burdensome Agreements                                | 116    |
|--------------------------------------------------|------------------------------------------------------|--------|
| SECTION 7.10.                               | Financial Covenant                                   | 116    |
| SECTION 7.11.                               | Accounting Changes                                   | 117    |
| SECTION 7.12.                               | Prepayments, Etc. of Indebtedness                    | 117    |
| SECTION 7.13.                               | Holding Company                                      | 117    |
| SECTION 7.14.                               | Capital Expenditures                                 | 118    |
|                                             |                                                 |   |
| ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES      | 119                                                  |
|                                             |                                                 |
| SECTION 8.01.                               | Events of Default                                    | 119    |
| SECTION 8.02.                               | Remedies Upon Event of Default                       | 121    |
| SECTION 8.03.                               | Exclusion of Immaterial Subsidiaries                 | 121    |
| SECTION 8.04.                               | Application of Funds                                 | 122    |
| SECTION 8.05.                               | Company’s Right to Cure                         | 123    |
| SECTION 8.06.                               | CAM Exchange                                         | 123    |
|                                             |                                                 |   |
| ARTICLE IX ADMINISTRATIVE AGENT AND OTHER AGENTS | 124                                                  |
|                                             |                                                 |
| SECTION 9.01.                               | Appointment and Authorization of Agents              | 124    |
| SECTION 9.02.                               | Delegation of Duties                                 | 125    |
| SECTION 9.03.                               | Liability of Agents                                  | 125    |
| SECTION 9.04.                               | Reliance by Agents                                   | 126    |
| SECTION 9.05.                               | Notice of Default                                    | 126    |
| SECTION 9.06.                               | Credit Decision; Disclosure of Information by Agents | 126    |
| SECTION 9.07.                               | Indemnification of Agents                            | 127    |
| SECTION 9.08.                               | Agents in their Individual Capacities                | 127    |
| SECTION 9.09.                               | Successor Agents                                     | 128    |
| SECTION 9.10.                               | Administrative Agent May File Proofs of Claim   | 128    |
| SECTION 9.11.                               | Collateral and Guarantee Matters                     | 129    |
| SECTION 9.12.                               | Other Agents; Arrangers and Managers                 | 130    |
| SECTION 9.13.                               | Appointment of Supplemental Administrative Agents    | 130    |
|                                             |                                                 |   |
| ARTICLE X MISCELLANEOUS                          | 131                                                  |
|                                             |                                                 |
| SECTION 10.01.                              | Amendments, Etc                                      | 131    |
| SECTION 10.02.                              | Notices and Other Communications; Facsimile Copies   | 133    |
| SECTION 10.03.                              | No Waiver; Cumulative Remedies                       | 135    |
| SECTION 10.04.                              | Attorney Costs, Expenses and Taxes                   | 135    |
| SECTION 10.05.                              | Indemnification by the Company                       | 135    |
| SECTION 10.06.                              | Payments Set Aside                                   | 136    |
| SECTION 10.07.                              | Successors and Assigns                               | 137    |
| SECTION 10.08.                              | Confidentiality                                      | 140    |
| SECTION 10.09.                              | Setoff                                               | 142    |
| SECTION 10.10.                              | Interest Rate Limitation                             | 142    |
| SECTION 10.11.                              | Counterparts                                         | 142    |
| SECTION 10.12.                              | Integration                                          | 143    |
| SECTION 10.13.                              | Survival of Representations and Warranties           | 143    |
| SECTION 10.14.                              | Severability                                         | 143    |
| SECTION 10.15.                              | Tax Forms                                            | 143    |
| SECTION 10.16.                              | GOVERNING LAW                                        | 145    |
| SECTION 10.17.                              | WAIVER OF RIGHT TO TRIAL BY JURY                     | 146    |

 

iii

----

 
| SECTION 10.18. | Binding Effect                                                                                    | 146 |
|---------------------|---------------------------------------------------------------------------------------------------|-----|
| SECTION 10.19. | Lender Action                                                                                     | 146 |
| SECTION 10.20. | USA PATRIOT Act                                                                                   | 146 |
| SECTION 10.21. | Agent for Service of Process                                                                      | 146 |
| SECTION 10.22. | Effectiveness of the  Merger; Assignment and Delegation to and Assumption by Reader’s Digest | 147 |
| SECTION 10.23. | Judgment Currency                                                                                 | 147 |
| SECTION 10.24. | German Tax Confirmation                                                                           | 147 |

 

iv

----

 
| SCHEDULES |
|-----------|
|      |
|      | 1.01A |   | Certain  Security Interests and Guarantees |   |
|      | 1.01B |   | Mortgaged  Properties |   |
|      | 1.01C |   | Management  Adjustments |   |
|      | 1.01D |   | Excluded  Subsidiaries |   |
|      | 1.01E |   | Foreign  Subsidiaries |   |
|      | 1.01F |   | Holdings  Contractual Obligations |   |
|      | 1.01G |   | Unrestricted  Subsidiaries |   |
|      | 1.01H |   | Mandatory  Cost Formulae |   |
|      | 1.01I |   | Existing  Letters of Credit |   |
|      | 2.01 |   | Commitments |   |
|      | 5.05 |   | Certain Liabilities |   |
|      | 5.09 |   | Environmental Matters |   |
|      | 5.10 |   | Taxes |   |
|      | 5.11 |   | ERISA Compliance |   |
|      | 5.12 |   | Subsidiaries  and Other Equity Investments |   |
|      | 5.18 |   | Collateral  Matters |   |
|      | 7.01(b) |   | Existing  Liens |   |
|      | 7.02(f) |   | Existing  Investments |   |
|      | 7.03(b) |   | Existing  Indebtedness |   |
|      | 7.05(k) |   | Dispositions |   |
|      | 7.08 |   | Transactions  with Affiliates |   |
|      | 7.09 |   | Existing  Restrictions |   |
|      | 10.02 |   | Administrative  Agent’s Office, Certain Addresses for Notices |   |

 
| EXHIBITS |
|----------|

 
| *            Form of* |
|----------------------------------------------------------------------------------------|

 
|   | A   |   | Committed  Loan Notice                           |   |
|--------|-----|--------|--------------------------------------------------|--------|
|   | B   |   | Swing  Line Loan Notice                          |   |
|   | C-1 |   | U.S.  Term Note                                  |   |
|   | C-2 |   | Revolving  Credit Note                           |   |
|   | C-3 |   | Euro  Term Note                                  |   |
|   | D   |   | Compliance  Certificate                          |   |
|   | E   |   | Assignment  and Assumption                       |   |
|   | F   |   | Guarantee  and Security Agreement                |   |
|   | G   |   | Mortgage                                         |   |
|   | H-1 |   | Opinion  of Cravath, Swaine & Moore LLP |   |
|   | H-2 |   | Opinion  of Richards, Layton & Finger   |   |
|   | H-3 |   | Opinion  of General Counsel (Company)            |   |
|   | H-4 |   | Opinion  of General Counsel (WRC Media)          |   |
|   | H-5 |   | Opinion  of General Counsel (Direct Holdings)    |   |
|   | I   |   | Letter  of Credit Application (commercial)       |   |
|   | J   |   | Letter  of Credit Application (standby)          |   |
|   | K   |   | Continuing  Agreement                            |   |
|   | L   |   | German  Tax Confirmation                         |   |

 

v

----

 

**CREDIT AGREEMENT**

 

ThisCREDIT AGREEMENT (“**Agreement**”) isentered into as of March 2, 2007, among DOCTOR ACQUISITION CO., a Delawarecorporation (“**Acquisition Co**”) (tobe merged with and into Reader’s Digest (as defined herein), the “**Company**”), RDA HOLDING CO., a Delawarecorporation (“**Holdings**”), THEREADER’S DIGEST ASSOCIATION, INC., a Delaware corporation (“**Reader’s Digest**”), the Overseas Borrowersfrom time to time party hereto, JPMORGAN CHASE BANK, N.A., as AdministrativeAgent, each lender from time to time party hereto (collectively, the “**Lenders**” and individually, a “**Lender**”), CITICORP NORTH AMERICA, INC. andMERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED, as Co-SyndicationAgents, and THE ROYAL BANK OF SCOTLAND PLC, as Documentation Agent.

 

PRELIMINARYSTATEMENTS

 

Pursuantto the Purchase Agreement (as this and other capitalized terms used in thesepreliminary statements are defined in Section 1.01 below), Holdings agreedto acquire Reader’s Digest (the “**Acquisition**”)through the merger of Acquisition Co with and into Reader’s Digest (the “**Merger**”), with Reader’s Digest being thesurviving corporation.  Immediatelyfollowing and as a result of the Merger, Reader’s Digest will assume all rightsand obligations of Acquisition Co as the Company hereunder.

 

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

 

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

 

Theproceeds of the Term Loans and any Revolving Credit Loans made on the ClosingDate, together with the proceeds of (i) the issuance of the SeniorSubordinated Notes, (ii) the issuance of the Holdings Senior PIKPreferred, (iii) the issuance of the Holdings Common Equity, (iv) theSponsor Equity Contributions, and (v) cash on hand at Reader’s Digest ofup to $70,000,000 will be used to pay the cash portion of the Purchase Priceand the Transaction Expenses and to refinance certain outstanding Indebtednessof Reader’s Digest, WRC Media and Direct Holdings.  The proceeds of Revolving Credit Loans andSwing Line Loans and the Letters of Credit made on or after the Closing Datewill be used for working capital and other general corporate purposes ofHoldings and its Subsidiaries, including the financing of PermittedAcquisitions.

 

1

----

 

Theapplicable Lenders have indicated their willingness to lend, and the L/CIssuers have indicated their willingness to issue Letters of Credit, in eachcase, on the terms and subject to the conditions set forth herein.

 

Inconsideration of the mutual covenants and agreements herein contained, theparties hereto covenant and agree as follows:

 

# **ARTICLE I**

 

# **DEFINITIONS AND ACCOUNTING TERMS**

#  

SECTION 1.01.  DefinedTerms .  As used in this Agreement, thefollowing terms shall have the meanings set forth below:

 

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

 

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

 

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

 

“**Acquisition Co**” has the meaning specifiedin the introductory paragraph to this Agreement.

 

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

 

“**Additional Lender**” has the meaning setforth in Section 2.14(a).

 

“**Additional Overseas Lender**” has the meaningset forth in Section 2.14(b).

 

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

 

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

 

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

 

2

----

 

“**Affiliate**” means, with respect to aspecified Person, another Person that directly, or indirectly through one ormore intermediaries, Controls or is Controlled by or is under common Controlwith the Person specified.  “Control”means the possession, directly or indirectly, of the power to direct or causethe direction of the management or policies of a Person, whether through theability to exercise voting power, by contract or otherwise.  “Controlling” and “Controlled” have meaningscorrelative thereto.

 

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

 

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

 

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

 

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

 

“**Agreement**” means this Credit Agreement.

 

“**Agreement Currency**” has the meaningspecified in Section 10.23.

 

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

 

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

 

“**Applicable Rate**” means a percentage perannum equal to:

 

(a) withrespect to Term Loans, (i) for Eurocurrency Rate Loans, 2.00% and (ii) forBase Rate Loans, 1.00%; and

 

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

 
| **Applicable Rate** |
|--------------------------|
| **Pricing  Level**       | ** ** | **Total Leverage Ratio** | ** ** | **Eurocurrency  Rate and  Letter of  Credit Fees** | ** ** | **Base Rate** | ** ** | **Commitment  Fee Rate** | ** ** |
| 1                        |   | >6.0:1 |   | 2.25% |   | 1.25% |   | 0.375% |   |
| 2                        |   | <6.0:1 but  >5.0:1 |   | 2.00% |   | 1.00% |   | 0.375% |   |

 

3

----

 
| **Applicable Rate** |
|--------------------------|
| **Pricing  Level**       | ** ** | **Total Leverage Ratio** | ** ** | **Eurocurrency  Rate and  Letter of  Credit Fees** | ** ** | **Base Rate** | ** ** | **Commitment  Fee Rate** | ** ** |
| 3                        |   | <5.0:1 but  >4.0:1 |   | 1.75% |   | 0.75% |   | 0.375% |   |
| 4                        |   | <4.0:1 |   | 1.50% |   | 0.50% |   | 0.250% |   |

 

Anyincrease or decrease in the Applicable Rate resulting from a change in the TotalLeverage Ratio shall become effective as of the first Business Day immediatelyfollowing the date a Compliance Certificate (together with the relatedfinancial statements) is delivered pursuant to Section 6.02(b); *provided* that, at the option of the AdministrativeAgent or the Required Lenders, (x) the highest Pricing Level shall applyas of the third Business Day after the date on which a Compliance Certificate(together with the related financial statements) was required to have beendelivered but was not delivered, and shall continue to so apply to andincluding the date on which such Compliance Certificate (together with therelated financial statements) is so delivered (and thereafter the Pricing Levelotherwise determined in accordance with this definition shall apply) and (y) thenext-higher Pricing Level to the Pricing Level then in effect shall apply as ofthe first Business Day after an Event of Default under Section 8.01(a) shallhave occurred and be continuing, and shall continue to so apply to butexcluding the date on which such Event of Default is cured or waived (andthereafter the Pricing Level otherwise determined in accordance with thisdefinition shall apply).

 

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

 

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

 

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

 

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

 

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

 

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

 

“**Attorney Costs**” means and includes allreasonable fees, expenses and disbursements of any law firm or other externallegal counsel.

 

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

 

4

----

 

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

 

“**Australian Dollars**” means the lawfulcurrency of Australia.

 

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

 

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

 

“**Base Rate Loan**” means a Loan that bearsinterest based on the Base Rate.

 

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

 

“**Borrowers**” means the Company, the GermanBorrower and the other Overseas Borrowers.

 

“**Borrowing**” means a Revolving CreditBorrowing, a Swing Line Borrowing, or a Term Borrowing, as the context mayrequire.

 

“**Business Day**” means any day other than aSaturday, Sunday or other day on which commercial banks are authorized to closeunder the Laws of, or are in fact closed in, the state where the AdministrativeAgent’s Office is located or in The City of New York; *provided*, that (a) when used in connectionwith a Eurocurrency Rate Loan denominated in a currency other than Euro, theterm “Business Day” shall also exclude any day on which banks are not open fordealings in deposits in the applicable currency in the London interbank market,(b) when used in connection with a Eurocurrency Rate Loan denominated inEuro, the term “Business Day” shall also exclude any day which is not a TARGETDay, (c) when used in connection with any Loan denominated in CanadianDollars, the term “Business Day” shall also exclude any day on which banks arenot open for dealings in deposits in Toronto but shall include any day on whichbanks are open for dealings in deposits in Toronto, (d) when used inconnection with any Loan denominated in Sterling, the term “Business Day” shallalso exclude any day on which banks are not open for dealings in deposits inSterling in London but shall include any day on which banks are open fordealings in deposits in Sterling in London, and (e) when used inconnection with any 

 

5

----

 

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

 

“**CAM**” means the mechanism for the allocationand exchange of interests in Loans and other Credit Extensions under thisAgreement and collections thereunder established in Section 8.06.

 

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

 

“**CAM Exchange Date**” means the date on whichany Event of Default referred to in Section 8.01(f) shall occur orthe date on which the Company receives written notice from the AdministrativeAgent that any Event of Default referred to in Section 8.01(g) hasoccurred.

 

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

 

“**Canadian Dollars**” means the lawful currencyof Canada.

 

“**Capital Expenditures**” means, for anyperiod, the additions to property, plant and equipment and other capitalexpenditures of the Company and its consolidated Subsidiaries that are (or arerequired to be) set forth in a consolidated statement of cash flows of theCompany for such period prepared in accordance with GAAP; *provided* that the term “CapitalExpenditures” shall not include, without duplication, (i) subject to theterms of Section 2.05(b)(ii)(B), expenditures of Net Cash Proceeds arisingfrom any Casualty Event or any Disposition of any property or asset of theCompany or any Restricted Subsidiary (other than any Disposition permitted by Section 7.05(b) (tothe extent constituting a Disposition of inventory in the ordinary course ofbusiness), (d), (e), (f), (g) or (h)), (ii) the purchase price ofequipment that is purchased during such period to the extent the considerationtherefore consists of (x) existing equipment traded in at the time of suchpurchase or (y) the proceeds of a concurrent sale of existing equipment,in each case in the ordinary course of business, (iii) expenditures thatare accounted for as capital expenditures by the Company or any RestrictedSubsidiary and that actually are paid for by a Person other than the Company orany Restricted Subsidiary and for which neither the Company nor any RestrictedSubsidiary has provided or is required to provide or incur, directly orindirectly, any consideration or obligation to such Person or any other Person(whether before, during or after such period), (iv) interest capitalizedduring such period, (v) additions resulting from Permitted Acquisitions, (vi) thebook value of any asset owned by the Company or any Restricted Subsidiary priorto or during such period to the extent that such book value is included as acapital expenditure during such period as a result of such Person reusing orbeginning to reuse such asset during such period without a correspondingexpenditure actually having been made in such period; *provided* that (x) any expenditurenecessary in order to permit such asset to be reused shall be included as aCapital Expenditure during the period that such expenditure actually is madeand (y) such book value shall have been included in Capital Expenditureswhen such asset was originally acquired, or (vii) expenditures required tocomply with special legal requirements, including, but not limited to, changesin Environmental Laws.

 

6

----

 

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

 

“**Cash Collateral**” has the meaning specifiedin Section 2.03(g).

 

“**Cash Collateral Account**” means a blockedaccount at JPMorgan Chase Bank (or another commercial bank selected incompliance with Section 9.09) in the name of the Administrative Agent andunder the sole dominion and control of the Administrative Agent, and otherwiseestablished in a manner satisfactory to the Administrative Agent.

 

“**Cash Collateralize**” has the meaningspecified in Section 2.03(g).

 

“**Cash Equivalents**” means any of thefollowing types of Investments, to the extent owned by the Company or anyRestricted Subsidiary:

 

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

 

(b)  marketable obligations issued or directly and fullyguaranteed or insured by the government or any agency or instrumentality of (i) theUnited States or (ii) any member nation of the European Union, havingaverage maturities of not more than 12 months from the date of acquisitionthereof; *provided* that the fullfaith and credit of the United States or a member nation of the European Unionis pledged in support thereof;

 

(c)  time deposits with, or certificates of deposit, overnightbank deposits or bankers’ acceptances issued or guaranteed by, or money marketdeposit accounts issued or offered by, any commercial bank that (i) is aLender or (ii) (A) is organized under the Laws of the United States,any state thereof, the District of Columbia or any member nation of theOrganization for Economic Cooperation and Development or is the principalbanking Subsidiary of a bank holding company organized under the Laws of theUnited States, any state thereof, the District of Columbia or any member nationof the Organization for Economic Cooperation and Development, and is a memberof the Federal Reserve System, and (B) has combined capital and surplus ofat least $250,000,000 (any such bank in the foregoing clauses (i) or (ii) beingan “**Approved Bank**”), in each casewith average maturities of not more than 12 months from the date of acquisitionthereof;

 

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

 

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

 

7

----

 

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

 

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

 

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

 

(i)  Investments in money market investment or similar programswhich are registered under the Investment Company Act of 1940 or which areadministered by financial institutions having capital of at least $250,000,000,and, in either case, the portfolios of which are limited such thatsubstantially all of such investments are of the character, quality andmaturity described in clauses (a) through (h) of thisdefinition.

 

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

 

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

 

“**CERCLA**” means the ComprehensiveEnvironmental Response, Compensation, and Liability Act of 1980, assubsequently amended.

 

“**CERCLIS**” means the ComprehensiveEnvironmental Response, Compensation, and Liability Information Systemmaintained by the U.S. Environmental Protection Agency.

 

“**Change of Control**” means the earliest tooccur of (a) the Permitted Holders ceasing to have the power, directly orindirectly, to vote or direct the voting of securities having a majority of theordinary voting power for the election of directors of Holdings; *provided* that the occurrence of the foregoingevent shall not be deemed a Change of Control if,

 

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

 

8

----

 

Holdingsowned, directly or indirectly, by the Permitted Holders of record andbeneficially as of the Closing Date and such ownership by the Permitted Holdersrepresents the largest single block of voting securities of Holdings held byany Person or related group for purposes of Section 13(d) of theExchange Act; or

 

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

 

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

 

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

 

“**Charges**” has the meaningspecified in Section 10.10.

 

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

 

“**Closing Date**” means the first date all theconditions precedent in Section 4.01 are satisfied or waived in accordancewith Section 4.01.

 

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

 

“**Collateral**” means all the “Collateral” asdefined in any Collateral Document and shall include the Mortgaged Properties.

 

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

 

(a)  the Administrative Agent shall have received each CollateralDocument required to be delivered on the Closing Date pursuant to Section 4.01(a)(iii) orpursuant to Section 6.10 at such time, duly executed by each Loan Partythereto;

 

9

----

 

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

 

(c)  except as set forth in Section 6.17, all Obligations, ifany, of each Overseas Borrower (the “**OverseasObligations**”) shall have been unconditionally guaranteed (the “**Overseas Guarantees**” and, together with theU.S. Guarantees, the “**Guarantees**”)by each Restricted Subsidiary of such Overseas Borrower, in each case that isnot an Excluded Subsidiary (other than pursuant to clause (d) of thedefinition thereof) (each, an “**OverseasGuarantor**” and, together with the U.S. Guarantors, the “**Guarantors**”) prior to, or concurrentlywith, the funding of any Loans to any Overseas Borrower, except in each case tothe extent such Overseas Guarantee (A) is prohibited or limited byapplicable Law, including financial assistance rules, (B) would result inmaterial adverse tax consequences to Holdings and its Subsidiaries, (C) wouldconflict with the fiduciary duties of directors of any Subsidiary or (D) couldreasonably be expected to result in personal or criminal liability of anydirector of any Subsidiary;

 

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

 

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

 

(f)  except to the extent otherwise permitted hereunder or underany Collateral Document, (i) to the extent governed by the UniformCommercial Code, the execution of the Collateral Documents shall be effectiveto create a security interest in all Collateral described therein and proceedsthereof, in each case, to the extent constituting Collateral and with thepriority required by the Collateral Documents, (ii) except as set forth inSection 6.17, all Overseas Obligations and the related Overseas Guaranteesshall have been secured by a security interest, and mortgages on, substantiallyall material owned tangible and intangible assets of the relevant OverseasBorrower and each applicable Overseas Guarantor, in each case (x) with thepriority required by the Collateral Documents, (y) except to the extentthe granting of such security interests or mortgages (A) is prohibited orlimited by applicable Law, including financial assistance rules, (B) wouldresult in material adverse tax consequences to Holdings and its Subsidiaries, (C) wouldconflict with the fiduciary duties of directors of any Subsidiary or (D) could

 

10

----

 

reasonablybe expected to result in personal or criminal liability of any director of anySubsidiary, and (z) subject to exceptions and limitations consistent withthose set forth in the Collateral Documents as in effect on the Closing Date(to the extent appropriate in the applicable jurisdiction), and (iii) exceptas set forth in Section 6.17, all documents and instruments, includingUniform Commercial Code financing statements and filings made in respect ofIntellectual Property constituting Collateral in the United States Patent andTrademark Office and the United States Copyright Office, reasonably requestedby the Administrative Agent to be filed, registered or recorded to create theLiens intended to be created by the Collateral Documents and to perfect suchLiens to the extent required by, and with the priority required by, theCollateral Documents, shall have been filed, registered or recorded ordelivered to the Administrative Agent for filing, registration or recording;

 

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

 

(h)  the Administrative Agent shall have received (i) counterpartsof a Mortgage with respect to any Material Real Property described on Schedule1.01B hereto or required to be delivered pursuant to Section 6.10 or 6.12(the “**Mortgaged Properties**”) dulyexecuted and delivered by the record owner of such property, (ii) a policyor policies of title insurance issued by a nationally recognized titleinsurance company insuring the Lien of each such Mortgage as a valid Lien onthe property described therein, free of any other Liens except as expresslypermitted by Section 7.01, together with such endorsements, coinsuranceand reinsurance as the Administrative Agent may reasonably request, and (iii) suchsurveys, abstracts, appraisals, legal opinions and other documents (which, inthe case of surveys, abstracts and appraisals, shall be limited to thoseexisting as of the Closing Date or the date of the relevant acquisition) as theAdministrative Agent may reasonably request with respect to any such MortgagedProperty.

 

Theforegoing definition shall not require the creation or perfection of pledges ofor security interests in, or the obtaining of title insurance or surveys withrespect to, particular assets if and for so long as, in the reasonable judgmentof the Administrative Agent and the Company, the economic detriment to the LoanParties of granting or perfecting such pledges or security interests or thecost of creating or perfecting such pledges or security interests in suchassets or obtaining title insurance or surveys in respect of such assets shallbe excessive in view of the benefits to be obtained by the Lenderstherefrom.  The Administrative Agent maygrant extensions of time for the perfection of security interests in or theobtaining of title insurance with respect to particular assets (includingextensions beyond the Closing Date for the perfection of security interests inthe assets of the Loan Parties on such date) where it reasonably determines, inconsultation with the Company, that perfection cannot be accomplished withoutundue effort or expense by the time or times at which it would otherwise berequired by this Agreement or the Collateral Documents.

 

Notwithstandingthe foregoing provisions of this definition or anything in this Agreement orany other Loan Document to the contrary, Liens required to be granted from timeto time pursuant to the Collateral and Guarantee Requirement shall be subjectto exceptions and limitations set forth in the Collateral Documents as ineffect on the Closing Date and, to the extent appropriate in the applicablejurisdiction, as agreed between the Administrative Agent and the Company.

 

11

----

 

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

 

“**Commitment**” means a U.S. Term Commitment, aEuro Term Commitment or a Revolving Credit Commitment, as the context mayrequire.

 

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

 

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

 

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

 

“**Compensation Period**” has the meaningspecified in Section 2.12(c)(ii).

 

“**Compliance Certificate**” means a certificatesubstantially in the form of Exhibit D.

 

“**Confidential Information Memorandum**” meansthe Confidential Information Memorandum dated February 2007, as modifiedor supplemented prior to the Closing Date.

 

“**Consent Solicitation**” means a consentsolicitation with respect to the Existing Notes.

 

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

 

(a)  without duplication and to the extent already deducted (andnot added back) in arriving at such Consolidated Net Income, the sum of thefollowing amounts for such period:

 

(i)  total interest expense and, to the extentnot reflected in such total interest expense, any losses on hedging obligationsor other derivative instruments entered into for the purpose of hedginginterest rate risk, net of interest income and gains on such hedgingobligations, and costs of surety bonds in connection with financing activities,

 

(ii)  taxes and provision for taxes, includingtaxes based on income, profits or capital of the Company and the RestrictedSubsidiaries and state, franchise and similar taxes and foreign withholdingtaxes paid or accrued during such period,

 

12

----

 

(iii)  depreciation and amortization,

 

(iv)  Non-Cash Charges,

 

(v)  extraordinary losses and unusual or non-recurringcharges,

 

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

 

(vii) any deductions consisting of subsidiaryincome attributable to minority interests in a Subsidiary, except to the extentactually paid to a holder of Equity Interests in such Subsidiary (or anydesignee of such Person) other than the Company and its Subsidiaries (with suchpayments to be deducted in the period made),

 

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

 

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

 

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

 

(xi)  expensesresulting from liability or casualty events,

 

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

 

13

----

 

casemay be, (C) no cost savings shall be added pursuant to thisclause (xii) to the extent duplicative of any expenses or charges relatingto such cost savings that are included in clause (vi) above withrespect to such period and (D) the aggregate amount of cost savings addedpursuant to this clause (xii) shall not exceed $105,000,000 (for any such costsavings related to the Acquisitions in the aggregate) or $75,000,000 (for anysuch cost savings related to other specified actions in the aggregate) for anyperiod consisting of four consecutive quarters,

 

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

 

(xiv)  withregard to any period ending prior to July 1, 2008, the nonrecurringmanagement adjustments during the four-quarter period ending on the last day ofsuch period described in Schedule 1.01C to the extent occurring during suchperiod, and

 

(xv)  non-cashcharges pursuant to SFAS 158, *less*

 

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

 

(i)  extraordinary gains and unusual ornon-recurring gains,

 

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

 

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

 

(iv)  any net after-tax income from the earlyextinguishment of Indebtedness or hedging obligations or other derivativeinstruments, and

 

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

 

ineach case, as determined on a consolidated basis for the Company and theRestricted Subsidiaries in accordance with GAAP; *provided* that, to the extent included in Consolidated NetIncome,

 

(i)  there shall be excluded in determiningConsolidated EBITDA currency translation gains and losses related to currencyremeasurements of Indebtedness (including the net loss or gain resulting fromSwap Contracts for currency exchange risk),

 

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

 

14

----

 

(iii)  for purposes of determining the TotalLeverage Ratio only, (A) there shall be included in determiningConsolidated EBITDA for any period, without duplication, the Acquired EBITDA ofany Person, property, business or asset acquired by the Company or anyRestricted Subsidiary during such period (but not the Acquired EBITDA of anyrelated Person, property, business or assets to the extent not so acquired), tothe extent not subsequently sold, transferred or otherwise disposed by theCompany or such Restricted Subsidiary (each such Person, property, business orasset acquired and not subsequently so disposed of, an “**Acquired Entity or Business**”), based on theactual Acquired EBITDA of such Acquired Entity or Business for such period(including the portion thereof occurring prior to such acquisition), (B) thereshall be included in determining Consolidated EBITDA for any period, withoutduplication, an adjustment in respect of each Acquired Entity or Business equalto the amount of the Pro Forma Adjustment with respect to such Acquired Entityor Business for such period (including the portion thereof occurring prior tosuch acquisition) as reasonably determined by the Company in good faith andspecified in a certificate executed by a Responsible Officer and delivered tothe Administrative Agent, and (C) there shall be excluded in determiningConsolidated EBITDA for any period the Disposed EBITDA of any Person, property,business or asset sold, transferred or otherwise disposed of, closed orclassified as discontinued operations by the Company or any RestrictedSubsidiary during such period (each such Person, property, business or asset sosold or disposed of, a “**Sold Entity orBusiness**”), based on the actual Disposed EBITDA of such Sold Entityor Business for such period (including the portion thereof occurring prior tosuch sale, transfer or disposition).

 

Forthe purpose of the definition of Consolidated EBITDA, “**Non-Cash Charges**” means (a) non-cashlosses on asset sales, disposals or abandonments (other than of currentassets), (b) any impairment charge or asset write-off related tointangible assets, long-lived assets, and investments in debt and equitysecurities pursuant to GAAP, (c) all losses from investments recordedusing the equity method, (d) stock-based awards compensation expense, and (e) othernon-cash charges (*provided* thatif any non-cash charges referred to in this clause (e) represent anaccrual or reserve for potential cash items in any future period, the cashpayment in respect thereof in such future period shall be subtracted fromConsolidated EBITDA in such future period to such extent, and excludingnon-cash charges consisting of amortization of a prepaid cash item that waspaid in a prior period).  Notwithstandingthe foregoing, Consolidated EBITDA for the fiscal quarters ending March 31,2006, June 30, 2006, September 30, 2006, December 31, 2006 and March 31,2007 shall be deemed to be $38,000,000, $78,000,000, $0, $154,000,000 and$50,000,000, respectively.

 

“**Consolidated Net Income**” means, for anyperiod, the net income (loss) of the Company and the Restricted Subsidiariesfor such period determined on a consolidated basis in accordance with GAAP,excluding, without duplication, (a) extraordinary items for such period, (b) thecumulative effect of a change in accounting principles during such period tothe extent included in Consolidated Net Income, (c) any TransactionExpenses, (d) any fees and expenses incurred during such period, or anyamortization thereof for such period, in connection with the consummation ofany Permitted Acquisition, investment, asset disposition, issuance or repaymentof debt, issuance of equity securities, refinancing transaction or amendment orother modification of any debt instrument (in each case, including any suchtransaction consummated prior to the Closing Date and any such transactionundertaken but not completed) and any charges or non-recurring merger costsincurred during such period as a result of any such transaction, (e) any

 

15

----

 

income (loss) for such period attributable tothe early extinguishment of Indebtedness, (f) accruals and reserves thatare established within twelve months after the Closing Date that are sorequired to be established as a result of the Transaction in accordance withGAAP, (g) the income (loss) of any Unrestricted Subsidiary, provided thatConsolidated Net Income shall be increased by the amount of dividends or otherdistributions actually paid or made to the Company or one of the RestrictedSubsidiaries by such Unrestricted Subsidiary during such period in respect ofthe income earned by such Unrestricted Subsidiary in such period or in anyprior period (to the extent not previously included in Consolidated NetIncome), (h) the income (or deficit) of any Person accrued prior to thedate it becomes a Subsidiary of Holdings or is merged into or consolidated withHoldings or any of its Subsidiaries and (i) the income (or deficit) of anyPerson (other than a Subsidiary of the Company) in which the Company or any ofits Subsidiaries has an ownership interest, except to the extent that any suchincome is actually received by (or such deficit is actually distributed to) theCompany or such Subsidiary in the form of dividends or similardistributions.  There shall be excludedfrom Consolidated Net Income (i) for any period, at the option of theCompany or the Required Lenders (without prejudice to the application of theproviso set forth in the definition of “GAAP”), the effects of any change bythe Company in its accounting policies, accounting treatment for any matter orapplication of GAAP, (ii) for any period, the purchase accounting effectsof adjustments to property, inventory and equipment, pension andpost-retirement employee benefit plan (including health plan) assets andliabilities, software and other intangible assets and deferred revenue anddeferred expenses in component amounts required or permitted by GAAP andrelated authoritativepronouncements (including the effects of suchadjustments pushed down to Holdings, the Company and the RestrictedSubsidiaries), as a result of the Transaction, any acquisition consummatedprior to the Closing Date, any Permitted Acquisitions, or the amortization orwrite-off of any amounts thereof, (iii) for any period, any gains orlosses resulting from any reappraisal, revaluation or write-up or write-down ofassets acquired pursuant to the Acquisitions to the extent such reappraisal,revaluation, write-up or write-down is made during the period beginning on theClosing Date and ending on the date 18 months after the Closing Date, and (iv) forany period, any gains or losses resulting from any reappraisal, revaluation orwrite-up or write-down of assets acquired pursuant to a Permitted Acquisitionto the extent such reappraisal, revaluation, write-up or write-down is madeduring the period beginning on the date that such Permitted Acquisition isconsummated and ending on the date six months after such date.

 

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

 

“**Consolidated Working Capital**” means, at anydate, the excess of (a) the sum of all amounts (other than cash and CashEquivalents) that would, in conformity with GAAP, be set forth opposite thecaption “total current assets” (or any like caption) on a consolidated balancesheet of the Company and the Restricted Subsidiaries at such date, butexcluding the current portion of current and deferred income tax assets, over (b) thesum of all amounts that would, in conformity with GAAP, be set forth oppositethe caption “total current liabilities” (or any like caption) on a consolidatedbalance sheet of the Company and the Restricted Subsidiaries on such date,excluding, without duplication, (i) the current portion of any FundedDebt, (ii) all

 

16

----

 

Indebtednessconsisting of Loans and L/C Obligations to the extent otherwise includedtherein, (iii) the current portion of interest, (iv) the currentportion of current and deferred income taxes and (v) the current portionof deferred revenue.  There shall also beexcluded from Consolidated Working Capital to the extent otherwise includedtherein (i) at the option of the Company or the Required Lenders (withoutprejudice to the application of the proviso set forth in the definition of“GAAP”), the effects of any change by the Company in its accounting policies,accounting treatment for any matter or application of GAAP, (ii) thepurchase accounting effects of adjustments to property, inventory andequipment, pension and post-retirement employee benefit plan (including healthplan) assets and liabilities, software and other intangible assets and deferredrevenue and deferred expenses in component amounts required or permitted byGAAP and related authoritative pronouncements (including the effects of such adjustmentspushed down to Holdings, the Company and the Restricted Subsidiaries), as aresult of the Transaction, any acquisition consummated prior to the ClosingDate, any Permitted Acquisitions, or the amortization or write-off of anyamounts thereof, (iii) for any period, any gains or losses resulting fromany reappraisal, revaluation or write-up or write-down of assets acquiredpursuant to the Acquisitions to the extent such reappraisal, revaluation,write-up or write-down is made during the period beginning on the Closing Dateand ending on the date 18 months after the Closing Date, and (iv) for anyperiod, any gains or losses resulting from any reappraisal, revaluation orwrite-up or write-down of assets acquired pursuant to a Permitted Acquisitionto the extent such reappraisal, revaluation, write-up or write-down is madeduring the period beginning on the date that such Permitted Acquisition isconsummated and ending on the date six months after such date.

 

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

 

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

 

“**Contract Consideration**” has the meaning setforth in the definition of “Excess Cash Flow”.

 

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

 

“**Control**” has the meaning specified in thedefinition of “Affiliate.”

 

“**Co-Syndication Agents**” means Citicorp NorthAmerica, Inc. and Merrill Lynch, Pierce, Fenner & SmithIncorporated, as Co-Syndication Agents under this Agreement.

 

“**Credit Extension**” means each of thefollowing:  (a) a Borrowing and (b) anL/C Credit Extension.

 

“**Cumulative Excess Cash Flow**” means the sumof Excess Cash Flow (but not less than zero in any period) for the fiscal yearending on June 30, 2008 and Excess Cash Flow for each succeeding andcompleted fiscal year.

 

17

----

 

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

 

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

 

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

 

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

 

“**Decrees**” has the meaning specified in Section 10.24.

 

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

 

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

 

“**Defaulting Lender**” means any Lender that (a) hasfailed to fund any portion of the U.S. Term Loans, Euro Term Loans, RevolvingCredit Loans, participations in L/C Obligations or participations in Swing LineLoans required to be funded by it hereunder within one (1) Business Day ofthe date required to be funded by it hereunder, unless subsequently cured, (b) hasotherwise failed to pay over to the Administrative Agent or any other Lenderany other amount required to be paid by it hereunder within one (1) BusinessDay of the date when due, unless subsequently cured, or (c) has beendeemed insolvent or become the subject of a bankruptcy or insolvencyproceeding.

 

“**Defeasance**” means a covenant defeasance inrespect of the Existing Notes pursuant to Article VIII of the ExistingNote Indenture, including the placement of sufficient funds in escrow with thetrustee under the Existing Note Indenture and consummation of all other actionsnecessary to satisfy the provisions of such Article.

 

“**Designated Obligations**” means allobligations of the Borrowers with respect to (a) principal of and intereston the Loans, (b) Unreimbursed Amounts and interest thereon and (c) accruedand unpaid fees under the Loan Documents.

 

“**DH Acquisition**” has the meaning set forthin the preliminary statements to this Agreement.

 

“**DH Acquisition Agreement**” means the StockAcquisition Agreement, dated as of January 23, 2007, among Direct HoldingsU.S. Corp., RDA Holding Co. and each of the members of Direct HoldingsWorldwide L.L.C.

 

18

----

 

“**Direct Holdings**” has the meaning set forthin the preliminary statements to this Agreement.

 

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

 

“**Disposition**” or “**Dispose**” means the sale, transfer, license, lease or otherdisposition (including any sale and leaseback transaction and any sale ofEquity Interests held in another Person) of any property by any Person,including any sale, assignment, transfer or other disposal, with or withoutrecourse, of any notes or accounts receivable or any rights and claimsassociated therewith; *provided*that “Disposition” and “Dispose” shall not be deemed to include any issuance bya Person of any of its Equity Interests to another Person.

 

“**Disqualified Equity Interests**” means anyEquity Interest (other than the Company Preferred Stock) which, by its terms(or by the terms of any security or other Equity Interests into which it isconvertible or for which it is exchangeable), or upon the happening of anyevent or condition (a) matures or is mandatorily redeemable (other thansolely for Qualified Equity Interests), pursuant to a sinking fund obligationor otherwise (except as a result of a change of control, public equity offeringor asset sale so long as any rights of the holders thereof upon the occurrenceof a change of control, public equity offering or asset sale event shall besubject to the prior repayment in full of the Loans and all other Obligationsthat are accrued and payable and the termination of the Commitments and theexpiration, cancellation, termination or cash collateralization of any Lettersof Credit in accordance with the terms hereof), (b) is redeemable at theoption of the holder thereof (other than solely for Qualified EquityInterests), in whole or in part, (c) requires the scheduled payments ofdividends in cash, or (d) is or becomes convertible into or exchangeablefor Indebtedness or any other Equity Interests that would constituteDisqualified Equity Interests, in each case, prior to the date that is 91 daysafter the Maturity Date of the Term Loans.

 

“**Documentation Agent**” means The Royal Bankof Scotland plc, as Documentation Agent under this Agreement.

 

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

 

“**Dollar Amount**” means, at any time:

 

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

######  

###### (b) with respect to any Alternative Currency Loan, the principal amount thereofthen outstanding in the relevant Alternative Currency, converted to Dollars inaccordance with Section 1.08.

######  

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

 

19

----

 

“**ECF Percentage**” means 50%; providedthat with respect to each fiscal year of the Company, the ECF Percentage shallbe 25% in respect of such fiscal year if the Total Leverage Ratio as of thelast day of such fiscal year is less than or equal to 6.00:1.00 but greaterthan 5.00:1.00; and providedfurther that the ECF Percentageshall be 0% in respect of such fiscal year if the Total Leverage Ratio as ofthe last day of such fiscal year is less than or equal to 5.00:1.00.

 

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

 

“**EMU**” means the economic and monetary unionin accordance with the Treaty of Rome 1957, as amended by the Single EuropeanAct 1986, the Maastricht Treaty of 1992 and the Amsterdam Treaty of 1998.

 

“**EMU Legislation**” means the legislativemeasures of the European Council for the introduction of, changeover to oroperation of a single or unified European currency.

 

“**Environmental Laws**” means any and all Lawsrelating to pollution, the protection of the environment, natural resources,or, to the extent relating to exposure to Hazardous Materials, human health orto the release of any Hazardous Materials into the environment, including thoserelated to air emissions and discharges to public water or waste treatmentsystems.

 

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

 

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

 

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

 

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

 

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

 

20

----

 

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

 

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

 

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

 

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

 

“**Eurocurrency Rate**” means, for any InterestPeriod with respect to any Eurocurrency Rate Loan:

 

###### (a) the rate per annum equal to the rate determined by the Administrative Agent tobe the offered rate that appears on the page of the Dow Jones Marketscreen (or any successor thereto) that displays an average British BankersAssociation Interest Settlement Rate for deposits in Dollars or the relevant AlternativeCurrency (for delivery on the first day of such Interest Period) with a termequivalent to such Interest Period, determined as of approximately 11:00 a.m.(London time) two (2) Business Days prior to the first day of suchInterest Period, or, if different, the date on which quotations wouldcustomarily be provided by leading banks in the London Interbank Market fordeposits of amounts in the relevant currency for delivery on the first day ofsuch Interest Period, or

######  

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

######  

21

----

 

###### ofsuch Interest Period, or, if different, the date on which quotations wouldcustomarily be provided by leading banks in the London Interbank Market fordeposits of amounts in the relevant currency for delivery on the first day ofsuch Interest Period, or

######  

###### (c) if the rates referenced in the preceding clauses (a) and (b) are notavailable, the rate per annum determined by the Administrative Agent as therate of interest at which deposits in Dollars or the relevant AlternativeCurrency for delivery on the first day of such Interest Period in Same DayFunds in the approximate amount of the Eurocurrency Rate Loan being made, continuedor converted by JPMorgan Chase Bank and with a term equivalent to such InterestPeriod would be offered by JPMorgan Chase Bank’s London Branch to major banksin the London interbank eurodollar market at their request at approximately11:00 a.m. (London time) two (2) Business Days prior to the first dayof such Interest Period or, if different, the date on which quotations wouldcustomarily be provided by leading banks in the London Interbank Market fordeposits of amounts in the relevant currency for delivery on the first day ofsuch Interest Period.

######  

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

 

“**Euro Refinanced Term Loans**” has the meaningspecified in Section 10.01.

 

“**Euro Replacement Term Loans**” has themeaning specified in Section 10.01.

 

“**Euro Term Commitment**” means, as to eachEuro Term Lender, its obligation to make a Euro Term Loan to the GermanBorrower pursuant to Section 2.01(c) in an aggregate Dollar Amountnot to exceed the amount set forth opposite such Lender’s name on Schedule 2.01under the caption “Euro Term Commitment” or in the Assignment and Assumptionpursuant to which such Euro Term Lender becomes a party hereto, as applicable,as such amount may be adjusted from time to time in accordance with thisAgreement.  The initial aggregate amountof the Euro Term Commitments is $100,000,000.

 

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

 

“**Euro Term Loan**” means a Loan made pursuantto Section 2.01(c).

 

“**Euro****TermNote**” means a promissory note of the German Borrower payable to anyEuro Term Lender, in substantially the form of Exhibit C-3 hereto, evidencingthe aggregate Indebtedness of the German Borrower to such Euro Term Lenderresulting from the Euro Term Loans made by such Euro Term Lender.

 

“**Event of Default**” has the meaning specifiedin Section 8.01.

 

“**Excess Cash Flow**” means, for any period, anamount equal to:

 

(a) thesum, without duplication, of:

 

(i) Consolidated Net Income for such period,

 

22

----

 

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

 

(iii) an amount equal to the aggregate netnon-cash loss on Dispositions by the Company and the Restricted Subsidiariesduring such period to the extent deducted in arriving at such Consolidated NetIncome, and

 

(iv) decreases in Consolidated Working Capitalfor such period, and; *minus*

 

(b) thesum, without duplication among the clauses below and without duplication of anyamounts otherwise deducted in arriving at Consolidated Net Income for suchperiod, of:

 

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

 

(ii) an amount equal to the aggregate netnon-cash gain on Dispositions by the Company and the Restricted Subsidiariesduring such period to the extent included in arriving at such Consolidated NetIncome,

 

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

 

(iv) the aggregate amount of all principalpayments or prepayments of Indebtedness of the Company and the RestrictedSubsidiaries (including (A) the principal component of payments in respectof Capitalized Leases, (B) the amount of any mandatory prepayment of TermLoans pursuant to Section 2.05(b)(ii) to the extent required due to aDisposition that resulted in an increase to Consolidated Net Income and not inexcess of the amount of such increase and (C) the amount of any repaymentof Term Loans pursuant to Section 2.07(a), but excluding (X) allother prepayments of Term Loans and (Y) all prepayments of RevolvingCredit Loans and Swing Line Loans) made during such period (other than inrespect of any revolving credit facility to the extent there is not anequivalent permanent reduction in commitments thereunder), except to the extentthat such payments or prepayments were financed with the proceeds of anyissuance or sale of Equity Interests of Holdings, with the proceeds of anyother Indebtedness of Holdings, the Company or the Restricted Subsidiaries, or,to the extent not otherwise included in Consolidated Net Income, with theproceeds of any Disposition of property of or any Casualty Event with respectto property of Holdings, the Company or the Restricted Subsidiaries,

 

23

----

 

(v) increases in Consolidated Working Capitalfor such period,

 

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

 

(vii) without duplication of amounts deductedpursuant to clause (xi) below in prior fiscal years, the amount of Investmentsand Permitted Acquisitions made during such period pursuant to Section 7.02(other than Section 7.02(a)), except to the extent that such Investmentsand Permitted Acquisitions were financed with the proceeds of any issuance orsale of Equity Interests of Holdings, with the proceeds of any Indebtedness ofHoldings, the Company or the Restricted Subsidiaries, or, to the extent nototherwise included in Consolidated Net Income, with the proceeds of any Dispositionof property of or any Casualty Event with respect to property of Holdings, theCompany or the Restricted Subsidiaries,

 

(viii) the amount (without duplication) ofRestricted Payments paid by Holdings during such period pursuant to Section 7.06(g),(h)(i) or (i), except to the extent such Restricted Payments were financedwith the proceeds of any issuance or sale of Equity Interests of Holdings, withthe proceeds of any Indebtedness of Holdings, the Company or the RestrictedSubsidiaries, or, to the extent not otherwise included in Consolidated NetIncome, with the proceeds of any Disposition of property of or any CasualtyEvent with respect to property of Holdings, the Company or the RestrictedSubsidiaries,

 

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

 

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

 

(xi) without duplication of amounts deducted fromExcess Cash Flow in prior periods, the aggregate consideration required to bepaid in cash by the Company or any of the Restricted Subsidiaries pursuant tobinding contracts (the “**ContractConsideration**”) entered into prior to or during such period relatingto Permitted Acquisitions or Capital Expenditures to be consummated or madeduring the fiscal year of the Company following the end of such period, *provided* that to the extent the aggregatecash consideration paid for such Permitted Acquisitions or Capital Expendituresduring such fiscal year (other than amounts financed with the proceeds of anyissuance or sale of Equity Interests of Holdings, with the proceeds of anyIndebtedness of Holdings, the Company or the Restricted Subsidiaries, or, to theextent not otherwise included in Consolidated Net Income, with the proceeds ofany Disposition of property of or any Casualty Event with respect to propertyof Holdings, the Company or the Restricted Subsidiaries) is less than theContract Consideration, the amount of

 

24

----

 

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

 

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

 

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

 

“**Excluded Subsidiary**” means (a) anySubsidiary that is not a wholly-owned Subsidiary unless such Subsidiaryexecutes a Security Agreement Supplement, (b) each Subsidiary listed onSchedule 1.01D hereto, (c) any Foreign Subsidiary, or any other Subsidiarycreated or acquired after the date hereof, that is prohibited by applicable Lawfrom guaranteeing the Obligations (in each case unless such Subsidiarysubsequently executes a Security Agreement Supplement), (d) other thanwith respect to the Overseas Obligations to the extent required by thedefinition of “Collateral and Guarantee Requirement”, any Foreign Subsidiary,any Domestic Subsidiary that is a Subsidiary of a Foreign Subsidiary and anyDomestic Subsidiary substantially all of whose assets consist of voting EquityInterests of one or more Foreign Subsidiaries (in each case unless such Subsidiaryexecutes a Security Agreement Supplement), (e) any Restricted Subsidiaryacquired pursuant to a Permitted Acquisition financed with secured Indebtednessincurred pursuant to Section 7.03(g) and each Restricted Subsidiarythereof that guarantees such Indebtedness; *provided*that each such Restricted Subsidiary shall cease to be an Excluded Subsidiaryunder this clause (e) if such secured Indebtedness is repaid or becomesunsecured or if such Restricted Subsidiary ceases to guarantee such securedIndebtedness, as applicable, (f) any Immaterial Subsidiary and (g) anyother Subsidiary with respect to which, in the reasonable judgment of theAdministrative Agent (confirmed in writing by notice to the Company), the costor other consequences (including any adverse tax consequences) of providing aGuarantee shall be excessive in view of the benefits to be obtained by theLenders therefrom.

 

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

 

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

 

25

----

 

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

 

“**Existing Letters of Credit**” means theletters of credit set forth on Schedule 1.01I.

 

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

 

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

 

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

 

“**Federal Funds Rate**” means, for any day, therate per annum equal to the weighted average of the rates on overnight Federalfunds transactions with members of the Federal Reserve System arranged byFederal funds brokers on such day, as published by the Federal Reserve Bank onthe Business Day next succeeding such day; *provided*that (a) if such day is not a Business Day, the Federal Funds Rate forsuch day shall be such rate on such transactions on the next preceding BusinessDay as so published on the next succeeding Business Day, and (b) if nosuch rate is so published on such next succeeding Business Day, the FederalFunds Rate for such day shall be the average rate (rounded upward, ifnecessary, to a whole multiple of 1/100 of 1%) charged to JPMorgan Chase Bankon such day on such transactions as determined by the Administrative Agent.

 

“**Foreign Immaterial Subsidiary**” means anyForeign Subsidiary that is an Immaterial Subsidiary.  For the avoidance of doubt, as of the ClosingDate, none of Caribe Condor S.A. de C.V., Reader’s Digest Deutschland HoldingGmbH, The Reader’s Digest Assoc. Pty. Limited or 1302791 Alberta ULC shallconstitute a Foreign Immaterial Subsidiary.

 

“**Foreign Jurisdiction Deposit**” means adeposit or Guarantee incurred in the ordinary course of business and requiredby any Governmental Authority in a foreign jurisdiction as a condition of doingbusiness in such jurisdiction.

 

“**ForeignLender**” has the meaning specified in Section 10.15(a)(i).

 

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

 

“**Fund**” means any Person (other than anatural person) that is engaged in making, purchasing, holding or otherwiseinvesting in commercial loans and similar extensions of credit in the ordinarycourse.

 

26

----

 

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

 

“**GAAP**” means generally accepted accountingprinciples in the United States of America, as in effect from time to time; *provided*, however, that if the Companynotifies the Administrative Agent that the Company requests an amendment to anyprovision hereof to eliminate the effect of any change occurring after theClosing Date in GAAP or in the application thereof on the operation of suchprovision (or if the Administrative Agent notifies the Company that theRequired Lenders request an amendment to any provision hereof for suchpurpose), regardless of whether any such notice is given before or after suchchange in GAAP or in the application thereof, then such provision shall beinterpreted on the basis of GAAP as in effect and applied immediately beforesuch change shall have become effective until such notice shall have beenwithdrawn or such provision amended in accordance herewith.

 

“**German Borrower**” means RD German HoldingsGmbH.

 

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

 

“**Granting Lender**” has the meaning specifiedin Section 10.07(h).

 

“**Group Member**” means Holdings, the Companyand the Restricted Subsidiaries.

 

“**Guarantee**” means, as to any Person, withoutduplication, (a) any obligation, contingent or otherwise, of such Personguaranteeing or having the economic effect of guaranteeing any Indebtedness orother monetary obligation payable or performable by another Person (the“primary obligor”) in any manner, whether directly or indirectly, and includingany obligation of such Person, direct or indirect, (i) to purchase or pay(or advance or supply funds for the purchase or payment of) such Indebtednessor other monetary obligation, (ii) to purchase or lease property,securities or services for the purpose of assuring the obligee in respect ofsuch Indebtedness or monetary other obligation of the payment or performance ofsuch Indebtedness or other monetary obligation, (iii) to maintain workingcapital, equity capital or any other financial statement condition or liquidityor level of income or cash flow of the primary obligor so as to enable theprimary obligor to pay such Indebtedness or other monetary obligation, or (iv) enteredinto for the purpose of assuring in any other manner the obligee in respect ofsuch Indebtedness or other monetary obligation of the payment or performancethereof or to protect such obligee against loss in respect thereof (in whole orin part), or (b) any Lien on any assets of such Person securing any Indebtednessor other monetary obligation of any other Person, whether or not suchIndebtedness or monetary other obligation is assumed by such Person (or anyright, contingent or otherwise, of any holder of such Indebtedness to obtainany such Lien); *provided* that theterm “Guarantee” shall not include endorsements for collection or deposit, ineither case in the ordinary course of business. The amount of any Guarantee shall be deemed to be an amount equal to thestated or determinable amount of the related primary obligation, or portionthereof, in respect of which such Guarantee is made or, if not stated ordeterminable, the

 

27

----

 

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

 

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

 

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

 

“**Hazardous Materials**” means all explosive orradioactive substances or wastes and all hazardous or toxic substances, wastesor pollutants, including petroleum or petroleum distillates, asbestos orasbestos-containing materials, polychlorinated biphenyls, radon gas, infectiousor medical wastes and all other substances or wastes of any nature regulatedpursuant to any Environmental Law.

 

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

 

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

 

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

 

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

 

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

 

28

----

 

(vi) the performance of contractualobligations in existence on the date hereof and set forth on Schedule 1.01F, (vii) paymentof taxes for the benefit of or relating to Holdings, the Company and itsSubsidiaries and (viii) other activities incidental or related to theforegoing.

 

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

 

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

 

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

 

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

 

“**Incremental Amendment**” has the meaning setforth in Section 2.14(a).

 

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

 

“**Incremental Overseas Amendment**” has themeaning set forth in Section 2.14(b).

 

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

 

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

 

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

 

“**Indebtedness**” means, as to any Person at aparticular time, without duplication, all of the following, whether or notincluded as indebtedness or liabilities in accordance with GAAP:

 

29

----

 

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

 

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

 

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

 

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

 

(e)  indebtedness (excluding prepaid interest thereon) secured bya Lien on property owned or being purchased by such Person (includingindebtedness arising under conditional sales or other title retentionagreements and mortgage, industrial revenue bond, industrial development bondand similar financings), whether or not such indebtedness shall have beenassumed by such Person or is limited in recourse;

 

(f)  all Attributable Indebtedness;

 

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

 

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

 

Forall purposes hereof, the Indebtedness of any Person shall (A) include theIndebtedness of any partnership or joint venture (other than a joint venturethat is itself a corporation or limited liability company) in which such Personis a general partner or a joint venturer, except to the extent such Person’sliability for such Indebtedness is otherwise limited and only to the extentsuch Indebtedness would be included in the calculation of Consolidated TotalDebt and (B) in the case of Holdings and its Subsidiaries, exclude (i) allintercompany Indebtedness having a term not exceeding 364 days (inclusiveof any roll over or extensions of terms) and made in the ordinary of businessconsistent with past practice in connection with the cash management activitiesof Holdings and its Subsidiaries, (ii) customer deposits and advances andinterest payable thereon in the ordinary course of business in accordance withcustomary trade terms and other obligations incurred in the ordinary course ofbusiness through credit on an open account basis customarily extended to suchPerson, (iii) statutory or other legal requirements to make deposits inconnection with sweepstakes or similar contests, or surety bonds or letters ofcredit posted pursuant to such requirements and (iv) obligations underoverdraft arrangements with banks outside the United States incurred in theordinary course of business to cover working capital needs.  The amount of any net obligation under anySwap Contract on any date shall be deemed to be the Swap Termination Valuethereof as of such date.  The amount ofIndebtedness of any Person for purposes of clause (e) shall be deemed tobe equal to the lesser of (i) the aggregate unpaid amount of suchIndebtedness and (ii) the fair market value of the property encumberedthereby as determined by such Person in good faith.

 

30

----

 

“**Indemnified Liabilities**” has the meaningset forth in Section 10.05.

 

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

 

“**Information**” has the meaning specified in Section 10.08.

 

“**Intellectual Property**” has the meaning setforth in the Guarantee and Security Agreement.

 

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

 

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

 

(a)  any Interest Period that would otherwise end on a day that isnot a Business Day shall be extended to the next succeeding Business Day unlesssuch Business Day falls in another calendar month, in which case such InterestPeriod shall end on the next preceding Business Day;

 

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

 

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

 

“**Investment**” means, as to any Person, anydirect or indirect acquisition or investment by such Person, whether by meansof (a) the purchase or other acquisition of Equity Interests or debt orother securities of another Person or (b) a loan, advance or capitalcontribution to, Guarantee or assumption of Indebtedness of, or purchase orother acquisition of any other debt or equity participation or interest in,another Person, including any partnership or joint venture interest in suchother Person (excluding, in the case of Holdings and its Subsidiaries,intercompany loans, advances, or Indebtedness having a term not exceeding364 days (inclusive of any roll over or extensions of terms) and made inthe ordinary course of business consistent with past practice in connectionwith the cash management activities of Holdings and its Subsidiaries) or (c) thepurchase or other acquisition (in one transaction or a series of transactions)of all or substantially all of the property and assets or business of anotherPerson or assets constituting a business unit, line of business or division ofsuch Person.  For purposes of

 

31

----

 

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

 

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

 

“**IRS**” means the United States InternalRevenue Service.

 

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

 

“**Judgment Currency**” has the meaningspecified in Section 10.23.

 

“**Junior Financing**” has the meaning specifiedin Section 7.12.

 

“**Junior Financing Documentation**” means anydocumentation governing any Junior Financing.

 

“**Laws**” means, collectively, allinternational, foreign, Federal, state and local statutes, treaties, rules,guidelines, regulations, ordinances, codes and administrative or judicialprecedents or authorities.

 

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

 

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

 

“**L/C Credit Extension**” means, with respectto any Letter of Credit, the issuance thereof or extension of the expiry datethereof, or the renewal or increase of the amount thereof.

 

“**L/C Issuer**” means JPMorgan Chase Bank andany other Lender that becomes an L/C Issuer in accordance with Section 2.03(k) or10.07(j), in each case, in its capacity as an issuer of Letters of Credithereunder, or any successor issuer of Letters of Credit permitted hereunder.

 

“**L/C Obligations**” means, as at any date ofdetermination, the aggregate undrawn amount of all outstanding Letters ofCredit plus the aggregate of all Unreimbursed Amounts, including all L/CBorrowings.

 

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

 

32

----

 

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

 

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

 

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

 

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

 

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

 

“**Letter of Credit Sublimit**” means an amountequal to the lesser of (a) $50,000,000 and (b) the aggregate amountof the Revolving Credit Commitments.  TheLetter of Credit Sublimit is part of, and not in addition to, the RevolvingCredit Facility.

 

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

 

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

 

“**Loan Documents**” means, collectively, (i) thisAgreement, (ii) the Notes, (iii) the Collateral Documents, (iv) eachLetter of Credit Application and (v) the Continuing Agreement (ifapplicable).

 

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

 

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

 

33

----

 

“**Mandatory Cost**” means, with respect to anyperiod, the percentage rate per annum determined in accordance with Schedule1.01H.

 

“**Master Agreement**” has the meaning specifiedin the definition of “Swap Contract.”

 

“**Material Adverse Change**” means a materialadverse effect on (a) the business, financial condition or results ofoperations of Reader’s Digest and its subsidiaries, taken as a whole, (b) theability of Reader’s Digest to perform its obligations under the PurchaseAgreement or (c) the ability of Reader’s Digest to consummate theAcquisition and the other Transactions (as defined in the Purchase Agreement)to be performed or consummated by Reader’s Digest, other than any event,change, effect, development, condition or occurrence to the extent arising outof or relating to:  (i) generaleconomic conditions, (ii) conditions generally affecting industries inwhich any of Reader’s Digest or its subsidiaries operate (except, in the caseof clauses (i) and (ii) above, if the event, change, effect,development, condition or occurrence disproportionately impacts the business,financial condition or results of operations of Reader’s Digest and itssubsidiaries, taken as a whole, relative to companies operating in theindustries in which Reader’s Digest or its subsidiaries operate), (iii) thepublic announcement of the Purchase Agreement and the Acquisition, (iv) anychanges in law or interpretation thereof or (v) any changes in GAAP orinterpretation thereof.

 

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

 

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

 

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

 

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

 

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

 

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

 

“**Mortgage**” means, collectively, the deeds oftrust, trust deeds, hypothecs and mortgages made by the Loan Parties in favoror for the benefit of the Administrative Agent on behalf of the Lenderssubstantially in the form of Exhibit G (with such changes as may be customaryto account for local Law matters or as otherwise may be reasonably satisfactoryto the Administrative Agent), and any other mortgages executed and deliveredpursuant to Section 6.10.

 

“**Mortgage Policies**” has the meaningspecified in Section 6.12(b)(ii).

 

“**Mortgaged Properties**” has the meaningspecified in paragraph (g) of the definition of Collateral and GuaranteeRequirement.

 

34

----

 

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

 

“**Net Cash Proceeds**” means:

 

(a)  with respect to the Disposition of any asset by Holdings, theCompany or any Restricted Subsidiary or any Casualty Event, an amount equal to (i) thesum of cash and Cash Equivalents received in connection with such Dispositionor Casualty Event (including any cash or Cash Equivalents received by way ofdeferred payment pursuant to, or by monetization of, a note receivable orotherwise, but only as and when so received and, with respect to any CasualtyEvent, any insurance proceeds or condemnation awards in respect of suchCasualty Event actually received by or paid to or for the account of Holdings,the Company or any Restricted Subsidiary) less (ii) the sum of (A) theprincipal amount, premium or penalty, if any, interest and other amounts on anyIndebtedness that is secured by the asset subject to such Disposition orCasualty Event and that is required to be repaid (and is repaid) in connectionwith such Disposition or Casualty Event (other than Indebtedness under the LoanDocuments), (B) the out-of-pocket expenses (including attorneys’ fees,investment banking fees, accounting fees and other professional andtransactional fees, survey costs, title insurance premiums, and related searchand recording charges, transfer taxes, deed or mortgage recording taxes, othercustomary expenses and brokerage, consultant and other customary commissionsand fees) actually incurred by Holdings, the Company or such RestrictedSubsidiary in connection with such Disposition or Casualty Event, (C) taxespaid or reasonably estimated to be actually payable in connection therewith, (D) anyreserve for adjustment in accordance with GAAP in respect of (x) the saleprice of such asset or assets and (y) any liabilities associated with suchasset or assets and retained by Holdings, the Company or any RestrictedSubsidiary after such sale or other disposition thereof, including pension andother post-employment benefit liabilities and liabilities related toenvironmental matters or against any indemnification obligations associatedwith such transaction and (E) the Company’s reasonable estimate ofpayments required to be made with respect to unassumed liabilities relating tothe assets involved within one year of such Disposition or Casualty Event, andit being understood that “Net Cash Proceeds” shall include (i) any cash orCash Equivalents received upon the Disposition of any non-cash considerationreceived by Holdings, the Company or any Restricted Subsidiary in any suchDisposition, (ii) an amount equal to any reversal (without thesatisfaction of any applicable liabilities in cash in a corresponding amount)of any reserve described in clause (C) or (D) above at the time ofsuch reversal and (iii) an amount equal to any estimated liabilitiesdescribed in clause (E) above that have not been satisfied in cash withinthree hundred and sixty-five (365) days after such Disposition or CasualtyEvent; *provided* that (x) nonet cash proceeds calculated in accordance with the foregoing realized in asingle transaction or series of related transactions shall constitute Net CashProceeds unless such net cash proceeds shall exceed $5,000,000 and (y) nosuch net cash proceeds shall constitute Net Cash Proceeds under this clause (a) inany fiscal year until the aggregate amount of all such net cash proceeds insuch fiscal year shall exceed $10,000,000 (and thereafter only net cashproceeds in excess of such amount shall constitute Net Cash Proceeds under thisclause (a)); and

 

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

 

35

----

 

thesum of the cash received in connection with such incurrence or issuance less (ii) theattorneys’ fees, investment banking fees, accountants’ fees, underwriting orother discounts, commissions, costs and other out-of-pocket fees, transfer andsimilar taxes and other customary out-of-pocket expenses actually incurred byHoldings, the Company or such Restricted Subsidiary in connection with suchincurrence or issuance.

 

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

 

“**Non-Consenting Lenders**” has the meaningspecified in Section 3.07(d).

 

“**Nonrenewal Notice Date**” has the meaningspecified in Section 2.03(b)(iii).

 

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

 

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

 

“**Not Otherwise Applied**” means, withreference to any amount of Net Cash Proceeds of any transaction or event or ofExcess Cash Flow, that such amount (a) was not required to be applied toprepay the Loans pursuant to Section 2.05(b), and (b) was notpreviously applied as a Cure Amount or in determining the permissibility of atransaction under the Loan Documents where such permissibility was contingenton receipt of such amount or utilization of such amount for a specifiedpurpose.  The Company shall promptlynotify the Administrative Agent of any application of such amount ascontemplated by (b) above.

 

“**NPL**” means the National Priorities Listunder CERCLA.

 

“**Obligations**” means all (a) monetaryobligations of any Loan Party and its Subsidiaries arising under any LoanDocument, whether direct or indirect (including those acquired by assumption),absolute or contingent, due or to become due, now existing or hereafter arisingand including interest and fees that accrue after the commencement by oragainst any Loan Party or Subsidiary of any proceeding under any Debtor ReliefLaws naming such Person as the debtor in such proceeding, regardless of whethersuch interest and fees are allowed claims in such proceeding, (b) monetaryobligations of any Loan Party and its Subsidiaries arising under any SecuredHedge Agreement and (c) monetary Cash Management Obligations.  Without limiting the generality of theforegoing, the Obligations of the Loan Parties under the Loan Documents (and oftheir Subsidiaries to the extent they have obligations under the LoanDocuments) include (x) the obligation (including guarantee obligations) topay principal, interest, Letter of Credit commissions, reimbursementobligations, charges, expenses, fees, Attorney Costs, indemnities, and otheramounts payable by any Loan Party or its Subsidiaries under any Loan Documentand (y) the obligation of any Loan Party or any of its Subsidiaries toreimburse any amount in respect of any of the foregoing that any Lender, in itssole discretion, may elect to pay or advance on behalf of such Loan Party orsuch Subsidiary.

 

“**Organization Documents**” means, (a) withrespect to any corporation, the certificate or articles of incorporation andthe bylaws (or equivalent or comparable constitutive documents with respect toany non-U.S. jurisdiction); (b) with respect to any limited liabilitycompany, the certificate or articles of formation or organization and operatingagreement; and (c) with respect to any partnership, joint venture, trustor other form of business entity, the partnership, joint venture or otherapplicable agreement of formation or organization and any

 

36

----

 

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

 

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

 

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

 

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

 

“**Overseas Borrowers**” means, collectively, (a) theGerman Borrower and (b) any other Foreign Subsidiary which has borrowedIncremental Overseas Term Loans in accordance with Section 2.14(b).

 

“**Overseas Guarantees**” has the meaning setforth in the definition of “Collateral and Guarantee Requirement”.

 

“**Overseas Guarantors**” has the meaning setforth in the definition of “Collateral and Guarantee Requirement”.

 

“**Overseas Obligations**” has the meaning setforth in the definition of “Collateral and Guarantee Requirement”.

 

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

 

“**Participating Member State**” means eachstate so described in any EMU Legislation.

 

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

 

“**PBGC**” means the Pension Benefit GuarantyCorporation.

 

37

----

 

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

 

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

 

“**Perfection Certificate**” means a certificatein the form of Annex 2 to the Guarantee and Security Agreement or anyother form approved by the Administrative Agent.

 

“**Permitted Acquisition**” has the meaningspecified in Section 7.02(i).

 

“**Permitted Equity Issuance**” means any saleor issuance of any Qualified Equity Interests of Holdings to the extentpermitted hereunder or any capital contribution made to Holdings in respect ofits Qualified Equity Interests.

 

“**Permitted Holders**” means the EquityInvestors other than (i) the Management Stockholders to the extent thatthe amount of the outstanding voting stock of Holdings owned beneficially or ofrecord by such Management Stockholders in the aggregate at any time exceeds tenpercent (10%) of the total amount of the outstanding voting stock of Holdingsat such time and (ii) Goldentree Asset Management, LP, GSO CapitalPartners LP and Magnetar Financial LLC.

 

“**Permitted Holdings Distributions**” meanspayments, dividends or distributions by the Company to Holdings in order to payHoldings Operating Expenses.

 

“**Permitted Refinancing**” means, with respectto any Person, any modification, refinancing, refunding, renewal or extensionof any Indebtedness of such Person; *provided*that (a) the principal amount (or accreted value, if applicable) thereofdoes not exceed the principal amount (or accreted value, if applicable) of theIndebtedness so modified, refinanced, refunded, renewed or extended except byan amount equal to unpaid accrued interest and premium thereon plus otherreasonable amount paid, and fees and expenses reasonably incurred, inconnection with such modification, refinancing, refunding, renewal or extensionand by an amount equal to any existing commitments unutilized thereunder, (b) otherthan with respect to a Permitted Refinancing in respect of Indebtednesspermitted pursuant to Section 7.03(e), such modification, refinancing,refunding, renewal or extension has a final maturity date equal to or laterthan the earlier of (x) the final maturity date of the Indebtedness somodified, refinanced, refunded, renewed or extended and (y) the date whichis 91 days after the Maturity Date with respect to the Term Loans, (c) otherthan with respect to a Permitted Refinancing in respect of Indebtednesspermitted pursuant to Section 7.03(e), such modification, refinancing,refunding, renewal or extension has a Weighted Average Life to Maturity equalto or greater than the remaining Weighted Average Life to Maturity of, theIndebtedness being modified, refinanced, refunded, renewed or extended, (d) tothe extent such Indebtedness being modified, refinanced, refunded, renewed orextended is subordinated in right of payment to the Obligations, suchmodification, refinancing, refunding, renewal or extension is subordinated inright of payment to the Obligations on terms at least as favorable to theLenders (in the reasonable good faith determination of the Company) as thosecontained in the documentation governing the 

 

38

----

 

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

 

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

 

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

 

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

 

“**Pledged Equity**” has the meaning specifiedin the Guarantee and Security Agreement.

 

“**Post-Acquisition Period**” means, withrespect to any Permitted Acquisition, the period beginning on the date suchPermitted Acquisition is consummated and ending on the last day of the sixthfull consecutive fiscal quarter immediately following the date on which suchPermitted Acquisition is consummated.

 

“**Pro Forma Adjustment**” means, for any TestPeriod that includes all or any part of a fiscal quarter included in anyPost-Acquisition Period, with respect to the Acquired EBITDA of the applicableAcquired Entity or Business or the Consolidated EBITDA of the Company, the proforma increase or decrease in such Acquired EBITDA or such Consolidated EBITDA,as the case may be, projected by the Company in good faith as a result of (a) actionstaken during such Post-Acquisition Period for the purposes of realizingreasonably identifiable and factually supportable cost savings or (b) anyadditional costs incurred during such Post-Acquisition Period, in each case inconnection with the combination of the operations of such Acquired Entity orBusiness with the operations of the Company and the Restricted Subsidiaries; *provided* that, so long as such actions aretaken during such Post-Acquisition Period or such costs are incurred duringsuch Post-Acquisition Period, as applicable, with respect to the cost savingsrelated to such actions or such additional costs, as applicable, it may bereasonably assumed, for purposes of projecting such pro forma increase ordecrease to such Acquired EBITDA or such Consolidated EBITDA, as the case maybe, that such cost savings will be realizable during the entirety of such TestPeriod, or such additional costs, as applicable, will be incurred during theentirety of such Test Period; *providedfurther* that any such pro forma increase or decrease to suchAcquired EBITDA or such Consolidated EBITDA, as the case may be, shall bewithout duplication for cost savings or additional costs already included insuch Acquired EBITDA or such Consolidated EBITDA, as the case may be, for suchTest Period.

 

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

 

“**Pro Forma Basis**”, “**Pro Forma Compliance**” and “**Pro Forma Effect**” mean, with respect tocompliance with any test or covenant hereunder, that (A) to the extentapplicable, the Pro Forma Adjustment shall have been made and (B) allSpecified Transactions and the following transactions in connection therewithshall be deemed to have occurred as of the first

 

39

----

 

dayof the applicable period of measurement in such test or covenant:  (a) income statement items (whetherpositive or negative) attributable to the property or Person subject to suchSpecified Transaction, (i) in the case of a Disposition of all orsubstantially all Equity Interests in any Subsidiary of the Company owned bythe Company or any of its Subsidiaries or any division, product line, orfacility used for operations of the Company or any of its Subsidiaries, shallbe excluded, and (ii) in the case of a Permitted Acquisition or Investmentdescribed in the definition of “Specified Transaction”, shall be included, (b) anyretirement of Indebtedness and (c) any Indebtedness incurred or assumed bythe Company or any of the Restricted Subsidiaries in connection therewith andif such Indebtedness has a floating or formula rate, shall have an implied rateof interest for the applicable period for purposes of this definition determinedby utilizing the rate which is or would be in effect with respect to suchIndebtedness as at the relevant date of determination; *provided* that, without limiting theapplication of the Pro Forma Adjustment pursuant to clause (A) above (butwithout duplication thereof), the foregoing pro forma adjustments may beapplied to any such test or covenant solely to the extent that such adjustmentsare consistent with the definition of Consolidated EBITDA and give effect toevents (including operating expense reductions) that are (i) in thereasonable good faith determination of the Company (x) directlyattributable to such transaction and (y) factually supportable or (ii) otherwiseconsistent with the definition of Pro Forma Adjustment.

 

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

 

“**Projections**” shall have the meaning setforth in Section 6.01(c).

 

“**Purchase Agreement**” means the Agreement andPlan of Merger, dated as of November 16, 2006, among Holdings, AcquisitionCo and Reader’s Digest.

 

“**Purchase Price**” means the total fundsrequired to consummate the Acquisitions.

 

“**Qualified Equity Interests**” means anyEquity Interests that are not Disqualified Equity Interests.

 

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

 

“**Reader’s Digest**” has the meaning specifiedin the introductory paragraph to this Agreement.

 

“**Refunding Loans**” has the meaning set forthin Section 2.03(c)(i).

 

40

----

 

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

 

“**Reportable Event**” means any of the eventsset forth in Section 4043(c) of ERISA or the regulations issuedthereunder, other than events for which the thirty (30) day notice period hasbeen waived.

 

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

 

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

 

“**Responsible Officer**” means the chiefexecutive officer, president, chief financial officer, treasurer or controlleror other similar officer of a Loan Party and, as to any document delivered onthe Closing Date, any secretary or assistant secretary of a Loan Party.  Any document delivered hereunder that issigned by a Responsible Officer of a Loan Party shall be conclusively presumedto have been authorized by all necessary corporate, partnership and/or otheraction on the part of such Loan Party and such Responsible Officer shall beconclusively presumed to have acted on behalf of such Loan Party.

 

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

 

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

 

“**Revolving Commitment Increase**” has themeaning set forth in Section 2.14(a).

 

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

 

“**Revolving Credit Borrowing**” means aborrowing consisting of simultaneous Revolving Credit Loans of the same Typeand, in the case of Eurocurrency Rate Loans, having the same Interest Periodmade by each of the Revolving Credit Lenders pursuant to Section 2.01(b).

 

“**Revolving Credit Commitments**” means, as toeach Revolving Credit Lender, its obligation to (a) make Revolving CreditLoans to the Company pursuant to Section 2.01(b), (b) purchaseparticipations in L/C Obligations and (c) purchase participations in SwingLine

 

41

----

 

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

 

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

 

“**Revolving Credit Facility**” means, at anytime, the aggregate amount of the Revolving Credit Lenders’ Revolving CreditCommitments at such time.

 

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

 

“**Revolving Credit Loans**” has the meaningspecified in Section 2.01(b).

 

“**Revolving Credit Note**” means a promissorynote of the Company payable to any Revolving Credit Lender, in substantiallythe form of Exhibit C-2 hereto, evidencing the aggregate Indebtedness ofthe Company to such Revolving Credit Lender resulting from the Revolving CreditLoans made by such Revolving Credit Lender.

 

“**Rollover Amount**” has the meaning set forthin Section 7.14(b).

 

“**S&P**” means Standard & Poor’sRatings Services, a division of The McGraw-Hill Companies, Inc., and anysuccessor thereto.

 

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

 

“**SEC**” means the Securities and ExchangeCommission, or any Governmental Authority succeeding to any of its principalfunctions.

 

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

 

“**Secured Obligations**” has the meaningspecified in the Guarantee and Security Agreement.

 

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

 

42

----

 

“**Securities Act**” means the Securities Act of1933.

 

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

 

“**Senior Subordinated Note Indenture**” meansthe Indenture entered into by the Company and certain of its Subsidiaries inconnection with the issuance of the Senior Subordinated Notes, together withall instruments and other agreements entered into by the Company or suchSubsidiaries in connection therewith.

 

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

 

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

 

“**Solvent**” and “**Solvency**” mean, with respect to any Person on any date ofdetermination, that on such date (a) the fair value of the property ofsuch Person is greater than the total amount of liabilities, includingcontingent liabilities, of such Person, (b) the present fair salable valueof the assets of such Person is not less than the amount that will be requiredto pay the probable liability of such Person on its debts as they becomeabsolute and matured, (c) such Person does not intend to, and does notbelieve that it will, incur debts or liabilities beyond such Person’s abilityto pay such debts and liabilities as they become absolute and matured and (d) suchPerson is not engaged in any business, as conducted on such date and asproposed to be conducted following such date, for which such Person’s propertywould constitute an unreasonably small capital. The amount of contingent liabilities at any time shall be computed asthe amount that, in the light of all the facts and circumstances existing atsuch time, represents the amount that can reasonably be expected to become anactual or matured liability.

 

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

 

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

 

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

 

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

 

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

 

43

----

 

Lenderis subject for eurocurrency funding (currently referred to as “EurocurrencyLiabilities” in Regulation D of the Board).  Such reserve percentages shall include thoseimposed pursuant to such Regulation D. Eurocurrency Rate Loans shall be deemed to constitute eurocurrencyfunding and to be subject to such reserve requirements without benefit of orcredit for proration, exemptions or offsets that may be available from time totime to any Lender under such Regulation D or any comparableregulation.  The Statutory Reserve Rateshall be adjusted automatically on and as of the effective date of any changein any reserve percentage.

 

“**Sterling**” means the lawful currency of theUnited Kingdom.

 

“**Subsidiary**” of a Person means acorporation, partnership, joint venture, limited liability company or otherbusiness entity of which a majority of the shares of securities or otherinterests having ordinary voting power for the election of directors or othergoverning body (other than securities or interests having such power only byreason of the happening of a contingency) are at the time beneficially owneddirectly, or indirectly through one or more intermediaries, or both, by suchPerson.  Unless otherwise specified, allreferences herein to a “Subsidiary” or to “Subsidiaries” shall refer to aSubsidiary or Subsidiaries of the Company, as well as any other entity that,following the consummation of the Acquisitions, will become a Subsidiary of theCompany.

 

“**Successful Consent Solicitation**” means aConsent Solicitation that results in the receipt of consents in respect of anaggregate amount of Existing Notes necessary to modify the Existing NoteIndenture to remove any provisions thereof that would restrict or prohibit theTransactions or the entering into of the Loan Documents or the SeniorSubordinated Note Indenture.

 

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

 

“**Swap Contract**” means (a) any and allrate swap transactions, basis swaps, credit derivative transactions, forwardrate transactions, commodity swaps, commodity options, forward commoditycontracts, equity or equity index swaps or options, bond or bond price or bondindex swaps or options or forward bond or forward bond price or forward bondindex transactions, interest rate options, forward foreign exchangetransactions, cap transactions, floor transactions, collar transactions,currency swap transactions, cross-currency rate swap transactions, currencyoptions, spot contracts, or any other similar transactions or any combinationof any of the foregoing (including any options to enter into any of theforegoing), whether or not any such transaction is governed by or subject toany master agreement, and (b) any and all transactions of any kind, andthe related confirmations, which are subject to the terms and conditions of, orgoverned by, any form of master agreement published by the International Swapsand Derivatives Association, Inc., any International Foreign ExchangeMaster Agreement, or any other master agreement (any such master agreement,together with any related schedules, a “**MasterAgreement**”), including any such obligations or liabilities under anyMaster Agreement.

 

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

 

44

----

 

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

 

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

 

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

 

“**Swing Line Lender**” means JPMorgan ChaseBank, in its capacity as provider of Swing Line Loans, or any successor swingline lender hereunder.

 

“**Swing Line Loan**” has the meaning specifiedin Section 2.04(a).

 

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

 

“**Swing Line Obligations**” means, as at anydate of determination, the aggregate principal amount of all Swing Line Loansoutstanding.

 

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

 

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

 

“**Tax Confirmation**” has the meaning specifiedin Section 10.24.

 

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

 

“**Term Borrowing**” means a borrowingconsisting of simultaneous Term Loans of the same Type and currency and, in thecase of Eurocurrency Rate Loans, having the same Interest Period made by eachof the Term Lenders pursuant to Section 2.01.

 

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

 

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

 

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

 

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

 

“**Test Period”** means, for any determinationunder this Agreement, the four consecutive fiscal quarters of the Company thenlast ended.

 

45

----

 

“**Threshold Amount**” means $20,000,000.

 

“**Total Leverage Ratio**” means, with respectto any Test Period, the ratio as of the last day of such Test Period of (a) ConsolidatedTotal Debt as of the last day of such Test Period to (b) ConsolidatedEBITDA for such Test Period.

 

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

 

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

 

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

 

“**Transaction Expenses**” means any fees orexpenses incurred or paid by Holdings, the Company or any Restricted Subsidiaryin connection with the Transaction, this Agreement and the other Loan Documentsand the transactions contemplated hereby and thereby.

 

“**Type**” means, with respect to a Loandenominated in Dollars, its character as a Base Rate Loan or a EurocurrencyRate Loan.

 

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

 

“**Uniform Commercial Code**” means the UniformCommercial Code as the same may from time to time be in effect in the State ofNew York or the Uniform Commercial Code (or similar code or statute) of anotherjurisdiction, to the extent it may be required to apply to any item or items ofCollateral.

 

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

 

“**Unreimbursed Amount**” has the meaning setforth in Section 2.03(c)(i).

 

46

----

 

“**Unrestricted Subsidiary**” means (i) eachSubsidiary of the Company listed on Schedule 1.01G and (ii) any Subsidiaryof the Company designated by the board of directors of Holdings as anUnrestricted Subsidiary pursuant to Section 6.15 subsequent to the datehereof.

 

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

 

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

 

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

 

“**U.S.****RefinancedTerm Loans**” has the meaning specified in Section 10.01.

 

“**U.S.****ReplacementTerm Loans**” has the meaning specified in Section 10.01.

 

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

 

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

 

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

 

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

 

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

 

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

 

“**WRC Acquisition**” has the meaning set forthin the preliminary statements to this Agreement.

 

47

----

 

“**WRC Acquisition Agreement**” means theAgreement and Plan of Merger, dated as of January 23, 2007, among RDAHolding Co., WRC Acquisition Co. and WRC Media Inc.

 

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

 

SECTION 1.02.  Other Interpretive Provisions.  Withreference to this Agreement and each other Loan Document, unless otherwisespecified herein or in such other Loan Document:

 

###### (a)  Themeanings of defined terms are equally applicable to the singular and plural formsof the defined terms.

######  

###### (b)  (i)  Thewords “herein,” “hereto,” “hereof” and “hereunder” and words of similar importwhen used in any Loan Document shall refer to such Loan Document as a whole andnot to any particular provision thereof.

######  

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

 

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

 

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

 

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

######  

###### (d)  Section headingsherein and in the other Loan Documents are included for convenience ofreference only and shall not affect the interpretation of this Agreement or anyother Loan Document.

######  

SECTION 1.03.  Accounting Terms.  (a)  Allaccounting terms not specifically or completely defined herein shall beconstrued in conformity with, and all financial data (including financialratios and other financial calculations) required to be submitted pursuant tothis Agreement shall be prepared in conformity with, GAAP, applied in a mannerconsistent with that used in preparing the Audited Financial Statements, exceptas otherwise specifically prescribed herein.

 

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

 

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

 

48

----

 

bepermitted under this Agreement) shall be calculated by dividing the appropriatecomponent by the other component, carrying the result to one place more than thenumber of places by which such ratio is expressed herein and rounding theresult up or down to the nearest number (with a rounding-up if there is nonearest number).

 

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

 

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

 

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

 

SECTION 1.08.  Currency Equivalents Generally.  (a)  Anyamount specified in this Agreement (other than in Articles II, IX and X or asset forth in paragraph (b) of this Section) or any of the other LoanDocuments to be in Dollars shall also include the equivalent of such amount inany currency other than Dollars, such equivalent amount to be determined at therate of exchange quoted by the Reuters World Currency Page for theapplicable currency at 11:00 a.m. (London time) on such day (or, in theevent such rate does not appear on any Reuters World Currency Page, byreference to such other publicly available service for displaying exchangerates as may be agreed upon by the Administrative Agent and the Company, or, inthe absence of such agreement, such rate shall instead be the arithmeticaverage of the spot rates of exchange of the Administrative Agent in the marketwhere its foreign currency exchange operations in respect of such currency arethen being conducted, at or about 10:00 a.m. (New York City time) on suchdate for the purchase of Dollars for delivery two Business Dayslater).  Notwithstanding the foregoing,for purposes of determining compliance with Sections 7.01, 7.02 and 7.03 withrespect to any amount of Indebtedness or Investment in a currency other thanDollars, no Default shall be deemed to have occurred solely as a result ofchanges in rates of exchange occurring after the time such Indebtedness or Investmentis incurred; *provided* that, forthe avoidance of doubt, the foregoing provisions of this Section 1.08shall otherwise apply to such Sections, including with respect to determiningwhether any Indebtedness or Investment may be incurred at any time under suchSections.

 

### (b)  Forpurposes of determining compliance under Sections 7.02, 7.05, 7.06, 7.10 and7.14, any amount in a currency other than Dollars will be converted to Dollarsbased on the average Exchange Rate for such currency for the most recenttwelve-month period immediately prior to the date of determination determinedin a manner consistent with that used in calculating EBITDA for the applicableperiod, *provided, however,* thatthe foregoing shall not be deemed to apply to the determination of any amountof Indebtedness.  For purposes ofdetermining compliance with Section 7.10, (i) the Dollar Amount ofthe Euro Term Loans will be determined based on the Exchange Rate in effect onthe Closing Date, (ii) the Dollar Amount of any 

 

49

----

 

### Incremental Overseas TermLoans will be determined based on the Exchange Rate in effect on the applicableIncremental Overseas Facility Closing Date and (iii) the equivalent inDollars of any other Indebtedness denominated in a currency other than Dollarswill reflect the currency translation effects, determined in accordance withGAAP, of Swap Contracts for currency exchange risks with respect to theapplicable currency in effect on the date of determination of the Dollarequivalent of such other Indebtedness.

###  

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

###  

SECTION 1.09.  Change of Currency.  Eachprovision of this Agreement shall be subject to such reasonable changes ofconstruction as the Administrative Agent may from time to time specify with theCompany’s consent to appropriately reflect a change in currency of any countryand any relevant market conventions or practices relating to such change incurrency.

 

# **ARTICLE II**

# ** **

# **THE COMMITMENTS AND CREDIT EXTENSIONS**

#  

SECTION 2.01.  The Loans.  (a)  *The U.S. Term Borrowings*.  Subject to the terms and conditions set forthherein, each U.S. Term Lender severally agrees to make to the Company a singleloan denominated in Dollars in a Dollar Amount equal to such U.S. Term Lender’sU.S. Term Commitment on the Closing Date. Amounts borrowed under this Section 2.01(a) and repaid orprepaid may not be reborrowed.  U.S. TermLoans may be Base Rate Loans or Eurocurrency Rate Loans, as further providedherein.

 

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

###  

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

 

50

----

 

SECTION 2.02.  Borrowings, Conversions andContinuations of Loans.  (a)  Each TermBorrowing, each Revolving Credit Borrowing, each conversion of Term Loans orRevolving Credit Loans from one Type to the other, and each continuation ofEurocurrency Rate Loans shall be made upon the relevant Borrower’s notice tothe Administrative Agent, which may be given by telephone.  Each such notice must be received by theAdministrative Agent not later than (i) 12:30 p.m. (New York time orLondon time in the case of any Borrowing denominated in an AlternativeCurrency) three (3) Business Days prior to the requested date of anyBorrowing or continuation of Eurocurrency Rate Loans or any conversion of BaseRate Loans to Eurocurrency Rate Loans, and (ii) 11:00 a.m. (New Yorktime) on the requested date of any Borrowing of Base Rate Loans.  Each telephonic notice by the relevantBorrower pursuant to this Section 2.02(a) must be confirmed promptlyby delivery to the Administrative Agent of a written Committed Loan Notice,appropriately completed and signed by a Responsible Officer of suchBorrower.  Each Borrowing of, conversionto or continuation of Eurocurrency Rate Loans shall be in a principal amount of$5,000,000 or a whole multiple of $1,000,000 in excess thereof (or comparableamounts determined by the Administrative Agent in the case of AlternativeCurrency Loans).  Except as provided inSections 2.03(c) and 2.04(c), each Borrowing of or conversion to Base RateLoans shall be in a principal amount of $1,000,000 or a whole multiple of$500,000 in excess thereof.  EachCommitted Loan Notice (whether telephonic or written) shall specify (i) whetherthe relevant Borrower is requesting a Term Borrowing, a Revolving CreditBorrowing, a conversion of U.S. Term Loans or Revolving Credit Loans from oneType to the other, or a continuation of Eurocurrency Rate Loans, (ii) therequested date of the Borrowing, conversion or continuation, as the case may be(which shall be a Business Day), (iii) the principal amount of Loans to beborrowed, converted or continued, (iv) the currency in which the Loans tobe borrowed are to be denominated, (v) the Type of Loans to be borrowed orto which existing Term Loans or Revolving Credit Loans are to be converted, and(vi) if applicable, the duration of the Interest Period with respectthereto.  If with respect to Loansdenominated in Dollars the Company fails to specify a Type of Loan in aCommitted Loan Notice or fails to give a timely notice requesting a conversionor continuation, then the applicable Term Loans or Revolving Credit Loans shallbe made as, or converted to, Base Rate Loans. Any such automatic conversion to Base Rate Loans shall be effective asof the last day of the Interest Period then in effect with respect to theapplicable Eurocurrency Rate Loans.  Ifthe relevant Borrower requests a Borrowing of, conversion to, or continuationof Eurocurrency Rate Loans in any such Committed Loan Notice, but fails tospecify an Interest Period (or fails to give a timely notice requesting acontinuation of Eurocurrency Rate Loans denominated in an AlternativeCurrency), it will be deemed to have specified an Interest Period of one (1) month.

 

### (b)  Followingreceipt of a Committed Loan Notice, the Administrative Agent shall promptlynotify each Lender of the amount of its Pro Rata Share of the applicable Class ofLoans, and if no timely notice of a conversion or continuation is provided bythe Company, the Administrative Agent shall notify each Lender of the detailsof any automatic conversion to Base Rate Loans or continuation described in Section 2.02(a).  In the case of each Borrowing, eachAppropriate Lender shall make the amount of its Loan available to the AdministrativeAgent in Same Day Funds at the Administrative Agent’s Office for the applicablecurrency not later than 1:00 p.m. (New York time) on the Business Dayspecified in the applicable Committed Loan Notice.  Upon satisfaction of the applicable conditionsset forth in Section 4.02 (and, if such Borrowing is the initial CreditExtension, Section 4.01, and, if such Borrowing is made by an OverseasBorrower, Section 4.03), the Administrative Agent shall make all funds soreceived available to the relevant Borrower in like funds as received by theAdministrative Agent either by (i) crediting the account of such Borroweron the books of JPMorgan Chase Bank with the amount of such funds or (ii) wiretransfer of such funds, in each case in accordance with instructions providedto (and reasonably acceptable to) the Administrative Agent by such 

 

51

----

 

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

###  

### (c)  Exceptas otherwise provided herein, a Eurocurrency Rate Loan may be continued orconverted only on the last day of an Interest Period for such Eurocurrency RateLoan unless the Company pays the amount due, if any, under Section 3.05 inconnection therewith.

###  

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

###  

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

###  

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

###  

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

 

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

 

52

----

 

##### (A)  anyorder, judgment or decree of any Governmental Authority or arbitrator shall byits terms purport to enjoin or restrain such L/C Issuer from issuing suchLetter of Credit, or any Law applicable to such L/C Issuer or any directive(whether or not having the force of law) from any Governmental Authority withjurisdiction over such L/C Issuer shall prohibit, or direct that such L/CIssuer refrain from, the issuance of letters of credit generally or such Letterof Credit in particular; or

#####  

##### (B)  theissuance of such Letter of Credit would violate any Laws binding upon such L/CIssuer.

#####  

#### (iii)  EachLetter of Credit shall, unless otherwise agreed by the applicable L/C Issuerand subject to Section 2.03(b)(iii), expire no later than the earlier of (x) twelvemonths after the date of issuance or last renewal and (y) unless CashCollateralized prior to the Letter of Credit Expiration Date, the Letter ofCredit Expiration Date.  An L/C Issuershall be under no obligation to amend any Letter of Credit if (A) such L/CIssuer would have no obligation at such time to issue such Letter of Credit inits amended form under the terms hereof, or (B) the beneficiary of suchLetter of Credit does not accept the proposed amendment to such Letter ofCredit.

####  

### (b)  *Procedures for Issuance and Amendment of Letters ofCredit*;*Auto-Renewal Letters ofCredit*.  (i)  EachLetter of Credit shall be issued or amended, as the case may be, upon therequest of the Company delivered to an L/C Issuer (with a copy to theAdministrative Agent) in the form of a Letter of Credit Application,appropriately completed and signed by a Responsible Officer of theCompany.  Such Letter of CreditApplication must be received by the relevant L/C Issuer and the AdministrativeAgent not later than 12:30 p.m. at least three (3) Business Daysprior to the proposed issuance date or date of amendment, as the case may be;or, in each case, such later date and time as the relevant L/C Issuer mayagree in a particular instance in its sole discretion.  In the case of a request for an initialissuance of a Letter of Credit, such Letter of Credit Application shall specifyin form and detail reasonably satisfactory to the relevant L/C Issuer:  (a) the proposed issuance date of therequested Letter of Credit (which shall be a Business Day); (b) the amountthereof; (c) the expiry date thereof; (d) the name and address of thebeneficiary thereof; (e) the documents to be presented by such beneficiaryin case of any drawing thereunder; (f) the full text of any certificate tobe presented by such beneficiary in case of any drawing thereunder; and (g) suchother matters as the relevant L/C Issuer may reasonably request.  In the case of a request for an amendment ofany outstanding Letter of Credit, such Letter of Credit Application shall specifyin form and detail reasonably satisfactory to the relevant L/C Issuer (1) theLetter of Credit to be amended; (2) the proposed date of amendment thereof(which shall be a Business Day); (3) the nature of the proposed amendment;and (4) such other matters as the relevant L/C Issuer may reasonablyrequest.

###  

#### (ii)  Promptlyafter receipt of any Letter of Credit Application, the relevant L/C Issuerwill confirm with the Administrative Agent (by telephone or in writing) thatthe Administrative Agent has received a copy of such Letter of CreditApplication from the Company and, if not, such L/C Issuer will provide theAdministrative Agent with a copy thereof. Upon receipt by the relevant L/C Issuer of confirmation from theAdministrative Agent that the requested issuance or amendment is permitted inaccordance with the terms hereof, then, subject to the terms and conditionshereof, such L/C Issuer shall, on the requested date, issue a Letter of Creditfor the account of the Company or enter into the applicable amendment, as thecase may be.  Immediately upon theissuance of each Letter of Credit, each Revolving Credit Lender shall be deemedto, and hereby irrevocably and unconditionally agrees to, purchase from therelevant L/C Issuer a risk participation in such Letter of Credit in an amountequal to the product of such Lender’s Pro Rata Share times the amount of suchLetter of Credit.

 

53

----

 

#### (iii)  Ifthe Company so requests in any applicable Letter of Credit Application, therelevant L/C Issuer shall agree to issue a Letter of Credit that has automaticrenewal provisions (each, an “**Auto-RenewalLetter of Credit**”); *provided*thatany such Auto-Renewal Letter of Credit must permit the relevant L/C Issuer toprevent any such renewal at least once in each twelve month period (commencingwith the date of issuance of such Letter of Credit) by giving prior notice tothe beneficiary thereof not later than a day (the “**Nonrenewal Notice Date**”) in each such twelve month period tobe agreed upon at the time such Letter of Credit is issued.  Unless otherwise directed by the relevant L/CIssuer, the Company shall not be required to make a specific request to therelevant L/C Issuer for any such renewal. Once an Auto-Renewal Letter of Credit has been issued, the Lenders shallbe deemed to have authorized (but may not require) the relevant L/C Issuer topermit the renewal of such Letter of Credit at any time to an expiry date notlater than the Letter of Credit Expiration Date; *provided* that the relevant L/C Issuer shall not permit anysuch renewal if (A) the relevant L/C Issuer has determined that it wouldhave no obligation at such time to issue such Letter of Credit in its renewedform under the terms hereof (by reason of the provisions of Section 2.03(a)(ii) orSection 2.03(a)(iii) or otherwise), or (B) it has receivednotice (which may be by telephone or in writing) on or before the day that isfive (5) Business Days before the Nonrenewal Notice Date from theAdministrative Agent, any Revolving Credit Lender or the Company that one ormore of the applicable conditions specified in Section 4.02 is not thensatisfied.

####  

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

####  

### (c)  *Drawings and Reimbursements*;*Funding of Participations*.  (i)  Upon receipt from thebeneficiary of any Letter of Credit of any notice of a drawing under suchLetter of Credit, the relevant L/C Issuer shall notify promptly the Company andthe Administrative Agent thereof.  Notlater than 1:00 p.m. on (x) if notice that a payment is made on anydate by an L/C Issuer under a Letter of Credit is received by the Company on orbefore 11:00 a.m. (New York time), the Business Day immediately followingsuch date or (y) if notice that a payment is made on any date by an L/CIssuer under a Letter of Credit is received by the Company later than 11:00 a.m.(New York time), the second Business Day immediately following such date (eachsuch date, an “**Honor Date**”), theCompany shall reimburse such L/C Issuer through the Administrative Agent in anamount equal to the amount of such drawing. In order to reimburse any such drawing, the Company shall have theoption to request in accordance with Section 2.02 a Revolving CreditBorrowing of Base Rate Loans (“**RefundingLoans**”), without regard to the minimum and multiples specified in Section 2.02for the principal amount of Base Rate Loans but subject to the amount of theunutilized portion of the Revolving Credit Commitments of the Revolving CreditLenders and the conditions set forth in Section 4.02.  If the Company fails to so reimburse such L/CIssuer by such time, the Administrative Agent shall promptly notify eachRevolving Credit Lender of the Honor Date, the amount of the unreimburseddrawing (the “**Unreimbursed Amount**”),and the amount of such Revolving Credit Lender’s Pro Rata Share thereof.  Any notice given by an L/C Issuer or theAdministrative Agent pursuant to this Section 2.03(c)(i) may be givenby telephone if immediately confirmed in writing; *provided* that the lack of such an immediate confirmationshall not affect the conclusiveness or binding effect of such notice.

###  

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

 

54

----

 

#### Business Day specified insuch notice by the Company.  TheAdministrative Agent shall remit the funds so received to the relevant L/CIssuer.

####  

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

####  

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

####  

#### (v)  EachRevolving Credit Lender’s obligation to make Refunding Loans or L/C Advances toreimburse an L/C Issuer for amounts drawn under Letters of Credit, ascontemplated by this Section 2.03(c), shall be absolute and unconditionaland shall not be affected by any circumstance, including (A) any setoff,counterclaim, recoupment, defense or other right which such Lender may haveagainst the relevant L/C Issuer, the Company or any other Person for any reasonwhatsoever; (B) the occurrence or continuance of a Default, or (C) anyother occurrence, event or condition, whether or not similar to any of theforegoing; *provided* that eachRevolving Credit Lender’s obligation to make Refunding Loans pursuant to this Section 2.03(c) issubject to the conditions set forth in Section 4.02.  No such making of an L/C Advance shallrelieve or otherwise impair the obligation of the Company to reimburse therelevant L/C Issuer for the amount of any payment made by such L/C Issuer underany Letter of Credit, together with interest as provided herein.

####  

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

####  

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

 

55

----

 

### the Administrative Agentwill distribute to such Lender its Pro Rata Share thereof (appropriatelyadjusted, in the case of interest payments, to reflect the period of timeduring which such Lender’s L/C Advance was outstanding) in the same funds asthose received by the Administrative Agent.

###  

#### (ii)  Ifany payment received by the Administrative Agent for the account of an L/CIssuer pursuant to Section 2.03(c) is required to be returned underany of the circumstances described in Section 10.06 (including pursuant toany settlement entered into by such L/C Issuer in its discretion), eachRevolving Credit Lender shall pay to the Administrative Agent for the accountof such L/C Issuer its Pro Rata Share thereof on demand of the AdministrativeAgent, plus interest thereon from the date of such demand to the date suchamount is returned by such Lender, at a rate per annum equal to the FederalFunds Rate from time to time in effect.

####  

### (e)  *Obligations Absolute*.  The obligation of the Company to reimbursethe relevant L/C Issuer for each drawing under each Letter of Credit issued byit and to repay each L/C Borrowing shall be absolute, unconditional andirrevocable, and shall be paid strictly in accordance with the terms of thisAgreement under all circumstances, including the following:

###  

#### (i)  anylack of validity or enforceability of such Letter of Credit, this Agreement, orany other agreement or instrument relating thereto;

####  

#### (ii)  theexistence of any claim, counterclaim, setoff, defense or other right that anyLoan Party may have at any time against any beneficiary or any transferee ofsuch Letter of Credit (or any Person for whom any such beneficiary or any suchtransferee may be acting), the relevant L/C Issuer or any other Person, whetherin connection with this Agreement, the transactions contemplated hereby or bysuch Letter of Credit or any agreement or instrument relating thereto, or anyunrelated transaction;

####  

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

####  

#### (iv)  anypayment by the relevant L/C Issuer under such Letter of Credit againstpresentation of a draft or certificate that does not strictly comply with theterms of such Letter of Credit; or any payment made by the relevant L/C Issuerunder such Letter of Credit to any Person purporting to be a trustee inbankruptcy, debtor-in-possession, assignee for the benefit of creditors,liquidator, receiver or other representative of or successor to any beneficiaryor any transferee of such Letter of Credit, including any arising in connectionwith any proceeding under any Debtor Relief Law;

####  

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

####  

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

 

56

----

 

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

 

### (f)  *Role of L/C Issuers*.  Each Lender and the Company agree that, inpaying any drawing under a Letter of Credit, the relevant L/C Issuer shall nothave any responsibility to obtain any document (other than any sight draft,certificates and documents expressly required by the Letter of Credit) or toascertain or inquire as to the validity or accuracy of any such document or theauthority of the Person executing or delivering any such document.  None of the L/C Issuers, any Agent-RelatedPerson nor any of the respective correspondents, participants or assignees ofany L/C Issuer shall be liable to any Lender for (i) any action taken oromitted in connection herewith at the request or with the approval of theLenders or the Required Lenders, as applicable; (ii) any action taken oromitted in the absence of gross negligence or willful misconduct; or (iii) thedue execution, effectiveness, validity or enforceability of any document orinstrument related to any Letter of Credit or Letter of CreditApplication.  The Company hereby assumesall risks of the acts or omissions of any beneficiary or transferee withrespect to its use of any Letter of Credit; *provided*that this assumption is not intended to, and shall not, preclude the Company’spursuing such rights and remedies as it may have against the beneficiary ortransferee at law or under any other agreement. None of the L/C Issuers, any Agent-Related Person, nor any of therespective correspondents, participants or assignees of any L/C Issuer, shallbe liable or responsible for any of the matters described in clauses (i) through(vi) of Section 2.03(e); *provided*that anything in such clauses to the contrary notwithstanding, the Company mayhave a claim against an L/C Issuer, and such L/C Issuer may be liable to theCompany, to the extent, but only to the extent, of any direct, as opposed toconsequential or exemplary, damages suffered by the Company which the Companyproves were caused by such L/C Issuer’s willful misconduct or gross negligenceor such L/C Issuer’s willful or grossly negligent failure to pay under anyLetter of Credit after the presentation to it by the beneficiary of a sightdraft and certificate(s) strictly complying with the terms and conditionsof a Letter of Credit.  In furtheranceand not in limitation of the foregoing, each L/C Issuer may accept documentsthat appear on their face to be in order, without responsibility for furtherinvestigation, regardless of any notice or information to the contrary, and noL/C Issuer shall be responsible for the validity or sufficiency of anyinstrument transferring or assigning or purporting to transfer or assign aLetter of Credit or the rights or benefits thereunder or proceeds thereof, inwhole or in part, which may prove to be invalid or ineffective for any reason.

###  

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

 

57

----

 

### notice and (y) in thecase of the immediately preceding clause (iii), the Business Day on which anEvent of Default set forth under Section 8.01(f) occurs or, if suchday is not a Business Day, the Business Day immediately succeeding suchday.  For purposes hereof, “**Cash Collateralize**” means to pledge anddeposit with or deliver to the Administrative Agent, for the benefit of therelevant L/C Issuer and the Lenders, as collateral for the L/C Obligations,cash or deposit account balances (“**CashCollateral**”) pursuant to documentation in form and substancereasonably satisfactory to the Administrative Agent and the relevant L/C Issuer(which documents are hereby consented to by the Lenders).  Derivatives of such term have correspondingmeanings.  The Company hereby grants tothe Administrative Agent, for the benefit of the L/C Issuers and the Lenders, asecurity interest in all such cash, deposit accounts and all balances thereinand all proceeds of the foregoing.  CashCollateral shall be maintained in blocked accounts at JPMorgan Chase Bank andmay be invested in readily available Cash Equivalents.  If at any time the Administrative Agentdetermines that any funds held as Cash Collateral are subject to any right orclaim of any Person other than the Administrative Agent (on behalf of theSecured Parties) or that the total amount of such funds is less than 102% ofthe aggregate Outstanding Amount of all L/C Obligations, the Company will,forthwith upon demand by the Administrative Agent, pay to the AdministrativeAgent, as additional funds to be deposited and held in the deposit accounts atJPMorgan Chase Bank as aforesaid, an amount equal to the excess of (a) 102%of such aggregate Outstanding Amount over (b) the total amount of funds,if any, then held as Cash Collateral that the Administrative Agent reasonablydetermines to be free and clear of any such right and claim.  Upon the drawing of any Letter of Credit forwhich funds are on deposit as Cash Collateral, such funds shall be applied, tothe extent permitted under applicable Law, to reimburse the relevant L/C Issuer.  To the extent the amount of any CashCollateral exceeds 102% of the then Outstanding Amount of such L/C Obligationsand so long as no Event of Default has occurred and is continuing, the excessshall be refunded to the Company.  If theCompany is required to provide an amount of Cash Collateral hereunder as aresult of the occurrence of an Event of Default, such amount *plus* any accrued interest or realizedprofits with respect to such amount (to the extent not applied as aforesaid)shall be returned to the Company within two Business Days after all Events ofDefault have been cured or waived. Notwithstanding the occurrence of the Letter of Credit Expiration Date,any full or partial failure by the Company to Cash Collateralize theOutstanding Amount of any Letter of Credit in the case of clause (i) aboveshall operate to continue the several obligations of the Revolving CreditLenders to participate in such Letter of Credit (x) to the extent so notCash Collateralized and (y) to the extent any such Cash Collateral isrequired to be returned to the Company under any of the circumstances describedin Section 10.06 (including pursuant to any settlement entered into bysuch L/C Issuer in its discretion), and upon any drawing under such Letter ofCredit, such participations by the Revolving Credit Lenders in any UnreimbursedAmount shall be deemed to be L/C Borrowings and L/C Advances pursuant to this Section 2.03.

###  

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

 

58

----

 

### shall be computed and multipliedby the Applicable Rate separately for each period during such quarter that suchApplicable Rate was in effect.

###  

### (i)  *Fronting Fee and Documentary and Processing ChargesPayable to L/C Issuers.*  TheCompany shall pay directly to each L/C Issuer for its own account a frontingfee with respect to each Letter of Credit issued by it equal to 0.125% perannum of the daily maximum amount then available to be drawn under such Letterof Credit (whether or not such maximum amount is then in effect under such Letterof Credit if such maximum amount increases periodically pursuant to the termsof such Letter of Credit).  Such frontingfees shall be computed on a quarterly basis in arrears.  Such fronting fees shall be due and payableon the first Business Day after the end of each March, June, September andDecember, commencing with the first such date to occur after the issuance ofsuch Letter of Credit, on the Letter of Credit Expiration Date and thereafteron demand.  In addition, the Companyshall pay directly to each L/C Issuer for its own account the customaryissuance, presentation, amendment and other processing fees, and other standardcosts and charges, of such L/C Issuer relating to letters of credit as fromtime to time in effect.  Such customaryfees and standard costs and charges are due and payable within ten (10) BusinessDays of demand and are nonrefundable.

###  

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

###  

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

###  

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

###  

SECTION 2.04.  Swing Line Loans.  (a)  *The Swing Line*.  Subject to the terms and conditions set forthherein, the Swing Line Lender agrees to make loans (each such loan, a “**Swing Line Loan**”) to the Company from timeto time on any Business Day (other than the Closing Date) until the MaturityDate in an aggregate amount not to exceed at any time outstanding the amount ofthe Swing Line Sublimit, notwithstanding the fact that such Swing Line Loans,when aggregated with the Pro Rata Share of the Outstanding Amount of RevolvingCredit Loans and L/C Obligations of the Lender acting as Swing Line Lender, mayexceed the amount of such Lender’s Revolving Credit Commitment; *provided* that, after giving effect to anySwing Line Loan, the aggregate Outstanding Amount of the Revolving Credit Loansof any Lender, plus such Lender’s Pro Rata Share of the Outstanding Amount ofall L/C Obligations, plus such Lender’s Pro Rata Share of the OutstandingAmount of all Swing Line Loans shall not exceed such Lender’s Revolving CreditCommitment then in effect; *provided further*that, the Company shall not use the proceeds of any Swing Line Loan torefinance any outstanding Swing Line Loan. Within the foregoing limits, and subject to the other terms andconditions hereof, the Company may borrow under this Section 2.04, prepayunder Section 2.05, and reborrow under this Section 2.04.  Each Swing Line Loan shall be a Base RateLoan.  Immediately upon the making of aSwing Line Loan, each Revolving Credit Lender shall be deemed to, and herebyirrevocably and unconditionally agrees to, purchase from the Swing Line Lendera risk participation in such Swing Line Loan in an amount equal to the productof such Lender’s Pro Rata Share times the amount of such Swing Line Loan.

 

59

----

 

### (b)  *Borrowing Procedures*.  Each Swing Line Borrowing shall be made uponthe Company’s notice to the Swing Line Lender and the Administrative Agent,which may be given by telephone.  Eachsuch notice must be received by the Swing Line Lender and the AdministrativeAgent not later than 2:00 p.m. on the requested borrowing date, and shallspecify (i) the amount to be borrowed, which shall be a minimum of$250,000, and (ii) the requested borrowing date, which shall be a BusinessDay.  Each such telephonic notice must beconfirmed promptly by delivery to the Swing Line Lender and the AdministrativeAgent of a written Swing Line Loan Notice, appropriately completed and signedby a Responsible Officer of the Company. Promptly after receipt by the Swing Line Lender of any telephonic SwingLine Loan Notice, the Swing Line Lender will confirm with the AdministrativeAgent (by telephone or in writing) that the Administrative Agent has alsoreceived such Swing Line Loan Notice and, if not, the Swing Line Lender willnotify the Administrative Agent (by telephone or in writing) of the contentsthereof.  Unless (A) the making ofsuch Swing Line Loan would not be permitted pursuant to the proviso to thefirst sentence of Section 2.04(a) or (B) one or more of theapplicable conditions specified in Section 4.02 is not then satisfied,then, subject to the terms and conditions hereof, the Swing Line Lender will,not later than 4:00 p.m. on the borrowing date specified in such SwingLine Loan Notice, make the amount of its Swing Line Loan available to theCompany.

###  

### (c)  *Refinancing of Swing Line Loans*.  (i)  In order to reimburse any suchSwing Line Loans, the Company at any time may request that each RevolvingCredit Lender make a Revolving Credit Loan (which shall be a Base Rate Loan) inan amount equal to such Lender’s Pro Rata Share of the amount of Swing LineLoans then outstanding.  Such requestshall be made in accordance with the requirements of Section 2.02, withoutregard to the minimum and multiples specified therein for the principal amountof Base Rate Loans, but subject to the unutilized portion of the aggregateRevolving Credit Commitments and the conditions set forth in Section 4.02.  Each Revolving Credit Lender shall make anamount equal to its Pro Rata Share of the amount specified in such CommittedLoan Notice available to the Administrative Agent in immediately availablefunds for the account of the Swing Line Lender at the Administrative Agent’sOffice not later than 1:00 p.m. on the day specified in such CommittedLoan Notice.  The Administrative Agentshall remit the funds so received to the Swing Line Lender.

###  

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

####  

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

 

60

----

 

 

#### (iv)  EachRevolving Credit Lender’s obligation to make Revolving Credit Loans or topurchase and fund risk participations in Swing Line Loans pursuant to this Section 2.04(c) shallbe absolute and unconditional and shall not be affected by any circumstance,including (A) any setoff, counterclaim, recoupment, defense or other rightwhich such Lender may have against the Swing Line Lender, the Company or anyother Person for any reason whatsoever, (B) the occurrence or continuanceof a Default, or (C) any other occurrence, event or condition, whether ornot similar to any of the foregoing; *provided*that each Revolving Credit Lender’s obligation to make Revolving Credit Loanspursuant to this Section 2.04(c) is subject to the conditions setforth in Section 4.02.  No suchfunding of risk participations shall relieve or otherwise impair the obligationof the Company to repay Swing Line Loans, together with interest as providedherein.

####  

### (d)  *Repayment of Participations*.  (i)  At any time after anyRevolving Credit Lender has purchased and funded a risk participation in aSwing Line Loan, if the Swing Line Lender receives any payment on account ofsuch Swing Line Loan, the Swing Line Lender will distribute to such Lender itsPro Rata Share of such payment (appropriately adjusted, in the case of interestpayments, to reflect the period of time during which such Lender’s riskparticipation was funded) in the same funds as those received by the Swing LineLender.

###  

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

####  

### (e)  *Interest for Account of Swing Line Lender*.  The Swing Line Lender shall be responsiblefor invoicing the Company for interest on the Swing Line Loans.  Until each Revolving Credit Lender funds itsBase Rate Loan or risk participation pursuant to this Section 2.04 torefinance such Lender’s Pro Rata Share of any Swing Line Loan, interest inrespect of such Pro Rata Share shall be solely for the account of the SwingLine Lender.

###  

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

###  

SECTION 2.05.  Prepayments.  (a)  *Optional*. (i)  Any Borrower may, upon notice to the AdministrativeAgent, at any time or from time to time voluntarily prepay Term Loans andRevolving Credit Loans in whole or in part without premium or penalty; providedthat (1) such notice must be received by the Administrative Agent notlater than 12:30 p.m. (New York time or London time in the case of Loansdenominated in an Alternative Currency) (A) three (3) Business Daysprior to any date of prepayment of Eurocurrency Rate Loans and (B) on thedate of prepayment of Base Rate Loans; (2) any prepayment of EurocurrencyRate Loans shall be in a principal amount of $5,000,000 or a whole multiple of$1,000,000 in excess thereof (or comparable amounts determined by theAdministrative Agent in the case of Alternative Currency Loans); and (3) anyprepayment of Base Rate Loans shall be in a principal amount of $1,000,000 or awhole multiple of $500,000 in excess thereof or, in each case, if less, theentire principal amount thereof then outstanding.  Each such notice shall specify the date andamount of such prepayment and the Class(es) and Type(s) of Loans to beprepaid.  The Administrative Agent willpromptly notify each Appropriate Lender of its receipt of each such notice, andof the amount of such Lender’s Pro Rata Share of such prepayment.  If such notice is given by a Borrower, such 

 

61

----

 

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

 

#### (ii)  TheCompany may, upon notice to the Swing Line Lender (with a copy to theAdministrative Agent), at any time or from time to time, voluntarily prepaySwing Line Loans in whole or in part without premium or penalty; *provided* that (1) such notice must bereceived by the Swing Line Lender and the Administrative Agent not later than1:00 p.m. on the date of the prepayment, and (2) any such prepaymentshall be in a minimum principal amount of $250,000 or a whole multiple of$25,000 in excess thereof or, if less, the entire principal amount thereof thenoutstanding.  Each such notice shallspecify the date and amount of such prepayment. If such notice is given by the Company, the Company shall make suchprepayment and the payment amount specified in such notice shall be due andpayable on the date specified therein.

####  

#### (iii)  Notwithstandinganything to the contrary contained in this Agreement, the Company may rescindany notice of prepayment under Section 2.05(a)(i) or 2.05(a)(ii) ifsuch prepayment would have resulted from a refinancing of all or any portion ofthe Facilities, which refinancing shall not be consummated or shall otherwisebe delayed.

####  

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

###  

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

####  

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

 

62

----

 

##### permittedby Section 7.02) within (x) twelve (12) months following receipt ofsuch Net Cash Proceeds or (y) if the Company or a Restricted Subsidiaryenters into a legally binding commitment to reinvest such Net Cash Proceedswithin twelve (12) months following receipt thereof, within twelve (12) monthsfollowing the date of such commitment; *provided*that an amount equal to any such Net Cash Proceeds shall be applied within five(5) Business Days after such Net Cash Proceeds cannot be so reinvested orthe Company reasonably determines that such Net Cash Proceeds are no longerintended to be so reinvested to the prepayment of the Term Loans as set forthin this Section 2.05.

#####  

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

####  

#### (iv)  Iffor any reason the aggregate Revolving Credit Exposures at any time exceeds theaggregate Revolving Credit Commitments then in effect, the Company shallpromptly prepay or cause to be promptly prepaid Revolving Credit Loans andSwing Line Loans and/or Cash Collateralize the L/C Obligations in an aggregateamount equal to such excess; *provided*that the Company shall not be required to Cash Collateralize the L/CObligations pursuant to this Section 2.05(b)(iv) unless after theprepayment in full of the Revolving Credit Loans and Swing Line Loans suchaggregate Outstanding Amount exceeds the aggregate Revolving Credit Commitmentsthen in effect.  If the Company isrequired to provide an amount of Cash Collateral in respect of L/C Obligationspursuant to this clause (iv), such amount *plus*any accrued interest or realized profits with respect to such amount shall bereturned to the Company as and to the extent that, after giving effect to suchreturn, the Company would remain in compliance with this clause (iv) andno Event of Default shall have occurred and be continuing.

####  

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

####  

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

####  

### (c)  Allprepayments under this Section 2.05 shall be made together with, in thecase of any such prepayment of a Eurocurrency Rate Loan on a date other thanthe last day of an Interest 

 

63

----

 

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

###  

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

 

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

###  

### (c)  *Application of Commitment Reductions*;*Payment of Fees*.  The Administrative Agent will promptly notifythe Lenders of any termination or reduction of unused portions of the Letter ofCredit Sublimit, or the Swing Line Sublimit or the unused Commitments of any Class underthis Section 2.06.  Upon anyreduction of unused Commitments of any Class, the Commitment of each Lender ofsuch Class shall be reduced by such Lender’s Pro Rata Share of the amountby which such Commitments are reduced (other than the termination of theCommitment of any Lender as provided in Section 3.07).  All commitment fees accrued until theeffective date of any 

 

64

----

 

termination of the AggregateCommitments shall be paid on the effective date of such termination.

###  

SECTION 2.07.  Repayment of Loans.  (a)  *U.S. Term Loans*.  The Company shall repay to the AdministrativeAgent for the ratable account of the U.S. Term Lenders (i) on the lastBusiness Day of each March, June, September and December, commencing withthe second such date to occur after the Closing Date, an aggregate DollarAmount equal to 0.25% of the aggregate amount of all U.S. Term Loansoutstanding on the Closing Date (which payments shall be reduced as a result ofthe application of prepayments in accordance with the order of priority setforth in Section 2.05) and (ii) on the Maturity Date for the TermLoans, the aggregate principal amount of all U.S. Term Loans outstanding onsuch date.

 

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

###  

### (c)  *Revolving Credit Loans*.  The Company shall repay to the AdministrativeAgent for the ratable account of the Revolving Credit Lenders on the MaturityDate for the Revolving Credit Facility the aggregate principal amount of all ofits Revolving Credit Loans outstanding on such date.

###  

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

###  

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

 

### (b)  EachBorrower shall pay interest on past due amounts owed by it hereunder at a fluctuatinginterest rate per annum at all times equal to the Default Rate to the fullestextent permitted by applicable Laws. Accrued and unpaid interest on past due amounts (including interest onpast due interest) shall be due and payable upon demand.

###  

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

 

65

----

 

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

 

### (a)  *Commitment Fee*.  The Company shall pay to the AdministrativeAgent for the account of each Revolving Credit Lender in accordance with itsPro Rata Share, a commitment fee equal to the Applicable Rate with respect tocommitment fees times the average daily amount by which the aggregate RevolvingCredit Commitment exceeds the sum of (A) the Outstanding Amount ofRevolving Credit Loans (excluding any Swing Line Loans) and (B) theOutstanding Amount of L/C Obligations; *provided*that any commitment fee accrued with respect to any of the Commitments of aDefaulting Lender during the period prior to the time such Lender became aDefaulting Lender and unpaid at such time shall not be payable by the Companyso long as such Lender shall be a Defaulting Lender except to the extent thatsuch commitment fee shall otherwise have been due and payable by the Companyprior to such time; and *provided further*that no commitment fee shall accrue on any of the Commitments of a DefaultingLender so long as such Lender shall be a Defaulting Lender.  The commitment fee shall accrue at all timesfrom the Closing Date until the Maturity Date for the Revolving Credit Facilityor such earlier date as the Revolving Credit Commitments shall be terminated hereunder,including at any time during which one or more of the conditions in Article IVis not met, and shall be due and payable quarterly in arrears on the lastBusiness Day of each March, June, September and December, commencing withthe first such date to occur after the Closing Date, and on the Maturity Datefor the Revolving Credit Facility.  Thecommitment fee shall be calculated quarterly in arrears, and if there is anychange in the Applicable Rate during any quarter, the average daily amountshall be computed and multiplied by the Applicable Rate separately for eachperiod during such quarter that such Applicable Rate was in effect.

###  

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

###  

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

 

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

 

66

----

 

payments thereon.  Any failure to so record or any error indoing so shall not, however, limit or otherwise affect the obligation of theBorrowers hereunder to pay any amount owing with respect to theObligations.  In the event of anyconflict between the accounts and records maintained by any Lender and theaccounts and records of the Administrative Agent in respect of such matters,the accounts and records of the Administrative Agent shall control in theabsence of manifest error.  Upon therequest of any Lender made through the Administrative Agent, the Borrowersshall execute and deliver to such Lender (through the Administrative Agent) aNote payable to such Lender, which shall evidence such Lender’s Loans inaddition to such accounts or records. Each Lender may attach schedules to its Note and endorse thereon thedate, Type (if applicable), amount and maturity of its Loans and payments with respectthereto.

 

### (b)  Inaddition to the accounts and records referred to in Section 2.11(a), eachLender and the Administrative Agent shall maintain in accordance with its usualpractice accounts or records and, in the case of the Administrative Agent,entries in the Register, evidencing the purchases and sales by such Lender ofparticipations in Letters of Credit and Swing Line Loans.  In the event of any conflict between theaccounts and records maintained by the Administrative Agent and the accounts andrecords of any Lender in respect of such matters, the accounts and records ofthe Administrative Agent shall control in the absence of manifest error.

###  

### (c)  Entriesmade in good faith by the Administrative Agent in the Register pursuant toSections 2.11(a) and (b), and by each Lender in its account or accountspursuant to Sections 2.11(a) and (b), shall be *prima facie* evidence of the amount of principal and interestdue and payable or to become due and payable from the Borrowers to, in the caseof the Register, each Lender and, in the case of such account or accounts, suchLender, under this Agreement and the other Loan Documents, absent manifesterror; *provided* that the failureof the Administrative Agent or such Lender to make an entry, or any findingthat an entry is incorrect, in the Register or such account or accounts shallnot limit or otherwise affect the obligations of the Borrowers under thisAgreement and the other Loan Documents.

###  

SECTION 2.12.  Payments Generally.  (a)  Allpayments to be made by the Borrowers shall be made without condition ordeduction for any counterclaim, defense, recoupment or setoff.  Except as otherwise expressly providedherein, all payments by the Company hereunder shall be made to theAdministrative Agent, for the account of the respective Lenders to which suchpayment is owed, at the applicable Administrative Agent’s Office in Dollars andin Same Day Funds not later than 2:00 p.m. on the date specifiedherein.  Except as otherwise expresslyprovided herein, all payments by the Borrowers hereunder with respect toprincipal and interest on Loans denominated in an Alternative Currency shall bemade to the Administrative Agent, for the account of the respective Lenders towhich such payment is owed, at the applicable Administrative Agent’s Office insuch Alternative Currency and in Same Day Funds not later than 2:00 p.m.(London time) on the dates specified herein. If, for any reason, any Borrower is prohibited by any Law from makingany required payment hereunder in an Alternative Currency, such Borrower shallmake such payment in Dollars in the Dollar Amount of the Alternative Currencypayment amount.  The Administrative Agentwill promptly distribute to each Lender its Pro Rata Share (or other applicableshare as provided herein) of such payment in like funds as received by wiretransfer to such Lender’s Lending Office. All payments received by the Administrative Agent (i) after 2:00 p.m.,in the case of payments in Dollars, or (ii) after 2:00 p.m. (Londontime) in the case of payments in an Alternative Currency, shall in each case bedeemed received on the next succeeding Business Day and any applicable interestor fee shall continue to accrue.

 

67

----

 

### (b)  Ifany payment to be made by any Borrower shall come due on a day other than aBusiness Day, payment shall be made on the next following Business Day, andsuch extension of time shall be reflected in computing interest or fees, as thecase may be; *provided* that, ifsuch extension would cause payment of interest on or principal of EurocurrencyRate Loans to be made in the next succeeding calendar month, such payment shallbe made on the immediately preceding Business Day.

###  

### (c)  Unlessany Borrower or any Lender has notified the Administrative Agent, prior to thetime any payment is required to be made by it to the Administrative Agenthereunder, that such Borrower or such Lender, as the case may be, will not makesuch payment, the Administrative Agent may assume that such Borrower or suchLender, as the case may be, has timely made such payment and may (but shall notbe so required to), in reliance thereon, make available a corresponding amountto the Person entitled thereto.  If andto the extent that such payment was not in fact made to the AdministrativeAgent in Same Day Funds, then:

###  

#### (i)  ifany Borrower failed to make such payment, each Lender shall forthwith on demandrepay to the Administrative Agent the portion of such assumed payment that wasmade available to such Lender in Same Day Funds, together with interest thereonin respect of each day from and including the date such amount was madeavailable by the Administrative Agent to such Lender to the date such amount isrepaid to the Administrative Agent in Same Day Funds at the applicableOvernight Rate from time to time in effect; and

####  

#### (ii)  ifany Lender failed to make such payment, such Lender shall forthwith on demandpay to the Administrative Agent the amount thereof in Same Day Funds, togetherwith interest thereon for the period from the date such amount was madeavailable by the Administrative Agent to the relevant Borrower to the date suchamount is recovered by the Administrative Agent (the “**Compensation Period**”) at a rate per annumequal to the applicable Overnight Rate from time to time in effect.  When such Lender makes payment to theAdministrative Agent (together with all accrued interest thereon), then suchpayment amount (excluding the amount of any interest which may have accrued andbeen paid in respect of such late payment) shall constitute such Lender’s Loanincluded in the applicable Borrowing.  Ifsuch Lender does not pay such amount forthwith upon the Administrative Agent’sdemand therefor, the Administrative Agent may make a demand therefor upon the relevantBorrower, and the relevant Borrower shall pay such amount to the AdministrativeAgent, together with interest thereon for the Compensation Period at a rate perannum equal to the rate of interest applicable to the applicableBorrowing.  Nothing herein shall bedeemed to relieve any Lender from its obligation to fulfill its Commitment orto prejudice any rights which the Administrative Agent or any Borrower may haveagainst any Lender as a result of any default by such Lender hereunder.

 

Anotice of the Administrative Agent to any Lender or the relevant Borrower withrespect to any amount owing under this Section 2.12(c) shall beconclusive, absent manifest error.

 

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

 

68

----

 

### (e)  Theobligations of the Lenders hereunder to make Loans and to fund participationsin Letters of Credit and Swing Line Loans are several and not joint.  The failure of any Lender to make any Loan orto fund any such participation on any date required hereunder shall not relieveany other Lender of its corresponding obligation to do so on such date, and noLender shall be responsible for the failure of any other Lender to so make itsLoan or purchase its participation.

###  

### (f)  Nothingherein shall be deemed to obligate any Lender to obtain the funds for any Loanin any particular place or manner or to constitute a representation by anyLender that it has obtained or will obtain the funds for any Loan in anyparticular place or manner.

###  

### (g)  Wheneverany payment received by the Administrative Agent under this Agreement or any ofthe other Loan Documents is insufficient to pay in full all amounts due andpayable to the Administrative Agent and the Lenders under or in respect of thisAgreement and the other Loan Documents on any date, such payment shall be distributedby the Administrative Agent and applied by the Administrative Agent and theLenders in the order of priority set forth in Section 8.04.  If the Administrative Agent receives fundsfor application to the Obligations of the Loan Parties under or in respect ofthe Loan Documents under circumstances for which the Loan Documents do notspecify the manner in which such funds are to be applied, the AdministrativeAgent may, but at the direction of Required Lenders shall, elect to distributesuch funds to each of the Lenders in accordance with such Lender’s Pro RataShare of the sum of (a) the Outstanding Amount of all Loans outstanding atsuch time and (b) the Outstanding Amount of all L/C Obligationsoutstanding at such time, in repayment or prepayment of such of the outstandingLoans or other Obligations then owing to such Lender.

###  

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

 

69

----

 

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

 

SECTION 2.14.  Incremental Credit Extensions.  (a)  TheCompany may at any time or from time to time after the Closing Date, by noticeto the Administrative Agent (whereupon the Administrative Agent shall promptlydeliver a copy to each of the Lenders), request (a) one or more additionaltranches of term loans denominated in Dollars (the “**Incremental U.S. Term Loans**”) or (b) one or moreincreases in the amount of the Revolving Credit Commitments on the same termsand conditions as are then applicable to the Revolving Credit Commitments (eachsuch increase, a “**Revolving CommitmentIncrease**”); *provided*that (i) both at the time of any such request and upon the effectivenessof any Incremental U.S. Amendment referred to below, no Default or Event ofDefault shall exist and at the time that any such Incremental U.S. Term Loan ismade or any such Revolving Commitment Increase becomes effective (and aftergiving effect thereto) no Default or Event of Default shall exist and (ii) theCompany shall be in compliance with the covenant set forth in Section 7.10determined on a Pro Forma Basis as of the date of such Incremental U.S. TermLoan or Revolving Commitment Increase and the last day of the most recent TestPeriod, in each case, as if such Incremental U.S. Term Loans or RevolvingCommitment Increases, as applicable, had been outstanding on the last day ofsuch fiscal quarter of the Company for testing compliance therewith.  Each tranche of Incremental U.S. Term Loansand each Revolving Commitment Increase shall be in an aggregate Dollar Amountthat is not less than $50,000,000 (*provided*that such amount may be less than $50,000,000 if such amount represents allremaining availability under the limit set forth in the next sentence).  Notwithstanding anything to the contraryherein, the aggregate Dollar Amount of the Incremental U.S. Term Loans and theRevolving Commitment Increases shall not exceed $200,000,000.  The Incremental U.S. Term Loans and anyRevolving Credit Exposure under any such Revolving Commitment Increase (a) shallrank pari passu in right of payment and of security with the other RevolvingCredit Exposure and the U.S. Term Loans, (b) in the case of IncrementalU.S. Term Loans, shall not mature earlier than the Maturity Date with respectto the U.S. Term Loans, (c) in the case of Incremental U.S. Term Loans,shall not have a Weighted Average Life to Maturity that is shorter than theWeighted Average Life to Maturity with respect to the U.S. Term Loans, (d) inthe case of Incremental U.S. Term Loans, will accrue interest at ratesdetermined by the Company and the lenders providing such Incremental U.S. TermLoans, which rates may be higher or lower than the rates applicable to the U.S.Term Loans, and (e) in the case of Incremental U.S. Term Loans, except asset forth above, shall be treated substantially the same as, or less favorablyto the lenders thereof than, the U.S. Term Loans (in each case, including withrespect to mandatory and voluntary prepayments), *provided* that (i) the terms and conditions applicableto Incremental U.S. Term Loans may be materially different from those of theU.S. Term Loans to the extent such differences are reasonably acceptable to theAdministrative Agent and (ii) subject to clauses (b), (c) and (d) above,the interest rates, maturity and amortization schedule applicable to theIncremental U.S. Term Loans shall be determined by the Company and the lendersthereof.  Each notice from the Companypursuant to this Section shall set forth the requested amount and proposedterms of the relevant Incremental U.S. Term Loans or Revolving CommitmentIncreases.  Incremental U.S. Term Loansmay be made, and Revolving Commitment Increases may be provided, by anyexisting Lender or by any other bank or other financial institution (any such otherbank or other financial institution being called an “**Additional Lender**”), in each case as designated by theCompany, *provided* that theAdministrative Agent, each L/C Issuer and the Swing Line Lender shall haveconsented (not to be unreasonably withheld) to such Lender’s or AdditionalLender’s making such Incremental U.S. Term Loans or providing such RevolvingCommitment Increases if such consent would be required under Section 10.07(b) foran assignment of Loans or Revolving Credit Commitments, as applicable, to suchLender or Additional Lender.  Commitmentsin respect of Incremental U.S. 

 

70

----

 

Term Loans and RevolvingCommitment Increases shall become Commitments (or in the case of a RevolvingCommitment Increase to be provided by an existing Revolving Credit Lender, anincrease in such Lender’s applicable Revolving Credit Commitment) under thisAgreement pursuant to an amendment (an “**IncrementalAmendment**”) to this Agreement and, as appropriate, the other LoanDocuments, executed by Holdings, the Company, each Lender agreeing to providesuch Commitment, if any, each Additional Lender, if any, and the AdministrativeAgent.  The Incremental Amendment may,without the consent of any other Lenders, effect such amendments to thisAgreement and the other Loan Documents as may be necessary or appropriate, inthe reasonable opinion of the Administrative Agent and the Company, to effectthe provisions of this Section.  The effectivenessof any Incremental Amendment shall be subject to the satisfaction on the datethereof (each, an “**Incremental FacilityClosing Date**”) of each of the conditions set forth in Section 4.02(it being understood that all references to “the date of such Credit Extension”or similar language in such Section 4.02 shall be deemed to refer to theeffective date of such Incremental Amendment) and such other conditions as theparties thereto shall agree.  The Companywill use the proceeds of the Incremental U.S. Term Loans and RevolvingCommitment Increases for any purpose not prohibited by this Agreement.  No Lender shall be obligated to provide anyIncremental U.S. Term Loans or Revolving Commitment Increases unless it soagrees.  Upon each increase in theRevolving Credit Commitments pursuant to this Section, each Revolving CreditLender immediately prior to such increase will automatically and withoutfurther act be deemed to have assigned to each Lender providing a portion ofthe Revolving Commitment Increase (each a “**RevolvingCommitment Increase Lender**”) in respect of such increase, and eachsuch Revolving Commitment Increase Lender will automatically and withoutfurther act be deemed to have assumed, a portion of such Revolving CreditLender’s participations hereunder in outstanding Letters of Credit and SwingLine Loans such that, after giving effect to each such deemed assignment andassumption of participations, the percentage of the aggregate outstanding (i) participationshereunder in Letters of Credit and (ii) participations hereunder in SwingLine Loans held by each Revolving Credit Lender (including each such RevolvingCommitment Increase Lender) will equal the percentage of the aggregateRevolving Credit Commitments of all Revolving Credit Lenders represented bysuch Revolving Credit Lender’s Revolving Credit Commitment and (b) if, onthe date of such increase,there are any Revolving Credit Loans outstanding, such Revolving Credit Loansshall on or prior to the effectiveness of such Revolving Commitment Increase beprepaid from the proceeds of additional Revolving Credit Loans made hereunder(reflecting such increase in Revolving Credit Commitments), which prepaymentshall be accompanied by accrued interest on the Revolving Credit Loans beingprepaid and any costs incurred by any Lender in accordance with Section 3.05.  The Administrative Agent and the Lendershereby agree that the minimum borrowing, pro rata borrowing and pro ratapayment requirements contained elsewhere in this Agreement shall not apply tothe transactions effected pursuant to the immediately preceding sentence.

 

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

 

71

----

 

Kingdom may, on any one dateafter the Closing Date, by notice to the Administrative Agent (whereupon theAdministrative Agent shall promptly deliver a copy to each of the Lenders),request a tranche of term loans denominated in Sterling or Euros (any and allsuch term loans, the “**Incremental OverseasTerm Loans**”); *provided*that both at the time of any such request and upon the effectiveness ofany Incremental Overseas Amendment referred to below, no Default or Event ofDefault shall exist and at the time that any such Incremental Overseas TermLoan is made (and after giving effect thereto) no Default or Event of Defaultshall exist.  Each tranche of IncrementalOverseas Term Loans shall be in an aggregate initial Dollar Amount of not morethan $150,000,000 as of the relevant Incremental Overseas Facility ClosingDate; provided that the aggregate initial Dollar Amount of the IncrementalOverseas Term Loans shall not exceed $300,000,000.  The Incremental Overseas Term Loans (a) shallrank pari passu in right of payment and of security with the U.S. Term Loans,but may have additional security or Guarantees or limits on security orGuarantees to the extent required by the Collateral and Guarantee Requirement, (b) shallnot mature earlier than the Maturity Date with respect to the U.S. Term Loans, (c) shallnot have a Weighted Average Life to Maturity that is shorter than the WeightedAverage Life to Maturity with respect to the U.S. Term Loans, (d) willaccrue interest at rates determined by the applicable Overseas Borrower and thelenders providing such Incremental Overseas Term Loans, which rates may behigher or lower than the rates applicable to the U.S. Term Loans, and (e) exceptas set forth above, shall be treated substantially the same as, or lessfavorably to the lenders thereof than, the U.S. Term Loans (in each case,including with respect to mandatory and voluntary prepayments), *provided* that (i) the terms and conditionsapplicable to Incremental Overseas Term Loans may be materially different fromthose of the U.S. Term Loans to the extent such differences are reasonablyacceptable to the Administrative Agent and (ii) subject to clauses (b), (c) and(d) above, the interest rates, maturity and amortization scheduleapplicable to the Incremental Overseas Term Loans shall be determined by theapplicable Overseas Borrower and the lenders thereof.  Each notice from an Overseas Borrowerpursuant to this Section shall set forth the requested amount and proposedterms of the relevant Incremental Overseas Term Loans.  Incremental Overseas Term Loans may be made by any existing Lender orby any other bank or other financial institution (any such other bank or otherfinancial institution being called an “**AdditionalOverseas Lender**”), in each case as designated by the applicableOverseas Borrower, *provided* thatthe Administrative Agent shall have consented (not to be unreasonably withheld)to such Lender’s or Additional Overseas Lender’s making such IncrementalOverseas Term Loans if such consent would be required under Section 10.07(b) foran assignment of Loans to such Lender or Additional Overseas Lender.  Commitments in respect of IncrementalOverseas Term Loans shall become Commitments under this Agreement pursuant toan amendment (an “**Incremental OverseasAmendment**”) to this Agreement and, as appropriate, the other LoanDocuments, executed by Holdings, the Company, the applicable Overseas Borrower,each Lender agreeing to provide such Commitment, if any, each AdditionalOverseas Lender, if any, and the Administrative Agent.  The Incremental Overseas Amendment may,without the consent of any other Lenders, effect such amendments to thisAgreement and the other Loan Documents as may be necessary or appropriate, inthe reasonable opinion of the Administrative Agent and the applicable OverseasBorrower, to effect the provisions of this Section.  The effectiveness of any Incremental OverseasAmendment shall be subject to the satisfaction on the date thereof (each, an “**Incremental Overseas Facility Closing Date**”)of each of the conditions set forth in Section 4.03 and such otherconditions as the parties thereto shall agree. The proceeds of the Incremental Overseas Term Loans shall be applied tothe prepayment of the U.S. Term Loans pursuant to Section 2.05(b)(iii).  No Lender shall be obligated to provide anyIncremental Overseas Term Loans unless it so agrees.  The Administrative Agent and the Lendershereby agree that the minimum borrowing, pro rata borrowing and pro ratapayment requirements contained elsewhere in this Agreement shall not apply tothe transactions effected pursuant to this Section 2.14(b).

 

72

----

 

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

###  

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

 

### (b)  EachLender will promptly notify the Company, the relevant Overseas Borrower and theAdministrative Agent of any event or circumstance of which it has knowledgethat will entitle such Lender to compensation pursuant to this Section 2.15.  If any Lender requests compensation underthis Section 2.15, then such Lender will, if requested by the Company, usecommercially reasonable efforts to designate another Lending Office for anyLoan affected by such event; *provided*that such efforts are made on terms that, in the reasonable judgment of such Lender,cause such Lender and its Lending Office(s) to suffer no materialeconomic, legal or regulatory disadvantage.

###  

# **ARTICLE III**

# **TAXES, INCREASED COSTS PROTECTION AND ILLEGALITY**

#  

SECTION 3.01.  Taxes.  (a)  Exceptas provided in this Section 3.01 and Section 10.15, any and allpayments by any Borrower (the term Borrower under Article III being deemedto include any Subsidiary for whose account a Letter of Credit is issued) to orfor the account of any Agent or any Lender under any Loan Document shall be madefree and clear of and without deduction for any and all present or futuretaxes, duties, levies, imposts, deductions, assessments, fees, withholdings orsimilar charges, and all liabilities (including additions to tax, penalties andinterest) with respect thereto, excluding in the case of each Agent and eachLender, (x) taxes imposed on or measured by its net income or overallgross income (including branch profits), and franchise (and similar) taxesimposed on it in lieu of net income taxes, by the jurisdiction (or anypolitical subdivision thereof) under the Laws of which such Agent or suchLender, as the case may be, is organized, managed or controlled or maintains aLending Office or, in the case of Germany, a permanent establishment for taxpurposes, and all liabilities (including additions to tax, penalties andinterest) with respect thereto and (y) any limited German income taxliability 

 

73

----

 

pursuant to § 49 para. 1 no. 5lit. c) aa) German Income Tax Act imposed on such Agent or such Lender(including any withholding obligation of the German Borrower on behalf of suchAgent or such Lender pursuant to § 50a para. 7 German Income Tax Act) due tothe fact that the Euro Term Loans are secured by German real property or by anyrights treated as German real property under German Civil Law, and allliabilities (including additions to tax, penalties and interest) with respectthereto; *provided* that theexclusion set forth in clause (y) above shall be inapplicable for so longas the Euro Term Loans are secured by German real property or by any rightstreated as German real property under German Civil Law the aggregate fairmarket value of which real property and rights exceeds 10% of the consolidatedtotal assets of the German Borrower and its Subsidiaries.  All non-excluded taxes, duties, levies,imposts, deductions, assessments, fees, withholdings or similar charges, andliabilities described in the immediately preceding sentence are hereinafterreferred to as “**Taxes**”.  If any Borrower shall be required by any Lawsto deduct any Taxes or Other Taxes from or in respect of any sum payable underany Loan Document to any Agent or any Lender, (i) the sum payable shall beincreased as necessary so that after making all required deductions (includingdeductions applicable to additional sums payable under this Section 3.01),each of such Agent and such Lender receives an amount equal to the sum it wouldhave received had no such deductions been made, (ii) such Borrower shallmake such deductions, (iii) such Borrower shall pay the full amountdeducted to the relevant taxation authority or other authority in accordancewith applicable Laws, and (iv) within thirty (30) days after the date ofsuch payment (or, if receipts or evidence are not available within thirty (30)days, as soon as possible thereafter), such Borrower shall furnish to suchAgent or Lender (as the case may be) the original or a certified copy of areceipt evidencing payment thereof to the extent such a receipt is issued therefor, or other written proof of paymentthereof that is reasonably satisfactory to the Administrative Agent.  If such Borrower fails to pay any Taxes orOther Taxes when due to the appropriate taxing authority or fails to remit toany Agent or any Lender the required receipts or other required documentaryevidence, such Borrower shall indemnify such Agent and such Lender for anyincremental taxes, interest or penalties that may become payable by such Agentor such Lender arising out of such failure.

 

### (b)  Inaddition, each Borrower agrees to pay any and all present or future stamp,court or documentary taxes and any other excise, property, intangible ormortgage recording taxes or charges or similar levies which arise from anypayment made under any Loan Document or from the execution, delivery,performance, enforcement or registration of, or otherwise with respect to, anyLoan Document (hereinafter referred to as “**OtherTaxes**”).

###  

### (c)  EachBorrower agrees to indemnify each Agent and each Lender for (i) the fullamount of Taxes and Other Taxes (including any Taxes or Other Taxes imposed orasserted by any jurisdiction on amounts payable under this Section 3.01)paid by such Agent and such Lender and (ii) any liability (includingadditions to tax, penalties, interest and expenses) arising therefrom or withrespect thereto, in each case whether or not such Taxes or Other Taxes werecorrectly or legally imposed or asserted by the relevant GovernmentalAuthority; provided such Agent or Lender, as the case may be, provides suchBorrower with a written statement thereof setting forth in reasonable detailthe basis and calculation of such amounts. Payment under this Section 3.01(c) shall be made within thirty(30) days after the date such Lender or such Agent makes a demand therefor.

###  

### (d)  NoBorrower shall be required pursuant to this Section 3.01 to pay anyadditional amount to, or to indemnify, any Lender or Agent, as the case may be,to the extent that such Lender or such Agent becomes subject to Taxessubsequent to the Closing Date (or, if later, the date such Lender or Agentbecomes a party to this Agreement) as a result of a change in the place oforganization of such Lender or Agent or a change in the lending office of suchLender, except 

 

74

----

 

to the extent that any suchchange is requested or required in writing by any Borrower (and provided thatnothing in this clause (d) shall be construed as relieving any Borrowerfrom any obligation to make such payments or indemnification in the event of achange in lending office or place of organization that precedes a change in Lawto the extent such Taxes result from a change in Law).

###  

### (e)  Notwithstandinganything else herein to the contrary, if a Lender or an Agent is subject towithholding tax imposed by any jurisdiction in which any Borrower is formed ororganized at a rate in excess of zero percent at the time such Lender or suchAgent, as the case may be, first becomes a party to this Agreement (or, iflater, the date such Lender or Agent makes an Incremental Overseas Term Loan toany Borrower), withholding tax imposed by such jurisdiction at such rate shallbe considered excluded from Taxes unless and until such Lender or Agent, as thecase may be, provides the appropriate forms required or prescribed byapplicable Law certifying that a lesser rate applies, whereupon withholding taxat such lesser rate only shall be considered excluded from Taxes for periodsgoverned by such forms; *provided*that, if at the date of the Assignment and Assumption pursuant to which aLender becomes a party to this Agreement, the Lender assignor was entitled topayments under clause (a) of this Section 3.01 in respect ofwithholding tax with respect to interest paid at such date, then, to suchextent, the term Taxes shall include (in addition to withholding taxes that maybe imposed in the future or other amounts otherwise includable in Taxes)withholding tax, if any, applicable with respect to the Lender assignee on suchdate.

###  

### (f)  Ifany Lender or Agent determines, in its reasonable discretion, that it hasreceived a refund in respect of any Taxes or Other Taxes as to whichindemnification or additional amounts have been paid to it by any Borrowerpursuant to this Section 3.01, it shall promptly remit such refund (butonly to the extent of indemnity payments made, or additional amounts paid, byany Borrower under this Section 3.01 with respect to the Taxes or OtherTaxes giving rise to such refund plus any interest included in such refund bythe relevant taxing authority attributable thereto) to such Borrower, net ofall out-of-pocket expenses of the Lender or Agent, as the case may be andwithout interest (other than any interest paid by the relevant taxing authoritywith respect to such refund); *provided*that such Borrower, upon the request of the Lender or Agent, as the case maybe, agrees promptly to return such refund to such party in the event such partyis required to repay such refund to the relevant taxing authority.  Such Lender or Agent, as the case may be,shall, at such Borrower’s request, provide such Borrower with a copy of anynotice of assessment or other evidence of the requirement to repay such refundreceived from the relevant taxing authority (*provided*that such Lender or Agent may delete any information therein that such Lenderor Agent deems confidential).  Nothingherein contained shall interfere with the right of a Lender or Agent to arrangeits tax affairs in whatever manner it thinks fit nor oblige any Lender or Agentto claim any tax refund or to make available its tax returns or disclose anyinformation relating to its tax affairs or any computations in respect thereofor require any Lender or Agent to do anything that would prejudice its ability tobenefit from any other refunds, credits, reliefs, remissions or repayments towhich it may be entitled.

###  

### (g)  EachLender agrees that, upon the occurrence of any event giving rise to theoperation of Section 3.01(a) or (c) with respect to such Lenderit will, if requested by the Company, use commercially reasonable efforts todesignate another Lending Office for any Loan or Letter of Credit affected bysuch event; *provided* that suchefforts are made on terms that, in the sole judgment exercised in good faith ofsuch Lender, cause such Lender and its Lending Office(s) to suffer noeconomic, legal or regulatory disadvantage, and *provided further* that nothing in this Section 3.01(g) shallaffect or postpone any of the Obligations of any Borrower or the rights of suchLender pursuant to Section 3.01(a) or (c).

 

75

----

 

SECTION 3.02.  Illegality.  Ifany Lender determines that any Law has made it unlawful, or that anyGovernmental Authority has asserted that it is unlawful, for any Lender or itsapplicable Lending Office to make, maintain or fund Eurocurrency Rate Loans, orto determine or charge interest rates based upon the Eurocurrency Rate, then,on notice thereof by such Lender to the Borrowers through the AdministrativeAgent, any obligation of such Lender to make or continue Eurocurrency RateLoans or to convert Base Rate Loans to Eurocurrency Rate Loans shall besuspended until such Lender notifies the Administrative Agent and the relevantBorrowers that the circumstances giving rise to such determination no longerexist.  Upon receipt of such notice, therelevant Borrowers shall upon demand from such Lender (with a copy to theAdministrative Agent), prepay or, if applicable, convert all Eurocurrency RateLoans of such Lender to Base Rate Loans, either on the last day of the InterestPeriod therefor, if such Lender may lawfully continue to maintain suchEurocurrency Rate Loans to such day, or promptly, if such Lender may notlawfully continue to maintain such Eurocurrency Rate Loans.  Upon any such prepayment or conversion, eachrelevant Borrower shall also pay accrued interest on the amount so prepaid orconverted and all amounts due, if any, in connection with such prepayment orconversion under Section 3.05.  EachLender agrees to designate a different Lending Office if such designation willavoid the need for such notice and will not, in the good faith judgment of suchLender, otherwise be materially disadvantageous to such Lender.

 

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

 

SECTION 3.04.  Increased Cost and Reduced Return;Capital Adequacy; Reserves on Eurocurrency Rate Loans.  (a)  Ifany Lender determines (in good faith) that as a result of the introduction ofor any change in or in the interpretation of any Law, in each case after thedate hereof, or such Lender’s compliance therewith, there shall be any increasein the cost to such Lender of agreeing to make or making, funding ormaintaining Eurocurrency Rate Loans or (as the case may be) issuing or participatingin Letters of Credit, or a reduction in the amount received or receivable bysuch Lender in connection with any of the foregoing (excluding for purposes ofthis Section 3.04(a) any such increased costs or reduction in amountcovered by Section 2.15 or resulting from (i) Taxes or Other Taxes(as to which Section 3.01 shall govern), (ii) changes in the basis oftaxation of overall net income or overall gross income (including branchprofits), and franchise (and similar) taxes imposed in lieu of net incometaxes, by the United States or any foreign jurisdiction or any politicalsubdivision of either thereof under the Laws of which such Lender is organizedor maintains a Lending Office, (iii) reserve requirements contemplated by Section 3.04(c) and(iv) in the case of Eurocurrency Rate Loans denominated in an AlternativeCurrency, the requirements of the Bank of England and the Financial ServicesAuthority or the European Central Bank reflected in the Mandatory Cost, otherthan as set forth 

 

76

----

 

below) or the Mandatory Cost,as calculated hereunder, does not represent the cost to such Lender ofcomplying with the requirements of the Bank of England and/or the FinancialServices Authority or the European Central Bank in relation to its making, fundingor maintaining of such Eurocurrency Rate Loans, then from time to time withinfifteen (15) days after demand by such Lender setting forth in reasonabledetail such increased costs (with a copy of such demand to the AdministrativeAgent given in accordance with Section 3.06), the Company shall pay tosuch Lender such additional amounts as will compensate such Lender for suchincreased cost or reduction or, if applicable, the portion of such cost that isnot represented by the Mandatory Cost.

 

### (b)  Ifany Lender determines (in good faith) that the introduction of any Lawregarding capital adequacy or any change therein or in the interpretationthereof, in each case after the date hereof, or compliance by such Lender orsuch Lender’s holding company therewith, has the effect of reducing the rate ofreturn on the capital of such Lender or such Lender’s holding company (or itsLending Office) as a consequence of its obligations hereunder to a level belowthat which such Lender or such Lender’s holding company could have achieved butfor such introduction, change or compliance (taking into consideration itspolicies with respect to capital adequacy, by an amount deemed by such Lenderto be material, then from time to time upon demand of such Lender setting forthin reasonable detail the charge and the calculation of such reduced rate ofreturn (with a copy of such demand to the Administrative Agent given inaccordance with Section 3.06), the Company shall pay to such Lender suchadditional amounts as will compensate such Lender or such Lender’s holdingcompany for such reduction within fifteen (15) days after receipt of suchdemand.

###  

### (c)  TheCompany shall pay to each Lender, (i) as long as such Lender shall berequired to maintain reserves with respect to liabilities or assets consistingof or including Eurocurrency funds or deposits, additional interest on theunpaid principal amount of each Eurocurrency Rate Loan equal to the actualcosts of such reserves allocated to such Loan by such Lender (as determined by suchLender in good faith, which determination shall be conclusive in the absence ofmanifest error), and (ii) as long as such Lender shall be required tocomply with any reserve ratio requirement or analogous requirement of any othercentral banking or financial regulatory authority imposed in respect of themaintenance of the Commitments or the funding of the Eurocurrency Rate Loans,such additional costs (expressed as a percentage per annum and rounded upwards,if necessary, to the nearest five decimal places) equal to the actual costsallocated to such Commitment or Loan by such Lender (as determined by suchLender in good faith, which determination shall be conclusive absent manifesterror) which in each case shall be due and payable on each date on whichinterest is payable on such Loan, provided the Company shall have received atleast fifteen (15) days’ prior notice (with a copy to the Administrative Agent,and which notice shall specify the Statutory Reserve Rate, if any, applicableto such Lender) of such additional interest or cost from such Lender.  If a Lender fails to give notice fifteen (15)days prior to the relevant Interest Payment Date, such additional interest orcost shall be due and payable fifteen (15) days from receipt of such notice.

###  

### (d)  Failureor delay on the part of any Lender to demand compensation pursuant to this Section 3.04shall not constitute a waiver of such Lender’s right to demand suchcompensation, *provided* that theCompany shall not be required to compensate a Lender pursuant to Section 3.04(a),(b) or (c) for any such increased cost or reduction incurred morethan ninety (90) days prior to the date that such Lender demands, or notifiesthe Company of its intention to demand, compensation therefor, *provided* further that, if the circumstancegiving rise to such increased cost or reduction is retroactive, then such90-day period referred to above shall be extended to include the period ofretroactive effect thereof.

 

77

----

 

### (e)  Ifany Lender requests compensation under this Section 3.04, then such Lenderwill, if requested by the Company, use commercially reasonable efforts todesignate another Lending Office for any Loan or Letter of Credit affected bysuch event; *provided* that suchefforts are made on terms that, in the reasonable judgment of such Lender,cause such Lender and its Lending Office(s) to suffer no materialeconomic, legal or regulatory disadvantage, and *provided further*that nothing in this Section 3.04(e) shallaffect or postpone any of the Obligations of any Borrower or the rights of suchLender pursuant to Section 3.04(a), (b), (c) or (d) or anyrights of the Company pursuant to Section 3.07.

 

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

 

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

###  

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

###  

includingany loss or expense arising from the liquidation or reemployment of fundsobtained by it to maintain such Loan or from fees payable to terminate thedeposits from which such funds were obtained.

 

SECTION 3.06.  Matters Applicable to All Requests forCompensation.  (a)  Any Agent or any Lenderclaiming compensation under this Article III shall deliver a certificateto the Company setting forth the additional amount or amounts to be paid to ithereunder which shall be conclusive in the absence of manifest error.

 

### (b)  Withrespect to any Lender’s claim for compensation under Section 2.15, 3.01,3.02, 3.03 or 3.04, no Borrower shall be required to compensate such Lender forany amount incurred more than ninety (90) days prior to the date that suchLender notifies the relevant Borrowers of the event that gives rise to suchclaim; *provided* that, if thecircumstance giving rise to such claim is retroactive, then such 90-day periodreferred to above shall be extended to include the period of retroactive effectthereof.  If any Lender requestscompensation by the Company under Section 2.15 or 3.04, the Company may,by notice to such Lender (with a copy to the Administrative Agent), suspend theobligation of such Lender to make or continue from one Interest Period toanother Eurocurrency Rate Loans, or to convert Base Rate Loans intoEurocurrency Rate Loans, until the event or condition giving rise to suchrequest ceases to be in effect (in which case the provisions of Section 3.06(c) shallbe applicable); *provided* thatsuch suspension shall not affect the right of such Lender to receive thecompensation so requested.

###  

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

 

78

----

 

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

###  

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

####  

#### (ii)  allLoans that would otherwise be made or continued from one Interest Period toanother by such Lender as Eurocurrency Rate Loans shall be made or continuedinstead as Base Rate Loans, and all Base Rate Loans of such Lender that wouldotherwise be converted into Eurocurrency Rate Loans shall remain as Base RateLoans.

####  

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

###  

SECTION 3.07.  Replacement of Lenders under CertainCircumstances.  (a)  If at any time (i) anyBorrower becomes obligated to pay additional amounts or indemnity paymentsdescribed in Section 2.15, 3.01 or 3.04 as a result of any conditiondescribed in such Sections or any Lender ceases to make Eurocurrency Rate Loansas a result of any condition described in Section 3.02 or Section 3.04,(ii) any Lender becomes a Defaulting Lender or (iii) any Lenderbecomes a Non-Consenting Lender, then the Company may, upon prior writtennotice to the Administrative Agent and such Lender, replace such Lender bycausing such Lender to (and such Lender shall be obligated to) assign pursuantto Section 10.07(b) (with the assignment fee to be paid by theCompany in such instance) all of its rights and obligations under thisAgreement to one or more Eligible Assignees; *provided*that neither the Administrative Agent nor any Lender shall have any obligationto the Company to find a replacement Lender or other such Person.

 

### (b)  AnyLender being replaced pursuant to Section 3.07(a) above shall (i) executeand deliver an Assignment and Assumption with respect to such Lender’sCommitment and outstanding Loans and participations in L/C Obligations and SwingLine Loans, and (ii) deliver any Notes evidencing such Loans to theCompany or Administrative Agent. Pursuant to such Assignment and Assumption, (A) the assignee Lendershall acquire all or a portion, as the case may be, of the assigning Lender’sCommitment and outstanding Loans and participations in L/C Obligations andSwing Line Loans, (B) all obligations of the Borrowers owing to theassigning Lender relating to the Loans and participations so assigned shall bepaid in full by the assignee Lender to such assigning Lender concurrently withsuch assignment and assumption and (C) upon such payment and, if sorequested by the assignee Lender, delivery to the assignee Lender of theappropriate Note or Notes executed by the relevant Borrowers, the assigneeLender shall become a Lender hereunder and the assigning Lender shall cease toconstitute a Lender hereunder with respect to such assigned Loans, Commitmentsand participations, except with respect to indemnification provisions underthis Agreement, which shall survive as to such assigning Lender.

 

79

----

 

### (c)  Notwithstandinganything to the contrary contained above, any Lender that acts as an L/C Issuermay not be replaced hereunder at any time that it has any Letter of Creditoutstanding hereunder unless arrangements reasonably satisfactory to such L/CIssuer (including the furnishing of a back-up standby letter of credit in formand substance, and issued by an issuer reasonably satisfactory to such L/C Issueror the depositing of cash collateral into a cash collateral account in amountsand pursuant to arrangements reasonably satisfactory to such L/C Issuer) havebeen made with respect to each such outstanding Letter of Credit and the Lenderthat acts as the Administrative Agent may not be replaced hereunder except inaccordance with the terms of Section 9.09.

###  

### (d)  Inthe event that (i) the Company or the Administrative Agent has requestedthat the Lenders consent to a departure or waiver of any provisions of the LoanDocuments or agree to any amendment thereto, (ii) the consent, waiver oramendment in question requires the agreement of all affected Lenders inaccordance with the terms of Section 10.01 or all the Lenders with respectto a certain Class of the Loans and (iii) the Required Lenders haveagreed to such consent, waiver or amendment, then any Lender who does not agreeto such consent, waiver or amendment shall be deemed a “**Non-Consenting Lender**.”

###  

SECTION 3.08.  Survival.  Allof the Borrowers’ obligations under this Article III shall survivetermination of the Aggregate Commitments and repayment of all otherObligations hereunder.

 

# **ARTICLE IV**

# **CONDITIONS PRECEDENT TO CREDIT EXTENSIONS**

#  

SECTION 4.01.  Conditions of Initial Credit Extension.  Theobligation of each Lender to make its initial Credit Extension hereunder issubject to satisfaction or waiver of the following conditions on or prior tothe Closing Date:

 

### (a)  TheAdministrative Agent’s receipt of the following, each of which shall beoriginals or facsimiles (followed promptly by originals) unless otherwisespecified, each properly executed by a Responsible Officer of the signing LoanParty, each in form and substance reasonably satisfactory to the AdministrativeAgent:

###  

#### (i)  executedcounterparts of this Agreement;

####  

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

####  

#### (iii)  eachCollateral Document set forth on Schedule 1.01A, duly executed by each LoanParty thereto, together with:

####  

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

#####  

##### (B)  tothe extent required under the Collateral and Guarantee Requirement, an opinionof local counsel for the Loan Parties in Iowa with respect to theenforceability and perfection of the Mortgage with respect to the MortgagedProperty in Iowa and any 

 

80

----

 

##### relatedfixture filings in form and substance reasonably satisfactory to theAdministrative Agent;

#####  

##### (C)  evidencethat all other actions, recordings and filings that the Administrative Agentmay deem reasonably necessary to satisfy the Collateral and GuaranteeRequirement shall have been taken, completed or otherwise provided for in amanner reasonably satisfactory to the Administrative Agent; and

#####  

##### (D)  acompleted Perfection Certificate dated the Closing Date and signed by the associategeneral counsel or the chief legal officer of the Company, together with allattachments contemplated thereby;

#####  

#### (iv)  suchcertificates of resolutions or other action, incumbency certificates and/orother certificates of Responsible Officers of each Loan Party as theAdministrative Agent may reasonably require evidencing the identity, authorityand capacity of each Responsible Officer thereof authorized to act as aResponsible Officer in connection with this Agreement and the other LoanDocuments to which such Loan Party is a party or is to be a party on theClosing Date;

####  

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

####  

#### (vi)  acertificate signed by a Responsible Officer of Holdings certifying that (A) exceptas set forth (x) in the Company Disclosure Letter (as defined in thePurchase Agreement) or (y) in Reader’s Digest’s Annual Report on Form 10-Kfor the fiscal year ended June 30, 2006, filed with the SEC on August 21,2006, Reader’s Digest’s Current Reports on Forms 8-K filed with the SEC on October 4,2006 and October 5, 2006, Reader’s Digest’s proxy statement on Schedule14A filed with the SEC on September 29, 2006, Reader’s Digest’s RegistrationStatement on Form S-8 filed with the SEC on August 21, 2006, andpost-effective amendment thereto dated August 22, 2006, but excluding ineach case under this clause (y) any risk factor disclosures or othercautionary, predictive and forward looking disclosures contained in any suchdocument under the heading “Risk Factors” or “Forward Looking Statements” orunder any other heading, from June 30, 2006 to November 16, 2006,there has been no state of facts, event, change, effect, development, conditionor occurrence that, individually or in the aggregate, has had or couldreasonably be expected to result in a Material Adverse Change, and (B) exceptas set forth in the Company Disclosure Letter, since November 16, 2006,there has been no event, change, effect, development, condition or occurrencethat, individually or in the aggregate, has had or could reasonably be expectedto result in a Material Adverse Change;

####  

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

 

81

----

 

#### (viii)  acertificate (which shall be reasonably satisfactory to the AdministrativeAgent) attesting to the Solvency of the Loan Parties (taken as a whole) aftergiving effect to the Transaction, from the Treasurer of Holdings;

####  

#### (ix)  exceptas set forth in Section 6.17, evidence that all insurance (including titleinsurance) required to be maintained pursuant to the Loan Documents has beenobtained and is in effect and that the Administrative Agent has been named asloss payee or additional insured, as appropriate, under each insurance policywith respect to such liability and property insurance as to which theAdministrative Agent shall have reasonably requested to be so named;

####  

#### (x)  aCommitted Loan Notice or Letter of Credit Application, as applicable, relatingto the initial Credit Extension; and

####  

#### (xi)  acertificate signed by a Responsible Officer of the Company certifyingcompliance with the conditions set forth in paragraphs (a) and (b) ofSection 4.02.

####  

### (b)  Allfees and expenses required to be paid hereunder and invoiced before the ClosingDate shall have been paid in full in cash.

###  

### (c)  Priorto or substantially contemporaneously with the initial Credit Extension, (i) theSponsor Equity Contributions shall have been funded in full in cash; and (ii) AcquisitionCo shall have received (as a common equity capital contribution or, ifotherwise, on terms and conditions reasonably satisfactory in all materialrespects to the Administrative Agent) cash proceeds from the EquityContribution in an aggregate amount, when combined with (x) the aggregatevalue of the Company Preferred Stock that is rolled over in connection with theTransactions and (y) the value (which shall be calculated net of the feesand expenses of the Company in connection with the WRC Acquisition and the DHAcquisition in excess of $15,000,000) of the Equity Interests issued byHoldings to the shareholders of WRC Media and Direct Holdings as considerationfor the WRC Acquisition and the DH Acquisition, respectively) is equal to atleast 29% of the total capitalization of the Company.

###  

### (d)  TheAcquisition and the Merger shall be consummated in accordance with the terms ofthe Purchase Agreement without waiver or amendment of any material provisionsthereof (other than any such waivers or amendments as are not, taken as awhole, materially adverse to the Lenders) unless consented to by theAdministrative Agent, which consent shall not be unreasonably withheld,conditioned or delayed.

###  

### (e)  TheDH Acquisition shall be consummated in accordance with the terms of the DHAcquisition Agreement without waiver or amendment of any material provisionsthereof (other than any such waivers or amendments as are not, taken as awhole, materially adverse to the Lenders) unless consented to by the AdministrativeAgent, which consent shall not be unreasonably withheld, conditioned ordelayed.  Holdings shall have contributedall of the Equity Interests of Direct Holdings to the Company.

###  

### (f)  TheWRC Acquisition shall be consummated in accordance with the terms of the WRCAcquisition Agreement without waiver or amendment of any material provisionsthereof (other than any such waivers or amendments as are not, taken as awhole, materially adverse to the Lenders) unless consented to by theAdministrative Agent, which consent shall not be unreasonably withheld,conditioned or delayed.  Holdings shallhave contributed all of the Equity Interests of WRC Media to the Company.

 

82

----

 

### (g)  Priorto or substantially contemporaneously with the initial Credit Extensions, theCompany shall have received at least $600,000,000 in gross cash proceeds fromthe issuance of the Senior Subordinated Notes.

###  

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

###  

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

###  

### (j)  TheAdministrative Agent shall have received evidence reasonably satisfactory to itthat all loans outstanding under the Existing Credit Agreement and the ExistingDH/WRC Debt Agreements and all accrued and unpaid interest, fees and otheramounts owing thereunder shall have been paid in full, all commitments toextend credit thereunder shall have terminated, and all Liens securingobligations thereunder shall have been released.  A Successful Consent Solicitation or aDefeasance shall have been consummated. Except for (A) any Existing Notes not repurchased or redeemed on orprior to the Closing Date, (B) Indebtedness listed on Schedule 7.03(b), (C) theCompany Preferred Stock, (D) the Loans and L/C Obligations, (E) theSenior Subordinated Notes and (F) the Holdings PIK Preferred, Holdings,the Company and its Subsidiaries shall have no Indebtedness or preferred EquityInterests outstanding after giving effect to the Transaction.

###  

### (k)  TheArrangers and the Lenders shall have received (i) the Audited FinancialStatements, (ii) the Unaudited Financial Statements and (iii) to theextent made available by each of Reader’s Digest, Direct Holdings and WRCMedia, monthly financial data generated by each of Reader’s Digest’s, DirectHoldings’, and WRC Media’s internal accounting systems for use by seniormanagement for each month ended after the latest fiscal quarter for whichUnaudited Financial Statements are delivered pursuant to clause (ii) aboveand at least 30 days before the Closing Date.

###  

### (l)  TheArrangers and the Lenders shall have received the Pro Forma Balance Sheet.

###  

### Notwithstanding anything inthis Agreement or any other Loan Document to the contrary, (I) the onlyrepresentations and warranties (and related defaults) made by the Loan Partiesrelating to Reader’s Digest, its subsidiaries and their businesses the makingof which shall be a condition to availability of the Facilities on the ClosingDate shall be such of the representations made by Reader’s Digest in thePurchase Agreement as are material to the interests of the Lenders, but only tothe extent that Holdings and Acquisition Co have the right to terminate theirobligations under the Purchase Agreement as a result of a breach of suchrepresentations in the Purchase Agreement (determined without regard to whetherany notice is required to be delivered by Holdings or Acquisition Co), and (II) theonly other representations and warranties (and related defaults) made by theLoan Parties the making of which shall be a condition to availability of theFacilities on the Closing Date shall be the Specified Representations (asdefined below).  For purposes hereof, “SpecifiedRepresentations” means the representations and warranties set forth inSections 5.01(a), 5.01(b), 5.02, 5.04, 5.13, 5.16 and 5.18.

 

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

 

83

----

 

a Committed Loan Noticerequesting only a conversion or a continuation of Loans) is subject to thefollowing conditions precedent:

 

### (a)  Therepresentations and warranties of the Company and each other Loan Partycontained in Article V or any other Loan Document shall be true andcorrect in all material respects on and as of the date of such CreditExtension; *provided*that, to theextent that such representations and warranties specifically refer to anearlier date, they shall be true and correct in all material respects as ofsuch earlier date; *provided, further*that,any representation and warranty that is qualified as to “materiality,”“Material Adverse Effect” or similar language shall be true and correct in allrespects on such respective dates.

###  

### (b)  NoDefault shall have occurred and be continuing at the time of or immediatelyafter giving effect to such proposed Credit Extension.

###  

### (c)  TheAdministrative Agent and, if applicable, the relevant L/C Issuer or the SwingLine Lender shall have received a Request for Credit Extension in accordancewith the requirements hereof.

###  

EachRequest for Credit Extension (other than a Committed Loan Notice requestingonly a conversion or a continuation of Loans) submitted by the Company shall bedeemed to be a representation and warranty that the conditions specified inSections 4.02(a) and (b) have been satisfied on and as ofthe date of the applicable Credit Extension.

 

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

 

### (a)  receiptby the Administrative Agent of an opinion of counsel for such Overseas Borrowerreasonably acceptable to the Administrative Agent, covering such customarymatters relating to the transactions contemplated hereby as the AdministrativeAgent may reasonably request;

###  

### (b)  receiptby the Administrative Agent of all documents with respect to such OverseasBorrower satisfying the requirements set forth in Section 4.01(a)(iv) withrespect thereto;

###  

### (c)  tothe extent required by the Collateral and Guarantee Requirement, all OverseasObligations shall have been (i) unconditionally guaranteed by eachrequired Guarantor and (ii) secured by a security interest in the requiredCollateral with the priority required by the Collateral Documents, and theAdministrative Agent shall have received evidence that all other actions,recordings and filings that the Administrative Agent may deem reasonablynecessary to satisfy the Collateral and Guarantee Requirement shall have beentaken, completed or otherwise provided for in a manner reasonably satisfactoryto the Administrative Agent;

###  

### (d)  receiptby the Administrative Agent of a Note executed by such Overseas Borrower infavor of each Lender that has requested a Note at least two Business Days inadvance of date of the relevant Credit Extension;

###  

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

 

84

----

 

### (f)  receiptby the Administrative Agent of a certificate signed by a Responsible Officer ofsuch Overseas Borrower certifying that the representations and warranties setforth in Sections 5.01, 5.02, 5.03 and 5.04 are true and correct in allmaterial respects as to such Overseas Borrower and any Loan Document to whichsuch Overseas Borrower is a party on and as of the date of such CreditExtension; *provided*that anyrepresentation and warranty that is qualified as to “materiality,” “MaterialAdverse Effect” or similar language shall be true and correct in all respectson such date.

###  

# **ARTICLE V**

# **REPRESENTATIONS AND WARRANTIES**

#  

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

 

SECTION 5.01.  Existence, Qualification and Power;Compliance with Laws.  Each Loan Party and each ofits Subsidiaries (a) is a Person duly organized or formed, validlyexisting and in good standing (to the extent such concept is applicable in theapplicable jurisdiction) under the Laws of the jurisdiction of itsincorporation or organization, (b) has all requisite power and authorityto (i) own or lease its assets and carry on its business and (ii) execute,deliver and perform its obligations under the Loan Documents to which it is aparty, (c) is duly qualified and in good standing (to the extent suchconcept is applicable in the applicable jurisdiction) under the Laws of eachjurisdiction where its ownership, lease or operation of properties or theconduct of its business requires such qualification, (d) is in compliancewith all Laws, orders, writs, injunctions and orders and (e) has allrequisite governmental licenses, authorizations, consents and approvals tooperate its business as currently conducted; except in each case referred to inclause (c), (d) or (e), to the extent that failure to do so could notreasonably be expected to have a Material Adverse Effect.

 

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

 

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

 

85

----

 

Collateral Documents (includingthe priority thereof), except for (i) filings necessary to perfect ormaintain the perfection of the Liens on the Collateral granted by the LoanParties in favor of the Secured Parties, (ii) the approvals, consents,exemptions, authorizations, actions, notices and filings which have been dulyobtained, taken, given or made and are in full force and effect and (iii) thoseapprovals, consents, exemptions, authorizations or other actions, notices orfilings, the failure of which to obtain or make could not reasonably beexpected to have a Material Adverse Effect.

 

SECTION 5.04.  Binding Effect.  ThisAgreement and each other Loan Document has been duly executed and delivered byeach Loan Party that is party thereto. This Agreement and each other Loan Document constitutes a legal, validand binding obligation of each Loan Party that is party thereto, enforceableagainst such Loan Party in accordance with its terms, except as suchenforceability may be limited by Debtor Relief Laws and by general principlesof equity, regardless of whether considered in a proceeding in equity or atlaw.

 

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

 

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

####  

### (b)  SinceJune 30, 2006, there has been no event or circumstance, eitherindividually or in the aggregate, that has had or could reasonably be expectedto have a Material Adverse Effect.

###  

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

###  

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

 

86

----

 

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

###  

SECTION 5.06.  Litigation.  Asof the Closing Date, there are no actions, suits, proceedings, claims,investigations or disputes pending or, to the knowledge of the Company,threatened in writing or contemplated, at law, in equity, in arbitration orbefore any Governmental Authority, by or against the Company or any of itsSubsidiaries or against any of their properties or revenues that, eitherindividually or in the aggregate, could reasonably be expected to have aMaterial Adverse Effect.

 

SECTION 5.07.  No Default. Neither the Company nor any Subsidiary is in default under or withrespect to any Contractual Obligation (other than any Contractual Obligationpursuant to which the Company or such Subsidiary has issued or incurredIndebtedness) that, either individually or in the aggregate, could reasonablybe expected to have a Material Adverse Effect.

 

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

 

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

 

### (b)  Exceptas specifically disclosed in Schedule 5.09 or except as could notreasonably be expected to have, individually or in the aggregate, a MaterialAdverse Effect, (i) none of the properties currently or, to the knowledgeof the Company, formerly owned, leased or operated by any Loan Party or any ofits Subsidiaries is listed or proposed for listing on the NPL or on the CERCLISor any analogous foreign, state or local list or, to the knowledge of theCompany, is adjacent to any such property; and (ii) Hazardous Materialshave not been released, discharged or disposed of by any Person on any propertycurrently or, to the knowledge of the Company, formerly owned, leased oroperated by any Loan Party or any of its Subsidiaries and Hazardous Materialshave not otherwise been released, discharged or disposed of by any of the LoanParties and their Subsidiaries at any other location, in each case in a mannerthat could reasonably be expected to result in Environmental Liability.

###  

### (c)  Theproperties owned, leased or operated by the Company and the Subsidiaries do notcontain any Hazardous Materials in amounts or concentrations which (i) constitutea violation of, (ii) require remedial action under, or (iii) couldgive rise to liability under, Environmental 

 

87

----

 

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

###  

### (d)  Exceptas specifically disclosed in Schedule 5.09, neither the Company nor any ofits Subsidiaries is undertaking, either individually or together with otherpotentially responsible parties, any investigation or assessment or remedial orresponse action relating to any actual or threatened release, discharge ordisposal of Hazardous Materials at any site, location or operation, eithervoluntarily or pursuant to the order of any Governmental Authority or therequirements of any Environmental Law, except for such investigation orassessment or remedial or response action that, individually or in the aggregate,could not reasonably be expected to result in a Material Adverse Effect.

###  

### (e)  AllHazardous Materials generated, used, treated, handled or stored at, ortransported to or from, by any Loan Party or any of its Subsidiaries, anyproperty currently or formerly owned or operated by any Loan Party or any ofits Subsidiaries have been disposed of in a manner not reasonably expected toresult, individually or in the aggregate, in a Material Adverse Effect.

###  

### (f)  Exceptas would not reasonably be expected to result, individually or in theaggregate, in a Material Adverse Effect, none of the Loan Parties and theirSubsidiaries has contractually assumed any liability or obligation under orrelating to any Environmental Law.

###  

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

 

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

###  

### (b)  (i) NoERISA Event has occurred during the five year period prior to the date on whichthis representation is made or deemed made with respect to any Pension Plan; (ii) neitherany Loan Party nor any ERISA Affiliate has incurred, or reasonably expects toincur, any liability under Title IV of ERISA with respect to any PensionPlan (other than premiums due and not delinquent under Section 4007 ofERISA); (iii) neither any Loan Party nor any ERISA Affiliate has incurred,or reasonably expects to incur, any liability (and no event has occurred which,with the giving of notice under Section 4219 of ERISA, would result insuch liability) under Sections 4201 or 4243 of ERISA with respect to aMultiemployer Plan; (iv) neither any Loan Party nor any ERISA Affiliatehas engaged in a transaction that could be subject to Sections 4069 or4212(c) of ERISA; and (v) the present value of all benefitliabilities under each Pension Plan does not exceed the aggregate current valueof the assets of such Pension Plan (based on those assumptions used to fund thePension Plans); except, with respect to each of the foregoing clauses of this Section 5.11(b),as could not reasonably be expected, individually or in the aggregate, toresult in a Material Adverse Effect.

 

88

----

 

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

 

SECTION 5.13.  Margin Regulations; Investment CompanyAct.  (a)  The Company is not engaged norwill it engage, principally or as one of its important activities, in thebusiness of purchasing or carrying margin stock (within the meaning ofRegulation U issued by the Board), or extending credit for the purpose ofpurchasing or carrying margin stock, and no proceeds of any Borrowings ordrawings under any Letter of Credit will be used for any purpose that violatesRegulation U.

 

### (b)  Noneof the Company, any Person Controlling the Company, or any Subsidiary isrequired to be registered as an “investment company” under the Investment CompanyAct of 1940.

###  

SECTION 5.14.  Disclosure.  Noreport, financial statement, certificate or other written information furnishedby or on behalf of any Loan Party to any Agent or any Lender in connection withthe transactions contemplated hereby and the negotiation of this Agreement ordelivered hereunder or any other Loan Document (as modified or supplemented byother information so furnished) when taken as a whole contains any materialmisstatement of fact or omits to state any material fact necessary to make thestatements therein, in the light of the circumstances under which they weremade, not materially misleading; *provided*that, with respect to projected financial information and pro forma financialinformation, the Company represents only that such information was prepared ingood faith based upon assumptions believed to be reasonable at the time made;it being understood that projections are, by their nature, inherently uncertainand such projections may vary from actual results and that such variances maybe material.

 

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

 

89

----

 

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

 

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

 

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

 

SECTION 5.18.  Collateral.  (a)  The Guarantee and Security Agreement is effective to create in favor of theAdministrative Agent, for the benefit of the Lenders, legal, valid andenforceable (subject to the effect of Debtor Relief Laws and subject to generalprinciples of equity) security interests in the Collateral described thereinand proceeds thereof to the extent governed by the Uniform CommercialCode.  In the case of the Pledged Equityor Pledged Debt described in any of the Collateral Documents, when stockcertificates representing such Pledged Equity or promissory notes representingsuch Pledged Debt are delivered to the Administrative Agent together with thenecessary endorsements (provided that stock certificates representing thePledged Equity of any Foreign Immaterial Subsidiary need not be delivered tothe Administrative Agent for so long as such Foreign Immaterial Subsidiaryremains a Foreign Immaterial Subsidiary), and in the case of the otherCollateral described in any of the Collateral Documents, when financingstatements and other filings specified on Schedule 5.18 in appropriate form arefiled in the offices specified on Schedule 5.18, the Guarantee andSecurity Agreement shall constitute a fully perfected Lien on, and securityinterest in, all right, title and interest of the Loan Parties in suchCollateral and the proceeds thereof, as security for their respectiveObligations to the extent a Lien on such Collateral can be perfected by thefiling of a financing statement, by filings to be made in respect ofIntellectual Property in the United States Patent and Trademark Office and theUnited States Copyright Office or, in the case of the Pledged Equity andPledged Debt, by possession or control, in each case prior and superior inright to any other Person (except (x) in the case of Collateralconstituting Pledged Equity and Pledged Debt, nonconsensual Liens permitted by Section 7.01and (y) in the case of Collateral other than Pledged Equity and PledgedDebt, Liens permitted by Section 7.01).

 

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

 

90

----

 

# **ARTICLE VI**

# **AFFIRMATIVE COVENANTS**

#  

Solong as any Lender shall have any Commitment hereunder, any Loan or otherObligation hereunder which is accrued and payable shall remain unpaid orunsatisfied, or any Letter of Credit shall remain outstanding, each of Holdingsand the Company shall, and shall (except in the case of the covenants set forthin Sections 6.01, 6.02 and 6.03) cause each Restricted Subsidiary to:

 

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

 

### (a)  assoon as available, but in any event within ninety (90) days (or, in the case ofthe fiscal year ending June 30, 2007, one hundred twenty (120) days) afterthe end of each fiscal year of the Company beginning with the fiscal yearending June 30, 2007, a consolidated balance sheet of the Company and itsconsolidated Subsidiaries as at the end of such fiscal year, and the relatedconsolidated statements of income or operations, stockholders’ equity and cashflows for such fiscal year, setting forth in each case in comparative form thefigures for the previous fiscal year, all prepared in accordance with GAAP,audited and accompanied by a report and opinion of an independent registeredpublic accounting firm of nationally recognized standing, which report andopinion shall be prepared in accordance with generally accepted auditingstandards and shall not be subject to any “going concern” or like qualificationor exception or any qualification or exception as to the scope of such audit;

###  

### (b)  assoon as available, but in any event within forty-five (45) days (or, in thecase of the fiscal quarter ending March 31, 2007, ninety (90) days) afterthe end of each of the first three (3) fiscal quarters of each fiscal yearof the Company, an unaudited consolidated balance sheet of the Company and itsconsolidated Subsidiaries (or, at the Company’s option, with respect to thefiscal quarter of the Company ending March 31, 2007, of each of Reader’sDigest and its consolidated Subsidiaries, WRC Media and its consolidatedSubsidiaries and Direct Holdings and its consolidated Subsidiaries) as at theend of such fiscal quarter, and the related unaudited (i) consolidatedstatements of income or operations for such fiscal quarter and for the portionof the fiscal year then ended and (ii) consolidated statements of cashflows for the portion of the fiscal year then ended, setting forth in each casein comparative form the figures for the corresponding fiscal quarter of theprevious fiscal year for the applicable entities and the corresponding portionof the previous fiscal year for the applicable entities, all certified by aResponsible Officer of the Company as fairly presenting in all materialrespects the consolidated financial condition, results of operations,stockholders’ equity and cash flows of the Company and its consolidatedSubsidiaries (or, at the Company’s option, with respect to the fiscal quarterof the Company ending March 31, 2007 or the corresponding fiscal quarter endedMarch 31, 2006, of each of Reader’s Digest and its consolidatedSubsidiaries, WRC Media and its consolidated Subsidiaries and Direct Holdingsand its consolidated Subsidiaries) in accordance with GAAP (other than thecomparative financial statements for the fiscal quarter ended March 31,2006 and the fiscal year ended June 30, 2006), subject only to normalyear-end audit adjustments and the absence of footnotes;

###  

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

 

91

----

 

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

###  

### (d)  simultaneouslywith the delivery of each set of consolidated financial statements referred toin Sections 6.01(a) and 6.01(b) above, the related consolidatingfinancial statements reflecting the adjustments necessary to eliminate theaccounts of Unrestricted Subsidiaries (if any) from such consolidated financialstatements.

###  

###### Notwithstanding theforegoing, the obligations in paragraphs (a) and (b) of this Section 6.01may be satisfied with respect to financial information of the Company and theRestricted Subsidiaries by furnishing (A) the applicable financialstatements of Holdings (or any direct or indirect parent of Holdings) or (B) theCompany’s or Holdings’ (or any direct or indirect parent thereof), asapplicable, Form 10-K or 10-Q, as applicable, filed with the SEC; *provided* that, with respect to each ofclauses (A) and (B), (i) to the extent such information relates toHoldings (or a parent thereof), such information is accompanied byconsolidating information that explains in reasonable detail the differencesbetween the information relating to Holdings (or such parent), on the one hand,and the information relating to the Company and the Restricted Subsidiaries ona standalone basis, on the other hand and (ii) to the extent suchinformation is in lieu of information required to be provided under Section 6.01(a),such materials are accompanied by a report and opinion of an independentregistered public accounting firm of nationally recognized standing, whichreport and opinion shall be prepared in accordance with generally accepted auditingstandards and shall not be subject to any “going concern” or like qualificationor exception or any qualification or exception as to the scope of such audit.

######  

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

 

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

###  

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

###  

### (c)  promptlyafter the same are publicly available, copies of all annual, quarterly andcurrent reports and registration statements which the Company files with theSEC or with any Governmental Authority that may be substituted therefor (otherthan amendments to any registration statement (to the extent such registrationstatement, in the form it became effective, is delivered), exhibits to anyregistration statement and, if applicable, any registration statement on 

 

92

----

 

Form S-8) and in any casenot otherwise required to be delivered to the Administrative Agent pursuanthereto;

###  

### (d)  promptlyafter the furnishing thereof, copies of any material requests or materialnotices received by any Loan Party (other than in the ordinary course ofbusiness) or material statements or material reports furnished to any holder ofdebt securities of any Loan Party or of any of its Subsidiaries pursuant to theterms of the Senior Subordinated Note Indenture or any other Junior FinancingDocumentation in a principal amount greater than the Threshold Amount or to anyholder of preferred equity securities of any Loan Party and not otherwiserequired to be furnished to the Lenders pursuant to any other clause of this Section 6.02;

###  

### (e)  togetherwith the delivery of each Compliance Certificate pursuant to Section 6.02(b) requiredto be delivered concurrently with the delivery of financial statements referredto in Section 6.01(a), (i) a certificate of a Responsible Officer ofthe Company (x) setting forth the information required pursuant to thePerfection Certificate or confirming that there has been no change in suchinformation since the date of the Perfection Certificate delivered on theClosing Date or the date of the most recent certificate delivered pursuant tothis Section and (y) identifying, based on Collateral owned, and Lawsin effect, as of the date of such certificate, all Uniform Commercial Codefinancing statements (including fixture filings, as applicable) or otherappropriate filings, recordings or registrations, including all refilings,rerecordings and reregistrations, containing a description of the Collateralthat will be required to be filed of record within the 18 months following thedate of such certificate, in each governmental, municipal or other appropriateoffice in each jurisdiction identified pursuant to clause (x) above to theextent necessary and required under the Collateral Documents to protect andperfect the security interests under the Collateral Documents for a period ofnot less than 18 months after the date of such certificate (except as notedtherein with respect to any continuation statements to be filed within suchperiod), (ii) a reasonably detailed calculation of Excess Cash Flow forsuch fiscal year, (iii) a description of any change in the status of aSubsidiary as a Restricted or an Unrestricted Subsidiary as of the date ofdelivery of such Compliance Certificate and (iv) a description of anychange in the status of any Subsidiary as a Foreign Immaterial Subsidiary as ofthe date of delivery of such Compliance Certificate; and

###  

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

###  

Documentsrequired to be delivered pursuant to Section 6.01(a) or (b) or Section 6.02(c) or(d) (to the extent any such documents are included in materials otherwisefiled with the SEC) may be delivered electronically and if so delivered, shallbe deemed to have been delivered on the date (i) on which the Companyposts such documents, or provides a link thereto on the Company’s website onthe Internet at the website address listed on Schedule 10.02; (ii) on whichsuch documents are posted on the Company’s behalf on IntraLinks/IntraAgency oranother relevant website, if any, to which each Lender and the AdministrativeAgent have access (whether a commercial, third-party website or whethersponsored by the Administrative Agent); or (iii) such documents arepublicly available on the SEC’s website pursuant to the SEC’s EDGAR system; *provided* that:  (i) upon written request by theAdministrative Agent, the Company shall deliver paper copies of such documentsto the Administrative Agent for further distribution to each Lender until awritten request to cease delivering paper copies is given by the AdministrativeAgent and (ii) the Company shall notify (which may be by facsimile orelectronic mail) the Administrative Agent of the posting of any such documentsand provide to the 

 

93

----

 

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

 

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

 

### (a)  ofthe occurrence of any continuing Default; and

###  

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

###  

Eachnotice pursuant to this Section shall be accompanied by a writtenstatement of a Responsible Officer of the Company (x) that such notice isbeing delivered pursuant to Section 6.03(a) or (b) (asapplicable) and (y) setting forth details of the occurrence referred totherein and stating what action the Company has taken and proposes to take withrespect thereto.

 

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

 

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

 

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

 

94

----

 

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

 

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

 

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

 

SECTION 6.10.  Covenant to Guarantee Obligations andGive Security.  At the Company’s expense, take all actionreasonably requested by the Administrative Agent to ensure that the Collateraland Guarantee Requirement continues to be satisfied, including:

 

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

###  

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

 

95

----

 

##### (A)  causeeach such Restricted Subsidiary that is required to become a Guarantor underthe Collateral and Guarantee Requirement or becomes a Guarantor to furnish tothe Administrative Agent a description of the Material Real Property owned bysuch Restricted Subsidiary, in detail reasonably satisfactory to theAdministrative Agent;

#####  

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

#####  

##### (C)  (x) causeeach such Restricted Subsidiary that is required to become a Guarantor pursuantto the Collateral and Guarantee Requirement or becomes a Guarantor to deliverany and all certificates representing Equity Interests (to the extentcertificated) that are required to be pledged pursuant to the Collateral andGuarantee Requirement, accompanied by undated stock powers or other appropriateinstruments of transfer executed in blank and any instruments evidencing theintercompany Indebtedness held by such Restricted Subsidiary and required to bepledged pursuant to the Collateral Documents, indorsed in blank to theAdministrative Agent and (y) cause each direct parent of such RestrictedSubsidiary (if such parent is a Borrower or is required to be a Guarantorpursuant to the Collateral and Guarantee Requirement or becomes a Guarantor) todeliver any and all certificates representing the outstanding Equity Interests(to the extent certificated) of such Restricted Subsidiary that are required tobe pledged pursuant to the Collateral and Guarantee Requirement, accompanied byundated stock powers or other appropriate instruments of transfer executed inblank and any instruments evidencing the intercompany Indebtedness issued bysuch Restricted Subsidiary and required to be pledged in 

 

96

----

 

##### accordancewith the Collateral Documents, indorsed in blank to the Administrative Agent;

#####  

##### (D)  takeand cause such Restricted Subsidiary and each direct or indirect parent of suchRestricted Subsidiary to take whatever action (including the recording ofMortgages, the filing of Uniform Commercial Code financing statements, deliveryof stock and membership interest certificates, delivery of promissory notesduly endorsed in favor of the Administrative Agent, and the execution,delivery, filing and recording of any such other documents, statements,assignments, instruments, agreements or other papers) may be reasonablyrequested by the Administrative Agent to vest in the Administrative Agent (orin any representative of the Administrative Agent designated by it) valid Liensrequired by the Collateral and Guarantee Requirement, enforceable against allthird parties in accordance with their terms, except as such enforceability maybe limited by Debtor Relief Laws and by general principles of equity;

#####  

##### (E)  causeeach such Restricted Subsidiary that is required to become a Guarantor underthe Collateral and Guarantee Requirement to Guarantee the Obligations; and

#####  

##### (F)  causeeach such Restricted Subsidiary to deliver to the Administrative Agent copiesof its Organization Documents,

#####  

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

####  

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

####  

### (b)  afterthe Closing Date, concurrently with the acquisition of any Material RealProperty by any Loan Party and such Material Real Property shall not already besubject to a perfected Lien pursuant to the Collateral and GuaranteeRequirement, the Company shall give notice thereof to the Administrative Agentand promptly thereafter shall cause such assets to be subjected to a Lien tothe extent and at such times as shall be required by the Collateral andGuarantee Requirement and the Collateral Documents, as the case may be, andwill take, or cause the relevant Loan Party to take, such actions and at suchtimes as shall be reasonably requested by the Administrative Agent to grant andperfect or record such Lien, including, as applicable, the actions referred toin Section 6.12(b).

###  

SECTION 6.11.  Compliance with Environmental Laws. Except, in each case, to the extent that the failure to do so could notreasonably be expected to have, individually or in the aggregate, a MaterialAdverse Effect:  (a) comply, andtake all reasonable actions to cause all lessees and other Persons operating oroccupying its properties to comply, with all applicable 

 

97

----

 

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

 

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

###  

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

###  

#### (i)  evidencethat counterparts of any such Mortgage has been duly executed, acknowledged anddelivered and is in form suitable for filing or recording in all filing orrecording offices that the Administrative Agent may deem reasonably necessaryor desirable in order to create a valid and subsisting perfected Lien on theproperty and/or rights described therein in favor of the Administrative Agentfor the benefit of the Secured Parties and that all filing and recording taxesand fees have been paid or otherwise provided for in a manner reasonablysatisfactory to the Administrative Agent;

####  

#### (ii)  fullypaid American Land Title Association Lender’s Extended Coverage title insurancepolicies or the equivalent or other form available in each applicablejurisdiction (the “**Mortgage Policies**”)in form and substance, with endorsements and in amount, reasonably acceptableto the Administrative Agent (not to exceed the value of the real properties coveredthereby), issued, coinsured and reinsured by title insurers reasonablyacceptable to the Administrative Agent, insuring the Mortgages to be validsubsisting Liens on the property described therein, free and clear of alldefects and encumbrances except for minor defects in title that do notmaterially interfere with the Loan Party’s ability to conduct business andsubject to Liens permitted by Section 7.01, and providing for such otheraffirmative insurance (including endorsements for future advances under theLoan Documents) and such coinsurance and direct access reinsurance as theAdministrative Agent may reasonably request;

####  

#### (iii)  opinionsof local counsel for the Loan Parties in states in which the real propertiesare located, with respect to the enforceability and perfection of any suchMortgage and any related fixture filings in form and substance reasonablysatisfactory to the Administrative Agent; and

####  

#### (iv)  suchother evidence that all other actions that the Administrative Agent mayreasonably deem necessary or desirable in order to create valid and subsistingLiens on the property described in each such Mortgage has been taken.

 

98

----

 

SECTION 6.13.  Use of Proceeds. Apply the proceeds of the Term Loans, Revolving Credit Loans and SwingLine Loans and the Letters of Credit solely to the uses described in the fourthparagraph of the preliminary statements to this Agreement and in the lastsentence of Section 2.05(b)(iii).

 

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

 

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

 

SECTION 6.16.  Ownership of Overseas Borrowers.  Eachof the Overseas Borrowers shall, at all times, be a direct or indirectSubsidiary of the Company.

 

SECTION 6.17.  Post-Closing Covenants.  (a)  Within90 days following the Closing Date (or such longer period as may be reasonablyacceptable to the Administrative Agent), (i) the Company will enter into,and cause W.A. Publications, LLC to enter into, a pledge agreement under thelaws of Australia in form and substance reasonably satisfactory to theAdministrative Agent and provide legal opinions reasonably satisfactory to theAdministrative Agent with respect to the pledge of the outstanding EquityInterests (limited, with respect to outstanding voting Equity Interests, to65%) in The Reader’s Digest Assoc. Pty. Limited and (ii) the Company willenter into a pledge agreement under the laws of France in form and substancereasonably satisfactory to the Administrative Agent and provide legal opinionsreasonably satisfactory to the Administrative Agent with respect to the pledgeof the outstanding Equity Interests (limited, with respect to outstandingvoting Equity Interests, to 65%) in Selection du Reader’s Digest S.A.

 

### (b)  Within90 days following the Closing Date (or such longer period as may be reasonablyacceptable to the Administrative Agent), (i) the German Borrower willenter into, and cause each of its Overseas Guarantors to enter into (and theCompany shall cause the direct parent entity of the German Borrower to enterinto, if such direct parent entity is a Foreign Subsidiary), 

 

99

----

 

foreign law security agreementsand pledge agreements and (in the case of such Overseas Guarantors and thedirect parent entity of the German Borrower, if such Person is a ForeignSubsidiary) Overseas Guarantees, in each case in form and substance reasonablysatisfactory to the Administrative Agent, and provide legal opinions reasonablysatisfactory to the Administrative Agent with respect thereto, in each case tothe extent required to satisfy the Collateral and Guarantee Requirement underclauses (c), (e) and (f) thereof, and (ii) each of the Companyand any U.S. Guarantor that directly owns Equity Interests in a Subsidiaryorganized under the laws of Germany (other than the German Borrower) will enterinto a foreign law pledge agreement with respect to such Equity Interests, ineach case in form and substance reasonably satisfactory to the AdministrativeAgent, and provide legal opinions reasonably satisfactory to the Administrative Agent with respect thereto, ineach case to the extent required to satisfy the Collateral and GuaranteeRequirement under clauses (d) and (f) thereof.

###  

### (c)  Within30 days following the Closing Date (or such longer period as may be reasonablyacceptable to the Administrative Agent), the Company will enter into a pledgeagreement under the laws of the United Kingdom in form and substance reasonablysatisfactory to the Administrative Agent and provide legal opinions reasonablysatisfactory to the Administrative Agent with respect to the pledge of theoutstanding Equity Interests (limited, with respect to outstanding votingEquity Interests, to 65%) in The Reader’s Digest Association Limited.

###  

### (d)  Within60 days following the Closing Date (or such longer period as may be reasonablyacceptable to the Administrative Agent), deliver to the Administrative Agentany and all certificates representing Equity Interests of Das Beste ausReader’s Digest AG, accompanied by undated stock powers or other appropriateinstruments of transfer executed in blank, in each case to the extent requiredto satisfy the Collateral and Guarantee Requirement under clause (d) thereof.

###  

# **ARTICLE VII**

# **NEGATIVE COVENANTS**

#  

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

 

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

 

### (a)  Lienspursuant to any Loan Document;

###  

### (b)  Liensexisting on the date hereof and listed on Schedule 7.01(b) and anymodifications, replacements, renewals or extensions thereof; *provided* that (i) the Lien does notextend to any additional property other than (A) after-acquired propertythat is affixed or incorporated into the property covered by such Lien orfinanced by Indebtedness permitted under Section 7.03, and (B) proceedsand products thereof, and (ii) the renewal, extension or refinancing ofthe obligations secured or benefited by such Liens is permitted by Section 7.03;

###  

### (c)  Liensfor taxes, assessments or governmental charges which are not overdue for aperiod of more than thirty (30) days or which are being contested in good faithand by appropriate 

 

100

----

 

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

###  

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

###  

### (e)  (i) Liens,pledges or deposits in the ordinary course of business in connection withworkers’ compensation, unemployment insurance and other social securitylegislation and (ii) Liens, pledges and deposits in the ordinary course ofbusiness securing liability for premiums or reimbursement or indemnificationobligations of (including obligations in respect of letters of credit or bankguarantees for the benefit of) insurance carriers providing insurance toHoldings, the Company or any Restricted Subsidiary;

###  

### (f)  Liensor deposits (including deposits made to satisfy statutory or other legalobligations in connection with sweepstakes or similar contests) to secure theperformance of bids, trade contracts, governmental contracts, tenders,statutory bonds and leases (other than Indebtedness for borrowed money andCapitalized Leases), statutory obligations, surety, stay, customs and appealbonds, performance bonds and other obligations of a like nature (includingthose to secure health, safety and environmental obligations) incurred in theordinary course of business;

###  

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

###  

### (h)  Lienssecuring judgments, decrees, attachments or awards for the payment of money notconstituting an Event of Default under Section 8.01(h);

###  

### (i)  Lienssecuring Indebtedness permitted under Section 7.03(e); *provided* that (i) such Liens attachconcurrently with or within two hundred and seventy (270) days after theacquisition, repair, replacement, construction or improvement (as applicable)of the property subject to such Liens, (ii) such Liens do not at any timeencumber any property except for accessions to such property other than theproperty financed by such Indebtedness and the proceeds and the productsthereof and (iii) with respect to Capitalized Leases, such Liens do not atany time extend to or cover any assets (except for accessions to such assets)other than the assets subject to such Capitalized Leases; *provided further* that individualfinancings of equipment provided by one lender may be cross collateralized toother financings of equipment provided by such lender;

###  

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

 

101

----

 

### (k)  Liensin favor of customs and revenue authorities arising as a matter of law tosecure payment of customs duties in connection with the importation of goods inthe ordinary course of business;

###  

### (l)  Liens(i) of a collection bank arising under Section 4-210 of the UniformCommercial Code on items in the course of collection, (ii) attaching tocommodity trading accounts or other commodities brokerage accounts incurred inthe ordinary course of business; and (iii) in favor of a bankinginstitution arising as a matter of law encumbering deposits (including theright of set-off);

###  

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

###  

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

###  

### (o)  Lienssecuring Indebtedness permitted under Section 7.03(d) (i) of theCompany or a Restricted Subsidiary in favor of a Loan Party and (ii) ofany Restricted Subsidiary that is not a Loan Party in favor of any otherRestricted Subsidiary that is not a Loan Party;

###  

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

###  

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

###  

### (r)  Liensarising out of conditional sale, title retention, consignment or similararrangements for sale of goods entered into by the Company or any of theRestricted Subsidiaries in the ordinary course of business permitted by thisAgreement;

###  

### (s)  Liensdeemed to exist in connection with Investments in repurchase agreements under Section 7.02;

 

102

----

 

 

### (t)  Liensencumbering reasonable customary initial deposits and margin deposits andsimilar Liens attaching to commodity trading accounts or other brokerageaccounts incurred in the ordinary course of business and not for speculativepurposes;

###  

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

###  

### (v)  Lienssolely on any cash earnest money deposits made by the Company or any of theRestricted Subsidiaries in connection with any letter of intent or purchaseagreement permitted hereunder;

###  

### (w)  (i) Liensplaced upon the Equity Interests of any Restricted Subsidiary acquired pursuantto a Permitted Acquisition to secure Indebtedness incurred pursuant to Section 7.03(g) inconnection with such Permitted Acquisition and (ii) Liens placed upon theassets of such Restricted Subsidiary and any of its Subsidiaries to secure aGuarantee by such Restricted Subsidiary and its Subsidiaries of any suchIndebtedness incurred pursuant to Section 7.03(g);

###  

### (x)  groundleases in respect of real property on which facilities owned or leased by theCompany or any of its Subsidiaries are located and other Liens affecting theinterest of any landlord (and any underlying landlord) of any real propertyleased by the Company or any Restricted Subsidiary;

###  

### (y)  Lienson equipment (including printing presses and data-processing equipment) ownedby the Company or any Restricted Subsidiary and located on the premises of anysupplier and used in the ordinary course of business; and

###  

### (z)  otherLiens securing obligations, including Indebtedness, outstanding in an aggregateprincipal amount not to exceed $100,000,000.

###  

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

 

### (a)  Investmentsby the Company or a Restricted Subsidiary in cash and assets that were CashEquivalents when such Investment was made;

###  

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

###  

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

 

103

----

 

### Company or any RestrictedSubsidiary (A) in any Restricted Subsidiary; *provided* that the aggregate amount of such Investments inRestricted Subsidiaries that are not Loan Parties (together with the aggregateconsideration paid in respect of Permitted Acquisitions of Persons that do notbecome Loan Parties pursuant to Section 7.02(i)(B)) shall not exceed (x) $350,000,000for the period from the Closing Date to the first anniversary of the ClosingDate, (y) $400,000,000 for the period from the Closing Date to the secondanniversary of the Closing Date and (z) $500,000,000 for the period fromthe Closing Date to the Maturity Date with respect to the Term Loans (in eachcase, net of any return representing a return of capital in respect of any suchInvestment), (B) in any Foreign Subsidiary that is a Loan Party,consisting of the contribution of Equity Interests of any other ForeignSubsidiary held directly by the Company or such Restricted Subsidiary inexchange for Indebtedness, Equity Interests or a combination thereof of theForeign Subsidiary to which such contribution is made, (C) in any ForeignSubsidiary, constituting an exchange of Equity Interests of such ForeignSubsidiary for Indebtedness of such Foreign Subsidiary or (D) constitutingGuarantees of Indebtedness or other monetary obligations of ForeignSubsidiaries owing to any Loan Party; *provided*that any Indebtedness incurred by a Loan Party pursuant to Section 7.03(h)(i)(B) tofinance a Permitted Acquisition and loaned, advanced or contributed to aRestricted Subsidiary that is not a Loan Party to consummate such PermittedAcquisition (which, but for the operation of this proviso, would have beentreated as an Investment by such Loan Party pursuant to this clause (c) anda subsequent Investment by such Restricted Subsidiary that is not a Loan Partypursuant to Section 7.02(i)) shall be treated as a single Investment bysuch Restricted Subsidiary that is not a Loan Party pursuant to Section 7.02(i);

###  

### (d)  Investmentsconsisting of extensions of credit in the nature of accounts receivable ornotes receivable arising from the grant of trade credit in the ordinary courseof business, and Investments received in satisfaction or partial satisfactionthereof from financially troubled account debtors and other credits tosuppliers in the ordinary course of business;

###  

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

###  

### (f)  (i) Investmentsexisting or contemplated on the date hereof and set forth on Schedule 7.02(f) andany modification, replacement, renewal, reinvestment or extension thereof and (ii) Investmentsexisting on the date hereof by the Company or any Restricted Subsidiary in theCompany or any other Restricted Subsidiary and any modification, renewal orextension thereof; *provided* thatthe amount of the original Investment is not increased except by the terms ofsuch Investment or as otherwise permitted by this Section 7.02;

###  

### (g)  Investmentsin Swap Contracts permitted under Section 7.03;

###  

### (h)  promissorynotes and other non-cash consideration received in connection with Dispositionspermitted by Section 7.05;

###  

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

###  

104

----

 

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

#####  

##### (B)  theaggregate amount of consideration (cash and non-cash (other than QualifiedEquity Interests of Holdings and the Net Cash Proceeds of Permitted EquityIssuances after the Closing Date Not Otherwise Applied), including (i) thefair market value (on the date of such Permitted Acquisition) of all EquityInterests issued or transferred to the sellers thereof and (ii) allindemnities, earnouts and other contingent payment obligations to, and theaggregate amounts paid or to be paid under noncompete, consulting and otheraffiliated agreements with, the sellers thereof, all write-downs of propertyand reserves for liabilities with respect thereto and all assumptions of debt,liabilities and other obligations in connection therewith; *provided* that any such liability or futurepayment pursuant to clause (ii) above that is subject to a contingencyshall be considered consideration for a Permitted Acquisition for purposes ofthis clause (B) only to the extent of the amount of such liability orpayment, if any, required under GAAP to be reflected on the face of aconsolidated balance sheet of the Company or the reserve, if any, requiredunder GAAP to be established in respect thereof by the Company or any of itsRestricted Subsidiaries, in each case at the time such Permitted Acquisition isconsummated) paid in respect of acquisitions of Persons that do not become LoanParties (together with the aggregate amount of all Investments in RestrictedSubsidiaries that are not Loan Parties pursuant to Section 7.02(c)(iii))shall not exceed (x) $350,000,000 for the period from the Closing Date tothe first anniversary of the Closing Date, (y) $400,000,000 for the periodfrom the Closing Date to the second anniversary of the Closing Date and (z) $500,000,000for the period from the Closing Date to the Maturity Date with respect to theTerm Loans (in each case, net of any return representing a return of capital inrespect of any such Investment);

#####  

##### (C)  (1) immediately before and immediately after giving Pro Forma Effect toany such purchase or other acquisition (including any Indebtedness incurredpursuant thereto as permitted under Sections 7.03(e), (g) and (h)), noEvent of Default shall have occurred and be continuing and (2) immediatelyafter giving effect to such purchase or other acquisition, the Company and theRestricted Subsidiaries shall be in Pro Forma Compliance with all of the covenantsset forth in Section 7.10, such compliance to be determined on the basisof the financial information most recently delivered to the AdministrativeAgent and the Lenders pursuant to Section 6.01(a) or (b) asthough such purchase or other acquisition had been consummated as of the firstday of the fiscal period covered thereby and evidenced by a certificate fromthe Chief Financial Officer of the Company demonstrating such compliancecalculation in reasonable detail; and

#####  

##### (D)  theCompany shall have delivered to the Administrative Agent, on behalf of theLenders, no later than five (5) Business Days after the date on which anysuch purchase or other acquisition is consummated, a certificate of aResponsible Officer, in form and substance reasonably satisfactory to theAdministrative Agent, certifying that all of the requirements set forth in thisclause (i) have been satisfied or will be satisfied on or prior to theconsummation of such purchase or other acquisition;

#####  

### (j)  theTransaction;

###  

105

----

 

### (k)  Investmentsin the ordinary course of business consisting of Article 3 endorsementsfor collection or deposit and Article 4 customary trade arrangements withcustomers consistent with past practices;

###  

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

###  

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

###  

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

###  

### (o)  advancesof payroll payments to employees and advances to authors in the ordinary courseof business;

###  

### (p)  Investmentsto the extent that payment for such Investments is made solely with QualifiedEquity Interests of Holdings;

###  

### (q)  existingInvestments of a Restricted Subsidiary acquired after the Closing Date or of acorporation merged into the Company or merged or consolidated with a RestrictedSubsidiary in accordance with Section 7.04 after the Closing Date to theextent that such Investments were not made in contemplation of or in connectionwith such acquisition, merger or consolidation and were in existence on thedate of such acquisition, merger or consolidation;

###  

### (r)  Guaranteesby Holdings, the Company or any Restricted Subsidiary of leases (other thanCapitalized Leases) or of other obligations that do not constituteIndebtedness, in each case entered into in the ordinary course of business;

###  

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

###  

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

 

*provided* that no Investment in anUnrestricted Subsidiary that would otherwise be permitted under this Section 7.02shall be permitted hereunder to the extent that any portion of such Investmentis used to make any prepayments, redemptions, purchases, defeasances and otherpayments in respect of Junior Financings that would not be permitted by thisAgreement if made by the Company.

 

106

----

 

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

 

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

###  

### (b)  (i)(x) Indebtednessoutstanding on the date hereof and listed on Schedule 7.03(b) and (y) anyPermitted Refinancing thereof (to the extent (A) such PermittedRefinancing is incurred by the Person who is the obligor of the Indebtednesssubject to such Permitted Refinancing, (B) such Permitted Refinancing, ifincurred by a Person who is not a Loan Party, is in respect of Indebtednessoriginally incurred by a Person who is not a Loan Party, or (C) suchincurrence is otherwise permitted under this Section 7.03) and (ii) intercompanyIndebtedness outstanding on the Closing Date;

###  

### (c)  Guaranteesby Holdings, the Company and the Restricted Subsidiaries in respect ofIndebtedness otherwise permitted hereunder of the Company or any RestrictedSubsidiary to the extent constituting an Investment permitted under Section 7.02;*provided* that (A) no Guaranteeby any Restricted Subsidiary of the Senior Subordinated Notes or any otherJunior Financing shall be permitted unless such Restricted Subsidiary shallhave also provided a Guarantee of the Obligations substantially on the termsset forth in the Guarantee and Security Agreement, (B) if the Indebtednessbeing Guaranteed is subordinated to the Obligations, such Guarantee shall besubordinated to the Guarantee of the Obligations on terms at least as favorableto the Lenders (in the reasonable good faith determination of the Company) asthose contained in the subordination of such Indebtedness and (C) a LoanParty may not Guarantee Indebtedness of a Restricted Subsidiary that is not aLoan Party unless such Loan Party could have incurred such Indebtedness or suchGuarantee is subordinated to the Obligations on the terms set forth in Section 5.1(b) ofthe Guarantee and Security Agreement;

###  

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

###  

### (e)  (i) AttributableIndebtedness and other Indebtedness (including Capitalized Leases) financingthe acquisition, construction, repair, replacement or improvement of fixed orcapital assets; *provided* thatsuch Indebtedness is incurred concurrently with or within two hundred andseventy (270) days after the applicable acquisition, construction, repair,replacement or improvement, and (ii) any Permitted Refinancing of anyIndebtedness set forth in the immediately preceding clause (i); *provided* that the aggregate principalamount of all Indebtedness permitted under this Section 7.03(e) shallnot exceed $50,000,000 at any time outstanding;

###  

### (f)  Indebtednessin respect of Swap Contracts incurred in the ordinary course of business andnot for speculative purposes;

###  

### (g)  Indebtednessof the Company or any Restricted Subsidiary (i) assumed in connection withany Permitted Acquisition; *provided*that such Indebtedness is not incurred in contemplation of such PermittedAcquisition or (ii) incurred to finance a Permitted Acquisition, in eachcase, that is secured only by the assets or business (including any EquityInterests) acquired in the applicable Permitted Acquisition and so long as bothimmediately prior and after giving effect thereto, (A) no Event of Defaultshall exist or result therefrom, (B) the Company and the

###  

107

----

###  

### Restricted Subsidiaries willbe in Pro Forma Compliance**withthe covenants set forth in Section 7.10, such compliance to be determinedon the basis of the financial information most recently delivered to theAdministrative Agent and the Lenders pursuant to Section 6.01(a) or (b) asthough such Indebtedness had been assumed or incurred as of the first day ofthe fiscal period covered thereby and evidenced by a certificate from the ChiefFinancial Officer of the Company demonstrating such compliance calculation inreasonable detail, (C) the aggregate principal amount of such Indebtednessand all Indebtedness resulting from any Permitted Refinancing thereof at anytime outstanding pursuant to this paragraph (g) (together with theaggregate principal amount of Indebtedness incurred pursuant to Section 7.03(h)(y))does not exceed $150,000,000, and (D) the aggregate principal amount of Indebtednesspursuant to this clause (g) and clause (h) below assumed byRestricted Subsidiaries that are not Loan Parties in connection with orincurred by Restricted Subsidiaries that are not Loan Parties to financePermitted Acquisitions of Persons that do not become Loan Parties and allIndebtedness resulting from any Permitted Refinancing thereof shall not exceed (I) withrespect to any such Permitted Acquisition, 65% of the aggregate amount ofconsideration paid in respect thereof pursuant to Section 7.02(i)(B), and (II) withrespect to all such Permitted Acquisitions, (a) $175,000,000 for theperiod from the Closing Date to the first anniversary of the Closing Date, (b) $200,000,000for the period from the Closing Date to the second anniversary of the ClosingDate and (c) $250,000,000 for the period from the Closing Date to theMaturity Date with respect to the Term Loans;

###  

### (h)  (i) Indebtednessof the Company and the Restricted Subsidiaries (A) assumed in connectionwith any Permitted Acquisition; *provided*that such Indebtedness is not incurred in contemplation of such PermittedAcquisition, or (B) incurred to finance a Permitted Acquisition and (ii) anyPermitted Refinancing of the foregoing; *provided*,in each case that such Indebtedness and all Indebtedness resulting from anyPermitted Refinancing thereof (t) is unsecured, (u) both immediatelyprior and after giving effect thereto, (1) no Event of Default shall existor result therefrom and (2) the Company and the Restricted Subsidiarieswill be in Pro Forma Compliance with the covenants set forth in Section 7.10,such compliance to be determined on the basis of the financial information mostrecently delivered to the Administrative Agent and the Lenders pursuant to Section 6.01(a) or(b) as though such Indebtedness had been assumed or incurred as of thefirst day of the fiscal period covered thereby and evidenced by a certificatefrom the Chief Financial Officer of the Company demonstrating such compliancecalculation in reasonable detail, (v) subject to clause (y) below,matures after, and does not require any scheduled amortization or otherscheduled payments of principal prior to, the Maturity Date of the Term Loans(it being understood that such Indebtedness may have mandatory prepayment,repurchase or redemptions provisions satisfying the requirement of clause (w) hereof),(w) subject to clause (y) below, has terms and conditions (other thaninterest rate and other pricing terms, redemption and prepayment premiums andsubordination terms) which, when taken as a whole, are not materially lessfavorable to the Lenders (in the reasonable good faith determination of theCompany) than the terms and conditions of the Senior Subordinated NoteIndenture as of the Closing Date; *provided*that the Company shall deliver to the Administrative Agent, at least fiveBusiness Days prior to the incurrence of such Indebtedness, a certificate of aResponsible Officer, together with a reasonably detailed description of thematerial terms and conditions of such Indebtedness or drafts of thedocumentation relating thereto, stating that the Company has determined in goodfaith that such terms and conditions satisfy the foregoing requirement; (x) subjectto clause (y) below, with respect to such Indebtedness described in the immediatelypreceding clause (B), is incurred by the Company or a Subsidiary that is a LoanParty; (y) the aggregate principal amount of such Indebtedness incurredpursuant to clause (B) and all Indebtedness resulting from any PermittedRefinancing thereof, in each case which Indebtedness or RefinancingIndebtedness would

###  

108

----

###  

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

###  

### (i)  Indebtednessrepresenting deferred compensation to employees of the Company and theRestricted Subsidiaries incurred in the ordinary course of business;

###  

### (j)  Indebtednessconsisting of promissory notes issued by any Loan Party to current or formerofficers, directors and employees, their respective estates, spouses or formerspouses to finance the purchase or redemption of Equity Interests of Holdingspermitted by Section 7.06;

###  

### (k)  Indebtednessincurred by the Company or the Restricted Subsidiaries in a PermittedAcquisition, any other Investment expressly permitted hereunder or anyDisposition, in each case constituting indemnification obligations or obligationsin respect of purchase price or other similar adjustments;

###  

### (l)  Indebtednessconsisting of (i) obligations of Holdings, the Company or the RestrictedSubsidiaries under deferred compensation or other similar arrangements incurredby such Person in connection with the Transaction and Permitted Acquisitions orany other Investment expressly permitted hereunder or (ii) unsecuredIndebtedness at any time outstanding that is owed to the seller of a businessin a Permitted Acquisition to the extent constituting consideration for suchPermitted Acquisition, *provided*that (x) such Indebtedness shall not mature or amortize any principalprior to the date that is 91 days after the Maturity Date with respect to theTerm Loans, (y) unless, as of the last day of the immediately precedingTest Period (after giving Pro Forma Effect to the incurrence of suchIndebtedness) the Total Leverage Ratio is less than 4.00:1.00, the aggregateamount of such Indebtedness shall not exceed $25,000,000 outstanding at anytime and (z) such Indebtedness shall not be incurred in contemplation ofthe transfer by such seller to one or more financial institutions;

###  

### (m)  CashManagement Obligations and other Indebtedness in respect of netting services,overdraft protections and similar arrangements in each case in connection withdeposit accounts incurred in the ordinary course of business in connection withcash management activities;

###  

### (n)  Indebtednessin an aggregate principal amount not to exceed $200,000,000 at any timeoutstanding;

###  

### (o)  Indebtednessconsisting of (a) the financing of insurance premiums with the providersof such insurance or their affiliates or (b) take-or-pay obligationscontained in supply arrangements, in each case, in the ordinary course ofbusiness;

###  

109

----

 

### (p)  Indebtednessincurred by the Company or any of the Restricted Subsidiaries in respect ofletters of credit, bank guarantees, bankers’ acceptances or similar instrumentsissued or created in the ordinary course of business, including in respect ofworkers compensation claims, health, disability or other employee benefits orproperty, casualty or liability insurance or self-insurance or otherIndebtedness with respect to reimbursement-type obligations regarding workerscompensation claims; *provided*that any reimbursement obligations in respect thereof are reimbursed within 30days following the incurrence thereof;

###  

### (q)  obligationsin respect of performance, bid, appeal and surety bonds and performance andcompletion guarantees and similar obligations provided by the Company or any ofthe Restricted Subsidiaries or obligations in respect of letters of credit,bank guarantees or similar instruments related thereto, in each case in theordinary course of business or consistent with past practice;

###  

### (r)  Indebtednesssupported by a Letter of Credit, in a principal amount not to exceed the faceamount of such Letter of Credit;

###  

### (s)  anyExisting Notes not tendered and purchased on the Closing Date pursuant to theExisting Note Indenture;

###  

### (t)  Indebtednessin respect of the Senior Subordinated Notes and any Permitted Refinancingthereof;

###  

### (u)  ForeignJurisdiction Deposits;

###  

### (v)  Indebtednessof Holdings represented by the obligations of Holdings to make payments withrespect to the cancellation or repurchase of its common stock or stock optionsor warrants in respect of its common stock granted to management investors; *provided* that any payments with respect tosuch obligations shall be subject to Section 7.06;

###  

### (w)  tothe extent constituting Indebtedness, judgments, decrees, attachments or awardsnot constituting an Event of Default under Section 8.01(h);

###  

### (x)  tothe extent constituting Indebtedness, Indebtedness in respect of the HoldingsPIK Preferred;

###  

### (y)  Indebtednessresulting from an Investment permitted by clauses (e)(i), (m) or (p) ofSection 7.02; and

###  

### (z)  allpremiums (if any), interest (including post-petition interest), fees, expenses,charges and additional or contingent interest on obligations described in clauses(a) through (y) above.

###  

SECTION 7.04.  FundamentalChanges.  Merge, dissolve, liquidate,consolidate with or into another Person, or Dispose of (whether in onetransaction or in a series of transactions) all or substantially all of itsassets (whether now owned or hereafter acquired) to or in favor of any Person,except that:

 

### (a)  anyRestricted Subsidiary may merge with (i) the Company;*provided*that the Company shall be thecontinuing or surviving Person, or (ii) any one or more other Restricted Subsidiaries;*provided*that when any RestrictedSubsidiary that is a Borrower or a Loan Party is

###  

110

----

 

### merging with anotherRestricted Subsidiary, a Borrower or a Loan Party shall be the continuing orsurviving Person;

###  

### (b)  (i) anySubsidiary (other than a Borrower) that is not a Loan Party may merge orconsolidate with or into any other Subsidiary (other than a Borrower) that isnot a Loan Party, (ii) any Overseas Guarantor may merge or consolidatewith or into the applicable Overseas Borrower, provided that the OverseasBorrower shall be the continuing or surviving Person, and (iii) anySubsidiary (other than a Borrower) may liquidate or dissolve or change itslegal form if the Company determines in good faith that such action is in thebest interests of the Company and its Subsidiaries and is not materiallydisadvantageous to the Lenders;

###  

### (c)  anyRestricted Subsidiary may Dispose of all or substantially all of its assets(upon voluntary liquidation or otherwise) to the Company or to anotherRestricted Subsidiary; *provided*that if the transferor in such a transaction is a Guarantor or a Borrower, theneither (i) the transferee must either be the Company or a U.S. Guarantor, (ii) inthe case of a transfer by an Overseas Guarantor, the transferee must be theapplicable Overseas Borrower or another Overseas Guarantor of such OverseasBorrower, or (iii) to the extent constituting an Investment, suchInvestment must be a permitted Investment in or Indebtedness of a RestrictedSubsidiary which is not a Loan Party in accordance with Sections 7.02 and 7.03,respectively;

###  

### (d)  solong as no Event of Default exists or would result therefrom, the Company maymerge with any other Person; *provided*that (i) the Company shall be the continuing or surviving corporation or (ii) ifthe Person formed by or surviving any such merger or consolidation is not theCompany (any such Person, the “**SuccessorCompany**”), (A) the Successor Company shall be an entityorganized or existing under the laws of the United States, any state thereof,the District of Columbia or any territory thereof, (B) the SuccessorCompany shall expressly assume all the obligations of the Company under thisAgreement and the other Loan Documents to which the Company is a party pursuantto a supplement hereto or thereto in form reasonably satisfactory to theAdministrative Agent, (C) each U.S. Guarantor, unless it is the otherparty to such merger or consolidation, shall have by a supplement to theGuarantee and Security Agreement confirmed that its obligations thereundershall apply to the Successor Company’s obligations under this Agreement, (D) eachmortgagor of a Mortgaged Property, unless it is the other party to such mergeror consolidation, shall have by an amendment to or restatement of theapplicable Mortgage confirmed that its obligations thereunder shall apply tothe Successor Company’s obligations under this Agreement, and (E) theCompany shall have delivered to the Administrative Agent an officer’s certificateand an opinion of counsel, each stating that such merger or consolidation andsuch supplement to this Agreement or any Collateral Document comply with thisAgreement; *provided, further*,that if the foregoing are satisfied, the Successor Company will succeed to, andbe substituted for, the Company under this Agreement;

###  

### (e)  anyRestricted Subsidiary may merge with any other Person in order to effect anInvestment permitted pursuant to Section 7.02; *provided* that the continuing or surviving Person shall be aRestricted Subsidiary, which together with each of its Restricted Subsidiaries,shall have complied with the requirements of Section 6.10;

###  

### (f)  theCompany and the Restricted Subsidiaries may consummate the Acquisitions andMerger and any Permitted Acquisition; and

###  

### (g)  amerger, dissolution, liquidation, consolidation or Disposition, the purpose ofwhich is to effect a Disposition permitted pursuant to Section 7.05.

###  

111

----

 

SECTION 7.05.  Dispositions.  Make any Disposition or enter into anyagreement to make any Disposition, except:

 

### (a)  Dispositionsof obsolete or worn out property, whether now owned or hereafter acquired, inthe ordinary course of business and Dispositions of property no longer used oruseful in the conduct of the business of the Company and the RestrictedSubsidiaries;

###  

### (b)  Dispositionsof inventory and immaterial assets in the ordinary course of business;

###  

### (c)  Dispositionsof property to the extent that (i) such property is exchanged for creditagainst the purchase price of similar replacement property or (ii) theproceeds of such Disposition are promptly applied to the purchase price of suchreplacement property;

###  

### (d)  Dispositionsof property (i) to the Company or to a Restricted Subsidiary; *provided* that if the transferor of suchproperty is a Guarantor or the Company, the transferee thereof must either bethe Company or a Guarantor, or in the case of a transfer by an OverseasGuarantor, the applicable Overseas Borrower, (ii) to the extent suchtransaction constitutes an Investment permitted under Section 7.02, or (iii) consistingof Equity Interests of Foreign Subsidiaries to other Foreign Subsidiaries;

###  

### (e)  Dispositionspermitted by Sections 7.04 and 7.06 and Liens permitted by Section 7.01;

###  

### (f)  Dispositionsof cash and Cash Equivalents;

###  

### (g)  Dispositionsof accounts receivable in connection with the collection or compromise thereof;

###  

### (h)  leases, subleases, licenses or sublicenses (including the provision of softwareunder an open source license), in each case in the ordinary course of businessand which do not materially interfere with the business of Holdings, theCompany and the Restricted Subsidiaries;

###  

### (i)  transfersof property to the extent subject to Casualty Events;

###  

### (j)  Dispositionsof property not otherwise permitted under this Section 7.05; *provided* that (i) at the time of suchDisposition (other than any such Disposition made pursuant to a legally bindingcommitment entered into at a time when no Event of Default exists), no Event ofDefault shall exist or would result from such Disposition, (ii) theaggregate book value of all property Disposed of in reliance on this clause (j) shallnot exceed $300,000,000 in the aggregate and (iii) with respect to anyDisposition pursuant to this clause (j) for a purchase price in excess of$25,000,000, the Company or a Restricted Subsidiary shall receive not less than75% of such consideration in the form of cash or Cash Equivalents (in eachcase, free and clear of all Liens at the time received, other thannonconsensual Liens permitted by Section 7.01 and Liens permitted by Section 7.01(s) andclauses (i) and (ii) of Section 7.01(u)); *provided*, *however,*that for the purposes of this clause (iii), each of the following shall bedeemed to be cash:  (A) anyliabilities (as shown on the Company’s or such Restricted Subsidiary’s mostrecent balance sheet provided hereunder or in the footnotes thereto) of theCompany or such Restricted Subsidiary, other than liabilities that are by theirterms subordinated to the payment in cash of the Obligations, that are assumedby the transferee with respect to the applicable Disposition and for which theCompany and all of the Restricted Subsidiaries shall have been validly releasedby all applicable creditors in writing and (B) any securities received bythe Company or such Restricted Subsidiary from

###  

112

----

 

### such transferee that areconverted by the Company or such Restricted Subsidiary into cash (to the extentof the cash received) within 180 days following the closing of the applicableDisposition;

###  

### (k)  Dispositionslisted on Schedule 7.05(k);

###  

### (l)  Dispositionsof Investments in joint ventures to the extent required by, or made pursuant tocustomary buy/sell arrangements between, the joint venture parties set forth injoint venture arrangements and similar binding arrangements; and

###  

### (m)  theDisposition for consideration not in excess of €15,000,000 of the buildingowned by Verlag Das Beste GmbH located at Augustenstrasse 1, Stuttgart 70178.

###  

*provided* that any Disposition of anyproperty pursuant to this Section 7.05(j), (k) and (m) shall befor no less than the fair market value of such property at the time of suchDisposition.  To the extent anyCollateral is Disposed of as expressly permitted by this Section 7.05 toany Person other than Holdings, the Company or any Restricted Subsidiary, suchCollateral shall be sold free and clear of the Liens created by the LoanDocuments without further action by the Administrative Agent, and theAdministrative Agent shall be authorized to take any actions deemed appropriatein order to effect the foregoing.

 

SECTION 7.06.  RestrictedPayments.  Declare ormake, directly or indirectly, any Restricted Payment, except:

 

### (a)  eachRestricted Subsidiary may make Restricted Payments to the Company and to otherRestricted Subsidiaries (and, in the case of a Restricted Payment by anon-wholly owned Restricted Subsidiary, to the Company and any other RestrictedSubsidiary and to each other owner of Equity Interests of such RestrictedSubsidiary based on their relative ownership interests of the relevant class ofEquity Interests);

###  

### (b)  Holdings,the Company and each Restricted Subsidiary may declare and make dividendpayments or other distributions to the extent payable in the Equity Interests(other than Disqualified Equity Interests not otherwise permitted by Section 7.03or such dividend payments or distributions that would cause a Change ofControl) of such Person;

###  

### (c)  RestrictedPayments made to consummate the Transaction;

###  

### (d)  tothe extent constituting Restricted Payments, Holdings, the Company and theRestricted Subsidiaries may enter into and consummate transactions expresslypermitted by any provision of Section 7.04 or 7.08;

###  

### (e)  repurchasesof Equity Interests in Holdings, the Company or any Restricted Subsidiarydeemed to occur upon exercise of stock options or warrants if such EquityInterests represent a portion of the exercise price of such options orwarrants;

###  

### (f)  Holdingsmay pay (or make Restricted Payments to allow any direct or indirect parentthereof to pay) for the repurchase, retirement or other acquisition orretirement for value of Equity Interests of Holdings (or of any such parent ofHoldings) by any future, present or former employee or director of Holdings (orany direct or indirect parent of Holdings) or any of its Subsidiaries pursuantto any employee or director equity plan, employee or director stock option planor any other employee or director benefit plan or any agreement (including anystock subscription or shareholder agreement) with any employee or director ofHoldings or any of its

 

113

----

 

### Subsidiaries; *provided* that the aggregate amount ofpayments under this clause (f) shall not exceed $16,000,000 in any fiscalyear of the Company;

###  

### (g)  theCompany and its Restricted Subsidiaries may make Restricted Payments toHoldings:

###  

#### (i)  theproceeds of which will be used to pay (or to make Restricted Payments to allowany direct or indirect parent of Holdings to pay) the tax liability to eachrelevant jurisdiction in respect of consolidated, combined, unitary oraffiliated returns for the relevant jurisdiction of Holdings (or such parent)attributable to Holdings, the Company or its Subsidiaries;

####  

#### (ii)  consistingof Permitted Holdings Distributions plus an additional amount of $500,000 perfiscal year (which amount shall be available only to pay Holdings OperatingExpenses);

####  

#### (iii)  theproceeds of which shall be used by Holdings to make Restricted Paymentspermitted by Section 7.06(c), (d) or (f);

####  

#### (iv)  tofinance any Investment permitted to be made pursuant to Section 7.02; *provided* that (A) such RestrictedPayment shall be made substantially concurrently with the closing of suchInvestment and (B) Holdings shall, immediately following the closingthereof, cause (1) all property acquired (whether assets or EquityInterests) to be contributed to the Company or its Restricted Subsidiaries or (2) themerger (to the extent permitted in Section 7.04) of the Person formed oracquired into the Company or its Restricted Subsidiaries in order to consummatesuch Permitted Acquisition, in each case, in accordance with the requirementsof Section 6.10;

####  

### (h)  solong as immediately before and after giving effect to any such RestrictedPayment, no Default shall have occurred and be continuing or would result therefrom,the Company may make additional Restricted Payments to Holdings the proceeds ofwhich may be utilized by Holdings to make additional Restricted Payments, in anaggregate amount not to exceed the sum of (i) $100,000,000 plus (ii) theaggregate amount of the Net Cash Proceeds of Permitted Equity Issuances afterthe Closing Date (other than Permitted Equity Issuances made pursuant to Section 8.05)that have been contributed to the Company as common equity and Not OtherwiseApplied plus (iii) if, as of the last day of the immediatelypreceding Test Period (after giving Pro Forma Effect to such RestrictedPayment) the Total Leverage Ratio is less than 4.00:1.00, the amount ofCumulative Excess Cash Flow that is Not Otherwise Applied;

###  

### (i)  solong as immediately before and after giving effect to any such RestrictedPayment, no Default shall have occurred and be continuing or would resulttherefrom, the Company may make additional Restricted Payments in cash toHoldings the proceeds of which may be utilized by Holdings to make additionalRestricted Payments in cash if, as of the last day of the immediately precedingTest Period (after giving Pro Forma Effect to such Restricted Payment) theTotal Leverage Ratio is less than 4.00:1.00;

###  

### (j)  Holdingsmay declare and pay dividend payments or other distributions in respect of (i) HoldingsSenior PIK Preferred to the extent payable in additional shares of HoldingsSenior PIK Preferred or accrued and added to the liquidation preference thereofand (ii) Holdings Junior PIK Preferred to the extent payable in additionalshares of Holdings Junior PIK Preferred or accrued and added to the liquidationpreference thereof; and

###  

114

----

 

### (k)  theCompany may (i) declare and pay regular quarterly dividends requiredpursuant to the terms of the Company Preferred Stock and (ii) to theextent any holder of Company Preferred Stock exercises appraisal rights inrespect of its shares of Company Preferred Stock as a result of the Transaction,pay amounts required to be paid with respect thereto.

###  

SECTION 7.07.  Changein Nature of Business. Engage to any material extent in a line of business substantiallydifferent from those lines of business conducted by the Company and theRestricted Subsidiaries on the date hereof or any business reasonably related,ancillary or complementary thereto.

 

SECTION 7.08.  Transactionswith Affiliates.  Enter intoany transaction of any kind with any Affiliate of the Company, whether or notin the ordinary course of business, other than (a) transactions among LoanParties or any Restricted Subsidiary or any entity that becomes a RestrictedSubsidiary as a result of such transaction, (b) on terms substantially asfavorable to Holdings, the Company or such Restricted Subsidiary (in thereasonable good faith determination of the Company) as would be obtainable byHoldings, the Company or such Restricted Subsidiary at the time in a comparablearm’s-length transaction with a Person other than an Affiliate, (c) the Transactionand the payment of fees and expenses related to the Transaction, (d) theissuance of Qualified Equity Interests of Holdings and the granting ofregistration or other customary rights in connection therewith, (e) solong as immediately before and after giving effect thereto, no Event of Defaultshall have occurred and be continuing or would result therefrom, the payment ofmanagement fees to the Sponsors in an aggregate amount in any fiscal quarternot to exceed $1,875,000, (f) reimbursement of out-of-pocket costs andexpenses to the Sponsors and their Affiliates, (g) loans, Investments,Restricted Payments and other transactions to the extent otherwise permittedunder this Article VII, (h) employment, incentive, benefit andseverance arrangements between Holdings, the Company and the RestrictedSubsidiaries and their respective officers and employees in the ordinary courseof business, (i) payments by Holdings (and any direct or indirect parentthereof), the Company and the Restricted Subsidiaries pursuant to the taxsharing agreements among Holdings (and any such parent thereof), the Companyand the Restricted Subsidiaries on customary terms to the extent attributableto the ownership or operation of the Company and the Restricted Subsidiaries, (j) customarycompensation and benefits and reimbursement of reasonable out-of-pocket coststo, and indemnities provided on behalf of, directors, officers and employees ofHoldings, the Company and the Restricted Subsidiaries in the ordinary course ofbusiness to the extent attributable to the ownership or operation of Holdings,the Company and the Restricted Subsidiaries, (k) transactions pursuant topermitted agreements in existence on the Closing Date and set forth on Schedule7.08 or any amendment thereto to the extent such an amendment is not adverse tothe Lenders in any material respect, (l) dividends, redemptions andrepurchases permitted under Section 7.06, (m) customary payments byHoldings, the Company and any Restricted Subsidiaries to the Sponsors or theirAffiliates made for any financial advisory, financing, underwriting orplacement services or in respect of other investment banking activities(including in connection with acquisitions or divestitures) up to 5.0% of thevalue of transactions with respect to which such services are provided, (n) theexistence of, and the performance by Holdings, the Company or any RestrictedSubsidiary of its obligations under the terms of, any limited liability companyagreement, limited partnership or other organizational document orsecurityholders agreement (including any registration rights agreement orpurchase agreement related thereto) to which it is a party on the Closing Dateand which has been disclosed to the Lenders as in effect on the Closing Date, andsimilar organizational agreements (including any registration rights agreementsor purchase agreements related thereto) it may enter into thereafter, *provided* that the existence of, or theperformance by Holdings, the Company or any Restricted Subsidiary ofobligations under, any amendment to any such existing agreement or any suchsimilar agreement (including any

 

115

----

 

registrationrights agreements or purchase agreements related thereto) entered into after theClosing Date shall only be permitted by this Section 7.08(n) to theextent not more adverse to the interest of the Lenders in any material respectwhen taken as a whole (in the reasonable good faith determination of theCompany) than any of such documents and agreements as in effect on the ClosingDate, and (o) transactions with landlords, customers, clients, suppliers,authors, joint venture partners or purchasers or sellers of goods and services,in each case in the ordinary course of business and not otherwise prohibited bythis Agreement.

 

SECTION 7.09.  BurdensomeAgreements.  Enter intoor permit to exist any Contractual Obligation (other than this Agreement or anyother Loan Document) that limits the ability of any Restricted Subsidiary ofthe Company that is not a U.S. Guarantor to make Restricted Payments to theCompany or any U.S. Guarantor; *provided*that the foregoing shall not apply to Contractual Obligations which (i)(x) existon the date hereof and (to the extent not otherwise permitted by this Section 7.09)are listed on Schedule 7.09 hereto or (y) are set forth in any agreementevidencing any permitted amendment, renewal, extension or refinancing of anyContractual Obligation permitted by clause (x) so long as such amendment,renewal, extension or refinancing is not materially more restrictive (in thereasonable good faith determination of the Company) than such ContractualObligation, (ii) are binding on a Restricted Subsidiary at the time suchRestricted Subsidiary first becomes a Restricted Subsidiary of the Company, solong as such Contractual Obligations were not entered into solely incontemplation of such Person becoming a Restricted Subsidiary of the Company,or are imposed by any permitted amendment, renewal, extension or refinancing ofany such Contractual Obligation so long as the terms of any such amendment,renewal, extension or refinancing, taken as a whole, are not materially morerestrictive (in the reasonable good faith determination of the Company) thansuch Contractual Obligation; *providedfurther* that this clause (ii) shall not apply to ContractualObligations that are binding on a Person that becomes a Restricted Subsidiarypursuant to Section 6.15, (iii) represent Indebtedness of aRestricted Subsidiary of the Company which is not a Loan Party which ispermitted by Section 7.03, (iv) arise in connection with anyDisposition permitted by Section 7.05, (v) are customary provisionsin joint venture agreements and other similar agreements applicable to jointventures permitted under Section 7.02 and applicable solely to such jointventure entered into in the ordinary course of business, (vi) arecustomary restrictions in leases, subleases, licenses or asset sale agreementsotherwise permitted hereby so long as such restrictions relate to the assetssubject thereto, (vii) comprise restrictions imposed by any agreementrelating to secured Indebtedness permitted pursuant to 7.03(g) to theextent that such restrictions apply only to the Restricted Subsidiariesincurring or guaranteeing such Indebtedness, (viii) are customaryprovisions restricting subletting or assignment of any lease governing aleasehold interest of the Company or any Restricted Subsidiary, (ix) arecustomary provisions restricting assignment of any agreement entered into inthe ordinary course of business, (x) are restrictions on cash or otherdeposits or net worth imposed by customers under contracts entered into in theordinary course of business, and (xi) comprise restrictions imposed by a Lienpermitted by Section 7.01 restricting the transfer of the property subjectthereto.

 

SECTION 7.10.  FinancialCovenant.  Permit theTotal Leverage Ratio as of the last day of any Test Period (beginning with theTest Period ending on March 31, 2008) to be greater than the ratio setforth below opposite the last day of such Test Period:

 
| **Year** | ** ** | **March 31** | ** ** | **June 30** | ** ** | **September 30** | ** ** | **December 31** | ** ** |
|----------|------------|-------------------|------------|------------------|------------|-----------------------|------------|----------------------|------------|
|     |       |              |       |             |       |                  |       |                 |       |
| 2008     |       | 8.75:1.00         |       | 8.75:1.00        |       | 8.75:1.00             |       | 8.75:1.00            |       |
| 2009     |       | 8.75:1.00         |       | 8.00:1.00        |       | 8.00:1.00             |       | 8.00:1.00            |       |
| 2010     |       | 8.00:1.00         |       | 6.50:1.00        |       | 6.50:1.00             |       | 6.50:1.00            |       |

 

116

----

 
| **Year** | ** ** | **March 31** | ** ** | **June 30** | ** ** | **September 30** | ** ** | **December 31** |   |
|----------|------------|-------------------|------------|------------------|------------|-----------------------|------------|----------------------|--------|
|     |       |              |       |             |       |                  |       |                 |   |
| 2011     |       | 6.50:1.00         |       | 5.75:1.00        |       | 5.75:1.00             |       | 5.75:1.00            |   |
| 2012     |       | 5.75:1.00         |       | 5.00:1.00        |       | 5.00:1.00             |       | 5.00:1.00            |   |
| 2013     |       | 5.00:1.00         |       | 5.00:1.00        |       | 5.00:1.00             |       | 5.00:1.00            |   |

 

SECTION 7.11.  AccountingChanges.  Make any change in fiscalyear; *provided, however,* that (i) eachof WRC Media and its Subsidiaries may change its fiscal year to June 30and (ii) each of the Company and its Subsidiaries may, upon written noticeto the Administrative Agent, change its fiscal year to a calendar year or toany other fiscal year reasonably acceptable to the Administrative Agent, inwhich case, the Company and the Administrative Agent will, and are herebyauthorized by the Lenders to, make any adjustments to this Agreement that arenecessary to reflect such change in fiscal year.

 

SECTION 7.12.  Prepayments,Etc. of Indebtedness.  (a)  Prepay,redeem, purchase, defease or otherwise satisfy prior to the scheduled maturitythereof in any manner (it being understood that payments of regularly scheduledinterest shall be permitted) the Senior Subordinated Notes, any otherIndebtedness that is required to be subordinated to the Obligations pursuant tothe terms of the Loan Documents (collectively, “**Junior Financing**”) or the Holdings PIK Preferred or make anypayment in violation of any subordination terms of any Junior FinancingDocumentation, except (i) the refinancing thereof with the Net Cash Proceedsof any Indebtedness (to the extent such Indebtedness constitutes a PermittedRefinancing), to the extent not required to prepay any Loans or Facilitypursuant to Section 2.05(b), (ii) the conversion of any JuniorFinancing to Equity Interests (other than Disqualified Equity Interests) ofHoldings or any of its direct or indirect parents, (iii) the prepayment ofIndebtedness of the Company or any Restricted Subsidiary to the Company or anyRestricted Subsidiary to the extent permitted by the Collateral Documents, and (iv) solong as immediately before and after giving effect thereto, no Default shallhave occurred and be continuing or would result therefrom, prepayments,redemptions, purchases, defeasances and other payments in respect of JuniorFinancings or the Holdings PIK Preferred prior to their scheduled maturity inan aggregate amount not to exceed the sum of (x) $100,000,000 plus (y) theaggregate amount of the Net Cash Proceeds of Permitted Equity Issuances afterthe Closing Date (other than Permitted Equity Issuances made pursuant to Section 8.05)that (other than with respect to any prepayment, redemption, purchase,defeasance or other payment of the Holdings PIK Preferred) have beencontributed to the Company as common equity and Not Otherwise Applied plus(z) if, as of the last day of the immediately preceding Test Period (aftergiving Pro Forma Effect to such prepayment, redemption, purchase, defeasance orother payment) the Total Leverage Ratio is less than 4.00:1.00, the amount ofCumulative Excess Cash Flow that is Not Otherwise Applied.

 

### (b)  Amend,modify or change in any manner materially adverse to the interests of theLenders (i) any term or condition of any Junior Financing Documentation, (ii) anyterm or condition of the Company Preferred Stock or (iii) any OrganizationDocument of Holdings, the Company or any Restricted Subsidiary, in any casewithout the consent of the Administrative Agent.

###  

SECTION 7.13.  HoldingCompany.  In the case of Holdings,conduct, transact or otherwise engage in any business or operations other thanthose incidental to (i) its ownership of the Equity Interests in, and itsmanagement of, the Company, (ii) the maintenance of its legal existenceand its compliance with applicable Laws, (iii) the performance of the LoanDocuments, the documents in respect of the Holdings PIK Preferred, the PurchaseAgreement, the DH

 

117

----

 

AcquisitionAgreement, the WRC Acquisition Agreement and the other agreements contemplatedby the Purchase Agreement, the DH Acquisition Agreement or the WRC AcquisitionAgreement, (iv) any public offering of its common stock or any otherissuance of its Equity Interests not prohibited by Article VII, and (v) theissuance, acquisition or maintenance of any Indebtedness or Investments, or themaking of any Restricted Payments, that Holdings is expressly permitted toenter into or consummate under this Article VII; *provided* that, notwithstanding theforegoing, Holdings shall not own, lease, manage, acquire or otherwise operateany properties or assets (other than the ownership of Equity Interests in, andits management of, the Company, cash and Cash Equivalents and de minimisamounts of other assets incidental to the conduct of its business) or incur anymaterial consensual liabilities (other than liabilities related to itsexistence and permitted business and activities specified above).

 

SECTION 7.14.  CapitalExpenditures.  (a)  Commencing with the fiscal year ending June 30, 2008, make any Capital Expenditureexcept for Capital Expenditures not exceeding, in the aggregate for the Companyand the Restricted Subsidiaries during each fiscal year set forth below, theamount set forth opposite such fiscal year:

 
| **Fiscal Year** | ** ** | **Amount** | ** ** |
|----------------------|------------|------------|------------|
|                 |       |       |       |
| 2008                 |       | $          | 40,000,000 |   |
| 2009                 |       | $          | 40,000,000 |   |
| 2010                 |       | $          | 40,000,000 |   |
| 2011                 |       | $          | 45,000,000 |   |
| 2012                 |       | $          | 45,000,000 |   |
| 2013                 |       | $          | 45,000,000 |   |
| 2014                 |       | $          | 45,000,000 |   |

 

;*provided* that the amount ofCapital Expenditures permitted to be made in respect of any fiscal year shallbe increased (i) after the consummation of any Permitted Acquisition in anamount equal to 10% of the pro forma aggregate consolidated revenues of theAcquired Entity or Business so acquired during the fiscal year of such AcquiredEntity or Business beginning after such Permitted Acquisition and (ii) byan amount equal to the sum of (x) the aggregate amount of the Net CashProceeds of Permitted Equity Issuances after the Closing Date (other thanPermitted Equity Issuances made pursuant to Section 8.05) that have beencontributed to the Company as common equity and Not Otherwise Applied plus(y) if, as of the last day of the immediately preceding Test Period (aftergiving Pro Forma Effect to such Capital Expenditure) the Total Leverage Ratiois less than 4.00:1.00, the amount of Cumulative Excess Cash Flow that is NotOtherwise Applied.

 

### (b)  Notwithstandinganything to the contrary contained in clause (a) above, to the extent thatthe aggregate amount of Capital Expenditures made by the Company and theRestricted Subsidiaries in any fiscal year pursuant to Section 7.14(a) isless than the maximum amount of Capital Expenditures permitted by Section 7.14(a) withrespect to such fiscal year (without taking into consideration any amountsavailable pursuant to clause (ii) of the proviso thereto), the amount ofsuch difference (the “**Rollover Amount**”)****may be carried forward and used to makeCapital Expenditures in the next succeeding fiscal year; *provided* that Capital Expenditures in anyfiscal year shall be counted against the base amount set forth in Section 7.14(a) (withouttaking into consideration any amounts available pursuant to clause (ii) ofthe proviso thereto) with respect to such fiscal year prior to being countedagainst any Rollover Amount available with respect to such fiscal year.

###  

118

----

 

# **ARTICLE VIII**

# ** **

# **EVENTS OF DEFAULT AND REMEDIES**

#  

SECTION 8.01.  Eventsof Default.  Any of thefollowing shall constitute an Event of Default:

 

### (a)  *Non-Payment*.  Any Borrower or any other Loan Party fails topay (i) when and as required to be paid herein, any amount of principal ofany Loan, or (ii) within five (5) Business Days after the samebecomes due, any interest or any other amount (including Cash Collateral)payable hereunder or with respect to any other Loan Document; or

###  

### (b)  *Specific Covenants*.  (i) Any Group Member fails to perform orobserve (or to cause the performance or observance of) any term, covenant oragreement contained in any of Sections 6.03(a), 6.05(a) (solely withrespect to the existence of Holdings and the Company), 6.17 or Article VIIor (ii) Holdings fails to observe any term, covenant or agreementcontained in Section 7.13; *provided*that any Event of Default under Section 7.10 is subject to cure ascontemplated by Section 8.05; or

###  

### (c)  *Other Defaults*.  Any Group Member fails to perform or observe(or to cause the performance or observance of) any other covenant or agreement(not specified in Section 8.01(a) or (b) above) contained in anyLoan Document on its part to be performed or observed and such failurecontinues for thirty (30) days after written notice thereof by theAdministrative Agent to the Company; or

###  

### (d)  *Representations and Warranties.*  Any representation, warranty, certificationor statement of fact made or deemed made by or on behalf of the Company or anyother Loan Party herein, in any other Loan Document, or in any documentrequired to be delivered in connection herewith or therewith shall be incorrector misleading in any material respect when made or deemed made; or

###  

### (e)  *Cross-Default.*  Any Loan Party or any Restricted Subsidiary (A) failsto make any payment beyond the applicable grace period with respect thereto, ifany (whether by scheduled maturity, required prepayment, acceleration, demand,or otherwise) in respect of any Indebtedness (other than Indebtednesshereunder) having an aggregate principal amount of not less than the ThresholdAmount, or (B) fails to observe or perform any other agreement orcondition contained in any instrument or agreement evidencing or governing anysuch Indebtedness, or any other “default” (or like term) occurs, the effect ofwhich failure or other “default” is to cause, or to permit the holder orholders of such Indebtedness (or a trustee or agent on behalf of such holder orholders or beneficiary or beneficiaries) to cause, with the giving of notice ifrequired, such Indebtedness to become due (automatically or otherwise) prior toits stated maturity; *provided*that this clause (e)(B) shall not apply to secured Indebtedness thatbecomes due as a result of the voluntary sale or transfer of the property orassets securing such Indebtedness, if such sale or transfer is permittedhereunder and under the documents providing for such Indebtedness; or

###  

### (f)  *Insolvency Proceedings, Etc.*  Any Loan Party or any of the RestrictedSubsidiaries institutes or consents to the institution of any proceeding underany Debtor Relief Law, or makes an assignment for the benefit of creditors; orapplies for or consents to the appointment of any receiver, trustee, custodian,conservator, liquidator, rehabilitator, administrator, administrative receiveror similar officer for it or for all or any material part of its property; orany receiver,

###  

119

----

 

### trustee, custodian,conservator, liquidator, rehabilitator, administrator, administrative receiveror similar officer is appointed without the application or consent of suchPerson and the appointment continues undischarged or unstayed for sixty (60)calendar days; or any proceeding under any Debtor Relief Law relating to anysuch Person or to all or any material part of its property is institutedwithout the consent of such Person and continues undismissed or unstayed forsixty (60) calendar days, or an order for relief approving or ordering any ofthe foregoing is entered in any such proceeding; or

###  

### (g)  *Inability to Pay Debts*;*Attachment.*  (i) Any Loan Party or any RestrictedSubsidiary becomes generally unable or admits in writing its inabilitygenerally or fails generally to pay its debts in excess of the Threshold Amountas they become due, or (ii) any writ or warrant of attachment or executionor similar process is issued or levied against all or any material part of theproperty of the Loan Parties, taken as a whole, and is not released, vacated orfully bonded within sixty (60) days after its issue or levy; or

###  

### (h)  *Judgments.* There is entered against any Loan Party or any Restricted Subsidiary afinal judgment or order for the payment of money in an aggregate amountexceeding the Threshold Amount (to the extent due and payable and not coveredby independent third-party insurance as to which the insurer has been notifiedof such judgment or order and has not disputed coverage) and such judgment ororder shall not have been satisfied, vacated, discharged or stayed or bondedpending an appeal for a  period of sixty(60) consecutive days; or

###  

### (i)  *ERISA.* (i) An ERISA Event occurs with respect toa Pension Plan or Multiemployer Plan which has resulted or could reasonably beexpected to result in liability of any Loan Party under Title IV of ERISA in anaggregate amount which could reasonably be expected to result in a MaterialAdverse Effect, (ii) any Loan Party or any ERISA Affiliate fails to paywhen due, after the expiration of any applicable grace period, any installmentpayment with respect to its withdrawal liability under Section 4201 ofERISA under a Multiemployer Plan in an aggregate amount which could reasonablybe expected to result in a Material Adverse Effect, (iii) any Loan Partyor any of its Subsidiaries or ERISA Affiliates shall engage in any “prohibitedtransaction” (as defined in Section 406 of ERISA or Section 4975 ofthe Code) involving any Pension Plan which could reasonably be expected toresult in a Material Adverse Effect, or (iv) any other event or conditionshall occur or exist with respect to a Pension Plan which has resulted or couldreasonably be expected to result in a Material Adverse Effect; or

###  

### (j)  *Invalidity of Collateral Documents.* Any material provision of any CollateralDocument, at any time after its execution and delivery and for any reason otherthan as expressly permitted hereunder or thereunder (including as a result of atransaction permitted under Section 7.04 or 7.05) or as a result of actsor omissions by the Administrative Agent or any Lender or the satisfaction infull of all the Obligations, ceases to be in full force and effect; or any LoanParty contests in writing the validity or enforceability of any provision ofany Collateral Document; or any Loan Party denies in writing that it has any orfurther liability or obligation under any Collateral Document (other than as aresult of repayment in full of the Obligations and termination of the AggregateCommitments), or purports in writing to revoke or rescind any CollateralDocument; or

###  

### (k)  *Change of Control.*  There occurs any Change of Control; or

###  

### (l)  *Liens on Collateral.* Any Collateral Document shall for any reason(other than pursuant to the terms thereof including as a result of atransaction permitted under Section 7.04 or 7.05) cease to create a validand perfected lien, with the priority required by the Collateral

###  

120

----

 

### Documents, (or othersecurity purported to be created on the applicable Collateral) on and securityinterest in any material portion of the Collateral purported to be coveredthereby, subject to Liens permitted under Section 7.01, or any Loan Partyor Affiliate thereof shall so assert in writing, except to the extent that anysuch loss of perfection or priority results from the failure of theAdministrative Agent to maintain possession of certificates actually deliveredto it representing securities pledged under the Collateral Documents or to fileUniform Commercial Code continuation statements and except as to Collateralconsisting of real property to the extent that such losses are covered by alender’s title insurance policy and such insurer has not disputed coverage; or

###  

### (m)  *Junior Financing Documentation.*  Any of the Obligations of the Loan Partiesunder the Loan Documents for any reason shall cease to be “Senior Indebtedness”(or any comparable term) or “Senior Secured Financing” (or any comparable term)under, and as defined in the Senior Subordinated Note Indenture or in any otherJunior Financing Documentation.

###  

SECTION 8.02.  RemediesUpon Event of Default.  Ifany Event of Default occurs and is continuing, the Administrative Agent mayand, at the request of the Required Lenders, shall take any or all of thefollowing actions:

 

### (a)  declarethe commitment of each Lender to make Loans and any obligation of the L/CIssuers to make L/C Credit Extensions to be terminated, whereupon suchcommitments and obligation shall be terminated;

###  

### (b)  declarethe unpaid principal amount of all outstanding Loans, all interest accrued andunpaid thereon, and all other amounts owing or payable hereunder or under anyother Loan Document to be immediately due and payable, without presentment,demand, protest or other notice of any kind, all of which are hereby expresslywaived by the Borrowers;

###  

### (c)  requirethat the Company Cash Collateralize the L/C Obligations (in an amount equal tothe then Outstanding Amount thereof); and

###  

### (d)  exerciseon behalf of itself and the Lenders all rights and remedies available to it andthe Lenders under the Loan Documents or applicable Law;

###  

*provided* that upon the occurrence ofan actual or deemed entry of an order for relief with respect to the Companyunder the Bankruptcy Code of the United States, the obligation of each Lenderto make Loans and any obligation of the L/C Issuers to make L/C CreditExtensions shall automatically terminate, the unpaid principal amount of alloutstanding Loans and all interest and other amounts as aforesaid shallautomatically become due and payable, and the obligation of the Company to CashCollateralize the L/C Obligations as aforesaid shall automatically becomeeffective, in each case without further act of the Administrative Agent or anyLender.

 

SECTION 8.03.  Exclusionof Immaterial Subsidiaries.  Solely for the purpose of determining whethera Default has occurred under clause (f) or (g) of Section 8.01,any reference in any such clause to any Restricted Subsidiary or Loan Partyshall be deemed not to include any Restricted Subsidiary affected by any eventor circumstances referred to in any such clause that did not, as of the lastday of the most recent completed fiscal quarter of the Company, have assetswith a value in excess of 5% of the consolidated total assets of the Companyand the Restricted Subsidiaries and did not, as of the four quarter periodending on the last day of such fiscal quarter, have revenues exceeding 5% ofthe total revenues of the Company and the Restricted Subsidiaries (it beingagreed that all Restricted Subsidiaries affected by any event or circumstancereferred to

 

121

----

 

inany such clause shall be considered together, as a single consolidated RestrictedSubsidiary, for purposes of determining whether the condition specified aboveis satisfied).

 

SECTION 8.04.  Applicationof Funds.  After theexercise of remedies provided for in Section 8.02 (or after the Loans haveautomatically become immediately due and payable and the L/C Obligations haveautomatically been required to be Cash Collateralized as set forth in theproviso to Section 8.02), any amounts received on account of theObligations shall be applied by the Administrative Agent in the followingorder:

 

*First*, to payment of that portionof the Obligations constituting fees, indemnities, expenses and other amounts(other than principal and interest, but including Attorney Costs payable under Section 10.04and amounts payable under Article III) payable to the Administrative Agentin its capacity as such;

 

*Second*, to payment of that portionof the Obligations constituting fees, indemnities and other amounts (other thanprincipal and interest) payable to the Lenders (including Attorney Costspayable under Section 10.04 and amounts payable under Article III),ratably among them in proportion to the amounts described in this clause *Second* payable to them;

 

*Third*, to payment of that portionof the Obligations constituting accrued and unpaid interest on the Loans andL/C Borrowings, ratably among the holders of such Obligations in proportion tothe respective amounts described in this clause *Third* payable to them;

 

*Fourth*, to payment of that portionof the Obligations constituting unpaid principal of the Loans and L/CBorrowings, the termination value under Secured Hedge Obligations and CashManagement Obligations and to Cash Collateralize the portion of the L/CObligations comprised of the aggregate undrawn amount of Letters of Credit,ratably among the holders of such Obligations in proportion to the respectiveamounts described in this clause *Fourth*held by them;

 

*Fifth*, to the payment of allother Obligations of the Loan Parties that are due and payable to theAdministrative Agent and the other Secured Parties on such date, ratably basedupon the respective aggregate amounts of all such Obligations owing to theAdministrative Agent and the other Secured Parties on such date; and

 

*Last*, the balance, if any, afterall of the Obligations have been paid in full, to the Company or as otherwiserequired by Law.

 

Subjectto Section 2.03(c), amounts used to Cash Collateralize the aggregateundrawn amount of Letters of Credit pursuant to clause *Fourth* above shall be applied to satisfydrawings under such Letters of Credit as they occur.  If any amount remains on deposit as CashCollateral after all Letters of Credit have either been fully drawn or expired,such remaining amount shall be applied to the other Obligations, if any, in theorder set forth above and, if no Obligations remain outstanding, to theCompany.

 

Notwithstandinganything to the contrary in this Agreement, amounts received from any ForeignSubsidiary on account of the Obligations of any Foreign Subsidiary shall beapplied solely to the payment of Obligations of Foreign Subsidiaries.

 

122

----

 

 

SECTION 8.05.  Company’s Right to Cure.* *(a)   Notwithstandinganything to the contrary contained in Section 8.01, in the event thatHoldings and the Company fail to comply with the requirements of Section 7.10at the end of any fiscal quarter, at any time during the period beginning withthe first day of such fiscal quarter and ending on the expiration of thetwentieth (20th) day after the date on which financialstatements are required to be delivered with respect to the applicable fiscalquarter hereunder (the “**Cure Period**”),Holdings shall have the right to engage in a Permitted Equity Issuance for cashor otherwise receive cash contributions to the capital of Holdings (which, orthe cash proceeds of which, shall be contributed to the Company prior to theend of the Cure Period), and upon receipt by the Company of such amount in cash(the “**Cure Amount**”) to the extentNot Otherwise Applied, (i) to the extent the Cure Amount is applied toprepay Term Loans on or prior to the last day of the Cure Period, suchprepayment shall be deemed to have occurred prior to the end of such fiscalquarter and (ii) the Cure Amount shall be added to Consolidated EBITDA forpurposes of determining compliance with Section 7.10 for the last fiscalquarter of the four fiscal quarter period for which such failure to complywould have otherwise occurred (and future four fiscal quarter periods whichinclude such fiscal quarter).  If, aftergiving effect to the foregoing recalculation, the Company shall then be incompliance with the requirements of Section 7.10, the Company shall bedeemed to have satisfied the requirements of Section 7.10 as of therelevant date of determination with the same effect as though there had been nofailure to comply therewith at such date, and the applicable breach or defaultof Section 7.10 that would have otherwise occurred but for the prepaymentof the Term Loans pursuant to clause (i) above and/or the receipt by theCompany of the Cure Amount and the addition thereof to Consolidated EBITDApursuant to clause (ii) above shall be deemed not to have occurred for thepurposes of the Loan Documents.  Theparties hereby acknowledge that, other than as set forth in clause (i) above,this Section 8.05(a) may not be relied on for purposes of calculatingany financial ratios other than as applicable to Section 7.10 and shallnot result in any adjustment to any amounts other than the amount of theConsolidated EBITDA as referred to in this Section 8.05(a).

 

### (b)  Notwithstandinganything herein to the contrary, (i) in each period of four fiscalquarters, there shall be at least two (2) fiscal quarters in which no cureset forth in Section 8.05(a) is made and (ii) the Cure Amountshall be no greater than the amount required for purposes of complying with Section 7.10for the most recently completed four fiscal quarter period.

###  

SECTION 8.06.  CAM Exchange.  Onthe CAM Exchange Date, (i) the Commitments shall automatically and withoutfurther act be terminated in accordance with Section 8.02, (ii) theLenders shall automatically and without further act be deemed to have exchangedinterests in the Designated Obligations such that, in lieu of the interests ofeach Lender in the Designated Obligations under each Tranche in which it shallparticipate as of such date, such Lender shall own an interest equal to suchLender’s CAM Percentage in the Designated Obligations under each of theTranches and (iii) simultaneously with the deemed exchange of interestspursuant to clause (ii) above, the interests in the DesignatedObligations to be received in such deemed exchange shall, automatically andwith no further action required, be converted into the Dollar Amount,determined using the Exchange Rate calculated as of such date, of such amountand on and after such date all amounts accruing and owed to the Lenders inrespect of such Designated Obligations shall accrue and be payable in Dollarsat the rate otherwise applicable hereunder. Each Lender, each person acquiring a participation from any Lender ascontemplated by Section 10.07 and each Borrower hereby consents and agreesto the CAM Exchange.  Each of theBorrowers and the Lenders agrees from time to time to execute and deliver tothe Administrative Agent all such promissory notes and other instruments anddocuments as the Administrative Agent shall reasonably request to evidence andconfirm the respective interests and obligations of the Lenders after givingeffect to the CAM Exchange, and each Lender agrees to surrender any

 

123

----

 

promissorynotes originally received by it in connection with its Loans hereunder to theAdministrative Agent against delivery of any promissory notes so executed anddelivered; *provided* that thefailure of any Borrower to execute or deliver or of any Lender to accept anysuch promissory note, instrument or document shall not affect the validity oreffectiveness of the CAM Exchange.

 

Asa result of the CAM Exchange, on and after the CAM Exchange Date, each paymentreceived by the Administrative Agent pursuant to any Loan Document in respectof the Designated Obligations shall be distributed to the Lenders pro rata inaccordance with their respective CAM Percentages (to be redetermined as of eachsuch date of payment or distribution to the extent required by the nextparagraph below).

 

Inthe event that, on or after the CAM Exchange Date, the aggregate amount of theDesignated Obligations shall change as a result of the making of a disbursementunder a Letter of Credit by an L/C Issuer that is not reimbursed by theCompany, then (i) each Revolving Lender shall, in accordance with Section 2.03(c),promptly make its L/C Advance in respect of such Unreimbursed Amount (withoutgiving effect to the CAM Exchange), (ii) the Administrative Agent shallredetermine the CAM Percentages after giving effect to such disbursement andthe making of such L/C Advances and the Lenders shall automatically and withoutfurther act be deemed to have exchanged interests in the Designated Obligationssuch that each Lender shall own an interest equal to such Lender’s CAMPercentage in the Designated Obligations under each of the Tranches (and theinterests in the Designated Obligations to be received in such deemed exchangeshall, automatically and with no further action required, be converted into theDollar Amount of such amount in accordance with the first sentence of this Section 8.06),and (iii) in the event distributions shall have been made in accordancewith clause (i) of the preceding paragraph, the Lenders shall make such paymentsto one another as shall be necessary in order that the amounts received by themshall be equal to the amounts they would have received had each suchdisbursement and L/C Advance been outstanding on the CAM Exchange Date.  Each such redetermination shall be binding oneach of the Lenders and their successors and assigns and shall be conclusive,absent manifest error.

 

# **ARTICLE IX**

# **ADMINISTRATIVE AGENT AND OTHER AGENTS**

#  

Section 9.01.  Appointmentand Authorization of Agents.  (a)  Each Lender hereby irrevocablyappoints, designates and authorizes the Administrative Agent to take suchaction on its behalf under the provisions of this Agreement and each other LoanDocument and to exercise such powers and perform such duties as are expresslydelegated to it by the terms of this Agreement or any other Loan Document,together with such powers as are reasonably incidental thereto.  Notwithstanding any provision to the contrarycontained elsewhere herein or in any other Loan Document, the AdministrativeAgent shall have no duties or responsibilities, except those expressly setforth herein, nor shall the Administrative Agent have or be deemed to have anyfiduciary relationship with any Lender or participant, and no impliedcovenants, functions, responsibilities, duties, obligations or liabilitiesshall be read into this Agreement or any other Loan Document or otherwise existagainst the Administrative Agent. Without limiting the generality of the foregoing sentence, the use ofthe term “agent” herein and in the other Loan Documents with reference to anyAgent is not intended to connote any fiduciary or other implied (or express)obligations arising under agency doctrine of any applicable Law.  Instead, such term is used merely as a matterof market custom, and is intended to create or reflect only an administrativerelationship between independent contracting parties.

 

124

----

###  

### (b)  EachL/C Issuer shall act on behalf of the Lenders with respect to any Letters ofCredit issued by it and the documents associated therewith, and each such L/CIssuer shall have all of the benefits and immunities (i) provided to theAgents in this Article IX with respect to any acts taken or omissionssuffered by such L/C Issuer in connection with Letters of Credit issued by itor proposed to be issued by it and the applications and agreements for lettersof credit pertaining to such Letters of Credit as fully as if the term “Agent”as used in this Article IX and in the definition of “Agent-Related Person”included such L/C Issuer with respect to such acts or omissions, and (ii) asadditionally provided herein with respect to such L/C Issuer.

###  

### (c)  TheAdministrative Agent shall also act as the “collateral agent” under the LoanDocuments, and each of the Lenders (in its capacities as a Lender, Swing LineLender (if applicable), L/C Issuer (if applicable) and a potential Hedge Bank)hereby irrevocably appoints and authorizes the Administrative Agent to act asthe agent of (and to hold any security interest created by the CollateralDocuments for and on behalf of or on trust for) such Lender for purposes ofacquiring, holding and enforcing any and all Liens on Collateral granted by anyof the Loan Parties to secure any of the Secured Obligations, together withsuch powers and discretion as are reasonably incidental thereto.  In this connection, the Administrative Agent,as “collateral agent” (and any co-agents, sub-agents and attorneys-in-factappointed by the Administrative Agent pursuant to Section 9.02 forpurposes of holding or enforcing any Lien on the Collateral (or any portionthereof) granted under the Collateral Documents, or for exercising any rightsand remedies thereunder at the direction of the Administrative Agent), shall beentitled to the benefits of all provisions of this Article IX (including, Section 9.07,as though such co-agents, sub-agents and attorneys-in-fact were the “collateralagent” under the Loan Documents) as if set forth in full herein with respectthereto.

###  

Section 9.02.  Delegationof Duties.  The Administrative Agent may execute any ofits duties under this Agreement or any other Loan Document (including forpurposes of holding or enforcing any Lien on the Collateral (or any portionthereof) granted under the Collateral Documents or of exercising any rights andremedies thereunder) by or through agents, employees or attorneys-in-factincluding for the purpose of any Borrowings or payments in AlternativeCurrencies, such sub-agents as shall be deemed necessary by the AdministrativeAgent and shall be entitled to advice of counsel and other consultants orexperts concerning all matters pertaining to such duties.  The Administrative Agent shall not beresponsible for the negligence or misconduct of any agent or sub-agent orattorney-in-fact that it selects in the absence of gross negligence or willfulmisconduct (as determined in the final non-appealable judgment of a court ofcompetent jurisdiction).

 

Section 9.03.  Liabilityof Agents.  No Agent-Related Person shall (a) beliable for any action taken or omitted to be taken by any of them under or inconnection with this Agreement or any other Loan Document or the transactionscontemplated hereby (except for its own gross negligence or willful misconduct,as determined by the final judgment of a court of competent jurisdiction, inconnection with its duties expressly set forth herein), or (b) beresponsible in any manner to any Lender or participant for any recital,statement, representation or warranty made by any Loan Party or any officerthereof, contained herein or in any other Loan Document, or in any certificate,report, statement or other document referred to or provided for in, or receivedby the Administrative Agent under or in connection with, this Agreement or anyother Loan Document, or the validity, effectiveness, genuineness,enforceability or sufficiency of this Agreement or any other Loan Document, orthe perfection or priority of any Lien or security interest created orpurported to be created under the Collateral Documents, or for any failure ofany Loan Party or any other party to any Loan Document to perform itsobligations hereunder or thereunder.  NoAgent-Related Person shall be under any obligation to any Lender or participant

 

125

----

 

toascertain or to inquire as to the observance or performance of any of theagreements contained in, or conditions of, this Agreement or any other LoanDocument, or to inspect the properties, books or records of any Loan Party orany Affiliate thereof.

 

Section 9.04.  Relianceby Agents.  (a)  Each Agent shall be entitledto rely, and shall be fully protected in relying, upon any writing,communication, signature, resolution, representation, notice, consent,certificate, affidavit, letter, telegram, facsimile, telex or telephonemessage, electronic mail message, statement or other document or conversationbelieved by it to be genuine and correct and to have been signed, sent or madeby the proper Person or Persons, and upon advice and statements of legalcounsel (including counsel to any Loan Party), independent accountants andother experts selected by such Agent. Each Agent shall be fully justified in failing or refusing to take anyaction under any Loan Document unless it shall first receive such advice orconcurrence of the Required Lenders as it deems appropriate and, if it sorequests, it shall first be indemnified to its satisfaction by the Lendersagainst any and all liability and expense which may be incurred by it by reasonof taking or continuing to take any such action.  Each Agent shall in all cases be fullyprotected in acting, or in refraining from acting, under this Agreement or anyother Loan Document in accordance with a request or consent of the RequiredLenders (or such greater number of Lenders as may be expressly required herebyin any instance) and such request and any action taken or failure to actpursuant thereto shall be binding upon all the Lenders.

 

### (b)  Forpurposes of determining compliance with the conditions specified in Section 4.01,each Lender that has signed this Agreement shall be deemed to have consentedto, approved or accepted or to be satisfied with, each document or other matterrequired thereunder to be consented to or approved by or acceptable orsatisfactory to a Lender unless the Administrative Agent shall have receivednotice from such Lender prior to the proposed Closing Date specifying itsobjection thereto.

###  

Section 9.05.  Noticeof Default.  The Administrative Agent shall not be deemedto have knowledge or notice of the occurrence of any Default, except withrespect to defaults in the payment of principal, interest and fees required tobe paid to the Administrative Agent for the account of the Lenders, unless theAdministrative Agent shall have received written notice from a Lender or theCompany referring to this Agreement, describing such Default and stating thatsuch notice is a “notice of default.” The Administrative Agent will notify the Lenders of its receipt of anysuch notice.  The Administrative Agentshall take such action with respect to any Event of Default as may be directedby the Required Lenders in accordance with Article VIII; provided thatunless and until the Administrative Agent has received any such direction, theAdministrative Agent may (but shall not be obligated to) take such action, orrefrain from taking such action, with respect to such Event of Default as itshall deem advisable or in the best interest of the Lenders.

 

Section 9.06.  CreditDecision; Disclosure of Information by Agents.  Each Lender acknowledges thatno Agent-Related Person has made any representation or warranty to it, and thatno act by any Agent hereafter taken, including any consent to and acceptance ofany assignment or review of the affairs of any Loan Party or any Affiliatethereof, shall be deemed to constitute any representation or warranty by anyAgent-Related Person to any Lender as to any matter, including whetherAgent-Related Persons have disclosed material information in their possession.  Each Lender represents to each Agent that ithas, independently and without reliance upon any Agent-Related Person and basedon such documents and information as it has deemed appropriate, made its ownappraisal of and investigation into the business, prospects, operations,property, financial and other condition and creditworthiness of the LoanParties and their

 

126

----

 

respectiveSubsidiaries, and all applicable bank or other regulatory Laws relating to thetransactions contemplated hereby, and made its own decision to enter into thisAgreement and to extend credit to the Company and the other Loan Partieshereunder.  Each Lender also representsthat it will, independently and without reliance upon any Agent-Related Personand based on such documents and information as it shall deem appropriate at thetime, continue to make its own credit analysis, appraisals and decisions intaking or not taking action under this Agreement and the other Loan Documents,and to make such investigations as it deems necessary to inform itself as tothe business, prospects, operations, property, financial and other conditionand creditworthiness of the Company and the other Loan Parties.  Except for notices, reports and otherdocuments expressly required to be furnished to the Lenders by any Agentherein, such Agent shall not have any duty or responsibility to provide anyLender with any credit or other information concerning the business, prospects,operations, property, financial and other condition or creditworthiness of anyof the Loan Parties or any of their respective Affiliates which may come intothe possession of any Agent-Related Person.

 

Section 9.07.  Indemnificationof Agents.  Whether or not the transactions contemplatedhereby are consummated, the Lenders shall indemnify upon demand eachAgent-Related Person (to the extent not reimbursed by or on behalf of any LoanParty and without limiting the obligation of any Loan Party to do so), prorata, and hold harmless each Agent-Related Person from and against any and allIndemnified Liabilities incurred by it; *provided*that no Lender shall be liable for the payment to any Agent-RelatedPerson of any portion of such Indemnified Liabilities resulting from suchAgent-Related Person’s own gross negligence or willful misconduct, asdetermined by the final non-appealable judgment of a court of competentjurisdiction; provided that no action taken in accordance with the directionsof the Required Lenders (or such other number or percentage of the Lenders asshall be required by the Loan Documents) shall be deemed to constitute grossnegligence or willful misconduct for purposes of this Section 9.07; and *provided*, *further*,that to the extent the indemnification of the L/C Issuer is required hereunder,such obligation shall be limited solely to the Revolving Credit Lenders.  In the case of any investigation, litigationor proceeding giving rise to any Indemnified Liabilities, this Section 9.07applies whether any such investigation, litigation or proceeding is brought byany Lender or any other Person.  Withoutlimitation of the foregoing, each Lender shall reimburse the AdministrativeAgent upon demand for its ratable share of any costs or out-of-pocket expenses(including Attorney Costs) incurred by the Administrative Agent in connectionwith the preparation, execution, delivery, administration, modification,amendment or enforcement (whether through negotiations, legal proceedings orotherwise) of, or legal advice in respect of rights or responsibilities under,this Agreement, any other Loan Document, or any document contemplated by orreferred to herein, to the extent that the Administrative Agent is notreimbursed for such expenses by or on behalf of the Company.  The undertaking in this Section 9.07shall survive termination of the Aggregate Commitments, the payment of allother Obligations and the resignation of the Administrative Agent.

 

Section 9.08.  Agentsin their Individual Capacities.  JPMorgan Chase Bank and its Affiliates maymake loans to, issue letters of credit for the account of, accept depositsfrom, acquire Equity Interests in and generally engage in any kind of banking,trust, financial advisory, underwriting or other business with each of the LoanParties and their respective Affiliates as though JPMorgan Chase Bank were notthe Administrative Agent or an L/C Issuer hereunder and without notice to orconsent of the Lenders.  The Lendersacknowledge that, pursuant to such activities, JPMorganChase Bank or its Affiliatesmay receive information regarding any Loan Party or its Affiliates (includinginformation that may be subject to confidentiality obligations in favor of suchLoan Party or such Affiliate) and acknowledge that the Administrative Agentshall be under no obligation to provide such information to them.  With respect to its Loans,JPMorgan

 

127

----

 

ChaseBank shall have the same rights and powers under this Agreement as any otherLender and may exercise such rights and powers as though it were not theAdministrative Agent or an L/C Issuer, and the terms “Lender” and “Lenders”include JPMorgan Chase Bank in its individual capacity.

 

SECTION 9.09.  Successor Agents.  TheAdministrative Agent may resign as the Administrative Agent upon thirty (30)days’ notice to the Lenders and the Company. If the Administrative Agent resigns under this Agreement, the RequiredLenders shall appoint from among the Lenders a successor agent for the Lenders,which successor agent shall be consented to by the Company at all times otherthan during the existence of an Event of Default under Section 8.01(f) or(g) (which consent of the Company shall not be unreasonably withheld ordelayed).  If no successor agent isappointed prior to the effective date of the resignation of the AdministrativeAgent, the Administrative Agent may appoint, after consulting with the Lendersand the Company, a successor agent, which shall be a Lender or a bank with anoffice in New York, New York or an Affiliate of such Lender or bank, and whichsuccessor agent shall be consented to by the Company at all times other thanduring the existence of an Event of Default under Section 8.01(f) or (g) (whichconsent of the Company shall not be unreasonably withheld).  Upon the acceptance of its appointment assuccessor agent hereunder, the Person acting as such successor agent shallsucceed to all the rights, powers and duties of the retiring AdministrativeAgent and the term “Administrative Agent,” shall mean such successoradministrative agent and/or supplemental administrative agent, as the case maybe, and the retiring Administrative Agent’s appointment, powers and duties asthe Administrative Agent shall be terminated. After the retiring Administrative Agent’s resignation hereunder as theAdministrative Agent, the provisions of this Article IX and Sections 10.04and 10.05 shall inure to its benefit as to any actions taken or omitted to betaken by it while it was the Administrative Agent under this Agreement.  If no successor agent has acceptedappointment as the Administrative Agent by the date which is thirty (30) daysfollowing the retiring Administrative Agent’s notice of resignation, theretiring Administrative Agent’s resignation shall nevertheless thereupon becomeeffective and the Lenders shall perform all of the duties of the AdministrativeAgent hereunder until such time, if any, as the Required Lenders appoint asuccessor agent as provided for above. Upon the acceptance of any appointment as the Administrative Agenthereunder by a successor and upon the execution and filing or recording of suchfinancing statements, or amendments thereto, and such amendments or supplementsto the Mortgages, and such other instruments or notices, as may be necessary ordesirable, or as the Required Lenders may request, in order to (a) continuethe perfection of the Liens granted or purported to be granted by theCollateral Documents or (b) otherwise ensure that the Collateral andGuarantee Requirement is satisfied, the Administrative Agent shall thereuponsucceed to and become vested with all the rights, powers, discretion,privileges, and duties of the retiring Administrative Agent, and the retiringAdministrative Agent shall be discharged from its duties and obligations underthe Loan Documents.  After the retiringAdministrative Agent’s resignation hereunder as the Administrative Agent, theprovisions of this Article IX shall continue in effect for its benefit inrespect of any actions taken or omitted to be taken by it while it was actingas the Administrative Agent.

 

Section 9.10.  AdministrativeAgent May File Proofs of Claim.  In case of the pendency of anyreceivership, insolvency, liquidation, bankruptcy, reorganization, arrangement,adjustment, composition or other judicial proceeding relative to any LoanParty, the Administrative Agent (irrespective of whether the principal of anyLoan or L/C Obligation shall then be due and payable as herein expressed or bydeclaration or otherwise and irrespective of whether the Administrative Agentshall have made any demand on any Borrower) shall be entitled and empowered, byintervention in such proceeding or otherwise:

 

128

----

 

### (a)  tofile and prove a claim for the whole amount of the principal and interest owingand unpaid in respect of the Loans, L/C Obligations and all other Obligationsthat are owing and unpaid and to file such other documents as may be necessaryor advisable in order to have the claims of the Lenders and the AdministrativeAgent (including any claim for the reasonable compensation, expenses,disbursements and advances of the Lenders and the Administrative Agent andtheir respective agents and counsel and all other amounts due the Lenders andthe Administrative Agent under Sections 2.03(h) and (i), 2.09 and 10.04)allowed in such judicial proceeding; and

###  

### (b)  tocollect and receive any monies or other property payable or deliverable on anysuch claims and to distribute the same;

###  

andany custodian, receiver, assignee, trustee, liquidator, sequestrator or othersimilar official in any such judicial proceeding is hereby authorized by eachLender to make such payments to the Administrative Agent and, in the event thatthe Administrative Agent shall consent to the making of such payments directlyto the Lenders, to pay to the Administrative Agent any amount due for thereasonable compensation, expenses, disbursements and advances of the Agents andtheir respective agents and counsel, and any other amounts due the AdministrativeAgent under Sections 2.09 and 10.04.

 

Nothingcontained herein shall be deemed to authorize the Administrative Agent toauthorize or consent to or accept or adopt on behalf of any Lender any plan ofreorganization, arrangement, adjustment or composition affecting theObligations or the rights of any Lender or to authorize the AdministrativeAgent to vote in respect of the claim of any Lender in any such proceeding.

 

Section 9.11.  Collateraland Guarantee Matters.  The Lenders irrevocably agree:

 

### (a)  thatany Lien on any property granted to or held by the Administrative Agent underany Loan Document shall be automatically released (i) upon termination ofthe Aggregate Commitments and payment in full of all Obligations (other than (x) obligationsunder Secured Hedge Agreements, (y) Cash Management Obligations and (z) contingentreimbursement and indemnification obligations not yet accrued and payable) andthe expiration or termination of all Letters of Credit, (ii) at the timethe property subject to such Lien is transferred or to be transferred as partof or in connection with any transfer permitted hereunder or under any otherLoan Document to any Person other than Holdings, the Company or any of itsDomestic Subsidiaries that are Restricted Subsidiaries, (iii) subject to Section 10.01,if the release of such Lien is approved, authorized or ratified in writing bythe Required Lenders (or such greater number of Lenders as may be requiredpursuant to Section 10.01), (iv) if the property subject to such Lienis owned by a Guarantor, upon release of such Guarantor from its obligationsunder its Guarantee under the Guarantee and Security Agreement pursuant toclause (c) below, or (v) at the time such property subject to suchLien becomes a Specified Asset (as defined in the Guarantee and SecurityAgreement) described in clause (b) of the definition thereof (taking intoaccount the proviso thereto);

###  

### (b)  (i) torelease or subordinate any Lien on any property granted to or held by theAdministrative Agent under any Loan Document to the holder of any Lien on suchproperty that is permitted by Section 7.01(i) and (ii) that theAdministrative Agent is authorized (but not required) to release or subordinateany Lien on any property granted to or held by the Administrative Agent underany Loan Document to the holder of any Lien on such property that is permittedby any other clause of Section 7.01; and

 

129

----

 

### (c)  thatany Guarantor shall be automatically released from its obligations under theGuarantee and Security Agreement if such Person ceases to be a RestrictedSubsidiary as a result of a transaction or designation permitted hereunder; *provided*that no such release shall occurif such Guarantor continues to be a guarantor in respect of any JuniorFinancing.

###  

Uponrequest by the Administrative Agent at any time, the Required Lenders (or suchgreater number of Lenders as may be required pursuant to Section 10.01)will confirm in writing the Administrative Agent’s authority to release orsubordinate its interest in particular types or items of property, or torelease any Guarantor from its obligations under the Guarantee and SecurityAgreement pursuant to this Section 9.11. In each case as specified in this Section 9.11, the AdministrativeAgent will (and each Lender irrevocably authorizes the Administrative Agentto), at the Company’s expense, execute and deliver to the applicable Loan Partysuch documents as such Loan Party may reasonably request to evidence the releaseor subordination of such item of Collateral from the assignment and securityinterest granted under the Collateral Documents, or to evidence the release ofsuch Guarantor from its obligations under the Guarantee and Security Agreement,in each case in accordance with the terms of the Loan Documents and this Section 9.11.

 

Section 9.12.  OtherAgents; Arrangers and Managers.  None of the Lenders or other Personsidentified on the facing page or signature pages of this Agreement asa “co-syndication agent,” “documentation agent”, “joint bookrunner” or “co-leadarranger” shall have any right, power, obligation, liability, responsibility orduty under this Agreement other than those applicable to all Lenders assuch.  Without limiting the foregoing,none of the Lenders or other Persons so identified shall have or be deemed tohave any fiduciary relationship with any Lender.  Each Lender acknowledges that it has notrelied, and will not rely, on any of the Lenders or other Persons so identifiedin deciding to enter into this Agreement or in taking or not taking actionhereunder.

 

Section 9.13.  Appointmentof Supplemental Administrative Agents.  (a)  It is thepurpose of this Agreement and the other Loan Documents that there shall be noviolation of any Law of any jurisdiction denying or restricting the right ofbanking corporations or associations to transact business as agent or trusteein such jurisdiction.  It is recognizedthat in case of litigation under this Agreement or any of the other LoanDocuments, and in particular in case of the enforcement of any of the LoanDocuments, or in case the Administrative Agent deems that by reason of anypresent or future Law of any jurisdiction it may not exercise any of therights, powers or remedies granted herein or in any of the other Loan Documentsor take any other action which may be desirable or necessary in connectiontherewith, the Administrative Agent is hereby authorized to appoint anadditional individual or institution selected by the Administrative Agent in itssole discretion as a separate trustee, co-trustee, administrative agent,collateral agent, administrative sub-agent or administrative co-agent (any suchadditional individual or institution being referred to herein individually as a“**Supplemental Administrative Agent**”and collectively as “**SupplementalAdministrative Agents**”).

 

### (b)  Inthe event that the Administrative Agent appoints a Supplemental AdministrativeAgent with respect to any Collateral, (i) each and every right, power,privilege or duty expressed or intended by this Agreement or any of the otherLoan Documents to be exercised by or vested in or conveyed to theAdministrative Agent with respect to such Collateral shall be exercisable byand vest in such Supplemental Administrative Agent to the extent, and only tothe extent, necessary to enable such Supplemental Administrative Agent toexercise such rights, powers and privileges with respect to such Collateral andto perform such duties with respect to such Collateral, and every covenant and obligationcontained in the Loan Documents and necessary to

 

130

----

 

### the exercise or performancethereof by such Supplemental Administrative Agent shall run to and beenforceable by either the Administrative Agent or such SupplementalAdministrative Agent, and (ii) the provisions of this Article IX andof Sections 10.04 and 10.05 that refer to the Administrative Agent shall inureto the benefit of such Supplemental Administrative Agent and all referencestherein to the Administrative Agent shall be deemed to be references to theAdministrative Agent and/or such Supplemental Administrative Agent, as thecontext may require.

###  

### (c)  Shouldany instrument in writing from the Company, Holdings or any other Loan Party berequired by any Supplemental Administrative Agent so appointed by theAdministrative Agent for more fully and certainly vesting in and confirming tohim or it such rights, powers, privileges and duties, the Company or Holdings,as applicable, shall, or shall cause such Loan Party to, execute, acknowledgeand deliver any and all such instruments promptly upon request by theAdministrative Agent.  In case anySupplemental Administrative Agent, or a successor thereto, shall die, becomeincapable of acting, resign or be removed, all the rights, powers, privilegesand duties of such Supplemental Administrative Agent, to the extent permittedby Law, shall vest in and be exercised by the Administrative Agent until theappointment of a new Supplemental Administrative Agent.

###  

# **ARTICLE X**

# **MISCELLANEOUS**

#  

SECTION 10.01.  Amendments, Etc. Except as otherwise set forth in this Agreement or any other LoanDocument, no amendment or waiver of any provision of this Agreement or anyother Loan Document, and no consent to any departure by the Company or anyother Loan Party therefrom, shall be effective unless in writing signed by theRequired Lenders and the Company or the applicable Loan Party, as the case maybe, and each such waiver or consent shall be effective only in the specificinstance and for the specific purpose for which given; *provided* that, no such amendment, waiveror consent shall:

###  

### (a)  extendor increase the Commitment of any Lender without the written consent of eachLender directly affected thereby (it being understood that a waiver of anycondition precedent set forth in Section 4.02 or the waiver of anyDefault, mandatory prepayment or mandatory reduction of the Commitments shallnot constitute an extension or increase of any Commitment of any Lender);

###  

### (b)  postponeany date scheduled for, or reduce or forgive the amount of, any payment ofprincipal or interest under Section 2.07 or 2.08 without the writtenconsent of each Lender directly affected thereby, it being understood that thewaiver of (or amendment to the terms of) any mandatory prepayment of the TermLoans shall not constitute a postponement of any date scheduled for the paymentof principal or interest;

###  

### (c)  reduceor forgive the principal of, or the rate of interest specified herein on, anyLoan or L/C Borrowing or (subject to clause (iii) of the second proviso tothis Section 10.01) any fees (including fees set forth in Section 2.09or other amounts payable hereunder or under any other Loan Document), orextend, postpone or waive the date upon which any fees are to be paid, withoutthe written consent of each Lender directly affected thereby, it beingunderstood that any change to the definition of Total Leverage Ratio or in thecomponent definitions thereof shall not constitute a reduction in the rate; *provided* that, only the consent of theRequired Lenders shall be

 

131

----

 

### necessary to amend thedefinition of “Default Rate” or to waive any obligation of the Borrowers to payinterest at the Default Rate;

###  

### (d)  changeany provision of this Section 10.01, the definition of “Required Lenders”or “Pro Rata Share”, Section 2.06(c), the third sentence of Section 2.12(a),Section 2.13, Section 8.04 or Section 10.07(a)(x) withoutthe written consent of each Lender affected thereby;

###  

### (e)  otherthan in a transaction permitted under Section 7.05, release all orsubstantially all of the Collateral in any transaction or series of relatedtransactions, without the written consent of each Lender; or

###  

### (f)  otherthan in connection with a transaction permitted under Section 7.04 or7.05, release all or substantially all of the aggregate value of theGuarantees, without the written consent of each Lender;

###  

and*provided further* that (i) noamendment, waiver or consent shall, unless in writing and signed by each L/CIssuer in addition to the Lenders required above, affect the rights or dutiesof an L/C Issuer under this Agreement or any Letter of Credit Applicationrelating to any Letter of Credit issued or to be issued by it; (ii) noamendment, waiver or consent shall, unless in writing and signed by the SwingLine Lender in addition to the Lenders required above, affect the rights orduties of the Swing Line Lender under this Agreement; (iii) no amendment,waiver or consent shall, unless in writing and signed by the AdministrativeAgent in addition to the Lenders required above, affect the rights or dutiesof, or any fees or other amounts payable to, the Administrative Agent underthis Agreement or any other Loan Document; (iv) Section 10.07(h) maynot be amended, waived or otherwise modified without the consent of eachGranting Lender all or any part of whose Loans are being funded by an SPC atthe time of such amendment, waiver or other modification; and (v) theconsent of Lenders holding more than 50% of any Class of Commitments shallbe required with respect to any amendment that by its terms adversely affectsthe rights of such Class in respect of payments hereunder in a mannerdifferent than such amendment affects other Classes.  Notwithstanding anything to the contraryherein, no Defaulting Lender shall have any right to approve or disapprove anyamendment, waiver or consent hereunder, except that the Commitment of suchLender may not be increased or extended without the consent of such Lender (itbeing understood that any Commitments or Loans held or deemed held by anyDefaulting Lender shall be excluded for a vote of the Lenders hereunderrequiring any consent of the Lenders).

 

Notwithstandingthe foregoing, this Agreement may be amended (or amended and restated) with thewritten consent of the Required Lenders, the Administrative Agent and theCompany (a) to add one or more additional credit facilities to thisAgreement and to permit the extensions of credit from time to time outstandingthereunder and the accrued interest and fees in respect thereof to shareratably in the benefits of this Agreement and the other Loan Documents with theU.S. Term Loans, the Euro Term Loans and the Revolving Credit Loans and theaccrued interest and fees in respect thereof and (b) to includeappropriately the Lenders holding such credit facilities in any determinationof the Required Lenders.

 

Inaddition, notwithstanding the foregoing, this Agreement may be amended with thewritten consent of the Administrative Agent, the Company and the Lenders (and,in the case of any amendment with respect to Euro Replacement Term Loans (asdefined below), the German Borrower) providing the relevant U.S. ReplacementTerm Loans or Euro Replacement Term Loans (as defined below) to permit therefinancing of all outstanding U.S. Term Loans (“**U.S. Refinanced Term Loans**”) or Euro Term Loans (the “**Euro Refinanced Term Loans**”) with a

 

132

----

 

replacementU.S. term loan tranche denominated in Dollars (“**U.S. Replacement Term Loans**”) or Euro term loan tranchedenominated in Euros (“**Euro Replacement TermLoans**”), respectively, hereunder; *provided*that (a) the aggregate principal amount of such U.S. Replacement TermLoans or Euro Replacement Term Loans shall not exceed the aggregate principalamount of such U.S. Refinanced Term Loans or Euro Refinanced Term Loans,respectively, (b) the Applicable Rate for such U.S. Replacement Term Loansor Euro Replacement Term Loans shall not be higher than the Applicable Rate forsuch U.S. Refinanced Term Loans or Euro Refinanced Term Loans, respectively, (c) theWeighted Average Life to Maturity of such U.S. Replacement Term Loans or EuroReplacement Term Loans shall not be shorter than the Weighted Average Life toMaturity of such U.S. Refinanced Term Loans or Euro Refinanced Term Loans,respectively, at the time of such refinancing (except to the extent of nominalamortization for periods where amortization has been eliminated as a result ofprepayment of the applicable Term Loans) and (d) all other termsapplicable to such U.S. Replacement Term Loans or Euro Replacement Term Loansshall be substantially identical to, or less favorable to the Lenders providingsuch U.S. Replacement Term Loans or Euro Replacement Term Loans than, thoseapplicable to such U.S. Refinanced Term Loans or Euro Refinanced Term Loans,respectively, except to the extent necessary to provide for covenants and otherterms applicable to any period after the latest final maturity of the TermLoans in effect immediately prior to such refinancing.

 

Notwithstandinganything to the contrary contained in Section 10.01, guarantees,collateral security documents and related documents executed by ForeignSubsidiaries in connection with this Agreement may be in a form reasonablydetermined by the Administrative Agent and may be, together with thisAgreement, amended and waived with the consent of the Administrative Agent atthe request of the Company without the need to obtain the consent of any otherLender if such amendment or waiver is delivered in order (i) to complywith local Law or advice of local counsel, (ii) to cure ambiguities ordefects or (iii) to cause such guarantee, collateral security document orother document to be consistent with this Agreement and the other LoanDocuments.

 

Section 10.02.  Noticesand Other Communications; Facsimile Copies.  (a)  *General*. Unless otherwise expressly provided herein, all notices and othercommunications provided for hereunder or under any other Loan Document shall bein writing (including by facsimile transmission).  All such written notices shall be mailed,faxed or delivered to the applicable address, facsimile number or electronicmail address, and all notices and other communications expressly permittedhereunder to be given by telephone shall be made to the applicable telephonenumber, as follows:

 

#### (i)  ifto any Borrower, the Administrative Agent, an L/C Issuer or the Swing LineLender, to the address, facsimile number, electronic mail address or telephonenumber specified for such Person on Schedule 10.02 or to such other address,facsimile number, electronic mail address or telephone number as shall bedesignated by such party in a notice to the other parties; and

####  

#### (ii)  ifto any other Lender, to the address, facsimile number, electronic mail addressor telephone number specified in its Administrative Questionnaire or to suchother address, facsimile number, electronic mail address or telephone number asshall be designated by such party in a notice to the Company, theAdministrative Agent, the L/C Issuers and the Swing Line Lender.

 

133

----

 

Allsuch notices and other communications shall be deemed to be given or made, ifgiven or made during the recipient’s normal business hours (and if not, shallbe deemed to be given or made on the next succeeding Business Day), upon theearlier to occur of (i) actual receipt by the relevant party hereto and (ii) (A) ifdelivered by hand or by courier, when signed for by or on behalf of therelevant party hereto; (B) if delivered by mail, four (4) BusinessDays after deposit in the mails, postage prepaid; (C) if delivered byfacsimile, when sent and receipt has been confirmed by telephone; and (D) ifdelivered by electronic mail (which form of delivery is subject to theprovisions of Section 10.02(d)), when delivered; *provided* that notices and othercommunications to the Administrative Agent, the L/C Issuers and the Swing LineLender pursuant to Article II shall not be effective until actuallyreceived by such Person.  In no eventshall a voice mail message be effective as a notice, communication orconfirmation hereunder.

 

### (b)  *Effectiveness of Facsimile Documents and Signatures*.  Loan Documents may be transmitted and/orsigned by facsimile or “PDF” (subject to Section 10.02(d).  The effectiveness of any such documents andsignatures shall, subject to applicable Law, have the same force and effect asmanually signed originals and shall be binding on all Loan Parties, the Agentsand the Lenders.

###  

### (c)  *Reliance by Agents and Lenders.*  The Administrative Agent and the Lendersshall be entitled to rely and act upon any notices (including telephonicCommitted Loan Notices and Swing Line Loan Notices) purportedly given by or onbehalf of any Borrower even if (i) such notices were not made in a mannerspecified herein, were incomplete or were not preceded or followed by any otherform of notice specified herein, or (ii) the terms thereof, as understoodby the recipient, varied from any confirmation thereof.  The Borrowers shall indemnify eachAgent-Related Person and each Lender from all losses, liabilities and relatedreasonable out-of-pocket costs and expenses resulting from the reliance by suchPerson on each notice purportedly given by or on behalf of the Borrowers in theabsence of gross negligence or willful misconduct.  All telephonic notices to the AdministrativeAgent may be recorded by the Administrative Agent, and each of the partieshereto hereby consents to such recording.

###  

### (d)  *Electronic Communications*.  Notices and other communications to theLenders hereunder may be delivered or furnished by electronic communication(including e-mail and Internet or intranet websites) pursuant to proceduresapproved by the Administrative Agent, *provided*that the foregoing shall not apply to notices to any Lender pursuant toArticles II and III, if such Lender has notified the Administrative Agent thatit is incapable of receiving notices thereunder by electroniccommunication.  The Administrative Agentor the Company may, in their discretion, agree to accept notices and othercommunications to them hereunder by electronic communications pursuant toprocedures approved by it, *provided*that approval of such procedures may be limited to particular notices orcommunications.  Unless theAdministrative Agent otherwise prescribes, (i) notices and othercommunications sent to an e-mail address shall be deemed received upon thesender’s receipt of an acknowledgment from the intended recipient (such as bythe “return receipt requested” function, as available, return e-mail or otherwritten acknowledgment), *provided*that if such notice or other communication is not sent during the normal businesshours of the recipient, such notice or communication shall be deemed to havebeen sent at the opening of business on the next Business Day for therecipient, and (ii) notices or communications posted to an Internet orintranet website shall be deemed received upon the deemed receipt by theintended recipient at its e-mail address as described in the foregoingclause (i) of notification that such notice or communication isavailable and identifying the website address therefor.

 

134

----

 

### (e)  *Designation by Overseas Borrowers*.  Each Overseas Borrower hereby designates theCompany as its representative and agent on its behalf for the purposes ofgiving and receiving all notices (other than Committed Loan Notices) and anyother documentation required to be delivered to it pursuant to this Agreementand any other Loan Document by the Administrative Agent or any Lender.  The Company hereby accepts such appointment.  The Agents and the Lenders may regard anynotice (other than Committed Loan Notices) or other communication pursuant toany Loan Document from the Company as a notice or communication from allBorrowers, and may give any notice or communication required or permitted to begiven to any Overseas Borrower or Overseas Borrowers hereunder to the Companyon behalf of such Overseas Borrower or Overseas Borrowers.  Each Overseas Borrower agrees that eachnotice, election, representation and warranty, covenant, agreement and undertakingmade on its behalf by the Company shall be deemed for all purposes to have beenmade by such Overseas Borrower and shall be binding upon and enforceableagainst such Overseas Borrower to the same extent as if the same had been madedirectly by such Overseas Borrower.

###  

Section 10.03.  NoWaiver; Cumulative Remedies.  No failure by any Lender or theAdministrative Agent to exercise, and no delay by any such Person inexercising, any right, remedy, power or privilege hereunder or under any otherLoan Document shall operate as a waiver thereof; nor shall any single orpartial exercise of any right, remedy, power or privilege hereunder precludeany other or further exercise thereof or the exercise of any other right,remedy, power or privilege.  The rights,remedies, powers and privileges herein provided, and provided under each otherLoan Document, are cumulative and not exclusive of any rights, remedies, powersand privileges provided by Law.

 

Section 10.04.  AttorneyCosts, Expenses and Taxes.  The Company agrees (a) if the ClosingDate occurs, to pay or reimburse the Administrative Agent, the SyndicationAgent, the Co-Documentation Agents and the Arrangers for all reasonableout-of-pocket costs and expenses incurred in connection with the preparation,negotiation, syndication and execution of this Agreement and the other LoanDocuments, and any amendment, waiver, consent or other modification of theprovisions hereof and thereof (whether or not the transactions contemplatedthereby are consummated), and the consummation and administration of thetransactions contemplated hereby and thereby, including all Attorney Costs ofSimpson Thacher & Bartlett LLP and, if necessary, one local counsel ineach applicable jurisdiction, and (b) to pay or reimburse theAdministrative Agent, the Syndication Agent, the Co-Documentation Agents, theArrangers and each Lender for all reasonable out-of-pocket costs and expensesincurred in connection with the enforcement of any rights or remedies underthis Agreement or the other Loan Documents (including all such costs andexpenses incurred during any legal proceeding, including any proceeding underany Debtor Relief Law, and including all Attorney Costs of one counsel to theAdministrative Agent and the Lenders and, if necessary, one local counsel ineach applicable jurisdiction).  Theforegoing costs and expenses shall include all reasonable search, filing,recording and title insurance charges and fees and taxes related thereto, andother reasonable out-of-pocket expenses incurred by any Agent.  The agreements in this Section 10.04shall survive the termination of the Aggregate Commitments and repayment of allother Obligations.  All amounts due underthis Section 10.04 shall be paid within ten (10) Business Days ofreceipt by the Company of an invoice relating thereto setting forth suchexpenses in reasonable detail.  If anyLoan Party fails to pay when due any costs, expenses or other amounts payableby it hereunder or under any Loan Document, such amount may be paid on behalfof such Loan Party by the Administrative Agent in its sole discretion.

 

Section 10.05.  Indemnificationby the Company.  Whether or not the transactions contemplatedhereby are consummated, the Company shall indemnify and hold harmless each

 

135

----

 

Agent-RelatedPerson, each Lender and their respective Affiliates, directors, officers,employees, counsel, agents, trustees, investment advisors and attorneys-in-fact(collectively the “**Indemnitees**”)from and against any and all liabilities, obligations, losses, damages,penalties, claims, demands, actions, judgments and suits and related reasonableout-of-pocket expenses (including Attorney Costs) of any kind or naturewhatsoever which may at any time be imposed on, incurred by or asserted againstany such Indemnitee in any way relating to or arising out of or in connectionwith (a) the execution, delivery, enforcement, performance oradministration of any Loan Document or any other agreement, letter orinstrument delivered in connection with the transactions contemplated therebyor the consummation of the transactions contemplated thereby, (b) anyCommitment, Loan or Letter of Credit or the use or proposed use of the proceedstherefrom (including any refusal by an L/C Issuer to honor a demand for paymentunder a Letter of Credit if the documents presented in connection with suchdemand do not strictly comply with the terms of such Letter of Credit), or (c) tothe extent relating to or arising from any of the foregoing, any actual oralleged presence or release of Hazardous Materials on or from any propertycurrently or formerly owned or operated by the Company, any Subsidiary or anyother Loan Party, or any Environmental Liability related in any way to theCompany, any Subsidiary or any other Loan Party, or (d) any actual orprospective claim, litigation, investigation or proceeding relating to any ofthe foregoing, whether based on contract, tort or any other theory (includingany investigation of, preparation for, or defense of any pending or threatened claim,investigation, litigation or proceeding) and regardless of whether anyIndemnitee is a party thereto (all the foregoing, collectively, the “**Indemnified Liabilities**”), in all cases,whether or not caused by or arising, in whole or in part, out of the negligenceof the Indemnitee; provided that such indemnity shall not, as to anyIndemnitee, be available to the extent that such liabilities, obligations,losses, damages, penalties, claims, demands, actions, judgments, suits orexpenses are found in a final non-appealable judgment of a court of competentjurisdiction to have resulted from the gross negligence or willful misconductof such Indemnitee, any Affiliate of such Indemnitee or any officer, director,employee, advisor, representative or agent of such Indemnitee or any suchAffiliate.  No Indemnitee shall be liableto any Group Member for any damages arising from the use by others of anyinformation or other materials obtained through IntraLinks or other similarinformation transmission systems in connection with this Agreement.  No Indemnitee shall be liable (whether director indirect, in contract, tort or otherwise) to any Group Member (other thanthe Lenders’ contractual liability for breach under this Agreement) except tothe extent such liability is found in a non-appealable judgment of a court ofcompetent jurisdiction to have resulted from the gross negligence or willfulmisconduct of such Indemnitee, any Affiliate of such Indemnitee or any officer,director, employee, advisor, representative or agent of such Indemnitee or anysuch Affiliate.  No Indemnitee shall haveany liability to any Group Member, nor any Group Member to any Indemnitee, forany special, punitive, indirect or consequential damages (including, withoutlimitation, loss of profits, business or anticipated savings) relating to thisAgreement or any other Loan Document or arising out of its activities inconnection herewith or therewith (whether before or after the ClosingDate).  All amounts due under this Section 10.05shall be paid within ten (10) Business Days after demand therefor;provided, however, that such Indemnitee shall promptly refund any amountreceived under this Section 10.05 to the extent that there is a finaljudicial or arbitral determination that such Indemnitee was not entitled toindemnification or contribution rights with respect to such payment pursuant tothe express terms of this Section 10.05. The agreements in this Section 10.05 shall survive the resignationof the Administrative Agent, the replacement of any Lender, the termination ofthe Aggregate Commitments and the repayment, satisfaction or discharge of allthe other Obligations.

 

Section 10.06.  PaymentsSet Aside.  To the extent that any payment by or onbehalf of the Company is made to any Agent or any Lender, or any Agent or anyLender exercises its

 

136

----

 

rightof setoff, and such payment or the proceeds of such setoff or any part thereofis subsequently invalidated, declared to be fraudulent or preferential, setaside or required (including pursuant to any settlement entered into by suchAgent or such Lender in its discretion) to be repaid to a trustee, receiver orany other party, in connection with any proceeding under any Debtor Relief Lawor otherwise, then (a) to the extent of such recovery, the obligation orpart thereof originally intended to be satisfied shall be revived and continuedin full force and effect as if such payment had not been made or such setoffhad not occurred, and (b) each Lender severally agrees to pay to theAdministrative Agent upon demand its applicable share of any amount sorecovered from or repaid by any Agent, plus interest thereon from the date ofsuch demand to the date such payment is made at a rate per annum equal to theapplicable Overnight Rate from time to time in effect.

 

Section 10.07.  Successorsand Assigns.  (a)  The provisions of thisAgreement shall be binding upon and inure to the benefit of the parties heretoand their respective successors and assigns permitted hereby, except that (x) neitherHoldings nor any Borrower may assign or otherwise transfer any of its rights orobligations hereunder without the prior written consent of each Lender and (y) noLender may assign or otherwise transfer any of its rights or obligationshereunder except (i) to an Eligible Assignee, (ii) by way ofparticipation in accordance with the provisions of Section 10.07(e), (iii) byway of pledge or assignment of a security interest subject to the restrictionsof Sections 10.07(g) or 10.07(i) or (iv) to an SPC inaccordance with the provisions of Section 10.07(h) (and any otherattempted assignment or transfer by any party hereto shall be null andvoid).  Nothing in this Agreement,expressed or implied, shall be construed to confer upon any Person (other thanthe parties hereto, their respective successors and assigns permitted hereby,Participants to the extent provided in Section 10.07(e) and, to theextent expressly contemplated hereby, the Indemnitees) any legal or equitable right,remedy or claim under or by reason of this Agreement.

 

### (b)  (i)  Subjectto the conditions set forth in paragraph (b)(ii) below, any Lender mayassign to one or more assignees (“**Assignees**”)all or a portion of its rights and obligations under this Agreement (includingall or a portion of its Commitment and the Loans (including for purposes ofthis Section 10.07(b), participations in L/C Obligations and in Swing LineLoans) at the time owing to it) with the prior written consent (such consentnot to be unreasonably withheld or delayed) of:

###  

##### (A)  theCompany, *provided* that no consentof the Company shall be required for an assignment to a Lender, an Affiliate ofa Lender, an Approved Fund or, if an Event of Default under Section 8.01(a),(f) or (g) has occurred and is continuing, any Assignee;

#####  

##### (B)  theAdministrative Agent, *provided*that no consent of the Administrative Agent shall be required for an assignmentof all or any portion of a Term Loan to a Lender, an Affiliate of a Lender oran Approved Fund;

#####  

##### (C)  eachL/C Issuer at the time of such assignment, *provided*that no consent of the L/C Issuers shall be required for any assignment of aTerm Loan; and

#####  

##### (D)  theSwing Line Lender; *provided* thatno consent of the Swing Line Lender shall be required for any assignment of aTerm Loan.

#####  

#### (ii)  Assignmentsshall be subject to the following additional conditions:

 

137

----

 

##### (A)  exceptin the case of an assignment to a Lender, an Affiliate of a Lender or anApproved Fund or an assignment of the entire remaining amount of the assigningLender’s Commitment or Loans of any Class, the amount of the Commitment orLoans of the assigning Lender subject to each such assignment (determined as ofthe date the Assignment and Assumption with respect to such assignment isdelivered to the Administrative Agent) shall not be less than $5,000,000 (inthe case of each Revolving Credit Facility), or $1,000,000 (in the case of aTerm Loan) and in increments of $1,000,000 in excess thereof unless each of theCompany and the Administrative Agent otherwise consents, *provided* that such amounts shall beaggregated in respect of each Lender and its Affiliates or Approved Funds, ifany;

#####  

##### (B)  theparties to each assignment shall execute and deliver to the AdministrativeAgent an Assignment and Assumption, together with a processing and recordationfee of $3,500; and

#####  

##### (C)  theAssignee, if it shall not be a Lender, shall deliver to the AdministrativeAgent (1) an Administrative Questionnaire in which the assignee designatesone or more Credit Contacts (as defined in the Administrative Questionnaire) towhom all syndicate-level information (which may contain material non-publicinformation about Holdings, the Borrowers, the other Loan Parties and theirAffiliates and related parties or their respective securities) will be madeavailable and who may receive such information in accordance with theAssignee’s compliance procedures and applicable laws, including Federal andstate securities laws.

#####  

Thisparagraph (b) shall not prohibit any Lender from assigning all or aportion of its rights and obligations among separate Facilities on a non-prorata basis.

 

### (c)  Subjectto acceptance and recording thereof by the Administrative Agent pursuant to Section 10.07(d),from and after the effective date specified in each Assignment and Assumption,the Eligible Assignee thereunder shall be a party to this Agreement and, to theextent of the interest assigned by such Assignment and Assumption, have therights and obligations of a Lender under this Agreement, and the assigningLender thereunder shall, to the extent of the interest assigned by suchAssignment and Assumption, be released from its obligations under thisAgreement (and, in the case of an Assignment and Assumption covering all of theassigning Lender’s rights and obligations under this Agreement, such Lendershall cease to be a party hereto but shall continue to be entitled to thebenefits of Sections 3.01, 3.04, 3.05, 10.04 and 10.05 with respect to factsand circumstances occurring prior to the effective date of suchassignment).  Upon request, and thesurrender by the assigning Lender of its Note, the relevant Borrower (at itsexpense) shall execute and deliver a Note to the assignee Lender.  Any assignment or transfer by a Lender ofrights or obligations under this Agreement that does not comply with thisclause (c) shall be treated for purposes of this Agreement as a sale bysuch Lender of a participation in such rights and obligations in accordance withSection 10.07(e).

###  

### (d)  TheAdministrative Agent, acting solely for this purpose as an agent of theBorrowers, shall maintain at the Administrative Agent’s Office a copy of eachAssignment and Assumption delivered to it and a register for the recordation ofthe names and addresses of the Lenders, and the Commitments of, and principalamounts (and related interest amounts) of the Loans, L/C Obligations(specifying the Unreimbursed Amounts), L/C Borrowings and amounts due under Section 2.03,owing to, each Lender pursuant to the terms hereof from time to time (the “**Register**”). The entries in the Register shall be conclusive, absent manifest error,and the Borrowers, the Agents and the Lenders shall treat each Person whosename is recorded in the

 

138

----

 

### Register pursuant to theterms hereof as a Lender hereunder for all purposes of this Agreement,notwithstanding notice to the contrary. The Register shall be available for inspection by the Company, any Agentand any Lender, at any reasonable time and from time to time upon reasonableprior notice.

###  

### (e)  AnyLender may at any time, without the consent of, or notice to, the Borrowers orthe Administrative Agent, sell participations to any Person (other than a naturalperson) (each, a “**Participant**”) inall or a portion of such Lender’s rights and/or obligations under thisAgreement (including all or a portion of its Commitment and/or the Loans(including such Lender’s participations in L/C Obligations and/or Swing LineLoans) owing to it); *provided*that (i) such Lender’s obligations under this Agreement shall remainunchanged, (ii) such Lender shall remain solely responsible to the otherparties hereto for the performance of such obligations and (iii) theBorrowers, the Agents and the other Lenders shall continue to deal solely anddirectly with such Lender in connection with such Lender’s rights andobligations under this Agreement.  Anyagreement or instrument pursuant to which a Lender sells such a participationshall provide that such Lender shall retain the sole right to enforce thisAgreement and the other Loan Documents and to approve any amendment,modification or waiver of any provision of this Agreement or the other LoanDocuments; *provided* that suchagreement or instrument may provide that such Lender will not, without theconsent of the Participant, agree to any amendment, waiver or othermodification described in the first proviso to Section 10.01 that directlyaffects such Participant.  Subject to Section 10.07(f),the Borrowers agree that each Participant shall be entitled to the benefits ofSections 3.01, 3.04 and 3.05 to the same extent as if it were a Lender and hadacquired its interest by assignment pursuant to Section 10.07(c) butshall not be entitled to recover greater amounts under such Sections than theselling Lender would be entitled to recover. To the extent permitted by applicable Law, each Participant also shallbe entitled to the benefits of Section 10.09 as though it were a Lender; *provided* that such Participant agrees tobe subject to Section 2.13 as though it were a Lender.

###  

### (f)  AParticipant shall not be entitled to receive any greater payment under Section 3.01,3.04 or 3.05 than the applicable Lender would have been entitled to receivewith respect to the participation sold to such Participant, unless the sale ofthe participation to such Participant is made with the relevant Borrower’sprior written consent.  A Participantshall not be entitled to the benefits of Section 3.01 unless the relevantBorrower is notified of the participation sold to such Participant and suchParticipant agrees, for the benefit of the relevant Borrower, to comply with Section 10.15as though it were a Lender.

###  

### (g)  AnyLender may at any time, without the consent of the Company or theAdministrative Agent, pledge or assign a security interest in all or anyportion of its rights under this Agreement (including under its Note, if any)to secure obligations of such Lender, including any pledge or assignment to secureobligations to a Federal Reserve Bank; *provided*that no such pledge or assignment shall release such Lender from any of itsobligations hereunder or substitute any such pledgee or assignee for suchLender as a party hereto.

###  

### (h)  Notwithstandinganything to the contrary contained herein, any Lender (a “**Granting Lender**”) may grant to a specialpurpose funding vehicle identified as such in writing from time to time by theGranting Lender to the Administrative Agent and the relevant Borrower (an “**SPC**”) the option to provide all or any partof any Loan that such Granting Lender would otherwise be obligated to makepursuant to this Agreement; *provided*that (i) nothing herein shall constitute a commitment by any SPC to fundany Loan, and (ii) if an SPC elects not to exercise such option orotherwise fails to make all or any part of such Loan, the Granting Lender shallbe obligated to make such Loan pursuant to the terms hereof.  Each party hereto hereby agrees that

 

139

----

 

### (i) neither the grantto any SPC nor the exercise by any SPC of such option shall increase the costsor expenses or otherwise increase or change the obligations of the relevantBorrower under this Agreement (including its obligations under Section 3.01,3.04 or 3.05), (ii) no SPC shall be liable for any indemnity or similarpayment obligation under this Agreement for which a Lender would be liable, and(iii) the Granting Lender shall for all purposes, including the approvalof any amendment, waiver or other modification of any provision of any LoanDocument, remain the lender of record hereunder.  The making of a Loan by an SPC hereundershall utilize the Commitment of the Granting Lender to the same extent, and asif, such Loan were made by such Granting Lender.  Notwithstanding anything to the contrarycontained herein, any SPC may (i) with notice to, but without priorconsent of the relevant Borrower and the Administrative Agent and with thepayment of a processing fee of $3,500, assign all or any portion of its rightto receive payment with respect to any Loan to the Granting Lender and (ii) discloseon a confidential basis any non-public information relating to its funding ofLoans to any rating agency, commercial paper dealer or provider of any suretyor Guarantee or credit or liquidity enhancement to such SPC.

###  

### (i)  Notwithstandinganything to the contrary contained herein, (1) any Lender may inaccordance with applicable Law create a security interest in all or any portionof the Loans owing to it and the Note, if any, held by it and (2) anyLender that is a Fund may, without the consent of the Company or theAdministrative Agent, create a security interest in all or any portion of theLoans owing to it and the Note, if any, held by it to the trustee for holdersof obligations owed, or securities issued, by such Fund as security for suchobligations or securities; *provided*that unless and until such trustee actually becomes a Lender in compliance withthe other provisions of this Section 10.07, (i) no such pledge shallrelease the pledging Lender from any of its obligations under the LoanDocuments and (ii) such trustee shall not be entitled to exercise any ofthe rights of a Lender under the Loan Documents.

###  

### (j)  Notwithstandinganything to the contrary contained herein, any L/C Issuer or the Swing LineLender may, upon thirty (30) days’ notice to the Company and the Lenders,resign as an L/C Issuer or the Swing Line Lender, respectively; *provided* that on or prior to theexpiration of such 30-day period with respect to such resignation, the relevantL/C Issuer or the Swing Line Lender shall have identified a successor L/CIssuer or Swing Line Lender reasonably acceptable to the Company willing toaccept its appointment as successor L/C Issuer or Swing Line Lender, asapplicable.  In the event of any suchresignation of an L/C Issuer or the Swing Line Lender, the Company shall beentitled to appoint from among the Lenders willing to accept such appointment asuccessor L/C Issuer or Swing Line Lender hereunder; *provided* that no failure by the Company to appoint any suchsuccessor shall affect the resignation of the relevant L/C Issuer or the SwingLine Lender, as the case may be, except as expressly provided above.  If an L/C Issuer resigns as an L/C Issuer, itshall retain all the rights and obligations of an L/C Issuer hereunder withrespect to all Letters of Credit outstanding as of the effective date of itsresignation as an L/C Issuer and all L/C Obligations with respect thereto(including the right to require the Lenders to make Base Rate Loans or fundrisk participations in Unreimbursed Amounts pursuant to Section 2.03(c)).  If the Swing Line Lender resigns as SwingLine Lender, it shall retain all the rights of the Swing Line Lender providedfor hereunder with respect to Swing Line Loans made by it and outstanding as ofthe effective date of such resignation, including the right to require theLenders to make Base Rate Loans or fund risk participations in outstandingSwing Line Loans pursuant to Section 2.04(c).

###  

SECTION 10.08.  Confidentiality.  Eachof the Agents and the Lenders agrees to maintain the confidentiality of theInformation, except that Information may be disclosed (a) to itsAffiliates and its and its Affiliates’ directors, officers, employees,trustees, investment advisors 

 

140

----

 

 

andagents, including accountants, legal counsel and other advisors (it beingunderstood that the Persons to whom such disclosure is made will be informed ofthe confidential nature of such Information and instructed to keep suchInformation confidential pursuant to the terms hereof); (b) to the extentrequested by any Governmental Authority; (c) to the extent  required by applicable Laws or regulations orby any subpoena or similar legal process; (d) to any other party to thisAgreement; (e) subject to an agreement for the benefit of the Companycontaining provisions substantially the same as those of this Section 10.08(or as may otherwise be reasonably acceptable to the Company), to any pledgeereferred to in Section 10.07(g), counterparty to a Swap Contract, EligibleAssignee of or Participant in, or any prospective Eligible Assignee of orParticipant in, any of its rights or obligations under this Agreement; (f) withthe written consent of the Company; (g) to the extent such Informationbecomes publicly available other than as a result of a breach of this Section 10.08;(h) to any Governmental Authority or examiner (including the NationalAssociation of Insurance Commissioners or any other similar organization)regulating any Lender; or (i) to any rating agency when required by it (itbeing understood that, prior to any such disclosure, such rating agency shallundertake to preserve the confidentiality of any Information relating to theLoan Parties received by it from such Lender). In addition, the Agents and the Lenders may disclose the existence ofthis Agreement and information about this Agreement to market data collectors,similar service providers to the lending industry, and service providers to theAgents and the Lenders in connection with the administration and management ofthis Agreement, the other Loan Documents, the Commitments, and the CreditExtensions.  For the purposes of this Section 10.08,“**Information**” means allinformation received from any Loan Party relating to any Loan Party or itsbusiness, other than any such information that is publicly available to anyAgent or any Lender prior to disclosure by any Loan Party other than as aresult of a breach of this Section 10.08; provided that, in the case ofinformation received from a Loan Party after the date hereof, such information (i) isclearly identified at the time of delivery as confidential or (ii) isdelivered pursuant to Section 6.01, 6.02 or 6.03 hereof.

 

**EACH LENDER ACKNOWLEDGES THAT INFORMATION FURNISHED TOIT PURSUANT TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS MAY INCLUDEMATERIAL NON-PUBLIC INFORMATION CONCERNING HOLDINGS, THE BORROWERS, THE OTHERLOAN PARTIES AND THEIR AFFILIATES AND RELATED PARTIES OR THEIR RESPECTIVESECURITIES, AND CONFIRMS THAT IT HAS DEVELOPED COMPLIANCE PROCEDURES REGARDINGTHE USE OF MATERIAL NON-PUBLIC INFORMATION AND THAT IT WILL HANDLE SUCHMATERIAL NON-PUBLIC INFORMATION IN ACCORDANCE WITH THOSE PROCEDURES ANDAPPLICABLE LAW, INCLUDING FEDERAL AND STATE SECURITIES LAWS.**

 

**ALL INFORMATION, INCLUDING WAIVERS AND AMENDMENTS,FURNISHED BY HOLDINGS, THE BORROWERS OR THE ADMINISTRATIVE AGENT PURSUANT TO,OR IN THE COURSE OF ADMINISTERING, THIS AGREEMENT WILL BE SYNDICATE-LEVELINFORMATION, WHICH MAY CONTAIN MATERIAL NON-PUBLIC INFORMATION ABOUTHOLDINGS, THE BORROWERS, THE OTHER LOAN PARTIES AND THEIR AFFILIATES ANDRELATED PARTIES OR THEIR RESPECTIVE SECURITIES. ACCORDINGLY, EACH LENDER REPRESENTS TO HOLDINGS, THE BORROWERS AND THEADMINISTRATIVE AGENT THAT IT HAS IDENTIFIED IN ITS ADMINISTRATIVE QUESTIONNAIREA CREDIT CONTACT WHO MAY RECEIVE INFORMATION THAT MAY CONTAINMATERIAL NON-PUBLIC INFORMATION IN**

 

141

----

 

**ACCORDANCE WITH ITS COMPLIANCE PROCEDURES AND APPLICABLE LAW,INCLUDING FEDERAL AND STATE SECURITIES LAWS.**

 

SECTION 10.09.  Setoff.  Inaddition to any rights and remedies of the Lenders provided by Law, upon theoccurrence and during the continuance of any Event of Default, each Lender andits Affiliates is authorized at any time and from time to time, without priornotice to the Company or any other Loan Party, any such notice being waived bythe Company (on its own behalf and on behalf of each Loan Party and itsSubsidiaries) to the fullest extent permitted by applicable Law, to set off andapply any and all deposits (general or special, time or demand, provisional orfinal) at any time held by, and other Indebtedness at any time owing by, suchLender and its Affiliates to or for the credit or the account of the respectiveLoan Parties and their Subsidiaries against any and all Obligations owing tosuch Lender and its Affiliates hereunder or under any other Loan Document, nowor hereafter existing, irrespective of whether or not such Agent or such Lenderor Affiliate shall have made demand under this Agreement or any other LoanDocument and although such Obligations may be contingent or unmatured ordenominated in a currency different from that of the applicable deposit orIndebtedness;*provided* that, inthe case of any such deposits or other Indebtedness for the credit or theaccount of any Foreign Subsidiary, such set off may only be against anyObligations of Foreign Subsidiaries. Each Lender agrees promptly to notify the Company and the AdministrativeAgent after any such set off and application made by such Lender; *provided*, that the failure to give suchnotice shall not affect the validity of such setoff and application.  The rights of the Administrative Agent andeach Lender under this Section 10.09 are in addition to other rights andremedies (including other rights of setoff) that the Administrative Agent andsuch Lender may have.  Notwithstandinganything herein or in any other Loan Document to the contrary, in no eventshall the assets of any Foreign Subsidiary that is not a Loan Party constitutecollateral security for payment of the Obligations of the Company or anyDomestic Subsidiary, it being understood that (a) the Equity Interests ofany Foreign Subsidiary that is not a Loan Party do not constitute such an assetand (b) the provisions hereof shall not limit, reduce or otherwisediminish in any respect the Borrowers’ obligations to make any mandatoryprepayment pursuant to Section 2.05(b)(ii).

 

SECTION 10.10.  Interest Rate Limitation. Notwithstanding anything to the contrary contained in any Loan Document,if at any time the interest rate applicable to any Loan, together with allfees, charges and other amounts which are treated as interest on such Loanunder applicable Law (collectively the “**Charges**”),shall exceed the maximum lawful rate (the “**MaximumRate**”) which may be contracted for, charged, taken, received orreserved by the Lender holding such Loan in accordance with applicable Law, therate of interest payable in respect of such Loan hereunder, together with allCharges payable in respect thereof, shall be limited to the Maximum Rate and,to the extent lawful, the interest and Charges that would have been payable inrespect of such Loan but were not payable as a result of the operation of this Section shallbe cumulated and the interest and Charges payable to such Lender in respect ofother Loans or periods shall be increased (but not above the Maximum Ratetherefor) until such cumulated amount, together with interest thereon at theFederal Funds Rate to the date of repayment, shall have been received by suchLender.

 

SECTION 10.11.  Counterparts.  ThisAgreement and each other Loan Document may be executed in one or morecounterparts, each of which shall be deemed an original, but all of whichtogether shall constitute one and the same instrument.  Delivery by telecopier of an executedcounterpart of a signature page to this Agreement and each other LoanDocument shall be effective as delivery of an original executed counterpart ofthis Agreement and such other Loan Document. The Agents may also require that any such documents and signaturesdelivered by telecopier be confirmed by a manually signed original thereof;provided that the failure to request

 

142

----

 

ordeliver the same shall not limit the effectiveness of any document or signaturedelivered by telecopier.

 

SECTION 10.12.  Integration.  ThisAgreement, together with the other Loan Documents, comprises the complete andintegrated agreement of the parties on the subject matter hereof and thereofand supersedes all prior agreements, written or oral, on such subjectmatter.  In the event of any conflictbetween the provisions of this Agreement and those of any other Loan Document,the provisions of this Agreement shall control; provided that the inclusion ofsupplemental rights or remedies in favor of the Agents or the Lenders in anyother Loan Document shall not be deemed a conflict with this Agreement.  Each Loan Document was drafted with the jointparticipation of the respective parties thereto and shall be construed neitheragainst nor in favor of any party, but rather in accordance with the fairmeaning thereof.

 

SECTION 10.13.  Survival of Representations andWarranties.  All representations and warranties madehereunder and in any other Loan Document or other document delivered pursuanthereto or thereto or in connection herewith or therewith shall survive theexecution and delivery hereof and thereof. Such representations and warranties have been or will be relied upon byeach Agent and each Lender, regardless of any investigation made by any Agentor any Lender or on their behalf and notwithstanding that any Agent or anyLender may have had notice or knowledge of any Default at the time of anyCredit Extension, and shall continue in full force and effect as long as anyLoan or any other Obligation hereunder shall remain unpaid or unsatisfied orany Letter of Credit shall remain outstanding.

 

SECTION 10.14.  Severability.  Ifany provision of this Agreement or the other Loan Documents is held to beillegal, invalid or unenforceable, the legality, validity and enforceability ofthe remaining provisions of this Agreement and the other Loan Documents shallnot be affected or impaired thereby.  Theinvalidity of a provision in a particular jurisdiction shall not invalidate orrender unenforceable such provision in any other jurisdiction.

 

SECTION 10.15.  Tax Forms.  (a)  (i)  EachLender and Agent that is not a “United States person” within the meaning of Section 7701(a)(30)of the Code (each, a “**Foreign Lender**”)shall deliver to the Company and the Administrative Agent, on or prior to thedate which is ten (10) Business Days after the Closing Date (or uponaccepting an assignment of an interest herein), two duly signed, properly completedcopies of either IRS Form W-8BEN or any successor thereto (relating tosuch Foreign Lender and entitling it to an exemption from, or reduction of,United States withholding tax on all payments to be made to such Foreign Lenderby the Company or any other Loan Party pursuant to this Agreement or any otherLoan Document) or IRS Form W-8ECI or any successor thereto (relating toall payments to be made to such Foreign Lender by the Company or any other LoanParty pursuant to this Agreement or any other Loan Document) or such otherevidence reasonably satisfactory to the Company and the Administrative Agentthat such Foreign Lender is entitled to an exemption from, or reduction of,United States withholding tax, including any exemption pursuant to Section 871(h) or881(c) of the Code, and in the case of a Foreign Lender claiming such anexemption under Section 881(c) of the Code, a certificate thatestablishes in writing to the Company and the Administrative Agent that suchForeign Lender is not (i) a “bank” as defined in Section 881(c)(3)(A) ofthe Code, (ii) a 10-percent stockholder within the meaning of Section 871(h)(3)(B) ofthe Code, or (iii) a controlled foreign corporation related to the Companywith the meaning of Section 864(d) of the Code.  Thereafter and from time to time, each suchForeign Lender shall (A) promptly submit to the Company and theAdministrative Agent such additional duly completed and signed copies of one ormore of such forms or certificates (or such successor forms or certificates asshall be adopted from time to time by the relevant United States taxingauthorities) as may then be 

 

143

----

 

availableunder then current United States Laws and regulations to avoid, or suchevidence as is reasonably satisfactory to the Company and the AdministrativeAgent of any available exemption from, or reduction of, United Stateswithholding taxes in respect of all payments to be made to such Foreign Lenderby the Company or other Loan Party pursuant to this Agreement, or any otherLoan Document, in each case, (1) on or before the date that any such form,certificate or other evidence expires or becomes obsolete, (2) after theoccurrence of any event requiring a change in the most recent form, certificateor evidence previously delivered by it to the Company and the AdministrativeAgent and (3) from time to time thereafter if reasonably requested by theCompany or the Administrative Agent, and (B) promptly notify the Companyand the Administrative Agent of any change in circumstances which would modifyor render invalid any claimed exemption or reduction.

 

#### (ii)  EachForeign Lender, to the extent it does not act or ceases to act for its ownaccount with respect to any portion of any sums paid or payable to such ForeignLender under any of the Loan Documents (for example, in the case of a typicalparticipation by such Foreign Lender), shall deliver to the Company and theAdministrative Agent on the date when such Foreign Lender ceases to act for itsown account with respect to any portion of any such sums paid or payable, andat such other times as may be necessary in the determination of the Company orthe Administrative Agent (in either case, in the reasonable exercise of itsdiscretion), (A) two duly signed completed copies of the forms orstatements required to be provided by such Foreign Lender as set forth above,to establish the portion of any such sums paid or payable with respect to whichsuch Foreign Lender acts for its own account that is not subject to UnitedStates withholding tax, and (B) two duly signed completed copies of IRS Form W-8IMY(or any successor thereto), together with any information such Foreign Lenderchooses to transmit with such form, and any other certificate or statement of exemptionrequired under the Code, to establish that such Foreign Lender is not actingfor its own account with respect to a portion of any such sums payable to suchForeign Lender.

####  

#### (iii)  EachLender and Agent (or Participant) that is entitled to an exemption from orreduction of non-U.S. withholding tax under the law of the jurisdiction inwhich a Borrower is formed or organized, or any treaty to which suchjurisdiction is a party, with respect to payments under this Agreement shalldeliver to such Borrower (with a copy to the Administrative Agent), at the timeor times prescribed by applicable law or reasonably requested by such Borrower,such properly completed and executed documentation prescribed by applicable lawas will permit such payments to be made without withholding, or at a reducedrate, *provided* that such Lenderor Agent (or Participant) is legally entitled to complete, execute and deliversuch documentation.  Each Lender andAgent (or Participant) shall promptly notify such Borrower and the AdministrativeAgent of any change in circumstances which would modify or render invalid anyclaimed exemption or reduction.

####  

#### (iv)  NoBorrower shall be required to pay any additional amount or any indemnitypayment under Section 3.01 to (A) any Lender if such Lender shallhave failed to satisfy the foregoing provisions of this Section 10.15(a),or (B) any U.S. Lender if such U.S. Lender shall have failed to satisfythe provisions of Section 10.15(b); *provided*that (i) if such Lender shall have satisfied the requirement of this or Section 10.15(b),as applicable, on the date such Lender became a Lender or, if later, the datesuch Lender made an Incremental Overseas Term Loan to any Borrower or the datea CAM Exchange occurred, or ceased to act for its own account with respect toany payment under any of the Loan Documents, nothing in this Section 10.15(a) orSection 10.15(b) shall relieve any Borrower of its obligation to payany amounts pursuant to Section 3.01 in the event that, as a result of anychange in any applicable Law, treaty or governmental rule, regulation or order,or any change in the interpretation, administration or

 

144

----

 

#### application thereof, suchLender is no longer properly entitled to deliver forms, certificates or otherevidence at a subsequent date establishing the fact that such Lender or otherPerson for the account of which such Lender receives any sums payable under anyof the Loan Documents is not subject to withholding or is subject to withholdingat a reduced rate and (ii) nothing in this Section 10.15(a) shallrelieve any Borrower of its obligation to pay any amounts pursuant to Section 3.01in the event that the requirements of Section 10.15(a)(ii) or10.15(a)(iii) have not been satisfied if such Borrower is entitled, underapplicable Law, to rely on any applicable forms and statements required to beprovided under this Section 10.15 by the Lender that does not act or hasceased to act for its own account under any of the Loan Documents, including inthe case of a typical participation.

####  

#### (v)  TheAdministrative Agent may deduct and withhold any taxes required by any Laws tobe deducted and withheld from any payment under any of the Loan Documents.

####  

### (b)  EachLender and Agent that is a “United States person” within the meaning of Section 7701(a)(30)of the Code (each, a “**U.S. Lender**”)shall deliver to the Administrative Agent and the Company two duly signed,properly completed copies of IRS Form W-9 on or prior to the Closing Date(or on or prior to the date it becomes a party to this Agreement), certifyingthat such U.S. Lender is entitled to an exemption from United States backupwithholding tax, or any successor form. If such U.S. Lender fails to deliver such forms, then the AdministrativeAgent may withhold from any payment to such U.S. Lender an amount equivalent tothe applicable backup withholding tax imposed by the Code.  Thereafter and from time to time, each suchU.S. Lender shall (A) promptly submit to the Company and the AdministrativeAgent such additional duly completed and signed copies of one or more of suchforms or certificates (or such successor forms) as may then be available underthen current United States Laws and regulations to avoid, or such evidence asis reasonably satisfactory to the Company and the Administrative Agent of anyavailable exemption from United States back up withholding taxes in respect ofall payments to be made to such U.S. Lender by the Company or other Loan Partypursuant to this Agreement, or any other Loan Document, in each case, (1) onor before the date that any such form or other evidence expires or becomesobsolete, (2) after the occurrence of any event requiring a change in themost recent form or evidence previously delivered by it to the Company and theAdministrative Agent and (3) from time to time thereafter if reasonablyrequested by the Company or the Administrative Agent, and (B) promptlynotify the Company and the Administrative Agent of any change in circumstanceswhich would modify or render invalid any claimed exemption.

###  

SECTION 10.16.  Governing Law.  (a) THIS AGREEMENT AND EACH OTHER LOAN DOCUMENT SHALL BE GOVERNED BY, AND CONSTRUEDIN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

 

(b) ANY LEGAL ACTION OR PROCEEDING ARISING UNDER ANY LOAN DOCUMENT OR IN ANY WAYCONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETOOR ANY OF THEM WITH RESPECT TO ANY LOAN DOCUMENT, OR THE TRANSACTIONS RELATEDTHERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, MAY BEBROUGHT IN THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK CITY OR OFTHE UNITED STATES FOR THE SOUTHERN DISTRICT OF SUCH STATE, AND BY EXECUTION ANDDELIVERY OF THIS AGREEMENT, EACH BORROWER, HOLDINGS, EACH AGENT AND EACH LENDERCONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVEJURISDICTION OF THOSE COURTS.  EACHBORROWER, HOLDINGS, EACH AGENT AND EACH LENDER IRREVOCABLY WAIVES

 

145

----

 

ANYOBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THEGROUNDS OF *FORUM NON CONVENIENS*,WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION ORPROCEEDING IN SUCH COURTS IN RESPECT OF ANY LOAN DOCUMENT OR OTHER DOCUMENTRELATED THERETO.

 

SECTION 10.17.  Waiver of Right to Trial by Jury.  EACHPARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OFANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER ANY LOAN DOCUMENT ORIN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THEPARTIES HERETO OR ANY OF THEM WITH RESPECT TO ANY LOAN DOCUMENT, OR THETRANSACTIONS RELATED THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTERARISING, AND WHETHER FOUNDED IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTYHEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OFACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TOTHIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION 10.17WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE SIGNATORIES HERETO TOTHE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

 

SECTION 10.18.  Binding Effect.  ThisAgreement shall become effective when it shall have been executed by theBorrowers and Holdings and the Administrative Agent shall have been notified byeach Lender, Swing Line Lender and L/C Issuer that each such Lender, Swing LineLender and L/C Issuer has executed it and thereafter shall be binding upon andinure to the benefit of the Company, each Agent and each Lender and their respectivepermitted successors and assigns, except that the Company shall not have theright to assign its rights hereunder or any interest herein without the priorwritten consent of the Lenders except as permitted by Section 7.04.

 

SECTION 10.19.  Lender Action.  EachLender agrees that it shall not take or institute any actions or proceedings,judicial or otherwise, for any right or remedy against any Loan Party or anyother obligor under any of the Loan Documents or the Secured Hedge Agreements(including the exercise of any right of setoff, rights on account of anybanker’s lien or similar claim or other rights of self-help), or institute anyactions or proceedings, or otherwise commence any remedial procedures, withrespect to any Collateral or any other property of any such Loan Party, withoutthe prior written consent of the Administrative Agent.  The provision of this Section 10.19 arefor the sole benefit of the Lenders and shall not afford any right to, orconstitute a defense available to, any Loan Party.

 

SECTION 10.20.  USA PATRIOT Act.  EachLender hereby notifies the Borrowers that pursuant to the requirements of thePatriot Act, it is required to obtain, verify and record information thatidentifies the Borrowers, which information includes the name and address ofthe Borrowers and other information that will allow such Lender to identify theBorrowers in accordance with the Act.

 

SECTION 10.21.  Agent for Service of Process.  TheCompany agrees that promptly following request by the Administrative Agent itshall cause each Foreign Subsidiary which is a Loan Party or for whose accounta Letter of Credit is issued to appoint and maintain an agent reasonablysatisfactory to the Administrative Agent to receive service of process in NewYork City on behalf of such Foreign Subsidiary.

 

146

----

 

SECTION 10.22.  Effectiveness of the Merger;Assignment and Delegation to and Assumption by Reader’s Digest. Reader’s Digest shall have no rights or obligations hereunder until theconsummation of the Merger and any representations and warranties of Reader’sDigest hereunder shall not become effective until such time.  Upon consummation of the Merger, and withoutany further action by any Person, (a) Reader’s Digest hereby irrevocablyand unconditionally (i) assumes and agrees punctually to pay, perform anddischarge when due each of the Obligations and each and every debt, covenantand agreement incurred, made or to be paid, performed or discharged by theCompany under the Loan Documents, (ii) agrees to be bound by all theterms, provisions and conditions of the Loan Documents applicable to theCompany and (iii) agrees that it will be responsible for and deemed tohave made all the representations and warranties of the Company, whenever madeor deemed to have been made and (b) Reader’s Digest automatically assumesand agrees to perform all the obligations of Acquisition Co under theCommitment Letter dated November 16, 2006, among Holdings, Acquisition Co,the Arrangers and the Agents and the Fee Letter referred to therein.  Upon the effectiveness of the assumptionprovided for above, Reader’s Digest will be the Company for all purposes ofthis Agreement and the other Loan Documents and may exercise every right andpower of the Company under this Agreement and the other Loan Documents.

 

SECTION 10.23.  Judgment Currency.  If,for the purposes of obtaining judgment in any court, it is necessary to converta sum due hereunder or any other Loan Document in one currency into anothercurrency, the rate of exchange used shall be that at which in accordance withnormal banking procedures the Administrative Agent could purchase the firstcurrency with such other currency on the Business Day preceding that on whichfinal judgment is given.  The obligationof each Borrower in respect of any such sum due from it to the AdministrativeAgent or the Lenders hereunder or under the other Loan Documents shall,notwithstanding any judgment in a currency (the “**Judgment Currency**”) other than that in which such sum isdenominated in accordance with the applicable provisions of this Agreement (the“**Agreement Currency**”), bedischarged only to the extent that on the Business Day following receipt by theAdministrative Agent of any sum adjudged to be so due in the Judgment Currency,the Administrative Agent may in accordance with normal banking procedurespurchase the Agreement Currency with the Judgment Currency.  If the amount of the Agreement Currency sopurchased is less than the sum originally due to the Administrative Agent fromany Borrower in the Agreement Currency, such Borrower agrees, as a separateobligation and notwithstanding any such judgment, to indemnify theAdministrative Agent or the Person to whom such obligation was owing against suchloss.  If the amount of the AgreementCurrency so purchased is greater than the sum originally due to theAdministrative Agent in such currency, the Administrative Agent agrees toreturn the amount of any excess to such Borrower (or to any other Person whomay be entitled thereto under applicable Law).

 

SECTION 10.24.  German Tax Confirmation.  (a)   If, atany time after the Closing Date, the German Borrower determines that aconfirmation by the Administrative Agent and/or each of the Euro Term Lenderssubstantially in the form of the Decree issued by the German Federal Ministryof Finance as of October 20, 2005 (substantially in the form of Exhibit L,the “**Tax Confirmation**”) may berequired under the decrees to § 8a of the German Corporate Income Tax Act (*Körperschaftsteuergesetz or KStG*) dated July 15,2004, July 22, 2005, and October 20, 2005 (as in effect on thedate hereof, the “**Decrees**”) withrespect to the Euro Term Loans, the German Borrower may prepare and deliver tothe Euro Term Lenders (through the Administrative Agent) a complete andaccurate draft Tax Confirmation listing all guarantees and security interestssecuring the claims of the Euro Term Lenders under the Loan Documents and theSecured Hedge Agreements and provide to the Euro Term Lenders any furtherinformation which may reasonably be required by the Administrative Agent or anyEuro Term Lender to issue the

 

147

----

 

Tax Confirmation (based on the then applicablepractice of the German tax authorities), such information to be requestedwithin fifteen (15) Business Days after the delivery of the draft TaxConfirmation by the German Borrower to the Euro Term Lenders (through theAdministrative Agent).

 

(b)  The TaxConfirmation shall only include factual but not legal statements to be issuedby the Euro Term Lenders.  The TaxConfirmation shall not contain any statement that any Euro Term Lender is notpermitted to issue by law, administrative rule or regulation of thejurisdiction to which the relevant Euro Term Lender is subject.

 

(c)  Each Euro TermLender (including any Person that becomes a Euro Term Lender subsequent to thedate hereof pursuant to Section 10.07) hereby authorizes theAdministrative Agent on behalf of such Euro Term Lender to issue a TaxConfirmation and provide it to the German Borrower within sixteen (16) BusinessDays after such Euro Term Lender’s receipt of the following (which receiptshall be deemed to have occurred upon the Administrative Agent’s posting of thefollowing to Intralinks or other similar information transmissionsystem):

 

#### (i)  the German Borrower’s requesttherefor,

####  

#### (ii)  a complete and accurate draftof such Tax Confirmation listing all guarantees and security interests pursuantto clause (a) above, and

####  

#### (iii)  all further informationreasonably requested within the period set forth for such request pursuant toclause (a) above to enable the Euro Term Lenders to complete such TaxConfirmation,

####  

unless such Euro Term Lender notifies theAdministrative Agent within the 15-Business Day period described in clause (a) abovethat (x) it is prohibited from doing so by law, administrative rule orregulation of the jurisdiction to which such Euro Term Lender is subject or (y) ithas reasonably determined that the factual information provided by the GermanBorrower is not correct or not complete or, in the view of such Euro TermLender (acting in good faith), is misleading or (z) such Euro Term Lenderhas not been released from confidentiality obligations to any Loan Party underapplicable banking secrecy rules with respect to confidential informationwith respect to such Loan Party contained in such Tax Confirmation or, to theextent applicable, has not been instructed to disclose any such information bythe relevant Loan Party.  Subject to theterms of the preceding sentence, within the 16-Business Day period set forthabove, the Administrative Agent acting also on behalf of the Euro Term Lendersshall issue and provide to the German Borrower the requested Tax Confirmation.

 

(d)  The Companyagrees to pay or reimburse the Administrative Agent and each Euro Term Lenderfor all reasonable expenses incurred in connection with any Tax Confirmation inaccordance with the principles set forth in Section 10.04, including AttorneyCosts.  The Company shall indemnify andhold harmless each Indemnitee from and against any and all liabilities,obligations, losses, damages, penalties, claims, demands, actions, judgmentsand suits and related reasonable expenses (including all reasonable AttorneyCosts) of any kind or nature whatsoever which may at any time be imposed on,incurred by or asserted against any such Indemnitee in any way relating to orarising out of or in connection with any Tax Confirmation in accordance withthe principles set forth in Section 10.05. The agreements in this clause (d) shall survive the resignation ofthe Administrative Agent, the replacement of any Lender, the termination of theAggregate Commitments and repayment, satisfaction or discharge of all otherObligations.

 

148

----

 

### (e)  The German Borrower confirms tothe Administrative Agent and each Euro Term Lender that (i) the Euro TermLenders will issue their respective Tax Confirmations exclusively at the requestof the German Borrower and solely for the purpose of providing information tothe German tax authorities as required pursuant to the Decrees, (ii) theEuro Term Lenders are not responsible for examining any Borrower’s tax positionor for achieving any certain tax treatment with respect to any Borrower and (iii) noLoan Party will raise any claims against the Administrative Agent or any EuroTerm Lender based on, or in connection with, any Tax Confirmation and no EuroTerm Lender will have any liability to any Loan Party with respect to any TaxConfirmation (other than, subject to the principles of Section 10.05, forfailure to comply with the last sentence of Section 10.24(c)).

###  

### (f)  It is the common understandingof the parties hereto that no party is providing any legal and/or tax advice toany other party with respect to this Agreement or, in particular, with respectto the application of § 8a KStG and the interpretation of § 8a KStG in theDecrees, and that it is the responsibility of each party, in particular eachLoan Party, to consult with its own legal/tax advisers.

###  

### (g)  Each Loan Party releases eachEuro Term Lender from its duty of confidentiality and/or obligation of banksecrecy (*Bankgeheimnis*) withregard to the issuance of a Tax Confirmation to the German Borrower and itssubmission to the German tax authorities.

###  

### (h)  If, after the date of thisAgreement, changes occur to German tax legislation or its interpretationmaterially prejudicing the tax treatment of interest payments of the GermanBorrower, the Administrative Agent and the Euro Term Lenders agree that theywill negotiate in good faith (without any legal obligation to agree) with theCompany and the German Borrower to restructure the Collateral securing the EuroTerm Loans to seek to reduce the impact of such materially prejudicial taxtreatment while retaining Collateral acceptable to the Euro Term Lenders.

###  

**[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]**

 

149

----

 

**IN WITNESS WHEREOF**, the parties hereto have caused this Agreement to be duly executed asof the date first above written.

 

 
| ** ** | **DOCTOR ACQUISITION CO.**       |
|------------|----------------------------------|
| ** ** | ** **                       |
|       |      by |
|       |                             | /s/  Christopher Minnetian |
|       |                             | Name:  Christopher Minnetian |
|       |                             | Title: |

 

Senior Secured Credit Agreement

 

----

 
|   | **RDA HOLDING CO.**                    |
|--------|----------------------------------------|
|   |       by |
|   |                                   |
|   |                                   | /s/  Christopher Minnetian |
|   |                                   | Name:  Christopher Minnetian |
|   |                                   | Title: |

 

Senior Secured Credit Agreement

 

----

 
|   | **THE READER’S DIGEST ASSOCIATION,  INC.** |
|--------|-------------------------------------------------|
|   | ** **                                      |
|   |     by                      |
|   |                                            | /s/  William H. Magill |
|   |                                            | Name:  William H. Magill |
|   |                                            | Title:  Vice President and Treasurer |

 

Senior Secured Credit Agreement

 

----

 
| ** ** | **RD GERMAN HOLDINGS GMBH** |
|------------|-----------------------------|
|       |                        |
|       |     by  |
|       |                        | /s/  Werner Neunzig |
|       |                        | Name:  Werner Neunzig |
|       |                        | Title:  Managing Director |

 

Senior Secured Credit Agreement

 

----

 
|   | **JPMORGAN CHASE BANK, N.A.**, as  Administrative Agent and a Lender, |
|--------|-----------------------------------------------------------------------|
|   | ** **                                                            |
|   |     by                                            |
|   |                                                                  | /s/  Gary L. Spevack |
|   |                                                                  | Name:  Gary L. Spevack |
|   |                                                                  | Title:  Vice President |

 

Senior Secured Credit Agreement

 

----

 
|   | **CITICORP NORTH AMERICA, INC.**, as  Co-Syndication Agent and a Lender, |
|--------|--------------------------------------------------------------------------|
|   |                                                                     |
|   |     by                                               |
|   |                                                                     | /s/  Caesar Wyszomirski |
|   |                                                                     | Name:  Caesar Wyszomirski |
|   |                                                                     | Title:  Vice President |

 

Senior Secured Credit Agreement

 

----

 
|   | **MERRILL LYNCH, PIERCE, FENNER &  SMITH INCORPORATED**,  as Co-  Syndication Agent, Co-Lead Arranger and Joint Bookrunner |
|--------|-------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                |
|   |     by                                                                                                          |
|   |                                                                                                                                | /s/  Gregory Margolies |
|   |                                                                                                                                | Name:  Gregory Margolies |
|   |                                                                                                                                | Title:  Managing Director |

 

Senior Secured Credit Agreement

 

----

 
|   | **MERRILL LYNCH CAPITAL  CORPORATION**, as a  Lender, |
|--------|-------------------------------------------------------|
|   |                                                  |
|   |     by                            |
|   |                                                  | /s/  Gregory Margolies |
|   |                                                  | Name:  Gregory Margolies |
|   |                                                  | Title:  Vice President |

 

Senior Secured Credit Agreement

 

----

 
|   | **THE ROYAL BANK OF SCOTLAND PLC**,  as Documentation Agent and a Lender, |
|--------|---------------------------------------------------------------------------|
|   |                                                                      |
|   |     by                                                |
|   |                                                                      | /s/  Jim Kuster |
|   |                                                                      | Name:  Jim Kuster |
|   |                                                                      | Title:  Managing Director |

 

Senior Secured Credit Agreement

 

----

 
|   | Credit Industrial ET Commercial, |
|--------|----------------------------------|
|   | as a Lender                      |
|   |                             |
|   | by                               | /s/ Marcus Edward |
|   |                             | Name: | Marcus Edward |
|   |                             | Title: | Managing Director |
|   |                             |   |
|   |                             |   |
|   | by                               | /s/ Anthony Rock |
|   |                             | Name: | Anthony Rock |
|   |                             | Title: | Managing Director |

 

----

 
|   | General Electric Capital Corporation,  as a Lender |
|--------|----------------------------------------------------|
|   |                                               |   |
|   | by                                                 | /s/ Karl E. Kleffer |
|   |                                               | Name: | Karl E. Kleffer |
|   |                                               | Title: | Duly Authorized Signatory |

 

----

 
|   | Toronto Dominion (Texas) LLC,  as a Lender |
|--------|--------------------------------------------|
|   |                                       |   |
|   | by                                         | /s/ Debbi Brito |
|   |                                       | Name: | Debbi Brito |
|   |                                       | Title: | Authorized Signatory |

 

----

 
|   | The CIT Group/Equipment Financing, Inc.,  as a Lender |
|--------|-------------------------------------------------------|
|   |                                                  |   |
|   | by                                                    | /s/ Peter Connolly |
|   |                                                  | Name: | Peter Connolly |
|   |                                                  | Title: | EVP |

 

----

 
|   | J.P. Morgan Securities Inc., as Co-Lead Arranger and Joint Bookrunner |
|--------|-----------------------------------------------------------------------|
|   |                                                                  |   |
|   | by:                                                                   | /s/ Gary L. Spevack |
|   |                                                                  | Name: | Gary L. Spevack |
|   |                                                                  | Title: | Vice President |

 

----

 
|   | Citigroup Global Markets, Inc., as Co-Lead Arranger and Joint  Bookrunner |
|--------|---------------------------------------------------------------------------|
|   |                                                                      |   |
|   | by                                                                        | /s/  Caesar Wyszomirski |
|   |                                                                      | Name: | Caesar  Wyszomirski |
|   |                                                                      | Title: | Director |

 

----

 
|   | RBS Securities Corporation, as Co-Lead Arranger and Joint Bookrunner |
|--------|----------------------------------------------------------------------|
|   |                                                                 |   |
|   | by                                                                   | /s/ Jim Kuster |
|   |                                                                 | Name: | Jim Kuster |
|   |                                                                 | Title: | Managing Director |

 

----

 

**Schedule 1.01A**

**Certain Security Interests and Guarantees**

 

·                                          Guaranteeand Collateral Agreement; and

 

·                                          Mortgageswith respect to each real property listed in Schedule 1.01B.

 

----

 

**Schedule 1.01B**

**Mortgaged Properties**

 
| **Record Owner**         | ** ** | **Property Address**                                                                                                                  |
|-------------------------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------|
| Books Are Fun, Ltd.           |       | 1680 Highway 1 North

Fairfield, Iowa

 

111 North Main Street

Fairfield, Iowa

 

123 North Main Street  Fairfield, Iowa |
|                          |       |                                                                                                                                       |
| Reiman Media Group, Inc. |       | 5400 South 60th Street

Greendale, Wisconsin                                                                                               |

 

----

 

**Schedule 1.01C**

**Management Adjustments**

 

Reader’s Digest adjustments:

 

·                                          Inconnection with the Transactions, Reader’s Digest will record a pro formabalance sheet adjustment to decrease unearned revenue by approximately $175.0million. This adjustment is expected to reduce net revenue by approximately$133.0 million in the first year following the Transactions. The remainingbalance is expected to impact net revenue in periods thereafter.

 

·                                          Restructuringactivities comprised:

 

·                                          Chargesof $2.8 million for severance, $2.6 million for asset impairments and $0.5million for other costs associated with the restructuring plan at Books AreFun, Ltd.. These charges were taken at Books Are Fun,Ltd. to lower the cost base, upgrade the management team and sales force andimprove the business model. The actions associated with these initiatives areexpected to be completed by the end of fiscal 2007. Asset impairment chargeswere primarily attributed to write-offs of capitalized software costs relatedto abandoned assets. The remaining costs are those incurred to close Books AreFun Ltd.’s jewelry business and to terminate contractual lease obligations.

 

·                                          Chargesof $3.5 million for severance, $0.2 million for asset impairments, and $1.4million in other costs to lower Reader’s Digest’s cost base commensurate withReader’s Digest’s current revenue and in an effort to streamline Reader’sDigest’s operations. Approximately 29%, 54% and 17% of these costs related toReader’s Digest North America, Reader’s Digest International and ConsumerBusiness Services, respectively. These actions are expected to be completed bythe end of fiscal 2007.

 

·                                          Incomeof $2.0 million related to reversals of charges, primarily severance, recordedin previous years and the reversal of amortized gains related to the sale andpartial lease-back of the Reader’s Digest headquarters facility. Reader’sDigest reviews its restructuring plans periodically to determine theappropriateness of existing accruals in light of current circumstances.Accordingly, these charges were reversed because of the occurrence of eventsthat affected the original plans.

 

·                                          Reader’sDigest disposed of American Woodworker magazine in the second quarter of fiscal2007 at a book loss of $6.2 million.

 

·                                          Represents a charge of $5.6 million because Reader’s Digestdetermined that it was probable that QSP, Inc. would not satisfy theminimum tonnage purchase requirement during calendar 2006 in its World’s FinestChocolate licensing agreement. In the event QSP, Inc. does not satisfy thepurchase requirement in future calendar years, QSP, Inc. 

 

----

 

will be requiredto make similar payments. QSP, Inc. paid $2.0 million and $0.8 million infiscal 2003 and 2004, respectively, in penalties to World’s Finest Chocolatefor failure to satisfy minimum purchase requirements.

 

·                                          Includes$2.0 million of expense under Reader’s Digest’s key employee long-termincentive compensation plan, primarily attributable to the increase in themarket price of Reader’s Digest’s common stock in connection with theTransactions. Also includes additional compensation of $0.6 million to retainkey personnel in connection with the Transactions.

 

·                                          Compensationand benefits paid to, and other expenses in the aggregate amount of $4.2million associated with, Reader’s Digest’s chairman of the board during thetwelve months ended December 31, 2006. Reader’s Digest’s chairman of theboard retired from that capacity on December 31, 2006.

 

·                                          Professionalfees of $4.0 million relating to an international tax planning initiative thatultimately was not implemented.

 

·                                          BooksAre Fun, Ltd. adjustments relate to: (a) a $7.0 million charge in fiscal2006 to write down the value of old and discontinued items, (b) $6.1million of legal expenses incurred in connection with suits against the founderof Books Are Fun, a competitor of Books Are Fun, Ltd. and certain formerexecutives of Books Are Fun, Ltd. and (c) $1.1 million of expenses torelocate the Books Are Fun, Ltd. headquarters from Iowa to the Chicago area andrecruit new management.

 

·                                          Stock-basedcompensation of $11.4 million includes: (a) compensation costs for allshare-based payments granted prior to, but not yet vested as of July 1,2005, based on the grant date fair value estimated in accordance with theoriginal provisions of SFAS No. 123, and compensation cost for allshare-based payments granted subsequent to July 1, 2005, based on thegrant date fair values estimated in accordance with the provisions of SFAS No. 123Rand (b) the expensing of restricted and deferred stock awards over thetwo- to four-year restriction period.

 

·                                          Anticipatedcost savings include (a) $4.0 million of estimated annual cost savingsexpected to be recognized through the restructuring of certain of Reader’sDigest’s operations and (b) $7.0 million of estimated annual cost savingsas a consequence of the conversion to a private company. These costs savingswill generally be in the areas of eliminating or reducing public companydirector fees, director and officer insurance, and certain professionalservices and staff.*

 

WRC Mediaadjustments:

 

·                                          Restructuringand other non-recurring items include:

 

----

 

·                                          Costsrelated to the shutdown of CompassLearning facilities in San Diego, California($2.6 million) and Weston, Florida ($0.5 million) and a Gareth Stevens facilityin Milwaukee, Wisconsin ($0.4 million). San Diego facility costs include $2.0million in employee-related expenses (including severance and relocations) and$0.6 million in vacated facility rent and fixed asset moving expenses. Weston,Florida-related charges of $0.5 million relate to employee severance andrelocation. The Gareth Stevens-related charges include $0.2 million of employeeseverance and relocation costs and $0.2 million of fixed asset write-offs.

 

·                                          Indemnificationcosts of $0.7 million for defense of former WRC Media’s employees with regardto an SEC investigation regarding such employees.

 

·                                          Costsof $1.5 million associated with the closure of two warehouse facilities(Cleveland, Ohio and Milwaukee, Wisconsin) in connection with the opening ofWRC Media’s new warehouse in Strongsville, Ohio. Expenses include $0.9 millionin rent payments on vacated facilities, $0.3 million in relocation and movingcosts and $0.2 million of employee severance costs.

 

·                                          Impairmentof goodwill and intangibles charge of $5.0 million.

 

·                                          Anticipatedcost savings include (1) estimated annual cost savings of $7.4 millionattributable to transitioning corporate functions to Reader’s Digest andconsolidating operations in Austin, Texas and Stamford, Connecticut, and (2) estimatedannual cost savings of $1.9 million attributable to consolidation offulfillment systems and renegotiation of supply contracts.*

 

Direct Holdings adjustments:

 

·                                          $1.4million stock-based compensation expense attributable to equity-based awards toDirect Holdings employees.

 

·                                          Restructuringand other non-recurring items include (1) a write-off of $20.6 millionrelated to a loan to Lillian Vernon Corporation (LVC), a former affiliate ofDirect Holdings, (2) $1.0 million of transaction fees related to the saleof LVC and (3) $0.8 million of expenses related to the European and otherrestructuring activities.

 

·                                          Portionof annualized cost savings attributable to restructuring actions taken duringthe twelve months ended December 31, 2006 that are not reflected inhistorical results of $1.4 million. These actions primarily related to therestructuring of Direct Holdings’ European operations.

 

----

 

·                                          Anticipatedcost savings include: (1) anticipated cost savings of $5.9 millionattributable to closing certain offices and transitioning corporate functionsto Reader’s Digest and (2) anticipated fulfillment savings of $5.6million.*

 

·                                          Annualmonitoring fee of $7.5 million to be paid to the Sponsors following the consummationof the Transactions.

 

----

*  Theadjustments for the anticipated cost savings described do not includeanticipated cash costs to implement such cost savings. Reader’s Digest hasbudgeted $40 million in expected cash costs to achieve these anticipated annualcost savings.

 

----

 

**Schedule 1.01D**

**Excluded Subsidiaries**

 

Direct Holdings IP L.L.C.

 

----

 

**Schedule 1.01E**

**Foreign Subsidiaries**

 
| **Foreign  Subsidiary**                                                                     | ** ** | **Country of  Organization** |
|---------------------------------------------------------------------------------------------|------------|------------------------------|
| Reader’s Digest Argentina, SRL                                                         |       | Argentina                    |
| The Reader’s Digest Association Pty. Limited                                           |       | Australia                    |
| Reader’s Digest (Australia) Pty. Ltd.                                                  |       | Australia                    |
| Verlag Das Beste GmbH                                                                       |       | Austria                      |
| Reader’s Digest N.V. - S.A.                                                            |       | Belgium                      |
| Reader’s Digest World Services S.A.                                                    |       | Belgium                      |
| Reader’s Digest Brasil Ltda.                                                           |       | Brazil                       |
| Reader’s Digest EOOD                                                                   |       | Bulgaria                     |
| 1302791 Alberta ULC                                                                         |       | Canada                       |
| Quality Service Programs, Inc.                                                         |       | Canada                       |
| eFundraising.com Corporation Incorporated/Corporation  eFundraising.com Incorporee (Canada) |       | Canada                       |
| The Reader’s Digest Association (Canada) Ltd.                                          |       | Canada                       |
| Reader’s Digest Magazines Limited                                                      |       | Canada                       |
| 3634116 Canada Inc.                                                                         |       | Canada                       |
| Shanghai Ying Cui Advertising Company Ltd.                                                  |       | China                        |
| Guangdong Pegasus Marketing Information & Services Co. Ltd                         |       | China                        |
| Reader’s Digest (Guangzhou) Direct Mail Service Co. Ltd.                               |       | China                        |
| Reader’s Digest Vyber s.r.o.                                                           |       | Czech Republic               |
| Oy Valitut Palat - Reader’s Digest Ab                                                  |       | Finland                      |
| Sélection du Reader’s Digest S.A.                                                 |       | France                       |
| Sélection du Reader’s Digest  Assurances SARL                                     |       | France                       |
| RD German Holdings GmbH                                                                     |       | Germany                      |
| Verlag Das Beste GmbH                                                                       |       | Germany                      |
| Optimail Direkwerbeservice GmbH                                                             |       | Germany                      |
| Pegasus Medien Produktions-und  Vertriebsgesellschaft mbH                                   |       | Germany                      |
| Reader’s Digest Deutschland Holding GmbH                                               |       | Germany                      |
| Reader’s Digest Hellas Publications Company with Limited Liability                     |       | Greece                       |
| Asian Qualiproducts Services, Ltd.                                                          |       | Hong Kong                    |
| Reader’s Digest Global Advertising Ltd.                                                |       | Hong Kong                    |
| Reader’s Digest Association Far East Limited                                           |       | Hong Kong                    |
| Reader’s Digest Asia, Ltd.                                                             |       | Hong Kong                    |
| Reader’s Digest (China) Direct Marketing Services Co., Ltd.                            |       | Hong Kong                    |
| Reader’s Digest (East Asia) Limited                                                    |       | Hong Kong                    |
| R.D. Properties, Ltd.                                                                       |       | Hong Kong                    |
| Reader’s Digest Kiadó Korlátolt Felelosségu Társaság          |       | Hungary                      |
| Reader’s Digest Book and Home Entertainment (India) Private Limited                    |       | India                        |

 

----

 
| **Foreign  Subsidiary**                                                                      | ** ** | **Country of  Organization** |
|----------------------------------------------------------------------------------------------|------------|------------------------------|
| Libri e più, S.r.l.                                                                     |       | Italy                        |
| The Reader’s Digest Ltd.                                                                |       | Japan                        |
| LLC Publisher Reader’s Digest                                                           |       | Kazakhstan                   |
| Pegasus Netherlands Services Lux Primary SC                                                  |       | Luxembourg                   |
| Pegasus Netherlands Services Lux Secondary SCS                                               |       | Luxembourg                   |
| RD Luxembourg Tertiary Services                                                              |       | Luxembourg                   |
| Reader’s Digest (Malaysia) Sdn. Bhd                                                     |       | Malaysia                     |
| Caribe Condor S.A. de C.V.                                                                   |       | Mexico                       |
| Reader’s Digest México, S.A. de  C.V.                                              |       | Mexico                       |
| Corporativo Reader’s Digest Mexico, S. de R.L. de C.V.                                  |       | Mexico                       |
| Grupo Editorial Reader’s Digest,  S. de R.L. de C.V.                                    |       | Mexico                       |
| Distrimedia Services B.V.                                                                    |       | Netherlands                  |
| Pegasus Netherlands Services CV                                                              |       | Netherlands                  |
| RD Netherlands Holdings BV                                                                   |       | Netherlands                  |
| Uitgeversmaatschappij The  Reader’s Digest N.V.                                         |       | Netherlands                  |
| Reader’s Digest European Shared Services B.V.                                           |       | Netherlands                  |
| Reader’s Digest Netherlands Holdings B.V.                                               |       | Netherlands                  |
| Reader’s Digest (Philippines) Inc.                                                      |       | Philippines                  |
| Reader’s Digest Przeglad Sp. z.o.o.                                                     |       | Poland                       |
| Selecçoes do Reader’s Digest (Portugal) S.A.                                       |       | Portugal                     |
| Euroselecçoes — Publicaçoes E Artigos Promocionais, Lda.   Promocionals, Lda. |       | Portugal                     |
| Editura Reader’s Digest SRL                                                             |       | Romania                      |
| LLC Digest Direct                                                                            |       | Russia                       |
| JSC Publishing House Reader’s Digest                                                    |       | Russia                       |
| Reader’s Digest Asia Pte. Ltd.                                                          |       | Singapore                    |
| Reader’s Digest Vyber Slovensko,  s.r.o.                                                |       | Slovak Republic              |
| Reader’s Digest Selecciones S.A.                                                        |       | Spain                        |
| Sociedad Difusión Cultural, S.L.                                                        |       | Spain                        |
| Reader’s Digest Aktiebolag                                                              |       | Sweden                       |
| Das Beste aus Reader’s Digest AG                                                        |       | Switzerland                  |
| Reader’s Digest (Thailand) Limited                                                      |       | Thailand                     |
| Reader’s Digest Secilmis Yayincilik Dagitim Pazarlama Ticaret Limited  Sirketi          |       | Turkey                       |
| LLC Direct Digest                                                                            |       | Ukraine                      |
| LLC Publisher Reader’s Digest                                                           |       | Ukraine                      |
| Pegasus UK Holdings Limited                                                                  |       | United Kingdom               |
| The Reader’s Digest Association Limited                                                 |       | United Kingdom               |
| RD Publications Limited                                                                      |       | United Kingdom               |
| Money Magazine Limited                                                                       |       | United Kingdom               |
| Reader’s Digest Financial Services Limited                                              |       | United Kingdom               |
| Fundraising For You Limited                                                                  |       | United Kingdom               |
| Reader’s Digest Europe Limited                                                          |       | United Kingdom               |

 

----

 
| **Foreign  Subsidiary**                                        | ** ** | **Country of  Organization** |
|----------------------------------------------------------------|------------|------------------------------|
| Reader’s Digest Children’s Publishing Limited        |       | United Kingdom               |
| Reader’s Digest European Systems Ltd.                     |       | United Kingdom               |
| Reader’s Digest Central & Eastern Europe Limited |       | United Kingdom               |
| Reader’s Digest Holdings Limited                          |       | United Kingdom               |
|                                                           |       |                         |
| Direct Holdings (N.Z.) Pty Limited                             |       | Australia                    |
| Direct Holdings Asia Pacific Pty Limited                       |       | Australia                    |
| Direct Holdings Australia Pty Limited                          |       | Australia                    |
| Shop Australia Pty Limited                                     |       | Australia                    |
| Direct Entertainment U.K. Limited                              |       | England and Wales            |
| Target Direct Marketing Services GmbH                          |       | Germany                      |
| Direct Holdings Holland B.V.                                   |       | Netherlands                  |
| Direct Holdings International B.V.                             |       | Netherlands                  |
| Direct Holdings Switzerland GmbH                               |       | Switzerland                  |

 

----

 

**Schedule 1.01F**

**Holdings Contractual Obligations**

 

Agreement and Plan of Merger dated as of November 16, 2006, amongRDA Holding Co. (f/k/a Doctor Acquisition Holding Co.), Doctor Acquisition Co.and The Reader’s Digest Association, Inc.

 

Stock Acquisition Agreement dated as of January 23, 2007, amongDirect Holdings U.S. Corp., RDA Holding Co., and the Transferors (as definedtherein).

 

Agreement and Plan of Merger dated as of January 23, 2007, amongRDA Holding Co., WRC Acquisition Co., a Delaware corporation, and WRC MediaInc.

 

Procurement Agreement dated as of February 2, 2007, between OperaSolutions, LLC and RDA Holding Co.(1)

 

----

(1) The obligations of RDA Holding Co. (other than the issuance ofequity interests) under this agreement to be assigned to a RestrictedSubsidiary on or prior to the Closing Date.

 

----

 

**Schedule 1.01G**

**Unrestricted Subsidiaries**

 

None.

 

----

 

**Schedule 1.01H**

**Mandatory Cost Formulae**

 

1.                                       TheMandatory Cost (to the extent applicable) is an addition to the interest rateto compensate Lenders for the cost of compliance with:

 

(a)                                  the requirements ofthe Bank of England and/or the Financial Services Authority (or, in eithercase, any other authority which replaces all or any of its functions); or

 

(b)                                 the requirements of the European Central Bank.

 

2.                                       Onthe first day of each Interest Period (or as soon as practicable thereafter)the Administrative Agent shall calculate, as a percentage rate, a rate (the “**Additional Cost Rate**”) for each Lender, in accordance withthe paragraphs set out below.  TheMandatory Cost will be calculated by the Administrative Agent as a weightedaverage of the Lenders’ Additional Cost Rates (weighted in proportion to thepercentage participation of each Lender in the relevant Loan) and will beexpressed as a percentage rate per annum. The Administrative Agent will, at the request of the Company or anyLender, deliver to the Company or such Lender as the case may be, a statementsetting forth the calculation of any Mandatory Cost.

 

3.                                       TheAdditional Cost Rate for any Lender lending from a Lending Office in aParticipating Member State will be the percentage notified by that Lender tothe Administrative Agent.  Thispercentage will be certified by such Lender in its notice to the AdministrativeAgent to be its reasonable determination of the cost (expressed as a percentageof such Lender’s participation in all Loans made from such Lending Office) ofcomplying with the minimum reserve requirements of the European Central Bank inrespect of Loans made from that Lending Office.

 

4.                                       TheAdditional Cost Rate for any Lender lending from a Lending Office in the UnitedKingdom will be calculated by the Administrative Agent as follows:

 

(a)                                  in relation to any Loan in Sterling:

 
| AB+C(B-D)+E  x 0.01 | p per cent per annum |
|---------------------|----------------------|
| 100 - (A+C)         |

 

(b)                                 in relation to any Loan in any currency otherthan Sterling:

 
| E x 0.01 | p percent per annum |
|----------|---------------------|
| 300      |

 

----

 

Where:

 

“A”                          is thepercentage of Eligible Liabilities (assuming these to be in excess of anystated minimum) which that Lender is from time to time required to maintain asan interest free cash ratio deposit with the Bank of England to comply withcash ratio requirements.

 

“B”                            is the percentage rate of interest (excluding the Applicable Rate, theMandatory Cost and any interest charged on overdue amounts pursuant to thefirst sentence of Section 2.08(b) and, in the case of interest (otherthan on overdue amounts) charged at the Default Rate, without counting anyincrease in interest rate effected by the charging of the Default Rate) payablefor the relevant Interest Period of such Loan.

 

“C”                            is the percentage (if any)of Eligible Liabilities which that Lender is required from time to time tomaintain as interest bearing Special Deposits with the Bank of England.

 

“D”                           is thepercentage rate per annum payable by the Bank of England to the AdministrativeAgent on interest bearing Special Deposits.

 

“E”                             isdesigned to compensate Lenders for amounts payable under the Fees Regulationsand is calculated by the Administrative Agent as being the average of the mostrecent rates of charge supplied by the Lenders to the Administrative Agent pursuant to paragraph 7 belowand expressed in pounds per £1,000,000.

 

5.                                       Forthe purposes of this Schedule:

 

(a)                                  “**Eligible Liabilities**”and “**Special Deposits**” have the meaningsgiven to them from time to time under or pursuant to the Bank of England Act1998 or (as may be appropriate) by the Bank of England;

 

(b)                                 “**Fees Regulations**”means the rules or periodic fees contained in the FSA Supervision Manualor such other law or regulation as may be in force from time to time in respectof the payment of fees for the acceptance of deposits;

 

(c)                                  “**Fee Tariffs**”means the fee tariffs specified in the Fees Regulations under the activitygroup A.1 Deposit acceptors (ignoring any minimum fee or zero rated feerequired pursuant to the Fees Regulations but taking into account anyapplicable discount rate); and

 

----

 

(d)                                 “**Tariff Base**”has the meaning given to it in, and will be calculated in accordance with, theFees Regulations.

 

6.                                       Inapplication of the above formulae, A, B, C and D will be included in theformulae as percentages (i.e. 5% will be included in the formula as 5 and notas 0.05).  A negative result obtained bysubtracting D from B shall be taken as zero. The resulting figures shall be rounded to four decimal places.

 

7.                                       Ifrequested by the Administrative Agent or the Company, each Lender with aLending Office in the United Kingdom or a Participating Member State shall, assoon as practicable after publication by the Financial Services Authority,supply to the Administrative Agent and the Company, the rate of charge payableby such Lender to the Financial Services Authority pursuant to the FeesRegulations in respect of the relevant financial year of the Financial ServicesAuthority (calculated for this purpose by such Lender as being the average ofthe Fee Tariffs applicable to such Lender for that financial year) andexpressed in pounds per £1,000,000 of the Tariff Base of such Lender.

 

8.                                       EachLender shall supply any information required by the Administrative Agent forthe purpose of calculating its Additional Cost Rate.  In particular, but without limitation, eachLender shall supply the following information in writing on or prior to the dateon which it becomes a Lender:

 

(a)                                  its jurisdiction of incorporation and thejurisdiction of the Lending Office out of which it is making available itsparticipation in the relevant Loan; and

 

(b)                                 any other information that the AdministrativeAgent may reasonably require for such purpose.

 

Each Lender shall promptlynotify the Administrative Agent in writing of any change to the informationprovided by it pursuant to this paragraph.

 

9.                                       Thepercentages or rates of charge of each Lender for the purpose of A, C and Eabove shall be determined by the Administrative Agent based upon theinformation supplied to it pursuant to paragraphs 7 and 8 aboveand on the assumption that, unless a Lender notifies the Administrative Agentto the contrary, each Lender’s obligations in relation to cash ratio deposits,Special Deposits and the Fees Regulations are the same as those of a typicalbank from its jurisdiction of incorporation with a Lending Office in the samejurisdiction as such Lender’s Lending Office.

 

10.                                 TheAdministrative Agent shall have no liability to any Person if suchdetermination results in an Additional Cost Rate which over- orunder-compensates any Lender and shall be entitled to assume that theinformation provided by any Lender pursuant to paragraphs 3, 7and 8 above is true and correct in all respects.

 

----

 

11.                                 TheAdministrative Agent shall distribute the additional amounts received as aresult of the Mandatory Cost to the Lenders on the basis of the Additional CostRate for each Lender based on the information provided by each Lender pursuantto paragraphs 3, 7 and 8 above.

 

12.                                 Anydetermination by the Administrative Agent pursuant to this Schedule in relationto a formula, the Mandatory Cost, an Additional Cost Rate or any amount payableto a Lender shall, in the absence of manifest error, be conclusive and bindingon all parties hereto.

 

The Administrative Agent may from time to time, after consultation withthe Company and the Lenders, determine and notify to all parties any amendmentswhich are required to be made to this Schedule in order to comply with anychange in law, regulation or any requirements from time to time imposed by theBank of England, the Financial Services Authority or the European Central Bank(or, in any case, any other authority which replaces all or any of its functions)and any such determination shall, in the absence of manifest error, beconclusive and binding on all parties hereto.

 

----

 

**Schedule 1.01I**

**Letters of Credit**

 

Each of the following lettersof credit are issued by JPMorgan Chase Bank, N.A.:

 
| **Letter of Credit No.** | ** ** | **Beneficiary**                                          | ** ** | **Stated Amount** | ** ** | **Expiry Date** | ** ** |
|--------------------------|------------|----------------------------------------------------------|------------|-------------------|------------|-----------------|------------|
| T-612818                 |       | COGNAC  WILLOW, LLC C/O PRUDENTIAL REAL ESTATE INVESTORS |       | $                 | 559,667.06 |            | 12-Oct-07  |   |
| IBTI580368               |       | TRANSFAR  INTERNATIONAL CORP.                            |       | $                 | 56,749.20  |            | 5-Mar-07   |   |
| IBTI580368               |       | TRANSFAR  INTERNATIONAL CORP.                            |       | $                 | 60,283.20  |            | 5-Mar-07   |   |
| IBTI580368               |       | TRANSFAR  INTERNATIONAL CORP.                            |       | $                 | 90,424.80  |            | 13-Mar-07  |   |
| IBTI580368               |       | TRANSFAR  INTERNATIONAL CORP.                            |       | $                 | 42,271.20  |            | 19-Mar-07  |   |
| IBTI580368               |       | TRANSFAR  INTERNATIONAL CORP.                            |       | $                 | 30,141.60  |            | 19-Mar-07  |   |
| IBTI581571               |       | TRANSFAR  INTERNATIONAL CORP.                            |       | $                 | 26,769.60  |            | 6-Mar-07   |   |
| IBTI581571               |       | TRANSFAR  INTERNATIONAL CORP.                            |       | $                 | 26,769.60  |            | 6-Mar-07   |   |
| IBTI581571               |       | TRANSFAR  INTERNATIONAL CORP.                            |       | $                 | 26,769.60  |            | 7-Mar-07   |   |
| IBTI581571               |       | TRANSFAR  INTERNATIONAL CORP.                            |       | $                 | 26,769.60  |            | 16-Mar-07  |   |
| IBTI581571               |       | TRANSFAR INTERNATIONAL  CORP.                            |       | $                 | 9,235.20   |            | 13-Mar-07  |   |
| IBTI581571               |       | TRANSFAR  INTERNATIONAL CORP.                            |       | $                 | 53,539.20  |            | 13-Mar-07  |   |
| IBTI581571               |       | TRANSFAR  INTERNATIONAL CORP.                            |       | $                 | 26,769.60  |            | 13-Mar-07  |   |
| IBTI581571               |       | TRANSFAR  INTERNATIONAL CORP.                            |       | $                 | 26,769.60  |            | 13-Mar-07  |   |
| IBTI582020               |       | SUN VIGOR  INDUSTRIAL CO. LTD.                           |       | $                 | 86,793.18  |            | 6-Apr-07   |   |
| IBTI583478               |       | M. K.  DISTRIBUTORS INC.                                 |       | $                 | 340,470.00 |            | 20-Mar-07  |   |
| IBTI583479               |       | WOODMAX KY  INDUSTRIES CORP.                             |       | $                 | 151,988.94 |            | 7-Mar-07   |   |
| IBTI583944               |       | YOA LING  INDUSTRY CO LTD                                |       | $                 | 148,751.80 |            | 13-Mar-07  |   |
| IBTI584462               |       | SUN VIGOR  INDUSTRIAL CO. LTD.                           |       | $                 | 98,455.00  |            | 8-Mar-07   |   |
| I584463                  |       | SUN VIGOR  INDUSTRIAL CO. LTD.                           |       | $                 | 162,086.64 |            | 2-May-07   |   |
| I585750                  |       | SUN VIGOR  INDUSTRIAL CO. LTD.                           |       | $                 | 106,898.30 |            | 16-Apr-07  |   |
|                          |            |                                                          |            |                   |            |                 |            |  |  |  |  |  |  |  |  |  |  |  |

** **

----

 

**Schedule 2.01**

**Commitments**

 

 
| **LENDER**                              | ** ** | **REVOLVING  COMMITMENT** | ** **      | **TERM LOAN  COMMITMENT** | ** ** | **EURO TERM LOAN  COMMITMENT(1)** | ** ** |
|-----------------------------------------|------------|---------------------------|-----------------|---------------------------|------------|-----------------------------------|------------|
| JPMorgan Chase Bank, N.A.               |       | $                         | 77,666,666.68   |                      | $          | 403,333,333.34                    |       | $ | 100,000,000 |   |
| Citicorp North America, Inc.       |       | $                         | 77,666,666.66   |                      | $          | 403,333,333.33                    |       | $ | 0 |   |
| Merrill Lynch Capital Corporation       |       | $                         | 77,666,666.66   |                      | $          | 403,333,333.33                    |       | $ | 0 |   |
| The Royal Bank of Scotland plc          |       | $                         | 35,000,000      |                      | $          | 0                                 |       | $ | 0 |   |
| General Electric Capital Corporation    |       | $                         | 25,000,000      |                      | $          | 0                                 |       | $ | 0 |   |
| Toronto Dominion (Texas) LLC            |       | $                         | 5,000,000       |                      | $          | 0                                 |       | $ | 0 |   |
| The CIT Group/Equipment Financing, Inc. |       | $                         | 2,000,000       |                      | $          | 0                                 |       | $ | 0 |   |
| **Total**                               | ** ** | **$**                     | **300,000,000** | ** **                | **$**      | **1,210,000,000**                 | ** ** | **$** | **100,000,000** | ** ** |

 

----

(1) To be funded in Euros.

 

----

 

**Schedule 5.05**

**Certain Liabilities**

 

·                                          TheReader’s Digest Pension Scheme (U.K.), approved, is currently under funded byapproximately $70 million.

 

·                                          Lindner, et al. v. the Company.  The Company is a defendant in a putativeclass action before the U.S. District Court for the Central District ofCalifornia, Southern Division.  The classaction claims that Reader’s Digest magazine’s continuous renewal programviolates federal and state consumer protection status.  As of September 25, 2006, this matterwas fully briefed on appeal to the 9th Circuit Court of Appeals following thetrial court’s dismissal of the action.

 

·                                          **The following table lists ongoing audits or examinationsby taxing authorities of Reader’s Digest or any of its Subsidiaries:**

 
| **Company**                                          | ** ** | **Taxing Jurisdiction** | ** ** | **Type of Tax** | ** ** | **Period Under Audit** |
|------------------------------------------------------|------------|------------------------------|------------|---------------------------|------------|----------------------------------|
| ***Domestic Tax Audits***                            |       |                         |       |                      |       |                             |
| The  Reader’s Digest Association, Inc.     |       | Federal                      |       | Income                    |       | 2001 - 2003                      |
| The  Reader’s Digest Association, Inc.     |       | Federal                      |       | Employment                |       | 2000 - 2003                      |
| The  Reader’s Digest Association, Inc.     |       | New York                     |       | Income                    |       | 1997 - 1999                      |
| The  Reader’s Digest Association, Inc.     |       | New York                     |       | Income                    |       | 2000 - 2003                      |
| The  Reader’s Digest Association, Inc.     |       | Texas                        |       | Franchise                 |       | TBD(2)                           |
| Books  Are Fun, Ltd.                                 |       | Minnesota                    |       | Sales                     |       | 1/03 - 5/06                      |
| Books  Are Fun, Ltd.                                 |       | Wisconsin                    |       | Income                    |       | 2002 - 2005                      |
| QSP, Inc.                                       |       | Arizona                      |       | Sales                     |       | 4/00 - 3/04                      |
| QSP, Inc.                                       |       | Florida                      |       | Sales                     |       | 12/03 - 11/06                    |
| QSP, Inc.                                       |       | Illinois                     |       | Sales                     |       | 2003 - 2005                      |
| QSP, Inc.                                       |       | Minnesota                    |       | Income                    |       | 2001 - 2004                      |
| QSP, Inc.                                       |       | New York                     |       | Income                    |       | 2002 - 2003                      |
| QSP, Inc.                                       |       | Ohio                         |       | Franchise                 |       | 2002 - 2003                      |
| QSP, Inc.                                       |       | Washington                   |       | Sales & B&O  |       | 2002 - 2005                      |
| Taste  of Home Entertaining, Inc.               |       | Shelby County, AL            |       | Sales                     |       | TBD(3)                           |
| Taste  of Home Productions, Inc.                |       | South Dakota                 |       | Sales                     |       | 2002 - 2006                      |
| World  Wide Country Tours, Inc.                 |       | Minnesota                    |       | Income                    |       | 2003 - 2005                      |
| World  Wide Country Tours, Inc.                 |       | Texas                        |       | Income & Sales   |       | 2002 - 2006                      |
|                                                 |       |                         |       |                      |       |                             |
| ***Foreign Tax Audits***                             |       |                         |       |                      |       |                             |
| The  Reader’s Digest Association (Canada), Ltd. |       | Federal Revenue              |       | Income                    |       | 2001 - 2004                      |

 

----

(2) State toinform company regarding period being audited.

 

(3) County toinform company regarding period being audited.

 

----

 
| The  Reader’s Digest Association (Canada), Ltd.                                           |   | Ontario             |   | Sales       |   | 1/02 - 7/05 |
|------------------------------------------------------------------------------------------------|--------|---------------------|--------|-------------|--------|-------------|
| Quality  Service Programs, Inc. (Canada)                                                  |   | Federal Revenue     |   | Income      |   | 2002 - 2003 |
| Quality  Service Programs, Inc. (Canada)                                                  |   | Provincial - Quebec |   | Sales       |   | 6/03 - 6/06 |
| Selecceous  do Reader’s Digest (Portugal) S.A.                                            |   | Federal             |   | Income      |   | 2001 - 2005 |
| Selecceous  do Reader’s Digest (Portugal) S.A.                                            |   | Federal             |   | Withholding |   | 2002        |
| JSC  Publishing House Reader’s Digest (Russia)                                            |   | Federal             |   | Income      |   | 2002 - 2003 |
| Das Beste Aus Reader’s Digest AG (Switzerland)                                            |   | Federal             |   | Income      |   | 2004        |
| Reader’s  Digest N.V. - S.A. (Belgium)                                                    |   | Federal             |   | Income      |   | 2004 - 2005 |
| eFundraising.com  Corporation  Incorporated/Corporation eFundraising.com   Incorporee (Canada) |   | Provincial - Quebec |   | Income      |   | 2003 - 2005 |
| Reader’s  Digest (Guangzhou) Direct Mail Service Co. Ltd. (China)                         |   | Federal             |   | Income      |   | 2004        |
| Reader’s  Digest Vyber S.R.O. (Czech)                                                     |   | Federal             |   | Income      |   | 2006        |
| LLC  Publisher Reader’s Digest (Kazakhstan)                                               |   | Federal             |   | VAT         |   | 2005        |
| The  Reader’s Digest Assoc. Ltd. (UK)                                                     |   | Federla             |   | Income      |   | 2004        |

 

·                                          DirectHoldings U.S. Corp. will assume the indemnification obligations of DirectHoldings Worldwide L.L.C. under the Stock Purchase Agreement dated as of May 26,2006, among LV Catalog Holding Corp., LVC, Direct Holdings Worldwide L.L.C.,and Lillian Vernon.

 

·                                          Byemail dated December 2, 2005, a representative of Warner Music Groupadvised DHAI of several issues they considered open in connection with anagreement between Rhino Entertainment Company and DHAI entered into in 2001regarding a music product called “Treasury of Folk” or “The Folk Years” and anagreement entered into between Warner Strategic Marketing, Inc. and DHAIentered into in 2002 regarding a video product called “Doo Wop”.  The email asserted, among other things, thatRhino has never received any accounting or payments on certain incrementalsales associated with Treasury of Folk or The Folk Years purportedly due, thata royalty reduction on the Doo Wop product was subject to conditions that hadnot been satisfied and that underpayment of royalties based on the unreducedrate was $791,626 through March 2005, and that WQED has separately broughta breach of contract claim against Warner Strategic Marketing on the basis thatDHAI’s inclusion of WQED’s “This Land is Your Land” 2-CD music set innon-pledge box set sales was not authorized. By subsequent email dated January 11, 2006, a representative ofWarner Music Group stated, among other things, that nearly $800,000 in royaltiesremain unpaid and that, as a result of Time Life’s actions, Warner Music Grouphas had to settle a related royalty dispute with WQED for over$400,000.  The matter is still pending.

 

·                                          SECv. Martin E. Kenney, 05 Civ. 7944 (S.D.N.Y. Sept. 13, 2005):  The Securities and Exchange Commission (SEC)filed a complaint against Martin E. Kenney, former Chief Executive Officer ofthe Company, alleging various securities law violations.  The Company was not named as a defendant inthe lawsuit.  A tentative settlement hasbeen reached and remains subject to final agreement among the parties and SECapproval.

 

----

 

The terms of the tentative settlement wouldrequire Kenney to pay a penalty of $60,000, for which he could not bereimbursed by the Company.  Kenneyrequested indemnification by the Company in a letter dated March 10, 2004,pursuant to Article VII of the Company’s By-Laws, which provides forindemnification of officers for expenses, judgments, fines and amounts paid insettlement expenses.  The Companyincurred approximately $3.4 million in legal fees in connetion with this case,including fees incurred during the initial investigation by the SEC, thedefense of an officer of CompassLearning, other employees of CompassLearning,and Kenney.  Kenney’s attorneys haveindicated that they intend to take the position that the Company should paywhatever legal fees are not covered by the insurance company.  To date, the Company’s directors and officersinsurance carrrier has taken the position that it will cover only reasonablecounsel fees for Kenney’s attorney following the commencement of the action,potentially leaving approximately $2.1 million or more in legal fees uncovered,of which the Company has already paid all but approximately $600,000.

 

·                                          KindlePublishing LLC v. CompassLearning, Inc. and American Guidance Service, Inc.,No. A06CA948-SS (W.D. Tex. Dec. 4, 2006):  Kindle Publishing has filed a complaintagainst CompassLearning alleging copyright infringement and unfair competitionand seeking a preliminary injunction in connection with a license agreementbetween CompassLearning and Lindy Acquisition, which subsequently assigned itsrights to Kindle Publishing. CompasLearning intends to deny any liability under the licenseagreement, but it projects that it will nevertheless incur approximately $1.25million in expenses in replacing such content since Kindle has effectivelyterminated the license agreement effective August 2007.

 

----

 

**Schedule 5.09**

**Environmental Matters**

 

None.

 

----

 

**Schedule 5.10**

**Taxes**

 

**·****                                         ****The Reader’s Digest Association, Inc. currently has atax reserve for possible state and local income tax liabilities related to QSP, Inc.for tax returns that have not been filed in prior years in the following statesand localities:**

 

Arizona

Colorado

Connecticut

Florida

Georgia

Hawaii

Louisiana

Maryland

Massachusetts

Minnesota

New Mexico

New York City

Ohio

Tennessee

Texas

 

·                                          WeeklyReader Corporation.  ConnecticutIncome/Franchise tax assessment (12/31/1994-12/31/1999).  $592,000. Connecticut has imputed interest income on the taxpayer’s intercompanybalances.  In addition, the state haschallenged the Company’s apportionment of intangibles outside of the state(franchise component).  An informalconference has been requested (indmenified by Primedia, Inc.).  The Company contests the assessment on thebasis of procedural grounds (the statute of limitations has expired) as well astechnical merits.

 

·                                          WeeklyReader Corporation.  ConnecticutIncome/Franchise tax assessment (11/17/1999). $740,000.  The assessment relatesto a state challenge to the taxpayer’s unitary apportionment filingmethod.  The state recalculated theCompany’s tax liability based upon a separate filing method.  The liability is materially due to theapportionment of IRC 338(h)(10) gain to Connecticut.  An informal conference was requested(indemnified by Primedia, Inc.)  TheCompany contests the assessment on technical merits and abuse of Commissionerof Revenue Services’ discretion in granting an alternative apportionmentmethod.

 

·                                          LifetimeLearning Systems, Inc.  ConnecticutIncome/Franchise tax assessment (Primedia, Inc. Combined Return).  (1/1/1999-11/17/1999).  $1,395,000. The assesstment relates to a state challenge to the taxpayer’s unitaryapportionment filing method.  The staterecalculated the Company’s tax liability based upon a separate filingmethod.  The liability is materially dueto the apportionment of IRC 338(h)(10) gain to Connecticut.  An informal conference was requested(indemnified by Primedia, Inc.)  The

 

----

 

Company contests the assessment on technicalmerits and abuse of Commissioner of Revenue Services’ discretion in granting analternative apportionment method.

 

·                                          Additionaltax exposure related to the pushdown and allocation of interest to itssubsidiaries was reflected in the 12/31/2005 financial statements.

 

24

----

 

**Schedule 5.11**

**ERISA Compliance**

 

None.

 

----

 

**Schedule 5.12**

**Subsidiaries and Other Equity Investments(4)**

 

**Domestic**

 
| **Loan  Party**                                  | ** ** | **Subsidiary**                                                                                                | ** ** | **Subsidiary  Jurisdiction   of   Organization** | ** ** | **Ownership Interest** | ** ** | **Percent  Ownership** | ** ** | **Equity  Interest  Required to   be Pledged** | ** ** |
|--------------------------------------------------|------------|---------------------------------------------------------------------------------------------------------------|------------|--------------------------------------------------|------------|------------------------|------------|------------------------|------------|------------------------------------------------|------------|
| RDA  Holding Co.                                 |       | The  Reader’s Digest Association, Inc.                                                              |       | Delaware                                         |       | 1,000 shares common    |       | 100                    | %          | 100                                            | %          |
| The  Reader’s Digest Association, Inc. |       | Allrecipes.com, Inc.                                                                                     |       | Washington                                       |       | 10 shares common       |       | 100                    | %          | 100                                            | %          |
| The  Reader’s Digest Association, Inc. |       | Ardee  Music Publishing, Inc.                                                                            |       | Delaware                                         |       | 100 shares common      |       | 100                    | %          | 100                                            | %          |
| The  Reader’s Digest Association, Inc. |       | Books  Are Fun, Ltd.                                                                                          |       | Iowa                                             |       | 100 shares common      |       | 100                    | %          | 100                                            | %          |
| The  Reader’s Digest Association, Inc. |       | Christmas  Angel Productions, Inc.                                                                       |       | Delaware                                         |       | 10 shares common       |       | 100                    | %          | 100                                            | %          |
| The  Reader’s Digest Association, Inc. |       | Pegasus  Asia Investments Inc.                                                                                |       | Delaware                                         |       | 10 shares common       |       | 100                    | %          | 100                                            | %          |
| The  Reader’s Digest Association, Inc. |       | Pegasus  Finance Corp.                                                                                        |       | Delaware                                         |       | 10 shares common       |       | 100                    | %          | 100                                            | %          |
| The  Reader’s Digest Association, Inc. |       | Pegasus  Investment, Inc.                                                                                |       | Delaware                                         |       | 10 shares common       |       | 100                    | %          | 100                                            | %          |
| The  Reader’s Digest Association, Inc. |       | Pegasus  Sales, Inc.                                                                                     |       | Delaware                                         |       | 1,000 shares common    |       | 100                    | %          | 100                                            | %          |
| The  Reader’s Digest Association, Inc. |       | Pleasantville  Music Publishing, Inc.                                                                    |       | Delaware                                         |       | 100 shares common      |       | 100                    | %          | 100                                            | %          |
| The  Reader’s Digest Association, Inc. |       | QSP, Inc.                                                                                                |       | Delaware                                         |       | 10 shares common       |       | 100                    | %          | 100                                            | %          |
| The  Reader’s Digest Association, Inc. |       | R.  D. Manufacturing Corporation                                                                              |       | Delaware                                         |       | 1,000 shares common    |       | 100                    | %          | 100                                            | %          |
| The  Reader’s Digest Association, Inc. |       | RD  Publications, Inc. (f/k/a Travel Publications, Inc.)                                            |       | Delaware                                         |       | 10 shares common       |       | 100                    | %          | 100                                            | %          |
| The  Reader’s Digest Association, Inc. |       | Reader’s  Digest Children’s Publishing, Inc. (f/k/a Reader’s Digest Sub  Five, Inc.) |       | Delaware                                         |       | 10 shares common       |       | 100                    | %          | 100                                            | %          |
| The  Reader’s Digest Association, Inc. |       | Reader’s  Digest Consumer Services, Inc.                                                            |       | Delaware                                         |       | 10 shares common       |       | 100                    | %          | 100                                            | %          |

 

----

(4) Reflects final structure on the Closing Date, following theconsummation of the Acquisitions and the contribution by RDA Holding Co. to TheReader’s Digest Association, Inc. of the Equity Interests of each ofDirect Holdings U.S. Corp. and WRC Media Inc.

 

----

 
| The  Reader’s Digest Association, Inc.                   |   | Reader’s  Digest Entertainment, Inc.                                                                |   | Delaware |   | 10 shares common    |   | 100 | % | 100 | % |
|--------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------|--------|----------|--------|---------------------|--------|-----|---|-----|---|
| The  Reader’s Digest Association, Inc.                   |   | Reader’s  Digest Financial Services, Inc.                                                           |   | Delaware |   | 10 shares common    |   | 100 | % | 100 | % |
| The  Reader’s Digest Association, Inc.                   |   | Reader’s  Digest Latinoamerica S.A.                                                                      |   | Delaware |   | 10 shares common    |   | 100 | % | 100 | % |
| The  Reader’s Digest Association, Inc.                   |   | Reader’s  Digest Sales and Services, Inc.                                                           |   | Delaware |   | 1,000 shares common |   | 100 | % | 100 | % |
| The  Reader’s Digest Association, Inc.                   |   | Reader’s  Digest Sub Nine, Inc.                                                                     |   | Delaware |   | 10 shares common    |   | 100 | % | 100 | % |
| The  Reader’s Digest Association, Inc.                   |   | Reader’s  Digest Young Families, Inc.                                                               |   | Delaware |   | 10 shares common    |   | 100 | % | 100 | % |
| The  Reader’s Digest Association, Inc.                   |   | SMDDMS, Inc.                                                                                             |   | Delaware |   | 10 shares common    |   | 100 | % | 100 | % |
| The  Reader’s Digest Association, Inc.                   |   | Taste  of Home Entertaining, Inc. (f/k/a Reader’s Digest Home Parties)                              |   | Delaware |   | 10 shares common    |   | 100 | % | 100 | % |
| The  Reader’s Digest Association, Inc.                   |   | The  Reader’s Digest Association (Russia) Incorporated (f/k/a Reader’s Digest Sub  Four, Inc.) |   | Delaware |   | 10 shares common    |   | 100 | % | 100 | % |
| The  Reader’s Digest Association, Inc.                   |   | W.A.  Publications, LLC                                                                                       |   | Delaware |   | 100%                |   | 100 | % | 100 | % |
| QSP, Inc.                                                     |   | Family  Reading Program Corp.                                                                                 |   | Delaware |   | 10 shares common    |   | 100 | % | 100 | % |
| QSP, Inc.                                                     |   | Fundraising.com, Inc.  (f/k/a Reader’s Digest Sub Eight, Inc.)                                 |   | Delaware |   | 10 shares common    |   | 100 | % | 100 | % |
| QSP, Inc.                                                     |   | QSP  Distribution Services, LLC                                                                               |   | Delaware |   | 100%                |   | 100 | % | 100 | % |
| QSP, Inc.                                                     |   | QSP  Products and Programs, LLC                                                                               |   | Delaware |   | 100%                |   | 100 | % | 100 | % |
| QSP, Inc.                                                     |   | QSP  Sales, LLC                                                                                               |   | Delaware |   | 100%                |   | 100 | % | 100 | % |
| QSP, Inc.                                                     |   | QSP  Services, LLC                                                                                            |   | Delaware |   | 100%                |   | 100 | % | 100 | % |
| QSP, Inc.                                                     |   | QSP  Ventures, LLC                                                                                            |   | Delaware |   | 100%                |   | 100 | % | 100 | % |
| QSP, Inc.                                                     |   | Reiman  Media Group, Inc. (f/k/a Reader’s Digest Media Group, Inc.)                            |   | Delaware |   | 10 shares common    |   | 100 | % | 100 | % |
| QSP, Inc.                                                     |   | VideOvation, Inc.(f/k/a  Reader’s Digest Sub Three, Inc.)                                      |   | Delaware |   | 10 shares common    |   | 100 | % | 100 | % |
| RD  Publications, Inc. (f/k/a Travel Publications, Inc.) |   | Home  Service Publications, Inc.                                                                         |   | Delaware |   | 10 shares common    |   | 100 | % | 100 | % |

 

27

----

 
| RD  Publications, Inc.                                                        |   | RD  Large Edition, Inc.                                                         |   | Delaware  |   | 10 shares common                      |   | 100    | %      | 100    | %      |
|------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------|--------|-----------|--------|---------------------------------------|--------|--------|--------|--------|--------|
| RD  Publications, Inc.                                                        |   | RD  Trade Shows, Inc.                                                           |   | Delaware  |   | 10 shares common                      |   | 100    | %      | 100    | %      |
| RD  Publications, Inc.                                                        |   | RD  Walking, Inc.                                                               |   | Delaware  |   | 10 shares common                      |   | 100    | %      | 100    | %      |
| RD  Publications, Inc.                                                        |   | Retirement  Living Publishing Company, Inc.                                     |   | Delaware  |   | 10 shares common                      |   | 100    | %      | 100    | %      |
| RD  Publications, Inc.                                                        |   | Travel  Publications, Inc. (f/k/a RD Publications, Inc.)                   |   | Delaware  |   | 10 shares common                      |   | 100    | %      | 100    | %      |
| Reader’s  Digest Consumer Services, Inc.                                 |   | RD  Magazine Value Partners, Inc.                                               |   | Delaware  |   | 10 shares common                      |   | 100    | %      | 100    | %      |
| Reader’s  Digest Latinoamerica, S.A.                                          |   | WAPLA,  LLC                                                                          |   | Delaware  |   | 100 units limited liability interests |   | 100    | %      | 100    | %      |
| Reiman  Media Group, Inc. (f/k/a Reader’s Digest Media Group, Inc.) |   | Taste  of Home Media Group, Inc.(f/k/a  Reader’s Digest RAP, Inc.)    |   | Delaware  |   | 10 shares common                      |   | 100    | %      | 100    | %      |
| Reiman  Media Group, Inc. (f/k/a Reader’s Digest Media Group, Inc.) |   | Taste  of Home Productions, Inc.(f/k/a  Reader’s Digest HV, Inc.)     |   | Delaware  |   | 10 shares common                      |   | 100    | %      | 100    | %      |
| Reiman  Media Group, Inc. (f/k/a Reader’s Digest Media Group, Inc.) |   | World  Wide Country Tours, Inc.(f/k/a  Reader’s Digest WWCT, Inc.)    |   | Delaware  |   | 10 shares common                      |   | 100    | %      | 100    | %      |
| Travel  Publications, Inc.                                                    |   | RD  Member Services, Inc.                                                       |   | Delaware  |   | 10 shares common                      |   | 100    | %      | 100    | %      |
|                                                                               |   |                                                                                 |   |      |   |                                  |   |   |   |   |   |
| The  Reader’s Digest Association, Inc.                                   |   | Direct  Holdings U.S. Corp.                                                          |   | Delaware  |   | 200,000 shares common                 |   | 100    | %      | 100    | %      |
| Direct  Holdings U.S. Corp.                                                        |   | Direct  Holdings Americas Inc. (f/k/a Time-Life Books Inc.)                          |   | Delaware  |   | 1,000 shares common                   |   | 100    | %      | 100    | %      |
| Direct  Holdings U.S. Corp.                                                        |   | Direct  Holdings IP L.L.C.                                                           |   | Delaware  |   | 100%                                  |   | 100    | %      | 100    | %      |
| Direct  Holdings Americas Inc. (f/k/a Time Life Inc.)                              |   | Direct  Holdings Custom Publishing Inc. (f/k/a Time Life Custom Publishing Inc.)     |   | Delaware  |   | 100 shares common                     |   | 100    | %      | 100    | %      |
| Direct  Holdings Americas Inc. (f/k/a Time Life Inc.)                              |   | Direct  Holdings Education Inc. (f/k/a Time Life Education Inc.)                     |   | Delaware  |   | 100 shares common                     |   | 100    | %      | 100    | %      |
| Direct  Holdings Americas Inc. (f/k/a Time Life Inc.)                              |   | Alex  Inc.                                                                           |   | Delaware  |   | 100 shares common                     |   | 100    | %      | 100    | %      |
| Direct  Holdings Americas Inc. (f/k/a Time-Life Books Inc.)                        |   | Direct  Holdings Customer Service, Inc. (f/k/a Time-Life Customer Service Inc.) |   | Delaware  |   | 100 shares common                     |   | 100    | %      | 100    | %      |
| Direct  Holdings Americas Inc. (f/k/a Time Life Inc.)                              |   | Direct  Holdings Libraries Inc. (f/k/a Time-Life Libraries, Inc.)               |   | New  York |   | 10,000 shares common                  |   | 100    | %      | 100    | %      |

 

28

----

 
| The  Reader’s Digest Association, Inc. |   | WRC  Media Inc.                           |   | Delaware  |   | 1,000 shares common     |   | 100  | % | 100 | % |
|--------------------------------------------------|--------|-------------------------------------------|--------|-----------|--------|-------------------------|--------|------|---|-----|---|
| WRC  Media Inc.                                  |   | CompassLearning, Inc.                |   | Delaware  |   | 10,000 shares common    |   | 100  | % | 100 | % |
| WRC  Media Inc.                                  |   | Weekly  Reader Corporation                |   | Delaware  |   | 2,685,670 shares common |   | 94.9 | % | 100 | % |
| Weekly  Reader Corporation                       |   | Lifetime  Learning Systems, Inc.     |   | Delaware  |   | 1,000 shares common     |   | 100  | % | 100 | % |
| Weekly  Reader Corporation                       |   | World  Almanac Education Group, Inc. |   | Delaware  |   | 1,000 shares common     |   | 100  | % | 100 | % |
| World  Almanac Education Group, Inc.        |   | Funk &  Wagnalls Yearbook Corp.  |   | Delaware  |   | 1,000 shares common     |   | 100  | % | 100 | % |
| World  Almanac Education Group, Inc.        |   | Gareth  Stevens, Inc.                |   | Wisconsin |   | 2,314,305 shares common |   | 100  | % | 100 | % |

 

**Foreign**

 
| **Loan  Party**                                                                                                            | ** ** | **No. of  Shares** | ** ** | **Subsidiary / Equity Investment**                 | ** ** | **Country  of Incorporation** | ** ** | **Percent Ownership** | ** ** | **Equity   Interest   Required to  be Pledged** | ** ** |
|----------------------------------------------------------------------------------------------------------------------------|------------|-------------------------|------------|----------------------------------------------------|------------|-------------------------------|------------|-----------------------|------------|-------------------------------------------------|------------|
| W.A. Publications, LLC   The Reader’s Digest Association, Inc.   The Reader’s Digest Association, Inc. |       | 1  872,237  469,665     |       | The Reader’s Digest  Association Pty. Limited |       | Australia                     |       | 100                   | %          | 65                                              | %          |
| Doctor Acquisition Co.                                                                                                     |       | 1,000                   |       | 1302791 Alberta ULC                                |       | Canada                        |       | 100                   | %          | 0                                               | %(5)       |
| The Reader’s Digest  Association, Inc.  The Reader’s Digest Association, Inc.                          |       | 72,000  38,000          |       | Oy Valitut Palat -  Reader’s Digest Ab        |       | Finland                       |       | 100                   | %          | 65                                              | %          |
| The Reader’s Digest  Association, Inc.                                                                           |       | 1                       |       | RD German Holdings GmbH                            |       | Germany                       |       | 100                   | %          | 65

100                                         | %(6)

%(7) |

 

----

(5) Not required tobe delivered.

 

(6) With respect tothe Obligations.

 

(7) With respect tothe Obligations of the German Borrower.

 

29

----

 
| **Loan Party**                                                                                                                                                               | ** ** | **No. of  Shares**                                                      | ** ** | **Subsidiary / Equity Investment**                                        | ** ** | **Country  of Incorporation** | ** ** | **Percent  Ownership** | ** ** | **Equity  Interest Required to  be Pledged** | ** ** |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------------------------------------------------------------|------------|---------------------------------------------------------------------------|------------|-------------------------------|------------|------------------------|------------|----------------------------------------------|------------|
| The Reader’s Digest  Association, Inc.                                                                                                                             |       | 80,000 DM  20,000 DM

1,900,000 DM

1,000,000 DM

9,000,000 DM

8,000,000 DM |       | Verlag Das Beste GmbH****                                                 |       | Germany                       |       | 100                    | %          | 10                                           | %(8)       |
| W.A. Publications, LLC

The Reader’s Digest  Association, Inc.

The Reader’s Digest  Association, Inc.

The Reader’s Digest  Association, Inc. |       | 5  45

33

12                                                                |       | Reader’s Digest  Association Far East Limited****                    |       | Hong Kong                     |       | 100                    | %          | 65                                           | %          |
| W.A. Publications, LLC  W.A. Publications, LLC  The Reader’s Digest Association, Inc.

The Reader’s Digest  Association, Inc.                            |       | 1  9  65

25                                                                 |       | Reader’s Digest Asia,  Ltd.                                          |       | Hong Kong

              |       | 100                    | %          | 65                                           | %          |
| W.A. Publications, LLC  W.A. Publications, LLC

The Reader’s Digest  Association, Inc.   The Reader’s Digest Association, Inc.                           |       | 1  9  65  24                                                                 |       | Reader’s Digest (East  Asia) Limited                                 |       | Hong Kong

              |       | 100                    | %          | 65                                           | %          |
| W.A. Publications, LLC

The Reader’s Digest  Association, Inc.  The Reader’s Digest Association, Inc.                                                    |       | 1

6,500

3,499                                                              |       | R.D. Properties, Ltd.                                                     |       | Hong Kong

              |       | 100                    | %          | 65                                           | %          |
| Reader’s Digest  Association Far East Limited  The Reader’s Digest Association, Inc.                                                                          |       | 1

99                                                                        |       | Reader’s Digest Book  and Home Entertainment (India) Private Limited |       | India

                  |       | 100                    | %          | 65                                           | %          |
| The Reader’s Digest  Association, Inc.

The Reader’s Digest  Association, Inc.                                                                           |       | 130

70                                                                      |       | The Reader’s Digest  Ltd.                                            |       | Japan

                  |       | 100                    | %          | 65                                           | %          |
| W.A. Publications, LLC

The Reader’s Digest  Association, Inc.

The Reader’s Digest  Association, Inc.                                                   |       | 1

17,913,286

9,645,615                                                     |       | Caribe Condor S.A. de C.V.                                                |       | Mexico

                 |       | 100                    | %          | 65                                           | %          |
| W.A. Publications, LLC                                                                                                                                                       |       | 1                                                                            |       | Reader’s Digest Mexico  S.A. de C.V.                                 |       | Mexico                        |       | 1                      | %          | 65                                           | %(9)       |

 

----

(8) 90% to betransferred to the RD German Holdings GmbH.

 

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

 

30

----

 
| **Loan Party**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | ** ** | **No. of  Shares**                         | ** ** | **Subsidiary / Equity Investment**                                                                         | ** ** | **Country  of Incorporation** | ** ** | **Percent   Ownership** | ** ** | **Equity  Interest  Required to  be Pledged** | ** ** |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------------------------------|------------|---------------------------------------------------------------------------------------------------------------------------|------------|------------------------------------|------------|------------------------------|------------|---------------------------------------------------------|------------|
| W.A. Publications, LLC                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |       | 1                                               |       | Corporativo Reader’s  Digest Mexico S. de R.L. de C.V.                                                               |       | Mexico                             |       | 1                            | %          | 65                                                      | %          |
| W.A. Publications, LLC                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |       | 1                                               |       | Grupo Editorial  Reader’s Digest S. de R.L. de C.V.                                                                  |       | Mexico                             |       | 1                            | %          | 65                                                      | %          |
| W.A. Publications, LLC   W.A. Publications, LLC  The Reader’s Digest Association, Inc.

The Reader’s Digest  Association, Inc.                                                                                                                                                                                                                                                                                                                                                                                                   |       | 100  100

1,300

495                            |       | Reader’s Digest  (Philippines) Inc.                                                                                  |       | Philippines

                 |       | 100                          | %(10)      | 65                                                      | %          |
| Selecções do Reader’s Digest (Portugal), SAThe 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), SAThe Reader’s Digest Association, Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                            |       | €1,796€199                            |       | Euroselecções - Publicações E Artigos Promocionais, Lda.                                              |       | Portugal

                    |       | 100                          | %          | 65                                                      | %          |
| W.A. Publications, LLC  The Reader’s Digest Association, Inc.  The Reader’s Digest Association, Inc.                                                                                                                                                                                                                                                                                                                                                                                                                             |       | 2

4,550

2,448                                 |       | Reader’s Digest Selecciones S.A.                                                                                     |       | Spain

                       |       | 100                          | %          | 65                                                      | %          |
| The Reader’s Digest  Association, Inc.

The Reader’s Digest  Association, Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                   |       | 15,750

29,250                                  |       | Reader’s Digest  Aktiebolag                                                                                          |       | Sweden

                      |       | 100                          | %          | 65                                                      | %          |
| The Reader’s Digest  Association, Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |       | 497                                             |       | Das Beste aus Reader’s Digest AG/  Sélection du Reader’s Digest SA/  Selezione dal Reader’s Digest SA |       | Switzerland

                 |       | 100                          | %(11)      | 65                                                      | %          |

 

----

(10) Five sharesheld by each of the five directors.

 

(11) 3 shares held byindividuals.

 

31

----

 

 
| **Loan Party**                                                                                                                                | ** ** | **No. of  Shares**                 | ** ** | **Subsidiary / Equity Investment**                        | ** ** | **Country  of Incorporation** | ** ** | **Percent   Ownership** | ** ** | **Equity  Interest  Required to  be Pledged** | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------------------|------------|--------------------------------------------------------------------------|------------|------------------------------------|------------|------------------------------|------------|---------------------------------------------------------|------------|
| The Reader’s Digest  Association, Inc.  The Reader’s Digest Association, Inc.  The Reader’s Digest Association, Inc. |       | 9,993  571,996

298,004                 |       | Reader’s Digest  (Thailand) Limited                                 |       | Thailand                           |       | 100                          | %(12)      | 65                                                      | %          |
| The Reader’s Digest  Association, Inc.  The Reader’s Digest Association, Inc.                                                  |       | 201,500,000  108,500,000                |       | The Reader’s Digest  Association Limited                            |       | United Kingdom                     |       | 100                          | %          | 65                                                      | %          |
| The Reader’s Digest  Association, Inc.  The Reader’s Digest Association, Inc.                                                  |       | 1,089,573  586,692                      |       | Reader’s Digest  Children’s Publishing Limited                 |       | United Kingdom                     |       | 100                          | %          | 65                                                      | %          |
| The Reader’s Digest  Association, Inc.  The Reader’s Digest Association, Inc.  The Reader’s Digest Association, Inc. |       | 1  34  65                               |       | Reader’s Digest Europe  Limited                                     |       | United Kingdom                     |       | 100                          | %          | 65                                                      | %          |
| Reader’s Digest  Latinoamerica, S.A.

WAPLA, LLC                                                                                              |       | 11,880 interests

120 interests         |       | Reader’s Digest Argentina, SRL                                      |       | Argentina                          |       | 100                          | %          | 65                                                      | %*         |
| The Reader’s Digest  Association, Inc.                                                                                                   |       | 500,000                                 |       | Verlag Das Beste GmbH                                                    |       | Austria                            |       | 100                          | %          | 65                                                      | %*         |
| W.A. Publications, LLC  The Reader’s Digest Association, Inc.                                                                            |       | 1  253,845                              |       | Reader’s Digest World  Services, S.A.                               |       | Belgium                            |       | 100                          | %          | 65                                                      | %*         |
| W.A. Publications, LLC  The Reader’s Digest Association, Inc.                                                                            |       | 164,200

656,800                        |       | Reader’s Digest N.V. -  S.A.                                        |       | Belgium                            |       | 100                          | %          | 65                                                      | %*         |
| W.A. Publications, LLC  The Reader’s Digest Association, Inc.                                                                            |       | 10%  90%                                |       | Reader’s Digest Brasil,  Ltda.                                      |       | Brazil                             |       | 100                          | %          | 65                                                      | %*         |
| The Reader’s Digest  Association, Inc.                                                                                                   |       | 193,846,000,000  CZK (no shares issued) |       | Reader’s Digest Vyber  s.r.o.                                       |       | Czech Republic                     |       | 100                          | %          | 65                                                      | %*         |
| The Reader’s Digest  Association, Inc.                                                                                                   |       | 61,992                                  |       | Sélection du Reader’s Digest S.A.                              |       | France                             |       | 100                          | %(13)      | 65                                                      | %*         |
| The Reader’s Digest  Association, Inc.                                                                                                   |       | 25,000                                  |       | Reader’s Digest  Deutschland Holding GmbH                           |       | Germany                            |       | 100                          | %          | 65                                                      | %*         |
| The Reader’s Digest  Association, Inc.                                                                                                   |       | 599                                     |       | Reader’s Digest Hellas  Publications Company with Limited Liability |       | Greece                             |       | 100                          | %(14)      | 65                                                      | %*         |

 

----

(12) 7 shares held byindividuals.

 

(13) 8 shares held byindividuals.

 

(14) 1 share held by anindividual.

 

32

----

 
| **Loan Party**                              | ** ** | **No. of  Shares**             | ** ** | **Subsidiary / Equity Investment**                                   | ** ** | **Country  of Incorporation** | ** ** | **Percent   Ownership** | ** ** | **Equity  Interest  Required to   be Pledged** | ** ** |
|--------------------------------------------------|------------|-------------------------------------|------------|-------------------------------------------------------------------------------------|------------|------------------------------------|------------|------------------------------|------------|----------------------------------------------------------|------------|
| The Reader’s Digest  Association, Inc. |       | 600,000,000 HUF  (no shares issued) |       | Reader’s Digest Kiadó  Korlátolt Felelosségu Társaság |       | Hungary                            |       | 100                          | %          | 65                                                       | %*         |
| The Reader’s Digest  Association, Inc. |       | €10,000                        |       | Libri e più, S.r.l.                                                            |       | Italy                              |       | 100                          | %          | 65                                                       | %*         |
| The Reader’s Digest  Association, Inc. |       | 182                                 |       | Reader’s Digest  European Shared Services B.V.                                 |       | Netherlands                        |       | 100                          | %          | 65                                                       | %*         |
| The Reader’s Digest  Association, Inc. |       | 100%                                |       | Uitgeversmaatschappij The Reader’s Digest N.V.                                 |       | Netherlands                        |       | 100                          | %          | 65                                                       | %*         |
| The Reader’s Digest  Association, Inc. |       | 16,162                              |       | Reader’s Digest  Przeglad Sp Z.o.o.                                            |       | Poland                             |       | 100                          | %          | 65                                                       | %*         |
| The Reader’s Digest  Association, Inc. |       | 299,999                             |       | Reader’s Digest Asia  Pte. Ltd.                                                |       | Singapore                          |       | 100                          | %(15)      | 65                                                       | %*         |
| The Reader’s Digest  Association, Inc. |       | 4,500 YTL                           |       | Reader’s Digest  Secilmis Yayincilik Dagitim Pazarlama Ticaret Limited Sirketi |       | Turkey                             |       | 90                           | %(16)      | 65                                                       | %*         |
|                                             |       |                                |       |                                                                                |       |                               |       |                         |       |                                                     |       |
| Direct Holdings U.S.  Corp.                      |       | 404 shares common                   |       | Direct Holdings  International B.V.                                                 |       | Netherlands                        |       | 100                          | %          | 65                                                       | %*         |

 

----

*Uncertificated.

 

(15) 1 share owned by anindividual.

 

(16) 10% owned by anindividual.

 

33

----

 

 

Non-firsttier foreign subsidiaries/equity investments:

 
| **Foreign**                                          | ** ** | **No. of  Shares**                                                                                                                                         | ** ** | **Subsidiary / Equity Investment**                                             | ** ** | **Country  of Incorporation** | ** ** | **Percent   Ownership** | ** ** | **Equity  Interest  Required to  be Pledged** | ** ** |
|------------------------------------------------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------------------------------------------------------------------------|------------|------------------------------------|------------|------------------------------|------------|---------------------------------------------------------|------------|
| The Reader’s  Digest Association (Pty.) Limited |       | 9,998  1  1                                                                                                                                                     |       | Reader’s Digest (Australia) Pty. Ltd.

                                             |       | Australia                          |       | 100                          | %          | 0                                                       | %          |
| The Reader’s  Digest Association (Canada) Ltd.  |       | 1

4,999

5,000                                                                                                                                                 |       | Quality Service  Programs, Inc.                                                          |       | Canada                             |       | 100                          | %          | 0                                                       | %          |
| Quality Service  Programs, Inc.

(100%)         |       | Quality Service Programs, Inc. (100 Common  Shares)

 

The Reader’s Digest Association (Canada) Ltd.  (5,500,000 Class A preferred shares) |       | eFundraising.com  Corporation   Incorporated / Corporation   eFundraising.com Incorporée |       | Canada                             |       | 100                          | %          | 0                                                       | %          |
| 1302791 Alberta  ULC                                 |       | 1,000                                                                                                                                                           |       | The Reader’s Digest  Association (Canada) Ltd.                                           |       | Canada                             |       | 100                          | %          | 0                                                       | %          |
| The Reader’s  Digest Association (Canada) Ltd.  |       | 50,000                                                                                                                                                          |       | Reader’s Digest  Magazines Limited                                                       |       | Canada                             |       | 25                           | %(17)      | 0                                                       | %          |
| The Reader’s  Digest Association (Canada) Ltd.  |       | 1                                                                                                                                                               |       | 3634116 Canada  Inc.                                                                          |       | Canada                             |       | 100                          | %          | 0                                                       | %          |
| Reader’s Digest  Far East Ltd.                  |       | 100%                                                                                                                                                            |       | Shanghai Ying Cui  Advertising Company Ltd.                                                   |       | China                              |       | 100                          | %**        | 0                                                       | %          |
| Asian  Qualiproducts. Services Ltd.                  |       | CNY945,000                                                                                                                                                      |       | Guangdong  Pegasus Marketing Information & Service Co. Ltd.                          |       | China                              |       | 90                           | %(18)**    | 0                                                       | %          |

 

----

(17)150,000 shares owned by Reader’s Digest Foundation of Canada.

 

34

----

 
| **Foreign**                                                                          | ** ** | **No. of  Shares**        | ** ** | **Subsidiary / Equity Investment**                      | ** ** | **Country  of Incorporation** | ** ** | **Percent   Ownership** | ** ** | **Equity  Interest  Required to  be Pledged** | ** ** |
|--------------------------------------------------------------------------------------|------------|--------------------------------|------------|------------------------------------------------------------------------|------------|------------------------------------|------------|------------------------------|------------|---------------------------------------------------------|------------|
| Reader’s Digest  (China) Direct Marketing Service Co. Ltd.                      |       | HK$1,890,000                   |       | Reader’s Digest  (Guangzhou) Direct Mail Service Co. Ltd.         |       | China                              |       | 90                           | %(19)**    | 0                                                       | %          |
| Sélection du Reader’s Digest S.A.                                          |       | 1,999                          |       | Sélection du Reader’s Digest Assurances SARL                 |       | France                             |       | 100                          | %(20)      | 0                                                       | %          |
| Verlag Das Beste  GmbH                                                               |       | 100,000 DEM                    |       | Optimail  Direktwerbeservice GmbH                                      |       | Germany                            |       | 100                          | %**        | 0                                                       | %          |
| Verlag Das Beste  GmbH                                                               |       | DM200,000                      |       | Pegasus Medien Produktions- und Vertriebsgesellschaft  GmbH            |       | Germany                            |       | 100                          | %**        | 0                                                       | %          |
| Reader’s Digest  Association Far East Limited

Reader’s Digest  Asia, Ltd. |       | 99

1                          |       | Asian Qualiproducts  Services, Ltd.                                    |       | Hong Kong                          |       | 100                          | %          | 0                                                       | %          |
| Reader’s Digest  (East Asia), Ltd.  Reader’s Digest Asia, Ltd.             |       | 9,999  1                       |       | Reader’s Digest Global  Advertising Ltd.                          |       | Hong Kong                          |       | 100                          | %          | 0                                                       | %          |
| Reader’s Digest  Association Far East Ltd.                                      |       | 1  59,999                      |       | Reader’s Digest  (China) Direct Marketing Services Co., Ltd. |       | Hong Kong                          |       | 60                           | %(21)      | 0                                                       | %          |
| JSC Publishing  House Reader’s Digest                                           |       | No shares issued               |       | LLC Publisher Reader’s  Digest                                    |       | Kazakhstan                         |       | 100                          | %          | 0                                                       | %          |
| Pegasus  Netherlands Services CV (99%), RD Primary European Holdings, LLC (1%)       |       | 124,000 euro of share capital  |       | Pegasus Netherlands  Services Lux Primary SC                           |       | Luxembourg                         |       | 100                          | %**        | 0                                                       | %          |
| Pegasus  Netherlands Services CV (99%), RD Secondary European Holdings, LLC (1%)     |       | € 83,000 share capital    |       | Pegasus Netherlands  Services Lux Secondary SCS                        |       | Luxembourg                         |       | 100                          | %**        | 0                                                       | %          |
| Pegasus  Netherlands Services Lux Secondary SCS                                      |       | 1,000 shares of € 25 each |       | RD Luxembourg Tertiary  Services                                       |       | Luxembourg                         |       | 100                          | %**        | 0                                                       | %          |

 

----

(18)10% owned by third party.

 

(19)10% owned by third party.

 

(20)1 share owned by an individual.

 

(21)40% owned by third party.

 

35

----

 
| **Foreign**                                                                                 | ** ** | **No. of  Shares**                | ** ** | **Subsidiary / Equity Investment**            | ** ** | **Country  of Incorporation** | ** ** | **Percent  Ownership** | ** ** | **Equity  Interest   Required to  be Pledged** | ** ** |
|---------------------------------------------------------------------------------------------|------------|----------------------------------------|------------|--------------------------------------------------------------|------------|------------------------------------|------------|------------------------|------------|---------------------------------------------------------------|------------|
| Reader’s Digest  (East Asia) Limited

 

 

  Reader’s Digest Asia Ltd. |       | 98

1

99,990

400,000  1              |       | Reader’s Digest  (Malaysia) Sdn. Bhd                    |       | Malaysia                           |       | 100                    | %          | 0                                                             | %          |
| Caribe Condor, S.A. de C.V.                                                                 |       | $23,965,884                            |       | Reader’s Digest  México, S.A. de C.V.              |       | Mexico                             |       | 99                     | %          | 0                                                             | %          |
| Caribe Condor, S.A. de C.V.                                                                 |       | $3,620,460                             |       | Corporativo Reader’s  Digest Mexico, S. de R.L. de C.V. |       | Mexico                             |       | 99                     | %          | 0                                                             | %          |
| Caribe Condor, S.A. de C.V.                                                                 |       | $4,999                                 |       | Grupo Editorial  Reader’s Digest, S. de R.L. de C.V.    |       | Mexico                             |       | 100                    | %          | 0                                                             | %          |
| Uitgeversmaatschappij The Reader’s Digest N.V.                                         |       | 35                                     |       | Distrimedia  Services B.V.                                   |       | Netherlands                        |       | 100                    | %**        | 0                                                             | %          |
| Reader’s Digest  World Services S.A.   Reader’s Digest N.V. - S.A.                |       | 270,000 shares of € 1 each        |       | Pegasus  Netherlands Services CV                             |       | Netherlands                        |       | 100                    | %          | 0                                                             | %          |
| Pegasus UK  Holdings Ltd.                                                                   |       | 90,000 shares of € 1 each         |       | RD Netherlands  Holdings BV                                  |       | Netherlands                        |       | 100                    | %          | 0                                                             | %          |
| Uitgeversmaatschappij The Reader’s Digest N.V.                                         |       | 100 shares                             |       | Reader’s Digest  Netherlands Holdings B.V.              |       | Netherlands                        |       | 100                    | %**        | 0                                                             | %          |
| Reader’s Digest  Vyber s.r.o. (Czech Republic)                                         |       | 3,380 shares of  10 RON each , 1 class |       | Editura Reader’s  Digest SRL                            |       | Romania                            |       | 100                    | %**        | 0                                                             | %          |
| JSC Publishing  House Reader’s Digest                                                  |       | No shares issued                       |       | LLC Digest  Direct                                           |       | Russia                             |       | 100                    | %**        | 0                                                             | %          |
| Reader’s Digest  Deutschland Holding GmbH                                              |       | 10                                     |       | JSC Publishing  House Reader’s Digest                   |       | Russia                             |       | 100                    | %**        | 0                                                             | %          |
| Reader’s Digest  Vyber s.r.o.

Reader’s Digest  Kiado KFT (Hungary)               |       | 99.7059%  0.2941%  No shares issued    |       | Reader’s Digest  Vyber Slovensko, s.r.o.                |       | Slovak Republic                    |       | 100                    | %          | 0                                                             | %          |
| Reader’s Digest  Selecciones S.A.                                                      |       | 199                                    |       | Sociedad  Difusión Cultural, S.L.                       |       | Spain                              |       | 100                    | %(22)      | 0                                                             | %          |

 

----

(22)1 share held by an individual.

 

36

----

 
| **Foreign**                                                                             | ** ** | **No. of  Shares**                       | ** ** | **Subsidiary / Equity Investment**               | ** ** | **Country  of Incorporation** | ** ** | **Percent   Ownership** | ** ** | **Equity  Interest  Required to  be Pledged** | ** ** |
|-----------------------------------------------------------------------------------------|------------|-----------------------------------------------|------------|-----------------------------------------------------------------|------------|------------------------------------|------------|------------------------------|------------|---------------------------------------------------------|------------|
| JSC Publishing  House Reader’ Digest [Russia]

LLC Digest  Direct [Russia]

  |       | 90%

10%  No shares issued                    |       | LLC Direct Digest                                               |       | Ukraine                            |       | 100                          | %          | 0                                                       | %          |
| JSC Publishing  House Reader’s Digest [Russia]

LLC Direct Digest  [Ukraine]       |       | 29%  71%                                      |       | LLC Publisher  Reader’s Digest                             |       | Ukraine                            |       | 100                          | %          | 0                                                       | %          |
| The Reader’s  Digest Association, Inc.

                                 |       | 100,000,000 ordinary shares of ₤ 1 each |       | Pegasus UK Holdings  Limited                                    |       | United Kingdom                     |       | 100                          | %          | 0                                                       | %          |
| Reader’s Digest  Holdings Limited                                             |       | 100                                           |       | RD Publications Limited  (Previously Berkeley Magazine Ltd.)    |       | United Kingdom                     |       | 100                          | %          | 0                                                       | %          |
| Reader’s  Digest  Holdings Limited                                            |       | 100                                           |       | Money Magazine Limited                                          |       | United Kingdom                     |       | 100                          | %          | 0                                                       | %          |
| Reader’s  Digest  Holdings Limited                                            |       | 201,000                                       |       | Reader’s Digest  Financial Services Limited                |       | United Kingdom                     |       | 100                          | %          | 0                                                       | %          |
| Reader’s  Digest  Holdings Limited                                            |       | 100                                           |       | Fundraising For You  Limited                                    |       | United Kingdom                     |       | 100                          | %          | 0                                                       | %          |
| Reader’s  Digest  Holdings Limited                                            |       | 19,184,000                                    |       | Reader’s Digest  European Systems Ltd.                     |       | United Kingdom                     |       | 100                          | %          | 0                                                       | %          |
| Reader’s  Digest  Holdings Limited                                            |       | 1                                             |       | Reader’s Digest Central &  Eastern Europe Limited |       | United Kingdom                     |       | 100                          | %          | 0                                                       | %          |

 

37

----

 
| **Foreign**                            | ** ** | **No. of  Shares**                                                                                                                                                                                                                                                                                            | ** ** | **Subsidiary / Equity Investment** | ** ** | **Country  of Incorporation** | ** ** | **Percent  Ownership** | ** ** | **Equity  Interest  Required to  be Pledged** | ** ** |
|----------------------------------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|---------------------------------------------------|------------|------------------------------------|------------|------------------------|------------|---------------------------------------------------------|------------|
| Reader’s Digest  Association Ltd. |       | 402 Ordinary  shares of nominal value £1 issued as follows:

 

100 shares at £1  per share at a premium of £171,665 per share

 

100 shares at £1  per share at a premium of £2,009 per share

 

202 shares at £1  per share (including original subscriber share) |       | Reader’s Digest  Holdings Limited            |       | United Kingdom                     |       | 100                    | %          | 0                                                       | %          |

 

----

**Uncertificated.

 

38

----

 

**Schedule 5.18**

**Collateral Matters**

 
| **Loan  Party**                                  | ** ** | **Filing Office**                                                                                                 |
|--------------------------------------------------|------------|-------------------------------------------------------------------------------------------------------------------|
| RDA  Holding Co.                                 |       | Delaware Secretary of State                                                                                       |
| Doctor  Acquisition Co.                          |       | Delaware Secretary of State                                                                                       |
| The  Reader’s Digest Association, Inc. |       | Delaware Secretary of State  United States Patent and Trademark Office   United States Copyright Office           |
| Allrecipes.com, Inc.                        |       | Washington Secretary of State   United States Patent and Trademark Office                                         |
| Ardee  Music Publishing, Inc.               |       | Delaware Secretary of State                                                                                       |
| Books  Are Fun, Ltd.                             |       | Iowa Secretary of State  United StatesPatent and Trademark Office  United States Copyright Office                 |
| Christmas  Angel Productions, Inc.          |       | Delaware Secretary of State                                                                                       |
| Pegasus  Asia Investments Inc.                   |       | Delaware Secretary of State                                                                                       |
| Pegasus  Finance Corp.                           |       | Delaware Secretary of State                                                                                       |
| Pegasus  Investment, Inc.                   |       | Delaware Secretary of State                                                                                       |
| Pegasus  Sales, Inc.                        |       | Delaware Secretary of State                                                                                       |
| Pleasantville  Music Publishing, Inc.       |       | Delaware Secretary of State                                                                                       |
| QSP, Inc.                                   |       | Delaware Secretary of State   United States Patent and Trademark Office                                           |
| Family  Reading Program Corp.                    |       | Delaware Secretary of State                                                                                       |
| QSP  Distribution Services, LLC                  |       | Delaware Secretary of State                                                                                       |
| QSP  Products and Programs, LLC                  |       | Delaware Secretary of State                                                                                       |
| QSP  Sales, LLC                                  |       | Delaware Secretary of State                                                                                       |
| QSP  Services, LLC                               |       | Delaware Secretary of State                                                                                       |
| QSP  Ventures, LLC                               |       | Delaware Secretary of State                                                                                       |
| Fundraising.com, Inc.                       |       | Delaware Secretary of State                                                                                       |
| Reiman  Media Group, Inc.                   |       | Delaware Secretary of State  United States Patent and Trademark  Office  United States Copyright Office |
| Taste  of Home Productions, Inc.            |       | Delaware Secretary of State                                                                                       |
| Taste  of Home Media Group, Inc.            |       | Delaware Secretary of State                                                                                       |
| World  Wide Country Tours, Inc.             |       | Delaware Secretary of State                                                                                       |
| VideOvation, Inc.                           |       | Delaware Secretary of State                                                                                       |
| R.  D. Manufacturing Corporation                 |       | Delaware Secretary of State                                                                                       |
| RD  Publications, Inc.                      |       | Delaware Secretary of State  United States Patent and Trademark Office                                            |
| Home  Service Publications, Inc.            |       | Delaware Secretary of State                                                                                       |
| RD  Large Edition, Inc.                     |       | Delaware Secretary of State                                                                                       |
| RD  Trade Shows, Inc.                       |       | Delaware Secretary of State                                                                                       |

 

----

 
| RD  Walking, Inc.                                      |   | Delaware Secretary of State                                                                              |
|-------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------|
| Retirement  Living Publishing Company, Inc.            |   | Delaware Secretary of State                                                                              |
| Travel  Publications, Inc.                             |   | Delaware Secretary of State                                                                              |
| RD  Member Services, Inc.                              |   | Delaware Secretary of State                                                                              |
| Reader’s  Digest Children’s Publishing, Inc. |   | Delaware Secretary of State  United States Patent and Trademark Office                                   |
| Reader’s  Digest Consumer Services, Inc.          |   | Delaware Secretary of State                                                                              |
| RD  Magazine Value Partners, Inc.                      |   | Delaware Secretary of State                                                                              |
| Reader’s  Digest Entertainment, Inc.              |   | Delaware Secretary of State                                                                              |
| Reader’s  Digest Financial Services, Inc.         |   | Delaware Secretary of State                                                                              |
| Taste  of Home Entertaining, Inc.                      |   | Delaware Secretary of State                                                                              |
| Reader’s  Digest Latinoamerica S.A.                    |   | Delaware Secretary of State                                                                              |
| WAPLA,  LLC                                                 |   | Delaware Secretary of State                                                                              |
| Reader’s  Digest Sales and Services, Inc.         |   | Delaware Secretary of State                                                                              |
| Reader’s  Digest Sub Nine, Inc.                   |   | Delaware Secretary of State                                                                              |
| Reader’s  Digest Young Families, Inc.             |   | Delaware Secretary of State   United States Patent and Trademark Office                                  |
| SMDDMS, Inc.                                           |   | Delaware Secretary of State                                                                              |
| The  Reader’s Digest Association (Russia) Incorporated |   | Delaware Secretary of State                                                                              |
| W.A.  Publications, LLC                                     |   | Delaware Secretary of State                                                                              |
|                                                        |   |                                                                                                     |
| Alex  Inc.                                                  |   | Delaware Secretary of State                                                                              |
| Direct  Holdings Americas Inc.                              |   | Delaware Secretary of State  United States Patent and Trademark Office   United States Copyright Office  |
| Direct  Holdings Custom Publishing Inc.                     |   | Delaware Secretary of State                                                                              |
| Direct  Holdings Customer Service, Inc.                |   | Delaware Secretary of State                                                                              |
| Direct  Holdings Education Inc.                             |   | Delaware Secretary of State                                                                              |
| Direct  Holdings Libraries Inc.                             |   | New York Secretary of State                                                                              |
| Direct  Holdings U.S. Corp.                                 |   | Delaware Secretary of State                                                                              |
|                                                        |   |                                                                                                     |
| WRC  Media Inc.                                             |   | Delaware Secretary of State 

United States Patent and Trademark Office                                  |
| CompassLearning, Inc.                                  |   | Delaware Secretary of State  United States Patent and Trademark Office  United States Copyright Office   |
| Weekly  Reader Corporation                                  |   | Delaware Secretary of State  United States Patent and Trademark Office                                   |
| Lifetime  Learning Systems, Inc.                       |   | Delaware Secretary of State   United States Patent and Trademark Office                                  |
| World  Almanac Education Group, Inc.                   |   | Delaware Secretary of State   United States Patent and Trademark Office   United States Copyright Office |
| Funk &  Wagnalls Yearbook Corp.                    |   | Delaware Secretary of State                                                                              |
| Gareth  Stevens, Inc.                                  |   | Wisconsin Secretary of State                                                                             |

 

40

----

 

**Schedule 7.01(b)**

**Existing Liens**

 

·                                          UCC-1 financing statementnumber 52446723 filed with the Delaware Secretary of State on August 8,2005.  Reader’s Digest Entertainment, Inc.is the debtor.  Screen Actors Guild, Inc.is the secured party.  Collateralincludes made-for-television motion picture tentatively entitled “Prisoner ofSilence.”

 

·                                          Cash Collateral SecurityAgreement made as of July 22, 2005 by and between Weekly ReaderCorporation, CompassLearning, Inc., WRC Media, Inc., World AlmanacEducation Group, Inc. and Bank of America, regarding outstanding lettersof credit in an aggregate amount of $2,872,500.

 

·                                          Duplicating and ReplicatingServices Agreement effective as of June 7, 2004, by and betweenTechnicolor Videocassette, Inc. and Technicolor Videocassette of Michigan, Inc.(collectively, “Technicolor”), and Direct Holdings Americas Inc.  Technicolor has a possessory lien onvideocassets, dvds and certain other materials.

 

----

 

**Schedule 7.02(f)**

**Existing Investments**

 
| **Issuer**                                                                                            | ** ** | **State/Country  of  Incorporation** | ** ** | **Equity Interests**                   | ** ** | **No. of Interests** | ** ** | **Record and Beneficial Owner**                     |
|-------------------------------------------------------------------------------------------------------|------------|--------------------------------------|------------|----------------------------------------|------------|---------------------------|------------|-----------------------------------------------------|
| BrandDirect  Marketing, Inc.                                                                     |       | Delaware                             |       | Series A  Preferred Stock         |       | 69,512  shares            |       | The  Reader’s Digest Association, Inc.    |
| BrandDirect  Marketing, Inc.                                                                     |       | Delaware                             |       | Series A  Preferred Stock         |       | 41,707  shares            |       | The  Reader’s Digest Association, Inc.    |
| BrandDirect  Marketing, Inc.                                                                     |       | Delaware                             |       | Series A  Preferred Stock         |       | 41,708  shares            |       | The  Reader’s Digest Association, Inc.    |
| BrandDirect  Marketing, Inc.                                                                     |       | Delaware                             |       | Series A  Preferred Stock         |       | 41,707  shares            |       | The  Reader’s Digest Association, Inc.    |
| BrandDirect  Marketing, Inc.                                                                     |       | Delaware                             |       | Series A  Preferred Stock         |       | 41,708  shares            |       | The  Reader’s Digest Association, Inc.    |
| BrandDirect  Marketing, Inc.                                                                     |       | Delaware                             |       | Series A  Preferred Stock         |       | 69,512  shares            |       | The  Reader’s Digest Association, Inc.    |
| BrandDirect  Marketing, Inc.                                                                     |       | Delaware                             |       | Series B  Preferred Stock         |       | 55,610  shares            |       | The  Reader’s Digest Association, Inc.    |
| BrandDirect  Marketing, Inc.                                                                     |       | Delaware                             |       | Series B  Preferred Stock         |       | 69,512  shares            |       | The  Reader’s Digest Association, Inc.    |
| BrandDirect  Marketing, Inc.                                                                     |       | Delaware                             |       | Series B  Preferred Stock         |       | 55,610  shares            |       | The  Reader’s Digest Association, Inc.    |
| BrandDirect  Marketing, Inc.                                                                     |       | Delaware                             |       | Series B  Preferred Stock         |       | 69,512  shares            |       | The  Reader’s Digest Association, Inc.    |
| BrandDirect  Marketing, Inc.                                                                     |       | Delaware                             |       | Series D  Preferred Stock         |       | 1,112,200  shares         |       | The  Reader’s Digest Association, Inc.    |
| BrandDirect  Marketing, Inc.                                                                     |       | Delaware                             |       | Series D  Preferred Stock         |       | 278,050  shares           |       | The  Reader’s Digest Association, Inc.    |
| BrandDirect  Marketing, Inc.                                                                     |       | Delaware                             |       | Series D  Preferred Stock         |       | 834,150  shares           |       | The  Reader’s Digest Association, Inc.    |
| BrandDirect  Marketing, Inc.                                                                     |       | Delaware                             |       | Series D  Preferred Stock Warrant |       | Variable                  |       | The  Reader’s Digest Association, Inc.    |
| BrandDirect  Marketing, Inc.                                                                     |       | Delaware                             |       | Series D  Preferred Stock Warrant |       | 839,807  shares           |       | The  Reader’s Digest Association, Inc.    |
| BrandDirect  Marketing, Inc.                                                                     |       | Delaware                             |       | Series D  Preferred Stock Warrant |       | 839,807  shares           |       | The  Reader’s Digest Association, Inc.    |
| BrandDirect  Marketing (UK) Limited                                                                   |       | U.K.                                 |       | Shares                                 |       | 1,000  shares             |       | The  Reader’s Digest Association, Inc.    |
| Dynegy, Inc.                                                                                     |       | Illinois                             |       | Class A  Common Stock             |       | 2,426  shares             |       | The  Reader’s Digest Association, Inc.    |
| Finet  Group Limited (formerly known as Finet International Holdings  Ltd. and China Markets Limited) |       | Cayman  Islands                      |       | Series B  Common Shares           |       | 341,516  shares           |       | The  Reader’s Digest Association, Inc.    |
| Infocrossing, Inc.                                                                               |       | Delaware                             |       | Common  Stock Purchase Warrant         |       | 50,000  shares            |       | The  Reader’s Digest Association, Inc.    |
| LoyaltyPoint, Inc.                                                                               |       | Delaware                             |       | Common  Stock                          |       | 3,335,263  shares         |       | The  Reader’s Digest Association, Inc.    |
| Onvia.com, Inc.                                                                                  |       | Delaware                             |       | Common  Stock                          |       | 2,558  shares             |       | The  Reader’s Digest Association, Inc.    |
| Onvia.com, Inc.                                                                                  |       | Delaware                             |       | Common  Stock                          |       | 639  shares               |       | Reader’s  Digest Sales and Services, Inc. |

 

----

 

·              DirectHoldings Australia Pty Limited is party to an Alliance Sales Agreement forJapan dated as of February 22, 2005, as amended, with Oak Lawn MarketingInc.  Although the relationship under theagreement is not structured as a joint venture entity or partnership for legalpurposes, the arrangement is accounted for as a joint venture.

 

·              CompassLearning, Inc.has a minority investment in ThinkBox, Inc. represented by 13,632,838shares of Series C preferred stock, convertible into common stock equal to31.06% of Think Box, Inc.’s outstanding common stock.

 

----

 

**Schedule 7.03(b)**

**Existing Indebtedness**

 

Three letters of credit issued by Bank of America on behalf of WeeklyReader Corporation/WRC Media Inc. in an aggregate amount of $2,872,500.

 

----

 

**Schedule 7.05(k)**

**Dispositions**

 

·              Dispositions of thebusinesses of (or Equity Interests in) QSP, Inc., Family ReadingProgram Corp., QSP Distribution Services, LLC, QSP Products and Programs, LLC,QSP Sales, LLC, QSP Services, LLC, QSP Ventures, LLC, Fundraising.com, Inc.,RD Magazine Value Partners, Inc., EFundraising.com CorporationIncorporated/Corporation eFundraising.com Incorporee (Canada), Books are Fun, Ltd.,Weekly Reader Corporation, CompassLearning, Inc. and World AlmanacEducation Group.

 

·              TheCompany is in the process of negotiating the sale of a 15% interest in Reader’sDigest Book and Home Entertainment (India) Private Limited to Living MediaIndia Ltd.

 

----

 

**Schedule 7.08**

**Transactions with Affiliates**

 

·                                          ConsultingAgreement between Direct Holdings U.S. Corp., ZelnickMedia Corp. and StraussZelnick dated as of January 23, 2007, providing for the payment of$750,000.  Agreement expires December 31,2008.

 

·                                          ManagementAgreement dated as of November 17, 1999 among Ripplewood Holdings L.L.C.and CompassLearning, Inc.*

 

·                                          ManagementAgreement dated as of November 17, 1999 among Ripplewood Holdings L.L.C.and Weekly Reader Corporation.*

 

----

*  Together with thepayment of management fees to the Sponsors, not to exceed $1,875,000 in anyfiscal quarter.

 

----

 

**Schedule 7.09**

**Existing Restrictions**

 

None.

 

----

 

**Schedule 10.02**

**Administrative Agent’s Office, CertainAddresses for Notices**

 
| If to the Administrative Agent, to:   |
|---------------------------------------|
|                                  |   |
|                                  | For Houston Loan and Agency: |
|                                  |   |
|                                  | Cynthia E.  Jasso |
|                                  | JPMorgan  Chase Bank N.A. |
|                                  | Americas  Investment Bank Loan Operations |
|                                  | Phone:  713-750-2119 |
|                                  | Fax:713-750-2782 |
|                                  |   |
|                                  | For London: |
|                                  |   |
|                                  | J.P.Morgan  Europe Limited |
|                                  | 125 London  Wall, London EC2Y 5AJ |
|                                  | Attn : The  Manager |
|                                  | Tel : +44  207 777 2434 / +44 207 7772940 |
|                                  | Fax: +44 207  777 2360 |
|                                  |   |
| If to Holdings or Acquisition Co, to: |
|                                  | c/o Ripplewood Holdings L.L.C. |
|                                  | One Rockefeller Plaza, 32nd Floor |
|                                  | New York, NY 10010 |
|                                  | Attention: Christopher Minnetian, Esq. |
|                                  |   |
| If to Reader’s Digest, to:       |
|                                  |   |
|                                  | The Reader’s Digest Association, Inc. |
|                                  | Reader’s Digest Road |
|                                  | Pleasantville, NY 10570 |
|                                  | Attention: Treasurer |
|                                  |   |
|                                  | Telephone number: | 914-244-7683 |
|                                  | Facsimile number: | 914-244-5904 |
|                                  | Electronic mail address: | william.magill@rd.com |
|                                  | Website address: | www.rd.com |

 

----

 

EXHIBIT A

 

[FORM OF]

 

COMMITTED LOAN NOTICE

 
| To:    | JPMorgan Chase Bank, N.A.,  as Administrative Agent |
|--------|-----------------------------------------------------|
|   | Loan & Agency  Services                    |
|   | 1111 Fannin, 10th Floor                             |
|   | Houston, TX 77002-6925                              |
|   | Attention: Antonio Adollo                           |

 

[Date]

 

Ladiesand Gentlemen:

 

Reference is made to the Credit Agreementdated as of March 2, 2007 (as amended, supplemented or otherwise modifiedfrom time to time, the “CreditAgreement”), amongDoctor Acquisition Co., a Delaware corporation (to be merged with and intoReader’s Digest (as defined herein), the “Company”), RDA Holding Co., aDelaware corporation (“Holdings”), The Reader’s Digest Association, Inc.,a Delaware corporation (“Reader’s Digest”), the Overseas Borrowers fromtime to time party hereto, JPMorgan Chase Bank, N.A., as Administrative Agent,each lender from time to time party thereto (collectively, the “Lenders”and individually, a “Lender”), Citicorp North America, Inc. andMerrill Lynch, Pierce, Fenner & Smith Incorporated, as Co-SyndicationAgents, and The Royal Bank of Scotland plc, as Documentation Agent.  Capitalized terms used herein and nototherwise defined herein shall have the meanings assigned to such terms in theCredit Agreement.

 

The undersignedCompany hereby requests (select one):

 

o  A Borrowing of new Loans

 

o  A conversion of Loans

 

o  A continuation of Loans

 

to be made on the terms set forth below:

 
| (A)    | Class of  Borrowing (Term or Revolving Credit)                       |   |
|--------|---------------------------------------------------------------------------|--------|
|   |                                                                      |
| (B)    | Date  of Borrowing, conversion or continuation  (which is a Business Day) |   |
|   |                                                                      |
| (C)    | Aggregate  principal amount                                               |   |
|   |                                                                      |
| (D)    | Type  of Loan (Eurodollar or Base Rate)                                   |   |
|        |                                                                           |        |  |

 

----

 
| (E) | Initial  Interest Period (23) |   |
|-----|-------------------------------|--------|

 

[The undersigned Companyhereby represents and warrants to the Administrative Agent and the Lendersthat, on the date of this Committed Loan Notice and on the date of the relatedBorrowing, the conditions to lending specified in paragraphs (a) and (b) ofSection 4.02 of the Credit Agreement have been satisfied.](24)

 
|   | [COMPANY], |
|--------|------------|
|   |       |
|   | by         |
|   |       |   |
|   |       | Name: |
|   |       | Title: |

 

----

(23) Applicable forEurodollar Borrowings/Loans only.

 

(24) Insert bracketedlanguage if the Borrowing is the initial Credit Extension, to include onlythose Specified Representations in Section 4.01 of the Credit Agreement.

 

----

 

EXHIBIT B

 

[FORM OF]

 

SWING LINE LOAN NOTICE

 
| To:    | JPMorgan Chase Bank, N.A.,  as Swing Line Lender and Administrative Agent |
|--------|---------------------------------------------------------------------------|
|   | 1111 Fannin, 10th Floor                                                   |
|   | Houston, TX 77002                                                         |
|   | Attention: Antonio Adollo                                                 |

 

[Date]

 

Ladiesand Gentlemen:

 

Reference is made to the Credit Agreementdated as of March 2, 2007 (as amended, supplemented or otherwise modifiedfrom time to time, the “CreditAgreement”), amongDoctor Acquisition Co., a Delaware corporation (to be merged with and intoReader’s Digest (as defined herein), the “Company”), RDA Holding Co., aDelaware corporation (“Holdings”), The Reader’s Digest Association, Inc.,a Delaware corporation (“Reader’s Digest”), the Overseas Borrowers fromtime to time party hereto, JPMorgan Chase Bank, N.A., as Administrative Agent,each lender from time to time party thereto (collectively, the “Lenders”and individually, a “Lender”), Citicorp North America, Inc. andMerrill Lynch, Pierce, Fenner & Smith Incorporated, as Co-SyndicationAgents, and The Royal Bank of Scotland plc, as Documentation Agent.  Capitalized terms used herein and nototherwise defined herein shall have the meanings assigned to such terms in theCredit Agreement.

 
| (A)    | Aggregate  principal amount  to be borrowed(25) |   |   |
|--------|-------------------------------------------------|--------|--------|
|   |                                            |
| (B)    | Date  of Borrowing  (which is a Business Day)   |   |   |

 
|   | [THE  READER’S DIGEST ASSOCIATION, INC.], |
|--------|------------------------------------------------|
|   |                                           |
|   | by                                             |
|   |                                           |   |
|   |                                           | Name: |
|   |                                           | Title: |

 

----

(25) Shall be a minimum of$250,000.

 

----

 

EXHIBIT C-1

 

LENDER:[·]

PRINCIPALAMOUNT: $[·]

 

**[FORM OF] TERM NOTE**

** **

New York, New York

[Date]

 

FORVALUE RECEIVED, the undersigned, Doctor Acquisition Co., a Delaware corporation(to be merged with and into Reader’s Digest (as defined herein), the “Company”),hereby promises to pay to the Lender set forth above (the “Lender”), inlawful money of the United States of America in immediately available funds atthe relevant Administrative Agent’s Office (such term, and each othercapitalized term used but not defined herein, having the meaning assigned to itin the Credit Agreement dated as of March 2, 2007 (as the same may beamended, supplemented or otherwise modified from time to time, the “CreditAgreement”), among the Company, RDA Holding Co., a Delaware corporation,The Reader’s Digest Association, Inc., a Delaware corporation (“Reader’sDigest”), the Overseas Borrowers from time to time party hereto, JPMorganChase Bank, N.A., as Administrative Agent, the lenders from time to time partythereto, Citicorp North America, Inc. and Merrill Lynch, Pierce, Fenner &Smith Incorporated, as Co-Syndication Agents, and The Royal Bank of Scotlandplc, as Documentation Agent (i) on the Maturity Date the principal sum of                Dollars ($        ) or, if less, thethen unpaid principal amount of all Term Loans made by the Lender to theCompany pursuant to the Credit Agreement and (ii) on each Interest PaymentDate, interest at the rate or rates per annum as provided in the CreditAgreement on the unpaid principal amount of all Term Loans made by the Lenderto the Company pursuant to the Credit Agreement.

 

The Company promises to pay interest, ondemand, on any overdue principal and, to the extent permitted by applicableLaw, overdue interest from their due dates at the rate or rates provided in theCredit Agreement.

 

The Company hereby waives diligence,presentment, demand, protest and notice of any kind whatsoever.

 

All borrowings evidenced by this note and allpayments and prepayments of the principal hereof and interest hereon and therespective dates thereof shall be endorsed by the holder hereof on the scheduleattached hereto and made a part hereof or on a continuation thereof which shallbe attached hereto and made a part hereof, or otherwise recorded by such holderin its internal records; provided, however, that the failure ofthe holder hereof to make such a notation or any error in such notation shallnot affect the obligations of the Company under this note.

 

This note is one of the Term Notes referredto in the Credit Agreement that, among other things, contains provisions forthe acceleration of the maturity hereof upon the continuance of an Event ofDefault, for optional and mandatory prepayment of the principal hereof prior tothe Maturity Date with respect to the Term Loans and for the

 

----

 

amendment or waiver ofcertain provisions of the Credit Agreement, all upon the terms and conditionsspecified in the Credit Agreement.

 

**THIS NOTE SHALL BE GOVERNED BY,AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.**

 

***************************************************

 
|   | DOCTOR  ACQUISITION CO., |
|--------|--------------------------|
|   |                     |
|   | by                       |
|   |                     |   |
|   |                     | Name: |
|   |                     | Title: |

 

----

 

LOANS AND PAYMENTS

 
| **Date** | ** ** | **Amount of Loan** | ** ** | **Maturity  Date** | ** ** | **Payments of  Principal/Interest** | ** ** | **Principal  Balance of  Note** | ** ** | **Name of  Person  Making the  Notation** | ** ** |
|----------|------------|------------------------------|------------|--------------------|------------|------------------------------------------|------------|--------------------------------------|------------|-----------------------------------------------------|------------|
|     |       |                         |       |               |       |                                     |       |                                 |       |                                                |       |
|     |       |                         |       |               |       |                                     |       |                                 |       |                                                |       |
|     |       |                         |       |               |       |                                     |       |                                 |       |                                                |       |

 

----

 

EXHIBIT C-2

 

LENDER:[·]

PRINCIPALAMOUNT: $[·]

 

**[FORM OF] REVOLVING CREDIT NOTE**

** **

New York, New York

[Date]

 

FORVALUE RECEIVED, the undersigned, Doctor Acquisition Co., a Delaware corporation(to be merged with and into Reader’s Digest (as defined herein), the “Company”),hereby promises to pay to the Lender set forth above (the “Lender”), inlawful money of the United States of America in immediately available funds atthe relevant Administrative Agent’s Office (such term, and each othercapitalized term used but not defined herein, having the meaning assigned to itin the Credit Agreement dated as of March 2, 2007 (as the same may beamended, supplemented or otherwise modified from time to time, the “CreditAgreement”), among the Company, RDA Holding Co., a Delaware corporation,The Reader’s Digest Association, Inc., a Delaware corporation (“Reader’sDigest”), the Overseas Borrowers from time to time party hereto, JPMorganChase Bank, N.A., as Administrative Agent, the lenders from time to time partythereto, Citicorp North America, Inc. and Merrill Lynch, Pierce, Fenner &Smith Incorporated, as Co-Syndication Agents, and The Royal Bank of Scotlandplc, as Documentation Agent (i) on the Maturity Date the principal sum of                Dollars ($        ) or, if less, thethen unpaid principal amount of all Term Loans made by the Lender to the Companypursuant to the Credit Agreement and (ii) on each Interest Payment Date,interest at the rate or rates per annum as provided in the Credit Agreement onthe unpaid principal amount of all Term Loans made by the Lender to the Companypursuant to the Credit Agreement.

 

The Company promises to pay interest, ondemand, on any overdue principal and, to the extent permitted by applicableLaw, overdue interest from their due dates at the rate or rates provided in theCredit Agreement.

 

The Company hereby waives diligence,presentment, demand, protest and notice of any kind whatsoever.

 

All borrowings evidenced by this note and allpayments and prepayments of the principal hereof and interest hereon and therespective dates thereof shall be endorsed by the holder hereof on the scheduleattached hereto and made a part hereof or on a continuation thereof which shallbe attached hereto and made a part hereof, or otherwise recorded by such holderin its internal records; provided, however, that the failure ofthe holder hereof to make such a notation or any error in such notation shallnot affect the obligations of the Company under this note.

 

This note is one of the Revolving CreditNotes referred to in the Credit Agreement that, among other things, containsprovisions for the acceleration of the maturity hereof upon the continuance ofan Event of Default, for optional and mandatory prepayment of the principalhereof prior to the Maturity Date with respect to the Revolving Credit Facilityand

 

----

 

for the amendment or waiverof certain provisions of the Credit Agreement, all upon the terms andconditions specified in the Credit Agreement.

 

**THISNOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THESTATE OF NEW YORK.**

 

 

 
|   | DOCTOR  ACQUISITION CO., |
|--------|--------------------------|
|   |                     |
|   | by                       |
|   |                     |   |
|   |                     | Name: |
|   |                     | Title: |

 

----

 

LOANS AND PAYMENTS

 
| **Date** | ** ** | **Amount of Loan** | ** ** | **Maturity  Date** | ** ** | **Payments of  Principal/Interest** | ** ** | **Principal  Balance of  Note** | ** ** | **Name of  Person  Making the  Notation** | ** ** |
|----------|------------|------------------------------|------------|--------------------|------------|------------------------------------------|------------|--------------------------------------|------------|-----------------------------------------------------|------------|
|     |       |                         |       |               |       |                                     |       |                                 |       |                                                |       |
|     |       |                         |       |               |       |                                     |       |                                 |       |                                                |       |
|     |       |                         |       |               |       |                                     |       |                                 |       |                                                |       |

 

----

 

EXHIBIT C-3

 

LENDER:[·]

PRINCIPALAMOUNT: € [·]

 

**[FORM OF] EURO TERM NOTE**

** **

New York, New York

[Date]

 

FORVALUE RECEIVED, the undersigned, RD German Holdings GmbH, a German corporation(the “Company”), hereby promises to pay to the Lender set forth above(the “Lender”), in Euros in immediately available funds at the relevantAdministrative Agent’s Office (such term, and each other capitalized term usedbut not defined herein, having the meaning assigned to it in the CreditAgreement dated as of March 2, 2007 (as the same may be amended,supplemented or otherwise modified from time to time, the “Credit Agreement”),among Doctor Acquisition Co., a Delaware corporation, RDA Holding Co., aDelaware corporation, The Reader’s Digest Association, Inc., a Delawarecorporation (“Reader’s Digest”), the Overseas Borrowers from time totime party hereto, JPMorgan Chase Bank, N.A., as Administrative Agent, thelenders from time to time party thereto, Citicorp North America, Inc. andMerrill Lynch, Pierce, Fenner & Smith Incorporated, as Co-SyndicationAgents, and The Royal Bank of Scotland plc, as Documentation Agent (i) onthe Maturity Date the principal sum of                Euros (€        )or, if less, the then unpaid principal amount of all Euro Term Loans made bythe Lender to the Company pursuant to the Credit Agreement and (ii) oneach Interest Payment Date, interest at the rate or rates per annum as providedin the Credit Agreement on the unpaid principal amount of all Euro Term Loansmade by the Lender to the Company pursuant to the Credit Agreement.

 

The Company promises to pay interest, ondemand, on any overdue principal and, to the extent permitted by applicableLaw, overdue interest from their due dates at the rate or rates provided in theCredit Agreement.

 

The Company hereby waives diligence,presentment, demand, protest and notice of any kind whatsoever.

 

All borrowings evidenced by this note and allpayments and prepayments of the principal hereof and interest hereon and therespective dates thereof shall be endorsed by the holder hereof on the scheduleattached hereto and made a part hereof or on a continuation thereof which shallbe attached hereto and made a part hereof, or otherwise recorded by such holderin its internal records; provided, however, that the failure ofthe holder hereof to make such a notation or any error in such notation shallnot affect the obligations of the Company under this note.

 

This note is one of the Euro Term Notesreferred to in the Credit Agreement that, among other things, containsprovisions for the acceleration of the maturity hereof upon the continuance ofan Event of Default, for optional and mandatory prepayment of the principal hereofprior to the Maturity Date with respect to the Euro Term Loans and for theamendment or

 

----

 

waiver of certain provisionsof the Credit Agreement, all upon the terms and conditions specified in theCredit Agreement.

 

**THIS NOTE SHALL BE GOVERNED BY,AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.**

 

***************************************************

 

 
|   | RD  GERMAN HOLDINGS GMBH, |
|--------|---------------------------|
|   |                      |
|   | by                        |
|   |                      |   |
|   |                      | Name: |
|   |                      | Title: |

 

----

 

LOANS AND PAYMENTS

 
| **Date** | ** ** | **Amount of Loan** | ** ** | **Maturity  Date** | ** ** | **Payments of  Principal/Interest** | ** ** | **Principal  Balance of  Note** | ** ** | **Name of  Person  Making the  Notation** | ** ** |
|----------|------------|------------------------------|------------|--------------------|------------|------------------------------------------|------------|--------------------------------------|------------|-----------------------------------------------------|------------|
|     |       |                         |       |               |       |                                     |       |                                 |       |                                                |       |
|     |       |                         |       |               |       |                                     |       |                                 |       |                                                |       |
|     |       |                         |       |               |       |                                     |       |                                 |       |                                                |       |

 

----

 

EXHIBIT D

 

[FORM OF]

 

**COMPLIANCE CERTIFICATE**

** **

Reference is made to theCredit Agreement dated as of March 2, 2007 (as amended, supplemented orotherwise modified from time to time, the “Credit Agreement”),among Doctor Acquisition Co., a Delaware corporation (to be merged with andinto Reader’s Digest (as defined herein), the “Company”), RDA HoldingCo., a Delaware corporation (“Holdings”), The Reader’s DigestAssociation, Inc., a Delaware corporation (“Reader’s Digest”), theOverseas Borrowers from time to time party hereto, JPMorgan Chase Bank, N.A.,as Administrative Agent, each lender from time to time party thereto(collectively, the “Lenders” and individually, a “Lender”),Citicorp North America, Inc. and Merrill Lynch, Pierce, Fenner &Smith Incorporated, as Co-Syndication Agents, and The Royal Bank of Scotlandplc, as Documentation Agent.  Capitalizedterms used herein and not otherwise defined herein shall have the meaningsassigned to such terms in the Credit Agreement.

 

Pursuant to Section 6.02 of the CreditAgreement, the undersigned, in his/her capacity as a Responsible Officer of theCompany certifies as follows:

 

1.                                       [Attached hereto as Exhibit [A]is the audited consolidated balance sheet of the Company and its consolidatedSubsidiaries as at the end of the fiscal year ended [     ] and related consolidated statements ofincome or operations, stockholders’ equity and cash flows for such fiscal year,setting forth in each case in comparative form the figures for the previousfiscal year, all prepared in accordance with GAAP, audited and accompanied by areport and opinion of [        ], preparedin accordance with generally accepted auditing standards in the United Statesand not subject to any “going concern” or like qualification or exception orany qualification or exception as to the scope of such audit.]

 

2.                                       [Attached hereto as Exhibit [B]is the unaudited consolidated balance sheet of the Company and its consolidatedSubsidiaries as at the end of the fiscal quarter ended [     ] and the related unaudited (i) consolidatedstatements of income or operations for such fiscal quarter and for the portionof the fiscal year then ended and (ii) consolidated statements of cashflows for the portion of the fiscal year then ended, setting forth in each casein comparative form the figures for the corresponding fiscal quarter of theprevious fiscal year and the corresponding portion of the previous fiscalyear.  These present fairly in allmaterial respects the consolidated financial condition, results of operations,stockholders’ equity and cash flows of the Company and its consolidatedSubsidiaries in accordance with GAAP, subject only to normal year-end auditadjustments and the absence of footnotes.]

 

3.                                       To my knowledge, on the date hereof, noDefault or Event of Default has occurred and is continuing.  [If unable to provide the foregoingcertification, fully describe the reasons therefor and circumstances thereofand any action taken or proposed to be taken with respect thereto onAnnex A attached hereto.]

 

----

 

4.                                       The following represent true and accuratecalculations to be used to determine whether the Company is in compliance withthe financial covenant set forth in Section 7.10 of the Credit Agreementas of the last day of the Test Period ended [  ] (the “Certificate Period”):

 

## TotalLeverage Ratio.

##  

| Consolidated Total Debt= | [          ]         |
|--------------------------|------------------------------------------------------------------------|
| Consolidated EBITDA=     | [          ]         |
| Actual Ratio=            | [          ]  to 1.0 |
| Required Ratio=          | [          ]  to 1.0 |

 

# Supportingdetail showing the calculation of Consolidated Total Debt, as of the last dayof the Certificate Period, is attached hereto as Schedule 1.  Supporting detail showing the calculation of ConsolidatedEBITDA, for the Certificate Period, is attached hereto as Schedule 2.

#  

# 5.                                       TheCompany and its Restricted Subsidiaries are in compliance with Section 7.14of the Credit Agreement.  For the currentfiscal year the limit on Capital Expenditures is $[     ] [, which amount includes the unusedamount carried forward from the previous fiscal year pursuant to Section 7.14of the Credit Agreement].  The amount ofCapital Expenditures incurred by the Company and its Restricted Subsidiaries inthe current fiscal year through the end of the fiscal quarter most recentlyended is $[     ].  Supporting detail showing the calculation ofthe foregoing Capital Expenditures is attached hereto as Schedule 4.

#  

IN WITNESS WHEREOF, the undersigned, inhis/her capacity as a Responsible Officer of the Company, has executed thiscertificate for and on behalf of the Company and has caused this certificate tobe delivered this          day of                  .

 
|   | THE  READER’S DIGEST ASSOCIATION, INC. |
|--------|---------------------------------------------|
|   |                                        |
|   | by                                          |
|   |                                        |   |
|   |                                        | Name: |
|   |                                        | Title: |

 

----

 

EXHIBIT E

 

[FORM OF]

 

ASSIGNMENT AND ASSUMPTION

 

This Assignment and Assumption (this “Assignmentand Assumption”) is dated as of the Effective Date set forth below and isentered into by and between the Assignor (as defined below) and the Assignee(as defined below).  Capitalized termsused in this Assignment and Assumption and not otherwise defined herein havethe meanings specified in the Credit Agreement dated as of March 2, 2007(as amended, supplemented or otherwise modified from time to time, the “Credit Agreement”), among Doctor Acquisition Co., aDelaware corporation (to be merged with and into Reader’s Digest (as definedherein), the “Company”), RDA Holding Co., a Delaware corporation (“Holdings”),The Reader’s Digest Association, Inc., a Delaware corporation (“Reader’sDigest”), the Overseas Borrowers from time to time party hereto, JPMorganChase Bank, N.A., as Administrative Agent, each lender from time to time partythereto (collectively, the “Lenders” and individually, a “Lender”),Citicorp North America, Inc. and Merrill Lynch, Pierce, Fenner &Smith Incorporated, as Co-Syndication Agents, and The Royal Bank of Scotlandplc, as Documentation Agent, receipt of a copy of which is hereby acknowledgedby the Assignee.  The Standard Terms andConditions set forth in Annex 1 attached hereto are hereby agreed to andincorporated herein by reference and made a part of this Assignment andAssumption as if set forth herein in full.

 

For an agreed consideration, the Assignorhereby irrevocably sells and assigns to the Assignee, and the Assignee herebyirrevocably purchases and assumes from the Assignor, subject to and inaccordance with the Standard Terms and Conditions and the Credit Agreement, asof the Effective Date inserted by the Administrative Agent as contemplatedbelow, (i) all of the Assignor’s rights and obligations in its capacity asa Lender under the Credit Agreement and any other documents or instrumentsdelivered pursuant thereto to the extent related to the amount and percentageinterest identified below of all of such outstanding rights and obligations ofthe Assignor under the facility identified below (including participations inany Letters of Credit or Swing Line Loans included in such facility) and (ii) tothe extent permitted to be assigned under applicable law, all claims, suits,causes of action and any other right of the Assignor (in its capacity as aLender) against any Person, whether known or unknown, arising under or inconnection with the Credit Agreement, any other documents or instrumentsdelivered pursuant thereto or the loan transactions governed thereby or in anyway based on or related to any of the foregoing, including, but not limited to,contract claims, tort claims, malpractice claims, statutory claims and allother claims at law or in equity related to the rights and obligations sold andassigned pursuant to clause (i) above (the rights and obligations sold andassigned pursuant to clauses (i) and (ii) above being referred toherein collectively as the “Assigned Interest”).  Such sale and assignment is without recourseto the Assignor and, except as expressly provided in this Assignment andAssumption, without representation or warranty by the Assignor.

 

1.                                       Assignor (the “Assignor”):

 

----

 

2.                                       Assignee (the “Assignee”):

 

Assigneeis an Affiliate of: [Name of Lender]

 

Assigneeis an Approved Fund of: [Name of Lender]

 

3.                                       Borrowers: The Reader’s Digest Association, Inc.

 

4.                                       Administrative Agent:  JPMorgan Chase Bank, N.A.

 

5.                                       Assigned Interest:

 
| **Facility**              | ** ** | **Aggregate Amount  of  Commitment/Loans  of all Lenders** | ** **   | **Amount of  Commitment/Loans  Assigned** | ** ** | **Percentage  Assigned of  Commitment/  Loans(26)** | ** ** |
|---------------------------|------------|---------------------------------------------------------------------------|--------------|------------------------------------------------|------------|----------------------------------------------------------|------------|
| Revolving Credit Facility |       | $                                                                         |    |                                           | $          |                                                |       | % |   |
| Term Loans                |       | $                                                                         |    |                                           | $          |                                                |       | % |   |
| Euro Term Loans           |       | €                                                                    |    |                                           | €     |                                                |       | % |   |

 

Effective Date:

 

[To be inserted by Administrative Agent andwhich shall be the Effective Date of Recordation of Transfer in the Registertherefore.]

 

----

(26)  The Assignee (in the case an Assignee is nota Lender) agrees to deliver to the Administrative Agent a completed AdministrativeQuestionnaire in which the Assignee designates one or more credit contacts towhom all syndicate-level information (which may contain material non-publicinformation about the Loan Parties and their Related Parties or theirrespective securities) will be made available and who may receive suchinformation in accordance with the Assignee’s compliance procedures andapplicable laws, including Federal and state securities laws.

 

----

 

The terms set forth in thisAssignment and Assumption are hereby agreed to:

 

 
|   | JPMORGAN  CHASE BANK, N.A., as Assignor, |
|--------|------------------------------------------|
|   |                                     |
|   | by                                       |
|   |                                     |   |
|   |                                     | Name: |
|   |                                     | Title: |

 

----

 
|   | [NAME  OF ASSIGNEE], as Assignee, |
|--------|-----------------------------------|
|   |                              |
|   | by                                |
|   |                              |   |
|   |                              | Name: |
|   |                              | Title: |

 

----

 
| [Consented  to and](27) Accepted:                 |
|---------------------------------------------------|
|                                              |
| JPMORGAN  CHASE BANK, N.A.                        |
| as  Administrative Agent,                         |
|                                              |
| by                                                |
|                                              |   |   |
|                                              | Name: |   |
|                                              | Title: |   |
|                                              |   |   |
|                                              |
| [Consented  to:                                   |
|                                              |
| [L/C  ISSUER], as L/C Issuer,                     |
|                                              |
| by                                                |
|                                              |   |   |
|                                              | Name: |   |
|                                              | Title: |   |
|                                              |   |   |
|                                              |
| JPMORGAN  CHASE BANK, N.A., as Swing Line Lender, |
|                                              |
| by                                                |
|                                              |   |   |
|                                              | Name: |   |
|                                              | Title:]](28) |   |

 

----

(27)  No consent of the Administrative Agent shallbe required for an assignment of a Term Loan or a Euro Term Loan to a Lender,an Affiliate of a Lender or an Approved Fund.

 

(28)  No consent of any L/C Issuer or the SwingLine Lender shall be required for an assignment of a Term Loan or a Euro TermLoan.

 

----

 
| [THE  READER’S DIGEST ASSOCIATION, INC. |
|----------------------------------------------|
|                                         |
| by                                           |
|                                         |   |   |
|                                         | Name: |   |
|                                         | Title:](29) |   |

 

----

**(29)  No consent of the Company shall be required foran assignment to a Lender, an Affiliate of a Lender, an Approved Fund or, if anEvent of Default under Section 8.01(a), (f) or (g) of the CreditAgreement has occurred and is continuing, any Assignee.**

 

----

 

**Annex 1**

** **

**CREDIT AGREEMENT(30)**

** **

**STANDARD TERMS AND CONDITIONS FORASSIGNMENT AND ASSUMPTION**

** **

1.  Representationsand Warranties.

 

1.1  Assignor.  The Assignor (a) representsand warrants that (i) it is the legal and beneficial owner of the AssignedInterest, (ii) the Assigned Interest is free and clear of any lien,encumbrance or other adverse claim and (iii) it has full power andauthority, and has taken all action necessary, to execute and deliver thisAssignment and Assumption and to consummate the transactions contemplatedhereby; and (b) assumes no responsibility with respect to (i) anystatements, warranties or representations made in or in connection with theCredit Agreement, (ii) the execution, legality, validity, enforceability,genuineness, sufficiency or value of the Credit Agreement, (iii) thefinancial condition of Holdings, the Company, or any of their Subsidiaries orAffiliates or any other Person obligated in respect of the Credit Agreement or (iv) theperformance or observance by Holdings, the Company, or any of theirSubsidiaries or Affiliates or any other Person of any of their obligationsunder the Credit Agreement.

 

1.2.  Assignee.  The Assignee (a) represents and warrantsthat (i) it has full power and authority, and has taken all actionnecessary, to execute and deliver this Assignment and Assumption and toconsummate the transactions contemplated hereby and to become a Lender underthe Credit Agreement, (ii) it satisfies the requirements, if any,specified in the Credit Agreement that are required to be satisfied by it inorder to acquire the Assigned Interest and become a Lender, (iii) from andafter the Effective Date, it shall be bound by the provisions of the Credit Agreementas a Lender thereunder and, to the extent of the Assigned Interest, shall havethe obligations of a Lender thereunder, (iv) it has received a copy of theCredit Agreement, together with copies of the most recent financial statementsdelivered pursuant to Section 6.01 thereof, and such other documents andinformation as it has deemed appropriate to make its own credit analysis anddecision to enter into this Assignment and Assumption and to purchase the

 

----

**(30)  Capitalized terms used in this Assignment andAssumption and not otherwise defined herein have the meanings specified in theCredit Agreement dated as of March [ ], 2007 (as amended, supplemented or otherwise modified from time totime, the “Credit Agreement”), among Doctor Acquisition Co., a Delawarecorporation (to be merged with and into Reader’s Digest (as defined herein),the “Company”), RDA Holding Co., a Delaware corporation (“Holdings”),The Reader’s Digest Association, Inc., a Delaware corporation (“Reader’sDigest”), the Overseas Borrowers from time to time party hereto, JPMorgan ChaseBank, N.A., as Administrative Agent, each lender from time to time partythereto (collectively, the “Lenders” and individually, a “Lender”),Citicorp North America, Inc. and Merrill Lynch, Pierce, Fenner & SmithIncorporated, as Co-Syndication Agents, and The Royal Bank of Scotland plc, as DocumentationAgent.**

 

----

 

Assigned Interest on thebasis of which it has made such analysis and decision independently and withoutreliance on any Agent or any other Lender, and (v) if it is a ForeignLender, attached to this Assignment and Assumption is any documentationrequired to be delivered by it pursuant to Section 10.15 of the CreditAgreement, duly completed and executed by the Assignee; and (b) agreesthat (i) it will, independently and without reliance on the Assignor, anyAgent or any other Lender, and based on such documents and information as itshall deem appropriate at the time, continue to make its own credit decisionsin taking or not taking action under the Credit Agreement, and (ii) itwill perform in accordance with their terms all of the obligations which by theterms of the Credit Agreement are required to be performed by it as a Lender.

 

2.  Payments.  From and after the Effective Date, the AdministrativeAgent shall make all payments in respect of the Assigned Interest (includingpayments of principal, interest, fees and other amounts) to the Assignor foramounts which have accrued to but excluding the Effective Date and to theAssignee for amounts which have accrued from and after the Effective Date.

 

3.  GeneralProvisions.  This Assignment andAssumption shall be binding upon and inure to the benefit of the parties heretoand their respective permitted successors and assigns.  This Assignment and Assumption may beexecuted in any number of counterparts, which togethershall constitute one instrument. Delivery of an executed counterpart of a signature page of thisAssignment and Assumption by facsimile or other electronic transmission shallbe effective as delivery of a manually executed counterpart of this Assignmentand Assumption.  This Assignment andAssumption shall be construed in accordance with and governed by the law of theState of New York.

 

----

**EXHIBIT F**

 

 

 

GUARANTEE AND COLLATERAL AGREEMENT

 

made by 

 

DOCTOR ACQUISITION CO.,

 

RDA HOLDING CO.,

 

THE READER’S DIGEST ASSOCIATION, INC.

 

and

 

THE GUARANTORS IDENTIFIED HEREIN

 

in favor of

 

JPMORGAN CHASE BANK, N.A.,

as Administrative Agent

 

Dated as of March 2, 2007

 

 

 

----

 

TABLE OF CONTENTS

 
| ** **      | ** **                                                          | **Page** |
|-----------------|---------------------------------------------------------------------|----------|
|            |                                                                |     |
| Section 1. | DEFINED TERMS                                                       | 1        |
| 1.1.            | Definitions                                                         | 1        |
| 1.2.            | Other  Definitional Provisions                                      | 5        |
|            |                                                                |     |
| Section 2. | GUARANTEE                                                           | 5        |
| 2.1.            | Guarantee                                                           | 5        |
| 2.2.            | Right of  Contribution                                              | 6        |
| 2.3.            | No Subrogation                                                      | 6        |
| 2.4.            | Amendments, etc.,  with respect to the Borrower Obligations         | 7        |
| 2.5.            | Guarantee  Absolute and Unconditional                               | 7        |
| 2.6.            | Reinstatement                                                       | 8        |
| 2.7.            | Payments                                                            | 8        |
|            |                                                                |     |
| Section 3. | GRANT OF SECURITY INTEREST                                          | 8        |
|            |                                                                |     |
| Section 4. | REPRESENTATIONS AND WARRANTIES                                      | 10       |
| 4.1.            | Title; No Other  Liens                                              | 10       |
| 4.2.            | Perfected First  Priority Liens                                     | 11       |
| 4.3.            | Jurisdiction of  Organization                                       | 11       |
| 4.4.            | Inventory and  Equipment                                            | 11       |
| 4.5.            | Farm Products                                                       | 11       |
| 4.6.            | Investment  Property                                                | 11       |
| 4.7.            | Receivables                                                         | 12       |
| 4.8.            | Intellectual  Property                                              | 12       |
| 4.9.            | Commercial Tort  Claims                                             | 12       |
|            |                                                                |     |
| Section 5. | COVENANTS                                                           | 12       |
| 5.1.            | Delivery of  Instruments, Certificated Securities and Chattel Paper | 13       |
| 5.2.            | Maintenance of  Insurance                                           | 13       |
| 5.3.            | Maintenance of  Perfected Security Interest; Further Documentation  | 13       |
| 5.4.            | Changes in  Locations, Name, etc.                                   | 14       |
| 5.5.            | Notices                                                             | 14       |
| 5.6.            | Investment  Property                                                | 14       |
| 5.7.            | Receivables                                                         | 16       |
| 5.8.            | Intellectual  Property                                              | 16       |
| 5.9.            | Commercial Tort  Claims                                             | 18       |
|            |                                                                |     |
| Section 6. | REMEDIAL PROVISIONS                                                 | 18       |
| 6.1.            | Certain Matters  Relating to Receivables                            | 18       |
| 6.2.            | Communications  with Obligors; Grantors Remain Liable               | 19       |
| 6.3.            | Pledged Equity                                                      | 20       |
| 6.4.            | Proceeds to be  Turned Over to Administrative Agent                 | 21       |

 

i

----

 
| ** **      | ** **                                                                                        | **Page** |
|-----------------|---------------------------------------------------------------------------------------------------|----------|
|            |                                                                                              |     |
| 6.5.            | Application of  Proceeds                                                                          | 21       |
| 6.6.            | Code and Other  Remedies                                                                          | 21       |
| 6.7.            | Registration  Rights                                                                              | 22       |
| 6.8.            | Deficiency                                                                                        | 23       |
|            |                                                                                              |     |
| Section 7. | THE ADMINISTRATIVE AGENT                                                                          | 23       |
| 7.1.            | Administrative  Agent’s Appointment as Attorney-in-Fact, etc.                                | 23       |
| 7.2.            | Duty of  Administrative Agent                                                                     | 25       |
| 7.3.            | Execution of  Financing Statements                                                                | 25       |
| 7.4.            | Authority of  Administrative Agent                                                                | 26       |
|            |                                                                                              |     |
| Section 8. | MISCELLANEOUS                                                                                     | 26       |
| 8.1.            | Amendments in  Writing                                                                            | 26       |
| 8.2.            | Notices                                                                                           | 26       |
| 8.3.            | No Waiver by  Course of Conduct; Cumulative Remedies                                              | 26       |
| 8.4.            | Enforcement  Expenses; Indemnification                                                            | 26       |
| 8.5.            | Successors and  Assigns                                                                           | 27       |
| 8.6.            | Setoff                                                                                            | 27       |
| 8.7.            | Counterparts                                                                                      | 27       |
| 8.8.            | Severability                                                                                      | 28       |
| 8.9.            | Section Headings                                                                             | 28       |
| 8.10.           | Integration                                                                                       | 28       |
| **8.11.**       | **GOVERNING  LAW**                                                                                | 28       |
| 8.12.           | Submission To  Jurisdiction; Waivers                                                              | 28       |
| 8.13.           | Acknowledgments                                                                                   | 29       |
| 8.14.           | Additional  Guarantors and Grantors                                                               | 29       |
| 8.15.           | Releases                                                                                          | 29       |
| **8.16.**       | **WAIVER  OF JURY TRIAL**                                                                         | 30       |
| 8.17.           | Effectiveness of  the Merger; Assignment and Delegation to and Assumption by Reader’s Digest | 30       |
| 8.18.           | German Borrower  Security                                                                         | 30       |
| 8.19.           | Parallel  Obligations                                                                             | 31       |

 
| SCHEDULES  |                                        |
|------------|---------------------------------------------|
| Schedule 1 | Notice  Addresses                           |
| Schedule 2 | Investment  Property                        |
| Schedule 3 | Perfection  Matters                         |
| Schedule 4 | Jurisdictions  of Organization              |
| Schedule 5 | Inventory  and Equipment Locations          |
| Schedule 6 | Intellectual  Property                      |
| Schedule 7 | Commercial  Tort Claims                     |
|       |                                        |
| ANNEX      |                                        |
| Annex 1    | Form of  Security Agreement Supplement |
| Annex 2    | Form of  Perfection Certificate        |

 

ii

----

 

GUARANTEE AND COLLATERAL AGREEMENT, dated as of March 2, 2007,made by each of the signatories hereto (other than the German Borrower, andtogether with any other entity that may become a party hereto as providedherein, the “Grantors”), in favor of JPMORGAN CHASE BANK, N.A., asAdministrative Agent (in such capacity, the “Administrative Agent”) forthe lending and other financial institutions (the “Lenders”) from timeto time parties to the Credit Agreement, dated as of the date hereof (asamended, supplemented or otherwise modified from time to time, the “CreditAgreement”), among DOCTOR ACQUISITION CO., a Delaware corporation (to bemerged with and into Reader’s Digest (as defined below), the “Company”),RDA HOLDING CO., a Delaware corporation (“Holdings”), THE READER’SDIGEST ASSOCIATION, INC., a Delaware corporation (“Reader’s Digest”),the Overseas Borrowers from time to time party thereto (together with theCompany, the “Borrowers”), the Lenders and the Administrative Agent.

 

WITNESSETH:

 

WHEREAS, Holdings, the Borrowers, the Lendersand the Administrative Agent have entered into the Credit Agreement, pursuantto which the Lenders have severally agreed to make extensions of credit to theBorrowers upon the terms and subject to the conditions set forth therein;

 

WHEREAS, each Borrower is a member of anaffiliated group of companies that, following the consummation of theAcquisitions, will include each other Grantor;

 

WHEREAS, the proceeds of the extensions ofcredit under the Credit Agreement will be used in part to enable the Borrowersto make valuable transfers to one or more of the other Grantors in connectionwith the operation of their respective businesses;

 

WHEREAS, the Borrowers and the other Grantorsare engaged in related businesses, and each Grantor will derive substantialdirect and indirect benefit from the making of the extensions of credit underthe Credit Agreement; and

 

WHEREAS, it is a condition precedent to theobligation of the Lenders to make their respective extensions of credit to theBorrowers under the Credit Agreement that the Grantors shall have executed anddelivered this Agreement to the Administrative Agent for the ratable benefit ofthe Secured Parties;

 

NOW, THEREFORE, in consideration of thepremises and the agreements hereinafter set forth, and in order to induce theAdministrative Agent and the Lenders to enter into the Credit Agreement and inorder to induce the Lenders to make their respective extensions of credit tothe Borrowers thereunder, each Grantor hereby agrees with the AdministrativeAgent, for the ratable benefit of the Secured Parties, as follows:

 

# SECTION 1.                                DEFINEDTERMS

#  

1.1.                              Definitions.  (a)  Unless otherwise defined herein,terms defined in the Credit Agreement and used herein shall have the meaningsgiven to them in the Credit Agreement, and the following terms are used hereinas defined in the New York UCC: Accounts, Certificated Security, Chattel Paper, Commercial Tort Claims,Documents,

 

----

 

Equipment, FarmProducts, General Intangibles, Instruments, Inventory, Letter of Credit Rightsand Supporting Obligations.

 

### (b)         The following terms shall have the following meanings:

###  

“Agreement”:  this Guarantee and Collateral Agreement, asthe 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 CreditAgreement.

 

“Collateral”:  as defined in Section 3.

 

“Collateral Account”:  any collateral account established by theAdministrative Agent as provided in Section 6.1 or 6.4.

 

“Copyrights”:  (i) all copyrights arising under thelaws of the United States, any other country or any political subdivisionthereof, whether registered or unregistered and whether published orunpublished (including, without limitation, those listed in Schedule 6),all registrations and recordings thereof, and all applications in connectiontherewith, including, without limitation, all registrations, recordings andapplications in the United States Copyright Office, and (ii) the right toobtain all renewals thereof.

 

“Copyright Licenses”:  any written agreement naming any Grantor aslicensor or licensee, granting any right under any Copyright, including,without limitation, the grant of rights to manufacture, distribute, exploit andsell materials derived from any Copyright.

 

“Deposit Account”:  as defined in the Uniform Commercial Code ofany applicable jurisdiction and, in any event, including, without limitation,any demand, time savings, passbook or like account maintained with a depositaryinstitution.

 

“Excluded Property”: as defined in Section 3.

 

“Foreign Subsidiary”:  any direct or indirect Restricted Subsidiaryof the Company which (i) is not a Domestic Subsidiary or (ii) is setforth on Schedule 1.01E to the Credit Agreement.

 

“Foreign Subsidiary Voting Stock”:  the voting Equity Interests of any ForeignSubsidiary and of any Domestic Subsidiary substantially all of whose assetsconsist of voting Equity Interests of one or more Foreign Subsidiaries.

 

“Guarantor Obligations”:  with respect to any Guarantor, allobligations and liabilities of such Guarantor which may arise under or inconnection with this Agreement (including, without limitation, Section 2)or any other Loan Document or any Secured Hedge Agreement to which suchGuarantor is a party, in each case whether on account of guarantee obligations,reimbursement obligations, fees, indemnities, costs, expenses or 

 

2

----

 

otherwise (including, withoutlimitation, all Attorney Costs that are required to be paid by such Guarantorpursuant to the terms of this Agreement or any other Loan Document).

 

“Guarantors”:  the collective reference to each Grantorother than the Company; provided that the term “Guarantors” shallinclude 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 arisingunder United States, multinational or foreign laws or otherwise, including,without limitation, the Copyrights, the Copyright Licenses, the Patents, thePatent Licenses, the Trademarks and the Trademark Licenses, and all rights tosue 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 byany Grantor to Holdings or any of its Subsidiaries.

 

“Investment Property”:  the collective reference to (i) all “investmentproperty” as such term is defined in Section 9-102(a)(49) of the New YorkUCC (other than any Foreign Subsidiary Voting Stock and any Equity Interests ofUnrestricted Subsidiaries excluded from the definition of “Pledged Equity”) and(ii) whether or not constituting “investment property” as so defined, allPledged Debt and all Pledged Equity.

 

“Issuers”:  the collective reference to each issuer ofany Investment Property.

 

“LTIBR”:  any interest-bearing receivables, includingdeposits or other funds, with a maturity that qualifies as long-term pursuantto 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 GermanCorporate Income Tax Act (*Körperschaftsteuergesetz*)dated July 15, 2004.

 

“New York UCC”:  the Uniform Commercial Code as from time totime in effect in the State of New York.

 

“Obligations”:  (i) in the case of each Borrower, itsBorrower Obligations, and (ii) in the case of each Guarantor, itsGuarantor Obligations.

 

“Patents”:  (i) all letters patent of the UnitedStates, any other country or any political subdivision thereof, all reissuesand 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 othercountry 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 theforegoing.

 

“Patent License”:  all agreements, whether written or oral,providing for the grant by or to any Grantor of any right to manufacture, useor 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 acertificate substantially in the form of Annex 2, completed and supplementedwith the schedules and attachments contemplated thereby, and duly executed bythe 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 otherpromissory notes issued to or held by any Grantor (other than promissory notesissued in connection with extensions of trade credit by any Grantor in theordinary course of business).

 

“Pledged Equity”:  the Equity Interests listed on Schedule 2,together with any other shares, stock certificates, options or rights of anynature whatsoever in respect of the Equity Interests of any Person that may beissued or granted to, or held by, any Grantor while this Agreement is ineffect; provided that in no event shall (i) more than 65% of theissued and outstanding Foreign Subsidiary Voting Stock of any ForeignSubsidiary or of any Domestic Subsidiary substantially all of whose assetsconsist of voting Equity Interests of one or more Foreign Subsidiaries, (ii) EquityInterests of any Unrestricted Subsidiary, (iii) the Company PreferredStock or (iv) Equity Interests of any Restricted Subsidiary pledged tosecure Indebtedness permitted under Section 7.03(g) of the CreditAgreement 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, alldividends or other income from the Investment Property, collections thereon ordistributions or payments with respect thereto.

 

“Receivable”:  any right to payment for goods sold or leasedor for services rendered, whether or not such right is evidenced by anInstrument or Chattel Paper and whether or not it has been earned byperformance (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 aLender, the SupplementalAdministrative Agent and each co-agent or sub-agent appointed by theAdministrative Agent from time to time pursuant to Section 9.01(c) ofthe Credit Agreement, to which Borrower Obligations or GuarantorObligations, as applicable, are owed.

 

“Securities Act”:  the Securities Act of 1933, as amended.

 

“Specified Assets” means (a) LTIBRand (b) following any amendment or replacement of § 8a of the GermanCorporate Income Tax Act (*Körperschaftsteuergesetz*),any other property or assets owned by any Loan Party or any other provider ofsecurity, direct or indirect access to which property or assets (whetherthrough inclusion in the Collateral or otherwise) would result in adverse tax 

 

4

----

 

consequences to Holdings andits Subsidiaries as a consequence of any such amendment or replacement,provided that the aggregate fair market value of the property and assetsincluded in the definition of Specified Assets pursuant to this clause (b) shallnot exceed an amount equal to 10% of the consolidated total assets of theGerman Borrower and its Subsidiaries.

 

“Subsidiary Guarantor”:  any Subsidiary of the Company that is orbecomes 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 oracquired, all registrations and recordings thereof, and all applications inconnection therewith, whether in the United States Patent and Trademark Officeor in any similar office or agency of the United States, any State thereof orany other country or any political subdivision thereof, or otherwise, and allcommon-law rights related thereto, including, without limitation, any of theforegoing referred to in Schedule 6, and (ii) the right toobtain 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.                              OtherDefinitional Provisions.  (a) The words “hereof,” “herein, “ “hereto” and “hereunder” and words of similarimport when used in this Agreement shall refer to this Agreement as a whole andnot to any particular provision of this Agreement, and Section andSchedule references are to this Agreement unless otherwise specified.

 

### (b)         The meanings given to terms defined herein shall be equallyapplicable to both the singular and plural forms of such terms.

###  

### (c)          Where the context requires, terms relating to the Collateralor any part thereof, when used in relation to a Grantor, shall refer to suchGrantor’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 theAdministrative Agent, for the ratable benefit of the Secured Parties and theirrespective successors and permitted indorsees, transferees and assigns, theprompt and complete payment and performance by the Borrowers when due (whetherat the stated maturity, by acceleration or otherwise) of the BorrowerObligations.

 

### (b)         Anything herein or in any other Loan Document to thecontrary notwithstanding, the maximum liability of each Guarantor hereunder andunder the other Loan Documents shall in no event exceed the amount which can beguaranteed by such Guarantor under applicable federal and state laws relatingto the insolvency of debtors (after giving effect to the right of contributionestablished in Section 2.2).

 

5

----

 

### (c)          Each Guarantor agrees that the Borrower Obligations may atany time and from time to time exceed the amount of the liability of suchGuarantor hereunder without impairing the guarantee contained in this Section 2or affecting the rights and remedies of the Administrative Agent or any Lenderhereunder.

###  

### (d)         The guarantee contained in this Section 2 shall remainin full force and effect until all the Obligations (other than contingentindemnification and contingent expense reimbursement obligations, anyObligations in respect of Secured Hedge Agreements and Cash ManagementObligations) shall have been satisfied by payment in full, no Letter of Creditshall be outstanding and the Commitments shall be terminated, notwithstandingthat from time to time during the term of the Credit Agreement the Borrowersmay be free from any Borrower Obligations.

###  

### (e)          Except as provided in Section 8.15, no payment made byany Borrower, any of the Guarantors, any other guarantor or any other Person orreceived or collected by the Administrative Agent or any Lender from anyBorrower, any of the Guarantors, any other guarantor or any other Person byvirtue of any action or proceeding or any setoff, appropriation or applicationat any time or from time to time in reduction of or in payment of the BorrowerObligations shall be deemed to modify, reduce, release or otherwise affect theliability of any Guarantor hereunder which shall, notwithstanding any suchpayment (other than any payment made by such Guarantor in respect of theBorrower Obligations or any payment received or collected from such Guarantorin respect of the Borrower Obligations), remain liable for the BorrowerObligations up to the maximum liability of such Guarantor hereunder until theBorrower Obligations are paid in full, no Letter of Credit is outstanding andthe Commitments are terminated.

###  

2.2.                              Rightof Contribution.  Each SubsidiaryGuarantor hereby agrees that to the extent that a Subsidiary Guarantor shallhave paid more than its proportionate share of any payment made hereunder, suchSubsidiary Guarantor shall be entitled to seek and receive contribution fromand against any other Subsidiary Guarantor hereunder which has not paid itsproportionate share of such payment. Each Subsidiary Guarantor’s right of contribution shall be subject tothe terms and conditions of Section 2.3. The provisions of this Section 2.2 shall in no respect limit theobligations and liabilities of any Subsidiary Guarantor to the AdministrativeAgent and the Lenders, and each Subsidiary Guarantor shall remain liable to theAdministrative Agent and the Lenders for the full amount guaranteed by suchSubsidiary Guarantor hereunder.

 

2.3.                              NoSubrogation.  Notwithstanding anypayment made by any Guarantor hereunder or any setoff or application of fundsof any Guarantor by the Administrative Agent or any Lender, no Guarantor shallbe entitled to be subrogated to any of the rights of the Administrative Agentor 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 forthe payment of the Borrower Obligations, nor shall any Guarantor seek anycontribution or reimbursement from any Borrower or any other Guarantor inrespect of payments made by such Guarantor hereunder, until all amounts owingto the Administrative Agent and the Lenders by the Borrowers on account of theBorrower Obligations are paid in full, no Letter of Credit is outstanding andthe Commitments are terminated.  If anyamount shall be paid to any Guarantor on account of such subrogation rights atany time when all of the Borrower Obligations shall not 

 

6

----

 

have been paid infull, such amount shall be held by such Guarantor in trust for theAdministrative Agent and the Lenders, segregated from other funds of suchGuarantor, and shall, forthwith upon receipt by such Guarantor, be turned overto the Administrative Agent in the exact form received by such Guarantor (dulyindorsed by such Guarantor to the Administrative Agent, if required), to beapplied against the Borrower Obligations, whether matured or unmatured, in suchorder as the Administrative Agent may determine.  For the avoidance of doubt, nothing in theforegoing 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 applicablelaw, each Guarantor shall remain obligated hereunder notwithstanding that,without any reservation of rights against any Guarantor and without notice toor further assent by any Guarantor, any demand for payment of any of theBorrower Obligations made by the Administrative Agent or any Lender may berescinded by the Administrative Agent or such Lender and any of the BorrowerObligations continued, and the Borrower Obligations, or the liability of anyother Person upon them or for any part thereof, or any collateral security orguarantee therefor or right of offset with respect thereto, may, from time totime, in whole or in part, be renewed, extended, amended, modified,accelerated, compromised, waived, surrendered or released by the AdministrativeAgent or any Lender, and the Credit Agreement and the other Loan Documents andany other documents executed and delivered in connection therewith may beamended, modified, supplemented or terminated, in whole or in part, as theAdministrative Agent (or the Required Lenders or all Lenders, as the case maybe) may reasonably deem advisable from time to time, and any collateralsecurity, guarantee or right of offset at any time held by the AdministrativeAgent 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 anyobligation to protect, secure, perfect or insure any Lien at any time held byit as security for the Borrower Obligations or for the guarantee contained inthis Section 2 or any property subject thereto.

 

2.5.                              GuaranteeAbsolute and Unconditional.  To thefullest extent permitted by applicable law, each Guarantor waives any and allnotice of the creation, renewal, extension or accrual of any of the BorrowerObligations and notice of or proof of reliance by the Administrative Agent orany Lender upon the guarantee contained in this Section 2 or acceptance ofthe guarantee contained in this Section 2; the Borrower Obligations, andany of them, shall conclusively be deemed to have been created, contracted orincurred, or renewed, extended, amended or waived, in reliance upon theguarantee contained in this Section 2; and all dealings between anyBorrower and any of the Guarantors, on the one hand, and the AdministrativeAgent and the Lenders, on the other hand, likewise shall be conclusivelypresumed to have been had or consummated in reliance upon the guaranteecontained in this Section 2.  To thefullest extent permitted by applicable law, each Guarantor waives diligence,presentment, protest, demand for payment and notice of default or nonpayment toor upon any Borrower or any of the Guarantors with respect to the BorrowerObligations.  Each Guarantor understandsand agrees that the guarantee contained in this Section 2, to the fullestextent permitted by applicable law, shall be construed as a continuing,absolute and unconditional guarantee of payment without regard to (a) thevalidity or enforceability of the Credit Agreement or any other Loan Document,any of the Borrower Obligations or any other collateral security therefor orguarantee or right of offset with respect thereto at any time or from time totime 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 anytime be available to or be asserted by any Borrower or any other Person againstthe Administrative Agent or any Lender or (c) any other circumstancewhatsoever (with or without notice to or knowledge of any Borrower or suchGuarantor) which constitutes, or might be construed to constitute, an equitableor legal discharge of any Borrower for the Borrower Obligations, or of suchGuarantor under the guarantee contained in this Section 2, in bankruptcyor in any other instance.  When making anydemand hereunder or otherwise pursuing its rights and remedies hereunderagainst any Guarantor, the Administrative Agent or any Lender may, but shall beunder no obligation to, make a similar demand on or otherwise pursue suchrights and remedies as it may have against any Borrower, any other Guarantor orany other Person or against any collateral security or guarantee for theBorrower Obligations or any right of offset with respect thereto, and anyfailure by the Administrative Agent or any Lender to make any such demand, topursue such other rights or remedies or to collect any payments from anyBorrower, any other Guarantor or any other Person or to realize upon any suchcollateral security or guarantee or to exercise any such right of offset, orany release of any Borrower, any other Guarantor or any other Person or anysuch collateral security, guarantee or right of offset, shall not relieve anyGuarantor of any obligation or liability hereunder, and shall not impair oraffect the rights and remedies, whether express, implied or available as amatter of law, of the Administrative Agent or any Lender against anyGuarantor.  For the purposes hereof “demand”shall include the commencement and continuance of any legal proceedings.

 

2.6.                              Reinstatement.  The guarantee contained in this Section 2shall continue to be effective, or be reinstated, as the case may be, if at anytime payment, or any part thereof, of any of the Borrower Obligations isrescinded or must otherwise be restored or returned by the Administrative Agentor any Lender upon the insolvency, bankruptcy, dissolution, liquidation orreorganization of any Borrower or any Guarantor, or upon or as a result of theappointment of a receiver, intervenor or conservator of, or trustee or similarofficer for, any Borrower or any Guarantor or any substantial part of itsproperty, or otherwise, all as though such payments had not been made.

 

2.7.                              Payments.  Each Guarantor hereby guarantees thatpayments hereunder will be paid to the Administrative Agent without setoff orcounterclaim in Dollars at the Administrative Agent’s Office.

 

# SECTION 3.                                GRANT OFSECURITY INTEREST

#  

Each Grantor hereby assigns and transfers tothe Administrative Agent, and hereby grants to the Administrative Agent, forthe ratable benefit of the Secured Parties, a security interest in, all of thefollowing property now owned or at any time hereafter acquired by such Grantoror in which such Grantor now has or at any time in the future may acquire anyright, title or interest other than Excluded Property (collectively, the “Collateral”),as collateral security for the prompt and complete payment and performance whendue (whether at the stated maturity, by acceleration or otherwise) of suchGrantor’s Obligations:

 

#### (a)          allAccounts;

####  

#### (b)         allChattel Paper;

 

8

----

 

#### (c)          allDeposit Accounts;

####  

#### (d)         allDocuments;

####  

#### (e)          allEquipment;

####  

#### (f)            allFixtures;

####  

#### (g)         allGeneral Intangibles;

####  

#### (h)         allInstruments;

####  

#### (i)             allIntellectual Property;

####  

#### (j)             allInventory;

####  

#### (k)          allInvestment Property;

####  

#### (l)             allLetter of Credit Rights;

####  

#### (m)       allCommercial Tort Claims with respect to the matters described on Schedule 7;

####  

#### (n)         allother personal property not otherwise described above;

####  

#### (o)         allbooks and records pertaining to the Collateral; and

####  

#### (p)         tothe extent not otherwise included, all Proceeds, Supporting Obligations andproducts of any and all of the foregoing and all collateral security andguarantees given by any Person with respect to any of the foregoing;

####  

provided,however, that notwithstanding any of the other provisions set forth inthis Section 3, the term Collateral and the terms set forth in this Section definingthe components of Collateral shall not include, and this Agreement shall notconstitute a grant of a security interest in, any of the following (the “ExcludedProperty”): (i) any property to the extent that such grant of asecurity interest is prohibited by any applicable Law of a GovernmentalAuthority, requires a consent not obtained of any Governmental Authoritypursuant to such Law or is prohibited by, or constitutes a breach or defaultunder or results in the termination of or gives rise to a right on the part ofthe parties thereto other than Holdings, the Company and the Company’sSubsidiaries to terminate (or materially modify) or requires any consent notobtained under any contract, license, agreement, instrument or other documentevidencing or giving rise to such property or, in the case of any InvestmentProperty, Pledged Equity or Pledged Debt, any applicable shareholder or similaragreement, except to the extent that such Law or the term in such contract,license, agreement, instrument or other document or shareholder or similaragreement providing for such prohibition, breach, default or right oftermination or modification or requiring such consent is ineffective underapplicable law, (ii) any property owned by any Grantor on the date hereofor hereafter acquired that is subject to a Lien securing a purchase money,project financing or capital or finance lease obligation permitted to beincurred pursuant to the Credit Agreement if 

 

9

----

 

the contract or other agreementin which such Lien is granted (or the documentation providing for such purchasemoney, project financing or capital or finance lease obligation) prohibits thecreation of any other Lien on such property, (iii) any trucks, trailers,tractors, service vehicles, automobiles, rolling stock or other registeredmobile equipment or equipment covered by certificates of title or ownership ofany Grantor, (iv) Deposit Accounts exclusively used for payroll, payrolltaxes and other employee wage and benefit payments or any other Deposit Accountwith an average annual balance of less than $5,000,000 and (v) the EquityInterests 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 Subsidiariesholds an Equity Interest if (and only so long as), in any case, the grant of anysuch security interest is prohibited by, or constitutes a breach or defaultunder or results in the termination of or gives rise to a right on the part ofthe parties thereto other than Holdings, the Company and the Company’sSubsidiaries to terminate (or materially modify) or requires any consent notobtained under any contract, license, agreement, instrument or other documentevidencing or giving rise to such property or any applicable shareholder, jointventure or similar agreement; provided, however, that ExcludedProperty shall not include any Proceeds, substitutions or replacements of anyExcluded Property referred to above and such Proceeds shall not constitute “ExcludedProperty” (unless such Proceeds, substitutions or replacements would constituteExcluded Property referred to above).  Ifan Event of Default shall have occurred and be continuing, each Grantor shall,if requested to do so by the Administrative Agent, use commercially reasonableefforts to obtain any required consent that is reasonably obtainable withrespect to Collateral which the Administrative Agent reasonably determines tobe material.

 

# SECTION 4.                                REPRESENTATIONSAND WARRANTIES

#  

To induce the Administrative Agent and theLenders to enter into the Credit Agreement and to induce the Lenders to maketheir respective extensions of credit to the Borrowers thereunder, each Grantorhereby represents and warrants to the Administrative Agent and each Lenderthat:

 

4.1.                              Title;No Other Liens.  Except for thesecurity interest granted to the Administrative Agent for the ratable benefitof the Secured Parties pursuant to this Agreement and the other Liens permittedto exist on the Collateral by the Credit Agreement, such Grantor owns each itemof the Collateral free and clear of any and all Liens.  No effective financing statement or otherpublic notice with respect to all or any part of the Collateral is on file orof record in any public office, except such as have been filed in favor of theAdministrative Agent, for the ratable benefit of the Secured Parties, pursuantto this Agreement or as are permitted by the Credit Agreement or as to whichdocumentation to terminate the same shall have been delivered to theAdministrative Agent.  For the avoidance ofdoubt, it is understood and agreed that any Grantor may, as part of itsbusiness, grant licenses to third parties to use Intellectual Property owned ordeveloped by a Grantor.  For purposes ofthis Agreement and the other Loan Documents, such licensing activity shall notconstitute a “Lien” on such Intellectual Property.  Each of the Administrative Agent and eachLender understands that any such licenses may be exclusive to the applicablelicensees, and such exclusivity provisions may limit the ability of theAdministrative Agent to utilize, sell, lease or transfer the relatedIntellectual Property or otherwise realize value from such IntellectualProperty pursuant hereto.

 

10

----

 

4.2.                              PerfectedFirst Priority Liens.  The PerfectionCertificate has been duly prepared, completed and executed and the informationset forth therein, including the exact legal name of each Grantor, is correctand complete in all material aspects as of the Closing Date.  The security interests granted pursuant tothis Agreement (i) upon completion of the filings and other actionsspecified on Schedule 3 (which, in the case of all filings andother documents referred to on said Schedule, have been delivered to theAdministrative Agent in completed and, where required, duly executed form) (x) willconstitute valid perfected security interests in all of the Collateral (otherthan Intellectual Property) in favor of the Administrative Agent, for theratable benefit of the Secured Parties, as collateral security for such Grantor’sObligations, enforceable in accordance with the terms hereof against allcreditors of such Grantor and any Persons purporting to purchase any Collateralfrom such Grantor, to the extent a security interest therein may be perfectedby filing, recording or registration in the United States pursuant to the NewYork UCC, and (y) will constitute valid perfected security interests inall of the Collateral consisting of Intellectual Property in favor of theAdministrative Agent, for the ratable benefit of the Secured Parties, ascollateral security for such Grantor’s Obligations, enforceable in accordancewith the terms hereof against all creditors of such Grantor and any Personspurporting to purchase any Collateral from such Grantor, to the extent asecurity interest therein may be perfected by filings to be made in the UnitedStates Patent and Trademark Office and the United States Copyright Office, and (ii) areprior to all other Liens on the Collateral in existence on the date hereofexcept for Liens permitted by the Credit Agreement which have priority over theLiens on the Collateral by operation of law (including the priority rules underthe New York UCC) or which, in the case of Collateral consisting of PledgedEquity and Pledged Debt, are nonconsensual Liens permitted pursuant to Section 7.01of the Credit Agreement to be prior to the security interests granted pursuantto this Agreement or which, in the case of Collateral other than Pledged Equityand Pledged Debt, are permitted pursuant to Section 7.01 of the CreditAgreement to be prior to the security interests granted pursuant to thisAgreement.

 

4.3.                              Jurisdictionof Organization.  On the date hereof,such Grantor’s jurisdiction of organization and identification number from thejurisdiction of organization (if any) are specified on Schedule 4.  Such Grantor has furnished to theAdministrative Agent a certified charter, certificate of incorporation or otherorganization document and long-form good standing certificate as of a datewhich is recent to the date hereof.

 

4.4.                              Inventory andEquipment.  On the date hereof, theInventory and the Equipment of each Grantor are kept at the locations listed onSchedule 5.  The provisionsof 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 ordinarycourse of business), that is out for repair, that is at other locations forpurposes of onsite maintenance or repair or to Equipment and Inventory atlocations with less than $5,000,000 in aggregate value.

 

4.5.                              FarmProducts.  None of the Collateralconstitutes, or is the Proceeds of, Farm Products.

 

4.6.                              InvestmentProperty.  (a)  On the datehereof, the shares of Pledged Equity pledged by such Grantor hereunderconstitute all the issued and outstanding shares of all classes of the EquityInterests of each Restricted Subsidiary owned by such Grantor or, in the caseof Restricted Subsidiaries that are Foreign Subsidiaries or DomesticSubsidiaries substantially all of 

 

11

----

 

whose assetsconsist of voting Equity Interests of one or more Foreign Subsidiaries, theshares of such Issuers pledged by such Grantor constitute 65% of theoutstanding Foreign Subsidiary Voting Stock of each such Issuer (or, if suchGrantor owns less than 65% of the outstanding Foreign Subsidiary Voting Stockof any such Issuer, constitute all the Foreign Subsidiary Voting Stock of suchIssuer owned by such Grantor) in each case to the extent required by clause (d) ofthe Collateral and Guarantee Requirement.

 

### (b)         All the shares of the Pledged Equity as to which the Companyor a Restricted Subsidiary of the Company is the Issuer have been duly andvalidly issued and are fully paid and nonassessable.

###  

### (c)          To the best of such Grantor’s knowledge, each of the PledgedDebt constitutes the legal, valid and binding obligation of the obligor withrespect thereto, enforceable in accordance with its terms, subject to theeffects of bankruptcy, insolvency, fraudulent conveyance, reorganization,moratorium and other similar laws relating to or affecting creditors’ rightsgenerally, general equitable principles (whether considered in a proceeding inequity or at law) and an implied covenant of good faith and fair dealing.

###  

### (d)         Such Grantor is the beneficial owner of, and has good andmarketable title to, the Investment Property pledged by it hereunder, free ofany and all Liens or options in favor of any other Person, except the securityinterest created by this Agreement or nonconsensual Liens permitted pursuant toSection 7.01 of the Credit Agreement.

###  

4.7.                              Receivables.  (a)  No amount payable to such Grantorunder or in connection with any Receivable of an amount greater than $5,000,000is evidenced by any Instrument or Chattel Paper which has not been delivered tothe Administrative Agent.

 

### (b)         As of the Effective Date, theaggregate amount of Receivables required to be included in Collateral owed byGovernmental Authorities to the Grantors does not exceed $5,000,000.

###  

4.8.                              IntellectualProperty.  Schedule 6 listsall Intellectual Property (other than Copyright Licenses and TrademarkLicenses) that is registered in the United States or for which application forregistration in the United States has been filed and that is material to theoperation of the business of the Company and its Subsidiaries taken as a wholeowned by such Grantor in its own name on the date hereof.

 

4.9.                              CommercialTort Claims.  On the date hereof,except to the extent listed in Section 3 above, no Grantor has knowledgeof rights in any Commercial Tort Claim as to which it reasonably expects torecover more than $5,000,000.

 

# SECTION 5.                                COVENANTS

#  

Each Grantor covenants and agrees with theAdministrative Agent and the Lenders that, from and after the date of this Agreementuntil the Obligations (other than contingent indemnification and contingentexpense reimbursement obligations, any Obligations 

 

12

----

 

in respect of Secured Hedge Agreements andCash Management Obligations) shall have been paid in full, no Letter of Creditshall be outstanding and the Commitments shall have terminated:

 

5.1.                              Deliveryof 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) anyother amount in excess of $5,000,000 payable under or in connection with any ofthe Collateral shall be or become evidenced by any Instrument, CertificatedSecurity or Chattel Paper, such Instrument, Certificated Security or ChattelPaper shall be delivered as soon as reasonably practicable to theAdministrative Agent, duly indorsed in a manner reasonably satisfactory to theAdministrative Agent, to be held as Collateral pursuant to this Agreement.

 

### (b)         Any Guarantee required to be subordinated pursuant to Section 7.03(c)(C) ofthe Credit Agreement and any Indebtedness required to be subordinated pursuantto Section 7.03(d) of the Credit Agreement shall, in each case, befully subordinated to the payment in full of the Obligations.

###  

5.2.                              Maintenanceof Insurance.  (a)  Such Grantorwill maintain the insurance required by Section 6.07 of the CreditAgreement.

 

### (b)         All such insurance shall (i) provide that nocancellation, material reduction in amount or material change in coveragethereof shall be effective until at least 30 days or, in the case of insuranceexisting as of the date hereof, at least 10 days after receipt by theAdministrative Agent of written notice thereof and (ii) name theAdministrative Agent as insured party or loss payee.

###  

5.3.                              Maintenanceof Perfected Security Interest; Further Documentation.  (a)  Such Grantor shall take all actionsreasonably requested by the Administrative Agent to maintain the securityinterest created by this Agreement as a security interest having at least theperfection and priority described in Section 4.2 and shall take allcommercially reasonable actions to defend such security interest against theclaims and demands of all Persons whomsoever, subject in each case to, in thecase of Collateral consisting of Pledged Equity and Pledged Debt, nonconsensualLiens permitted by Section 7.01 of the Credit Agreement and, in the caseof Collateral other than Pledged Equity and Pledged Debt, Liens permitted bythe Credit Agreement and to the rights of such Grantor under the Loan Documentsto dispose of the Collateral.

 

### (b)         Such Grantor will furnish to the Administrative Agent fromtime to time statements and schedules further identifying and describing theassets and property of such Grantor and such other reports in connectiontherewith as the Administrative Agent may reasonably request, all in reasonabledetail.  Each year, at the time ofdelivery of annual financial statements with respect to the preceding fiscalyear pursuant to Section 6.01(a) of the Credit Agreement, the Companyshall deliver to the Administrative Agent a certificate executed by theassociate general counsel or the chief legal officer of the Company settingforth the information required pursuant to the Perfection Certificate orconfirming that there has been no change in such information since the date ofsuch certificate or the date of the most recent certificate delivered pursuantto this Section 5.3(b).

 

13

----

 

### (c)          At any time and from time to time, upon the written requestof the Administrative Agent, and at the sole expense of such Grantor, suchGrantor will promptly and duly execute and deliver, and have recorded, suchfurther instruments and documents and take such further actions as theAdministrative Agent may reasonably request for the purpose of obtaining orpreserving the full benefits of this Agreement and of the rights and powersherein granted, including, without limitation, (i) filing any financing orcontinuation statements under the Uniform Commercial Code (or other similarlaws) in effect in any jurisdiction with respect to the security interestscreated hereby and (ii) in the case of Investment Property not issued bythe Company or its Subsidiaries, Deposit Accounts, Letter of Credit Rights andany other relevant Collateral, using commercially reasonable efforts to take,at any time after the occurrence and during the continuation of an Event ofDefault, any actions necessary to enable the Administrative Agent to obtain “control”(within the meaning of the applicable Uniform Commercial Code) with respectthereto.

###  

5.4.                              Changesin Locations, Name, etc.  SuchGrantor will not, except upon 10 days’ prior written notice to theAdministrative Agent (or such shorter notice as shall be reasonablysatisfactory to the Administrative Agent) and delivery to the AdministrativeAgent of all additional executed financing statements and other documentsreasonably requested by the Administrative Agent to maintain the validity,perfection and priority of the security interests provided for herein, (i) changeits jurisdiction of organization from that referred to in Section 4.3 or (ii) changeits name.

 

5.5.                              Notices.  Such Grantor will advise the AdministrativeAgent promptly, in reasonable detail, of:

 

#### (a)          anyLien (other than security interests created hereby or Liens permitted under theCredit Agreement) on any of the Collateral which would adversely affect theability of the Administrative Agent to exercise any of its remedies hereunder;and

####  

#### (b)         theoccurrence of any other event which could reasonably be expected to have amaterial adverse effect on the aggregate value of the Collateral or on thesecurity interests created hereby.

####  

5.6.                              InvestmentProperty.  (a)  If such Grantorshall become entitled to receive or shall receive any certificate (including,without limitation, any certificate representing a dividend or a distributionin connection with any reclassification, increase or reduction of capital orany certificate issued in connection with any reorganization), option or rightsin respect of the Equity Interests of any Restricted Subsidiary, which EquityInterests are required to have been pledged pursuant to clause (d) of theCollateral and Guarantee Requirement, whether in addition to, in substitutionof, 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 theagent of the Administrative Agent and the Lenders, hold the same in trust forthe Administrative Agent and the Lenders and deliver the same forthwith to theAdministrative Agent in the exact form received, duly indorsed by such Grantorto the Administrative Agent, if required, together with an undated stock powercovering such certificate duly executed in blank by such Grantor, to be held bythe Administrative Agent, subject to the terms hereof, as additional collateralsecurity for the Obligations (provided that stock certificates representing thePledged Equity of any Foreign 

 

14

----

 

ImmaterialSubsidiary need not be delivered to the Administrative Agent for so long assuch Foreign Immaterial Subsidiary remains a Foreign ImmaterialSubsidiary).  If an Event of Defaultshall have occurred and be continuing, and any distribution of capital to aGrantor (other than cash) required to be included in Collateral shall be madeon 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 orwith respect to the Investment Property pursuant to the recapitalization orreclassification of the capital of any Issuer or pursuant to the reorganizationthereof, such Grantor shall, unless such distribution of capital or property isotherwise subject to a perfected security interest in favor of theAdministrative Agent, use commercially reasonable efforts to cause it to besubject to a perfected security interest in favor of the Administrative Agentto the extent and in the manner required pursuant to Section 5.3hereof.  If any such property sodistributed in respect of the Investment Property shall be received by suchGrantor, such Grantor shall, until such property is delivered to the AdministrativeAgent, hold such property in trust for the Administrative Agent and the Lendersas additional collateral security for the Obligations.

 

### (b)         Without the prior written consent of the AdministrativeAgent, such consent not to be unreasonably withheld, such Grantor will not (i) sell,assign, transfer, exchange, or otherwise dispose of, or grant any option withrespect to, the Investment Property or Proceeds thereof (except pursuant to atransaction expressly permitted by the Credit Agreement), (ii) create,incur or permit to exist any Lien or option in favor of, or any claim of anyPerson with respect to, any of the Investment Property or Proceeds thereof, orany interest therein, except for the security interests created by thisAgreement or permitted under Section 7.01 of the Credit Agreement or (iii) exceptas permitted by the Credit Agreement, enter, subsequent to the date upon whichsuch Investment Property becomes Collateral hereunder, into any agreement(other than the Credit Agreement) or undertaking restricting the right orability of such Grantor or the Administrative Agent to sell, assign or transferany of the Investment Property required to be included in Collateral orProceeds thereof.

###  

### (c)          In the case of each Grantor which is an Issuer, such Issueragrees that (i) it will be bound by the terms of this Agreement relatingto the Investment Property required to be included in Collateral issued by itand will comply with such terms insofar as such terms are applicable to it, (ii) itwill notify the Administrative Agent promptly in writing of the occurrence ofany of the events described in Section 5.6(a) with respect to suchInvestment Property issued by it and (iii) the terms of Sections 6.3(c) and6.7 shall apply to it, mutatismutandis, with respect to allactions that may be required of it pursuant to Section 6.3(c) and 6.7with respect to such Investment Property issued by it.

###  

### (d)         No Grantor shall permit any security interest incertificated Pledged Equity of any Issuer that is not a Subsidiary to beperfected by possession in favor of a Person other than the AdministrativeAgent.

###  

### (e)          The Company shall not permit any security interest incertificated Pledged Equity of 1302791 Alberta ULC (or any ULC parent entitythereof that is a Foreign Subsidiary the Equity Interests of which are directlyowned by the Company or a U.S. Guarantor) to be perfected by possession infavor of a Person other than the Administrative Agent (and shall so 

 

15

----

 

### perfect by possessionin favor of the Administrative Agent on behalf of the Secured Parties upon thereasonable request of the Administrative Agent).

###  

5.7.                              Receivables.  (a)  Other than in the ordinary courseof business, such Grantor will not (i) grant any extension of the time ofpayment of any Receivable required to be included in Collateral, (ii) compromiseor settle any Receivable required to be included in Collateral for less thanthe full amount thereof, (iii) release, wholly or partially, any Personliable for the payment of any Receivable required to be included in Collateral,(iv) allow any credit or discount whatsoever on any Receivable required tobe included in Collateral or (v) amend, supplement or modify anyReceivable required to be included in Collateral in any manner that couldadversely affect the value thereof.

 

### (b)         Such Grantor will deliver to the Administrative Agent a copyof each material demand, notice or document received by it that questions orcalls into doubt the validity or enforceability of more than 20% of theaggregate amount of the then-outstanding Receivables.

###  

### (c)          If such Grantor shall enter into any contract or othertransaction with an Applicable Governmental Authority (as defined below) whichwill result in an Applicable Governmental Authority becoming an obligor on anyReceivable required to be included in Collateral of an amount greater than$5,000,000, such Grantor shall (i) promptly thereafter notify theAdministrative Agent thereof, (ii) provide to the Administrative Agent allsuch documents and instruments, and take all such actions, as shall bereasonably requested by the Administrative Agent to enable the AdministrativeAgent to comply with the requirements of the Federal Assignment of Claims Actor any other applicable Law to perfect its security interest in suchReceivables and obtain the benefits of such Act or Law with respect thereto and(iii) otherwise comply with its obligations under Section 5.3(c) withrespect thereto.  As used in thisparagraph, the term “Applicable Governmental Authority” shall mean anyGovernmental Authority the  Lawapplicable to which provide that, for a creditor of a Person to which suchGovernmental Authority has an obligation to pay money, whether pursuant to aReceivable, a General Intangible or otherwise, to perfect such creditor’s Lienon such obligation and/or to obtain the full benefits of such Lien and suchLaw, certain notice, filing, recording or other similar actions other than thefiling of a financing statement under the Uniform Commercial Code must begiven, executed, filed, recorded, delivered or completed, including, withoutlimitation, any Federal Governmental Authority to which the Federal Assignmentof Claims Act of 1940 is applicable.

###  

5.8.                              IntellectualProperty.  (a)  Such Grantor(either itself or through licensees) will (i) continue to use eachTrademark that is material to the operation of the business of the Company andits Subsidiaries taken as a whole on each and every trademark class of goodsapplicable to its current line as reflected in its current catalogs, brochuresand price lists in order to maintain such Trademark in full force free from anyclaim of abandonment for non-use, (ii) maintain as in the past the qualityof products and services offered under such Trademark, (iii) use suchTrademark with the appropriate notice of registration and all other notices andlegends required by applicable Law, (iv) not adopt or use any mark whichis confusingly similar or a colorable imitation of such Trademark unless theAdministrative Agent, for the ratable benefit of the Secured Parties, shallobtain a perfected security interest in such mark pursuant to this Agreementand (v) not (and not permit any licensee or sublicensee thereof to) do anyact or 

 

16

----

 

knowingly omit todo any act whereby such Trademark may become invalidated or impaired in anymaterial respect.

 

### (b)         Such Grantor (either itself or through licensees) will notdo any act, or omit to do any act, whereby any Patent that is material to theoperation of the business of the Company and its Subsidiaries taken as a wholemay become forfeited, abandoned or dedicated to the public.

###  

### (c)          Such Grantor (either itself or through licensees) (i) willemploy each Copyright that is material to the operation of the business of theCompany and its Subsidiaries taken as a whole and (ii) will not (and willnot permit any licensee or sublicensee thereof to) do any act or knowingly omitto do any act whereby any portion of the Copyrights that is material to theoperation of the business of the Company and its Subsidiaries taken as a wholemay become invalidated or otherwise impaired. Such Grantor will not (either itself or through licensees) do any actwhereby any portion of the Copyrights that is material to the operation of thebusiness of the Company and its Subsidiaries taken as a whole may fall into thepublic domain.

###  

### (d)         Such Grantor (either itself or through licensees) will notdo any act that knowingly uses any Intellectual Property that is material tothe operation of the business of the Company and its Subsidiaries taken as awhole to infringe the intellectual property rights of any other Person.

###  

### (e)          Such Grantor will notify the Administrative Agentimmediately if it knows, or has reason to know, that any application orregistration relating to any Intellectual Property that is material to theoperation of the business of the Company and its Subsidiaries taken as a wholemay become forfeited, abandoned or dedicated to the public, or of any adversedetermination or development (including, without limitation, the institutionof, or any such determination or development in, any proceeding in the UnitedStates Patent and Trademark Office, the United States Copyright Office or anycourt or tribunal in any country) regarding such Grantor’s ownership of, or thevalidity of, any such Intellectual Property or such Grantor’s right to registerthe 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 inany fiscal year file an application for the registration of any IntellectualProperty that is material to the operation of the Company and its Subsidiariestaken as a whole with the United States Patent and Trademark Office, the UnitedStates Copyright Office or any similar office or agency in any other country orany political subdivision thereof, such Grantor shall report such filing to theAdministrative Agent at the time of delivery of annual financial statementswith respect to such fiscal year pursuant to Section 6.01(a) of theCredit Agreement.  Upon reasonablerequest of the Administrative Agent, such Grantor shall execute and deliver,and have recorded, any and all agreements, instruments, documents, and papersas the Administrative Agent may reasonably request to evidence theAdministrative Agent’s and the Lenders’ security interest in any suchCopyright, Patent or Trademark and the goodwill and general intangibles of suchGrantor relating thereto or represented thereby.

###  

### (g)         Such Grantor will take all reasonable and necessary steps,including, without limitation, in any proceeding before the United StatesPatent and Trademark Office, the United

 

17

----

 

### States CopyrightOffice or any similar office or agency in any other country or any politicalsubdivision thereof, to maintain and pursue each application (and to obtain therelevant registration) and to maintain each registration of the IntellectualProperty that is material to the operation of the business of the Company andits Subsidiaries taken as a whole, including, without limitation, filing ofapplications for renewal, affidavits of use and affidavits of incontestability.

###  

### (h)         In the event that any Intellectual Property that is materialto the operation of the business of the Company and its Subsidiaries taken as awhole is infringed, misappropriated or diluted by a third party, such Grantorshall (i) take such actions as such Grantor shall reasonably deemappropriate under the circumstances to protect such Intellectual Property and (ii) ifsuch Intellectual Property is of material economic value, promptly notify theAdministrative Agent after it learns thereof and sue for infringement,misappropriation or dilution, to seek injunctive relief where appropriate andto recover any and all damages for such infringement, misappropriation ordilution.

###  

### (i)             Notwithstanding anything to thecontrary in this Agreement, subject to the provisions of the Credit Agreement,nothing shall prevent any Grantor in the ordinary course of business fromabandoning, ceasing to use or otherwise impairing or disposing of anyIntellectual Property if such Grantor reasonably believes that doing so is inits business interests.  For theavoidance of doubt, nothing in this Section 5.8 shall prohibit a sale,transfer or disposition of any Intellectual Property made in accordance withSections 7.04 or 7.05 of the Credit Agreement.

###  

### (j)             No Grantor shall, and theGrantors in the aggregate shall not, make filings in the United StatesCopyright Office or the United States Trademark Office to perfect any securityinterest in all or substantially all of the Copyright Licenses held by theGrantors in the aggregate or all or substantially all of the Trademark Licensesheld by the Grantors in the aggregate (other than to perfect the securityinterest in such Copyright Licenses and Trademark Licenses securing theObligations).

###  

### (k)          Upon and during the continuance of an Event of Default, eachGrantor shall use all commercially reasonable efforts to obtain all requisiteconsents or approvals under each Copyright License, Patent License andTrademark License reasonably requested by the Administrative Agent to effectthe assignment of all such Grantor’s right, title and interest thereunder tothe Administrative Agent or its designee.

###  

5.9.                              CommercialTort Claims.  If such Grantor shallobtain an interest in any Commercial Tort Claim as to which it determines thatit reasonably expects to recover more than $5,000,000, such Grantor shallwithin 30 days of making such determination (or such other period reasonablysatisfactory to the Administrative Agent) sign and deliver documentationreasonably acceptable to the Administrative Agent granting a security interestunder the terms and provisions of this Agreement in and to such Commercial TortClaim.

 

# SECTION 6.                                REMEDIALPROVISIONS

#  

6.1.                              CertainMatters Relating to Receivables.  (a) The Administrative Agent shall have the right annually (or, if an Event of Defaulthas occurred and is continuing, at any 

 

18

----

 

time) to make testverifications of the Receivables required to be included in Collateral in anymanner and through any medium that it reasonably considers advisable, and eachGrantor shall furnish all such assistance and information as the AdministrativeAgent may require in connection with such test verifications.  Annually (or, if an Event of Default hasoccurred and is continuing, at any time), upon the Administrative Agent’sreasonable request and at the expense of the relevant Grantor, such Grantorshall use commercially reasonable efforts to cause independent publicaccountants or others satisfactory to the Administrative Agent to furnish tothe Administrative Agent reports showing reconciliations, aging and testverifications of, and trial balances for, such Receivables.

 

### (b)         The Administrative Agent hereby authorizes each Grantor tocollect such Grantor’s Receivables required to be included in Collateral andthe Administrative Agent may curtail or terminate said authority at any timeafter the occurrence and during the continuance of an Event of Default.  If required by the Administrative Agent atany time after the occurrence and during the continuance of an Event ofDefault, any payments of such Receivables, when collected by any Grantor, (i) shallbe forthwith (and, in any event, within two Business Days) deposited by suchGrantor in the exact form received, duly indorsed by such Grantor to the AdministrativeAgent if required, in a Collateral Account maintained under the sole dominionand control of the Administrative Agent, subject to withdrawal by theAdministrative 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 forthe Administrative Agent and the Lenders, segregated from other funds of suchGrantor.  Each such deposit of Proceedsof Receivables required to be included in Collateral shall be accompanied by areport identifying in reasonable detail the nature and source of the paymentsincluded in the deposit.

###  

### (c)          If an Event of Default has occurred and is continuing, atthe Administrative Agent’s request, each Grantor shall deliver to theAdministrative Agent all original and other documents evidencing, and relatingto, the agreements and transactions which gave rise to the Receivables requiredto be included in Collateral, including, without limitation, all originalorders, invoices and shipping receipts.

###  

6.2.                              Communicationswith Obligors; Grantors Remain Liable. (a)  The Administrative Agent in its own name or in the name ofothers may at any time when an Event of Default has occurred and is continuing,communicate with obligors under the Receivables required to be included inCollateral to verify with them to the Administrative Agent’s satisfaction theexistence, amount and terms of any such Receivables.

 

### (b)         Upon the request of the Administrative Agent at any timeafter the occurrence and during the continuance of an Event of Default, eachGrantor shall notify obligors on the Receivables required to be included inCollateral that such Receivables have been assigned to the Administrative Agentfor the ratable benefit of the Secured Parties and that payments in respectthereof shall be made directly to the Administrative Agent.

###  

### (c)          Anything herein to the contrary notwithstanding, eachGrantor shall remain liable under each of the Receivables required to beincluded in Collateral to observe and perform all the conditions andobligations to be observed and performed by it thereunder, all in accordancewith the terms of any agreement giving rise thereto.  Neither the Administrative 

 

19

----

 

### Agent nor any Lendershall have any obligation or liability under any such Receivable (or anyagreement giving rise thereto) by reason of or arising out of this Agreement orthe receipt by the Administrative Agent or any Lender of any payment relatingthereto, nor shall the Administrative Agent or any Lender be obligated in anymanner to perform any of the obligations of any Grantor under or pursuant toany such Receivable (or any agreement giving rise thereto), to make anypayment, to make any inquiry as to the nature or the sufficiency of any paymentreceived by it or as to the sufficiency of any performance by any partythereunder, to present or file any claim, to take any action to enforce anyperformance or to collect the payment of any amounts which may have beenassigned to it or to which it may be entitled at any time or times.

###  

6.3.                              PledgedEquity.  (a)  Unless an Event ofDefault shall have occurred and be continuing and the Administrative Agentshall have given notice to the relevant Grantor of the Administrative Agent’sintent to exercise its corresponding rights pursuant to Section 6.3(b),each Grantor shall be permitted to receive all dividends (other than dividendspayable in Equity Interests) paid in respect of the Pledged Equity and allpayments made in respect of the Pledged Debt, in each case to the extentpermitted in the Credit Agreement, and to exercise all voting and corporate orother organizational rights with respect to the Investment Property; provided,however, that such Grantor will not be entitled to exercise any suchright if the result thereof could materially and adversely affect the rightsinuring to a holder of the Investment Property or the rights and remedies ofthe Administrative Agent or the Lenders under any Loan Document or the abilityof the Administrative Agent or the Lenders to exercise the same.

 

### (b)         If an Event of Default shall occur and be continuing and theAdministrative Agent shall give notice of its intent to exercise such rights tothe relevant Grantor or Grantors, (i) the Administrative Agent shall havethe right to receive any and all cash dividends, payments (including sums paidupon the liquidation or dissolution of any Issuer or in connection with anydistribution of capital) or other Proceeds paid in respect of the Investment Propertyand make application thereof to the Obligations in accordance with theprovisions of the Credit Agreement and (ii) any or all of the InvestmentProperty shall be registered in the name of the Administrative Agent or itsnominee, and the Administrative Agent or its nominee may thereafter exercise (x) allvoting, corporate and other rights pertaining to such Investment Property atany meeting of shareholders of the relevant Issuer or Issuers or otherwise and (y) anyand all rights of conversion, exchange and subscription and any other rights,privileges or options pertaining to such Investment Property as if it were theabsolute owner thereof (including, without limitation, the right to exchange atits discretion any and all of the Investment Property upon the merger,consolidation, reorganization, recapitalization or other fundamental change inthe corporate or other organizational structure of any Issuer, or upon theexercise by any Grantor or the Administrative Agent of any right, privilege oroption pertaining to such Investment Property, and in connection therewith, theright to deposit and deliver any and all of the Investment Property with anycommittee, depositary, transfer agent, registrar or other designated agencyupon such terms and conditions as the Administrative Agent may determine), allwithout liability except to account for property actually received by it, butthe Administrative Agent shall have no duty to any Grantor to exercise any suchright, privilege or option and shall not be responsible for any failure to doso or delay in so doing.  If any sums ofmoney paid or distributed in respect of Investment Property, which theAdministrative 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 theAdministrative Agent, hold such money in trust for the Administrative Agent andthe Lenders as additional collateral for the Obligations.

###  

### (c)          Each Grantor hereby authorizes and instructs each Issuer ofany Investment Property pledged by such Grantor hereunder to (i) complywith any instruction received by it from the Administrative Agent in writingthat (x) states that an Event of Default has occurred and is continuingand (y) is otherwise in accordance with the terms of this Agreement,without any other or further instructions from such Grantor, and each Grantoragrees that each Issuer shall be fully protected in so complying, and (ii) unlessotherwise expressly permitted hereby, pay any dividends or other payments withrespect to the Investment Property directly to the Administrative Agent.

###  

6.4.                              Proceedsto be Turned Over to Administrative Agent. If an Event of Default occurs and is continuing and the AdministrativeAgent 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 theAdministrative Agent and the Lenders, segregated from other funds of suchGrantor, and shall, forthwith upon receipt by such Grantor, be turned over tothe Administrative Agent in the exact form received by such Grantor (dulyindorsed by such Grantor to the Administrative Agent, if required).  All Proceeds received by the AdministrativeAgent hereunder shall be held by the Administrative Agent in a CollateralAccount maintained under its sole dominion and control.  All Proceeds while held by the AdministrativeAgent in a Collateral Account (or by such Grantor in trust for theAdministrative Agent and the Lenders) shall continue to be held as collateralsecurity for all the Obligations and shall not constitute payment thereof untilapplied as provided in Section 6.5.

 

6.5.                              Applicationof Proceeds.  At such intervals asmay be agreed upon by the Company and the Administrative Agent, or, if an Eventof Default has occurred and is continuing, at any time at the AdministrativeAgent’s election, the Administrative Agent shall apply all or any part ofProceeds required to be included in Collateral, whether or not held in anyCollateral Account, and any proceeds of the guarantee set forth in Section 2,in payment of the Obligations in accordance with Section 8.04 of theCredit Agreement, and any part of such funds which the Administrative Agentelects not so to apply and deems not required as collateral security for theObligations shall be paid over from time to time by the Administrative Agent tothe Company or to whosoever may be lawfully entitled to receive the same.  Any balance of such Proceeds remaining afterthe Obligations shall have been paid in full, no Letters of Credit shall beoutstanding and the Commitments shall have terminated shall be paid over to theCompany or to whomsoever may be lawfully entitled to receive the same.

 

6.6.                              Codeand Other Remedies.  If an Event ofDefault occurs and is continuing, the Administrative Agent, on behalf of theLenders, may exercise, in addition to all other rights and remedies granted tothem in this Agreement and in any other instrument or agreement securing,evidencing or relating to the Obligations, all rights and remedies of a securedparty under the New York UCC or any other applicable law.  Without limiting the generality of theforegoing, if an Event of Default occurs and is continuing, the AdministrativeAgent, without demand of performance or other demand, presentment, protest,advertisement or notice of any kind (except any notice required by law referredto below) to or upon any Grantor or any other Person (all and each of whichdemands, defenses, advertisements and notices are 

 

21

----

 

hereby waived),may in such circumstances forthwith collect, receive, appropriate and realizeupon the Collateral, or any part thereof, and/or may forthwith sell, lease,assign, give option or options to purchase, or otherwise dispose of and deliverthe Collateral or any part thereof (or contract to do any of the foregoing), inone or more parcels at public or private sale or sales, at any exchange, broker’sboard or office of the Administrative Agent or any Lender or elsewhere uponsuch terms and conditions as it may deem advisable and at such prices as it maydeem best, for cash or on credit or for future delivery without assumption ofany credit risk.  The AdministrativeAgent 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, topurchase the whole or any part of the Collateral so sold, free of any right orequity of redemption in any Grantor, which right or equity is hereby waived andreleased.  Each Grantor further agrees,at the Administrative Agent’s request following and during the continuance ofan Event of Default, to assemble the Collateral and make it available to the AdministrativeAgent at places which the Administrative Agent shall reasonably select, whetherat such Grantor’s premises or elsewhere. The Administrative Agent shall apply the net proceeds of any actiontaken by it pursuant to this Section 6.6, after deducting all reasonableout-of-pocket costs and expenses of every kind incurred in connection therewithor incidental to the care or safekeeping of any of the Collateral or in any wayrelating to the Collateral or the rights of the Administrative Agent and theLenders hereunder, including, without limitation, reasonable attorneys’ feesand disbursements, to the payment in whole or in part of the Obligations, insuch order as the Administrative Agent may elect, and only after suchapplication and after the payment by the Administrative Agent of any otheramount required by any provision of law, including, without limitation, Section 9-615(a)(3) ofthe New York UCC, need the Administrative Agent account for the surplus, ifany, to any Grantor.  To the extent permittedby applicable law, each Grantor waives all claims, damages and demands it mayacquire against the Administrative Agent or any Lender arising out of theexercise by them of any rights hereunder. If any notice of a proposed sale or other disposition of Collateralshall be required by law, such notice shall be deemed reasonable and proper ifgiven at least 10 days before such sale or other disposition.

 

### 6.7.                              Registration Rights.  (a)  If the Administrative Agent shalldetermine to exercise its rights to sell all or any of the Pledged Equitypursuant to Section 6.6, and if, in the opinion of the AdministrativeAgent, it is necessary or advisable to have the Pledged Equity, or that portionthereof to be sold, registered under the provisions of the Securities Act, therelevant Grantor will cause the Issuer thereof to (i) execute and deliver,and cause the directors and officers of such Issuer to execute and deliver, allsuch instruments and documents, and do or cause to be done all such other actsas may be, in the opinion of the Administrative Agent, necessary or advisableto register the Pledged Equity, or that portion thereof to be sold, under theprovisions of the Securities Act, (ii) use its best efforts to cause theregistration statement relating thereto to become effective and to remaineffective for a period of one year from the date of the first public offeringof the Pledged Equity, or that portion thereof to be sold, and (iii) makeall amendments thereto and/or to the related prospectus which, in the opinionof the Administrative Agent, are necessary or advisable, all in conformity withthe requirements of the Securities Act and the rules and regulations ofthe Securities and Exchange Commission applicable thereto.  Each Grantor agrees to cause such Issuer tocomply with the provisions of the securities or “Blue Sky” laws of any and alljurisdictions which the Administrative Agent shall designate and to makeavailable to its security holders, as soon as practicable, an earningsstatement (which need not be audited) which will satisfy the provisions of Section 11(a) ofthe Securities Act.

 

22

----

 

### (b)         Each Grantor recognizes that the Administrative Agent may beunable to effect a public sale of any or all the Pledged Equity, by reason ofcertain prohibitions contained in the Securities Act and applicable statesecurities laws or otherwise, and may be compelled to resort to one or moreprivate sales thereof to a restricted group of purchasers which will be obligedto agree, among other things, to acquire such securities for their own accountfor investment and not with a view to the distribution or resale thereof.  Each Grantor acknowledges and agrees that anysuch private sale may result in prices and other terms less favorable than ifsuch sale were a public sale and, notwithstanding such circumstances, agreesthat any such private sale shall be deemed to have been made in a commerciallyreasonable manner.  The AdministrativeAgent shall be under no obligation to delay a sale of any of the Pledged Equityfor the period of time necessary to permit the Issuer thereof to register suchsecurities for public sale under the Securities Act, or under applicable statesecurities laws, even if such Issuer would agree to do so.

###  

### (c)          Each Grantor agrees to use its best efforts to do or causeto be done all such other acts as may be necessary to make such sale or salesof all or any portion of the Pledged Equity pursuant to this Section 6.7valid and binding and in compliance with any and all other applicable Law.  Each Grantor further agrees that a breach ofany of the covenants contained in this Section 6.7 will cause irreparableinjury to the Administrative Agent and the Lenders, that the AdministrativeAgent and the Lenders have no adequate remedy at law in respect of such breachand, as a consequence, that each and every covenant contained in this Section 6.7shall be specifically enforceable against such Grantor, and such Grantor herebywaives, to the fullest extent permitted by applicable law, and agrees not toassert any defenses against an action for specific performance of suchcovenants except for a defense that no Event of Default has occurred and iscontinuing under the Credit Agreement.

###  

6.8.                              Deficiency.  Each Grantor shall remain liable for anydeficiency if the proceeds of any sale or other disposition of the Collateralare insufficient to pay its Obligations and the reasonable fees anddisbursements of any attorneys employed by the Administrative Agent or any Lenderto collect such deficiency.

 

# SECTION 7.                                THEADMINISTRATIVE AGENT

#  

7.1.                              AdministrativeAgent’s Appointment as Attorney-in-Fact, etc.  (a)  Each Grantor hereby irrevocablyconstitutes and appoints the Administrative Agent and any officer or agentthereof, with full power of substitution, as its true and lawfulattorney-in-fact with full irrevocable power and authority in the place andstead of such Grantor and in the name of such Grantor or in its own name, forthe purpose of carrying out the terms of this Agreement, to take any and allappropriate action and to execute any and all documents and instruments whichmay be necessary or desirable to accomplish the purposes of this Agreement,and, without limiting the generality of the foregoing, each Grantor herebygives 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)                                     inthe name of such Grantor or its own name, or otherwise, take possession of andindorse and collect any checks, drafts, notes, acceptances or other instrumentsfor the payment of moneys due under any Receivable required to be included

 

23

----

 

##### in Collateralhereunder or with respect to any other Collateral and file any claim or takeany other action or proceeding in any court of law or equity or otherwisedeemed appropriate by the Administrative Agent for the purpose of collectingany and all such moneys due under any such Receivable or with respect to anyother Collateral whenever payable;

#####  

##### (ii)                                  inthe case of any Intellectual Property required to be included in Collateralhereunder, execute and deliver, and have recorded, any and all agreements,instruments, documents and papers as the Administrative Agent may request toevidence the Administrative Agent’s and the Lenders’ security interest in suchIntellectual Property and the goodwill and general intangibles of such Grantorrelating thereto or represented thereby;

#####  

##### (iii)                               payor discharge taxes and Liens levied or placed on or threatened against theCollateral, effect any repairs or any insurance called for by the terms of thisAgreement and pay all or any part of the premiums therefor and the coststhereof;

#####  

##### (iv)                              execute,in connection with any sale provided for in Section 6.6 or 6.7, anyindorsements, assignments or other instruments of conveyance or transfer withrespect to the Collateral; and

#####  

##### (v)                                 (1) directany party liable for any payment under any of the Collateral to make payment ofany and all moneys due or to become due thereunder directly to theAdministrative Agent or as the Administrative Agent shall direct; (2) askor demand for, collect, and receive payment of and receipt for, any and allmoneys, claims and other amounts due or to become due at any time in respect ofor 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 documentsin connection with any of the Collateral; (4) commence and prosecute anysuits, actions or proceedings at law or in equity in any court of competentjurisdiction to collect the Collateral or any portion thereof and to enforceany other right in respect of any Collateral; (5) defend any suit, actionor proceeding brought against such Grantor with respect to any Collateral; (6) settle,compromise or adjust any such suit, action or proceeding and, in connectiontherewith, give such discharges or releases as the Administrative Agent mayreasonably deem appropriate; (7) subject to any licenses (and the rightsgranted therein) existing at the time of such assignment, assign any Copyright,Patent or Trademark (along with the goodwill of the business to which any suchCopyright, Patent or Trademark pertains), throughout the world for such term orterms, on such conditions, and in such manner, as the Administrative Agentshall in its sole discretion determine; and (8) generally, sell, transfer,pledge and make any agreement with respect to or otherwise deal with any of theCollateral as fully and completely as though the Administrative Agent were theabsolute owner thereof for all purposes, and do, at the Administrative Agent’soption and such Grantor’s expense, at any time, or from time to time, all actsand things which the Administrative Agent deems necessary to protect, preserveor realize upon the Collateral and the Administrative Agent’s and the Lenders’security interests therein and to effect the intent of this Agreement, all asfully and effectively as such Grantor might do.

 

24

----

 

Anything in this Section 7.1(a) tothe contrary notwithstanding, the Administrative Agent agrees that it will notexercise any rights under the power of attorney provided for in this Section 7.1(a) unlessan Event of Default shall have occurred and be continuing.

 

### (b)         If any Grantor fails to perform or comply with any of itsagreements contained herein, the Administrative Agent, at its option, butwithout any obligation so to do, may perform or comply, or otherwise causeperformance or compliance, with such agreement.

###  

### (c)          The reasonable out-of-pocket expenses of the AdministrativeAgent 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 rateper annum at which interest would then be payable on any category of past dueBase Rate Loans under the Credit Agreement, from the date of payment by theAdministrative Agent to the date reimbursed by the relevant Grantor, shall bepayable by such Grantor to the Administrative Agent on demand.

###  

### (d)         Each Grantor hereby ratifies all that said attorneys shalllawfully do or cause to be done by virtue hereof.  All powers, authorizations and agenciescontained in this Agreement are coupled with an interest and are irrevocableuntil this Agreement is terminated and the security interests created herebyare released.

###  

7.2.                              Dutyof Administrative Agent.  The AdministrativeAgent’s sole duty with respect to the custody, safekeeping and physicalpreservation of the Collateral in its possession, under Section 9-207 ofthe New York UCC or otherwise, shall be to deal with it in the same manner asthe Administrative Agent deals with similar property for its own account.  Neither the Administrative Agent, any Lendernor any of their respective officers, directors, employees or agents shall beliable for failure to demand, collect or realize upon any of the Collateral orfor any delay in doing so or shall be under any obligation to sell or otherwisedispose of any Collateral upon the request of any Grantor or any other Personor to take any other action whatsoever with regard to the Collateral or anypart thereof.  The powers conferred onthe Administrative Agent and the Lenders hereunder are solely to protect theAdministrative Agent’s and the Lenders’ interests in the Collateral and shallnot impose any duty upon the Administrative Agent or any Lender to exercise anysuch powers.  The Administrative Agentand the Lenders shall be accountable only for amounts that they actuallyreceive as a result of the exercise of such powers, and neither they nor any oftheir officers, directors, employees or agents shall be responsible to anyGrantor for any act or failure to act hereunder, except for their own grossnegligence or willful misconduct.

 

7.3.                              Executionof Financing Statements.  Pursuant toany applicable law, each Grantor authorizes the Administrative Agent to file orrecord financing statements and other filing or recording documents orinstruments with respect to the Collateral without the signature of suchGrantor in such form and in such offices as the Administrative Agent determinesappropriate to perfect the security interests of the Administrative Agent underthis Agreement.  Each Grantor authorizesthe Administrative Agent to use the collateral description “all personalproperty” or “all assets” in any such financing statements.  Each Grantor hereby ratifies and authorizesthe filing by the Administrative Agent of any financing statement with respectto the Collateral made prior to the date hereof; provided that, at thereasonable request of any Grantor,

 

25

----

 

the AdministrativeAgent shall amend any such statement (and any other financing statement filedby the Administrative Agent in connection with this Agreement) to exclude anyproperty that is released from, or otherwise not included in, the Collateral.  The Administrative Agent agrees promptly tofurnish copies of all such filings to the Company.

 

7.4.                              Authorityof Administrative Agent.  EachGrantor acknowledges that the rights and responsibilities of the AdministrativeAgent under this Agreement with respect to any action taken by theAdministrative Agent or the exercise or non-exercise by the AdministrativeAgent of any option, voting right, request, judgment or other right or remedyprovided for herein or resulting or arising out of this Agreement shall, asbetween the Administrative Agent and the Lenders, be governed by the CreditAgreement and by such other agreements with respect thereto as may exist fromtime to time among them, but, as between the Administrative Agent and theGrantors, the Administrative Agent shall be conclusively presumed to be actingas agent for the Lenders with full and valid authority so to act or refrainfrom acting, and no Grantor shall be under any obligation, or entitlement, tomake any inquiry respecting such authority.

 

# SECTION 8.                                MISCELLANEOUS

#  

8.1.                              Amendmentsin Writing.  None of the terms orprovisions of this Agreement may be waived, amended, supplemented or otherwisemodified except in accordance with Section 10.01 of the Credit Agreement.

 

8.2.                              Notices.  All notices, requests and demands to or uponthe Administrative Agent or any Grantor hereunder shall be effected in themanner provided for in Section 10.02 of the Credit Agreement; providedthat any such notice, request or demand to or upon any Guarantor shall beaddressed to such Guarantor at its notice address set forth on Schedule 1.

 

8.3.                              NoWaiver by Course of Conduct; Cumulative Remedies.  Neither the Administrative Agent nor anyLender 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 orremedy hereunder or to have acquiesced in any Default or Event of Default.  No failure to exercise, nor any delay inexercising, 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 exercisethereof or the exercise of any other right, power or privilege.  A waiver by the Administrative Agent or anyLender of any right or remedy hereunder on any one occasion shall not beconstrued as a bar to any right or remedy which the Administrative Agent orsuch Lender would otherwise have on any future occasion.  The rights and remedies herein provided arecumulative, may be exercised singly or concurrently and are not exclusive ofany other rights or remedies provided by law.

 

8.4.                              EnforcementExpenses; Indemnification.  (a) Each Guarantor agrees to pay or reimburse each Lender and the AdministrativeAgent for all its reasonable out-of-pocket costs and expenses incurred incollecting against such Guarantor under the guarantee contained in Section 2or otherwise enforcing or preserving any rights under this Agreement and the otherLoan Documents to which such Guarantor is a party, including, withoutlimitation, the reasonable fees and disbursements of counsel to theAdministrative Agent.

 

26

----

 

### (b)         Each Guarantor agrees to pay, and to save the AdministrativeAgent 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 orother taxes which may be payable or determined to be payable with respect toany of the Collateral or in connection with any of the transactionscontemplated by this Agreement.

###  

### (c)          Each Guarantor agrees to pay, and to save the AdministrativeAgent and the Lenders harmless from, any and all liabilities, obligations,losses, damages, penalties, claims, demands, actions, judgments and suits andrelated reasonable out-of-pocket expenses (including Attorney Costs) of anykind or nature whatsoever with respect to the execution, delivery, enforcement,performance and administration of this Agreement to the extent the Companywould be required to do so pursuant to Section 10.05 of the CreditAgreement.

###  

### (d)         The agreements in this Section 8.4 shall surviverepayment of the Obligations and all other amounts payable under the CreditAgreement and the other Loan Documents.

###  

8.5.                              Successorsand Assigns.  This Agreement shall bebinding upon the permitted successors and assigns of each Grantor and shallinure to the benefit of the Administrative Agent and the Lenders and theirpermitted successors and assigns; provided that no Grantor may, exceptpursuant to a merger or consolidation permitted by the Credit Agreement,assign, transfer or delegate any of its rights or obligations under thisAgreement without the prior written consent of the Administrative Agent.

 

8.6.                              Setoff.  In addition to any rights and remedies of theLenders provided by Law, upon the occurrence and during the continuance of anyEvent of Default, each Lender and its Affiliates is authorized at any time andfrom time to time, without prior notice to any Grantor, any such notice beingwaived by each Grantor to the fullest extent permitted by applicable Law, toset 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 timeowing by, such Lender and its Affiliates to or for the credit or the account ofany Grantor against any and all Obligations owing to such Lender and itsAffiliates hereunder or under any other Loan Document, now or hereafterexisting, irrespective of whether or not such Agent or such Lender or Affiliateshall have made demand under this Agreement or any other Loan Document andalthough such Obligations may be contingent or unmatured or denominated in acurrency different from that of the applicable deposit or Indebtedness;*provided* that, in the case of any such deposits or otherIndebtedness for the credit or the account of any Foreign Subsidiary, such setoff may only be against any Obligations of Foreign Subsidiaries.  Each Lender agrees promptly to notify suchGrantor and the Administrative Agent after any such set off and applicationmade by such Lender; *provided*, thatthe failure to give such notice shall not affect the validity of such setoffand application.  The rights of theAdministrative Agent and each Lender under this Section 8.6 are inaddition to other rights and remedies (including other rights of setoff) thatthe Administrative Agent and such Lender may have.

 

8.7.                              Counterparts.  This Agreement may be executed in one or morecounterparts, each of which shall be deemed an original, but all of whichtogether shall constitute one and the same instrument.  Delivery by telecopier of an executedcounterpart of a signature

 

27

----

 

page to thisAgreement shall be effective as delivery of an original executed counterpart ofthis Agreement.

 

8.8.                              Severability.  If any provision of this Agreement is held tobe illegal, invalid or unenforceable, the legality, validity and enforceabilityof the remaining provisions of this Agreement shall not be affected or impairedthereby.  The invalidity of a provisionin a particular jurisdiction shall not invalidate or render unenforceable suchprovision in any other jurisdiction.

 

8.9.                              Section Headings.  The Section headings used in thisAgreement are for convenience of reference only and are not to affect theconstruction hereof or be taken into consideration in the interpretationhereof.

 

8.10.                        Integration.  This Agreement, together with the other LoanDocuments, comprises the complete and integrated agreement of the parties onthe subject matter hereof and thereof and supersedes all prior agreements,written or oral, on such subject matter.

 

**8.11.****                     GOVERNINGLAW****.  THISAGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OFTHE STATE OF NEW YORK.**

** **

8.12.                        SubmissionTo Jurisdiction; Waivers.  (a) Any legal action or proceeding arising under any Loan Document or in any wayconnected with or related or incidental to the dealings of the parties heretoor any of them with respect to any Loan Document, or the transactions relatedthereto, in each case whether now existing or hereafter arising, may be broughtin the courts of the State of New York sitting in New York City or of the UnitedStates for the Southern District of such State, and by execution and deliveryof this Agreement, each Grantor and the Administrative Agent consents, foritself and in respect of its property, to the non-exclusive jurisdiction ofthose courts.  Each Grantor and theAdministrative Agent irrevocably waives any objection, including any objectionto the laying of venue or based on the grounds of forum non conveniens, whichit may now or hereafter have to the bringing of any action or proceeding insuch courts in respect of any Loan Document or other document related thereto.

 

(b)  Each Grantorhereby irrevocably and unconditionally:

 

##### (i)                                     agreesthat service of process in any such action or proceeding may be effected bymailing a copy thereof by registered or certified mail (or any substantiallysimilar form of mail), postage prepaid, to such Grantor at its address referredto in Section 8.2 or at such other address of which the AdministrativeAgent shall have been notified pursuant thereto;

#####  

##### (ii)                                  agreesthat nothing herein shall affect the right to effect service of process in anyother manner permitted by law or shall limit the right to sue in any otherjurisdiction; and

 

28

----

 

##### (iii)                               waives,to the maximum extent not prohibited by law, any right it may have to claim orrecover in any legal action or proceeding referred to in this Section anyspecial, exemplary, punitive or consequential damages.

#####  

8.13.                        Acknowledgments.  Each Grantor hereby acknowledges that:

 

#### (a)          ithas been advised by counsel in the negotiation, execution and delivery of thisAgreement and the other Loan Documents to which it is a party;

####  

#### (b)         neitherthe Administrative Agent nor any Lender has any fiduciary relationship with orduty to any Grantor arising out of or in connection with this Agreement or anyof the other Loan Documents, and the relationship between the Grantors, on theone hand, and the Administrative Agent and the Lenders, on the other hand, inconnection herewith or therewith is solely that of debtor and creditor; and

####  

#### (c)          nojoint venture is created hereby or by the other Loan Documents or otherwiseexists by virtue of the transactions contemplated hereby among the Lenders oramong the Grantors and the Lenders.

####  

8.14.                        AdditionalGuarantors and Grantors.  EachSubsidiary of the Company that is required to become a party to this Agreementpursuant to Section 6.10 of the Credit Agreement shall become a Guarantorand a Grantor for all purposes of this Agreement upon execution and delivery bysuch Subsidiary of a Security Agreement Supplement in the form of Annex 1hereto.

 

8.15.                        Releases.  (a)  At such time as the Loans and theother Obligations (other than contingent indemnification and contingent expensereimbursement obligations, Obligations in respect of Secured Hedge Agreementsand Cash Management Obligations) shall have been paid in full, the Commitmentshave been terminated and no Letters of Credit shall be outstanding, theCollateral shall be released from the Liens created hereby, and this Agreementand all obligations (other than those expressly stated to survive suchtermination) of the Administrative Agent and each Grantor hereunder shallterminate, all without delivery of any instrument or performance of any act byany party, and all rights to the Collateral shall revert to the Grantors.  At the request and sole expense of anyGrantor following any such termination, the Administrative Agent shall deliverto such Grantor any Collateral held by the Administrative Agent hereunder andexecute and deliver to such Grantor such documents as such Grantor shallreasonably request to evidence such termination.

 

### (b)         If any of the Collateral shall be sold, transferred orotherwise disposed of by any Grantor in a transaction permitted by the CreditAgreement, then (i) the Liens created hereby on such Collateral shallautomatically be released and (ii) the Administrative Agent, at therequest and sole expense of such Grantor, shall execute and deliver to suchGrantor all releases or other documents reasonably necessary or desirable forthe release of the Liens created hereby on such Collateral.  If any of the Collateral shall becomeSpecified Assets described in clause (b) of the definition thereof (takinginto account the proviso thereto), then (A) the Liens created hereby onsuch Collateral shall automatically be released and (ii) theAdministrative Agent, at the request and sole expense of the Company, shallexecute and deliver to the Company or the 

 

29

----

 

### relevant Grantor allreleases or other documents reasonably necessary or desirable for the releaseof the Liens created hereby on such Collateral. In addition, at the request and at the sole expense of the Company, theAdministrative Agent agrees to (x) provide to each Grantor a power ofattorney to execute any document reasonably required to permit any salepermitted by the Credit Agreement of any asset, the perfection of which isgoverned by a certificate-of-title statute, free of the Liens created by theSecurity Documents and (y) with respect to any jurisdiction in whichreleases executed pursuant to such power of attorney are insufficient torelease such Liens, (1) execute in blank any document reasonably requiredto permit any sale permitted by the Credit Agreement of any asset, theperfection of which is governed by a certificate-of-title statute, free of theLiens created by the Security Documents and (2) authorize such Grantor tofill in the relevant information to release such Lien.  At the request and sole expense of theCompany, a Subsidiary Guarantor shall be released from its obligationshereunder in the event that all the Equity Interests of such SubsidiaryGuarantor shall be sold, transferred or otherwise disposed of in a transactionpermitted by the Credit Agreement; provided that the Company shall havedelivered to the Administrative Agent, at least five Business Days prior to thedate of the proposed release, a written request for release identifying therelevant Subsidiary Guarantor and the terms of the sale or other disposition inreasonable detail, including the price thereof and any expenses in connectiontherewith, together with a certification by the Company stating that suchtransaction is in compliance with the Credit Agreement and the other LoanDocuments.

###  

**8.16.****                     WAIVER OFJURY TRIAL**.  **EACH GRANTORHEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTIONOR CAUSE OF ACTION ARISING UNDER ANY LOAN DOCUMENT OR IN ANY WAY CONNECTED WITHOR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEMWITH RESPECT TO ANY LOAN DOCUMENT, OR THE TRANSACTIONS RELATED THERETO, IN EACHCASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER FOUNDED IN CONTRACTOR TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCHCLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIALWITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINALCOUNTERPART OR A COPY OF THIS SECTION 10.17 WITH ANY COURT AS WRITTENEVIDENCE OF THE CONSENT OF THE SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHTTO TRIAL BY JURY.**

** **

8.17.                        Effectivenessof the Merger; Assignment and Delegation to and Assumption by Reader’s Digest.  Reader’s Digest and its Subsidiaries shallhave no rights or obligations hereunder until the consummation of the Mergerand any representations and warranties of Reader’s Digest or any of itsSubsidiaries hereunder shall not become effective until such time.  Upon consummation of the Merger, Reader’sDigest shall succeed to all the rights and obligations of Doctor AcquisitionCo. under this Agreement and all rights, obligations, representations andwarranties of Reader’s Digest and its Subsidiaries shall become effective as ofthe date hereof, without any further action by any Person.

 

8.18.                        GermanBorrower Security.  Notwithstandingany provision to the contrary in any Loan Document or any Secured HedgeAgreement, any guarantees, security interests or other security provided underor in connection with this Agreement or any other 

 

30

----

 

Loan Document orany Secured Hedge Agreement (“Security”) shall at all times excludedirect or indirect access to Specified Assets other than Specified Assets ofthe German Borrower (in particular, no security in rem (*dinglicheSicherheit*) in Specified Assets other than Specified Assets of theGerman Borrower shall be created (or, in the event such exclusion is notpossible under applicable law, no such security in rem shall be enforceable),and no disposal restriction (*Verfügungsbeschränkung*)and no submission to immediate foreclosure (*Unterwerfung unter diesofortige Zwangsvollstreckung*) regarding Specified Assets other thanSpecified Assets of the German Borrower shall apply with respect to anycontractual claim (*schuldrechtlicher Anspruch*)in favor of any Secured Party).  Therestriction set forth in this Section 8.18 shall be applicable if and onlyto the extent that (and only for so long as) (a) such Security securesObligations of the German Borrower and (b) direct or indirect access tosuch Specified Assets would result in adverse tax consequences to Holdings andits Subsidiaries as a consequence of § 8a of the German Corporate Income TaxAct (*Körperschaftsteuergesetz*) as amended fromtime to time or of any future rules replacing § 8a of the German CorporateIncome Tax Act (*Körperschaftsteuergesetz*).

 

8.19.                        ParallelObligations

 

.  (a)  Solely for purposes of the validityand enforcement of any security interest granted to the Secured Parties in anyEquity Interests or other assets governed by German law, each of the parties hereto agrees (and eachSecured Party by its execution of the Credit Agreement or its Assignment andAssumption agrees), and each of the Loan Parties acknowledges by way of anabstract acknowledgement of debt (*abstraktesSchuldanerkenntnis* as effective under German law) (the “Acknowledgement”),that the Obligations of such Loan Party (and each of their respective permittedsuccessors and assigns) (the “Original Obligations”) shall also be owingin full to the Administrative Agent (and its permitted successors and assigns),and that accordingly the Administrative Agent will have its own independentright to demand performance by the respective Loan Party of the Obligations ofsuch Loan Party (such Obligations owed to the Administrative Agent, the “ParallelObligations”).  Any payment by anyLoan Party of its Parallel Obligations shall to the same extent reduce and be agood discharge of the corresponding Original Obligations of such Loan Partyowing to the relevant Secured Parties, and payment by any Loan Party of itsOriginal Obligations to the relevant Secured Parties shall to the same extentreduce and be a good discharge of the Parallel Obligations owing by it to theAdministrative Agent.  The AdministrativeAgent undertakes to each Loan Party that in the case of any discharge of anysuch obligation owing to one of the Administrative Agent or a Secured Party, itwill, to the same extent, not make a claim against such Loan Party under theAcknowledgement at any time, provided that any such claims can be made againstsuch 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 theAdministrative Agent other than with respect to claims arising under the LoanDocuments.

 

(b) Without limiting or affecting the Administrative Agent’s rights against theLoan Parties (whether under this Section 8.19 or under any other provisionof the Loan Documents), the Administrative Agent agrees with each other SecuredParty that it will not exercise its rights under the Acknowledgement withrespect to Obligations owed to such Secured Party except with the consent ofsuch Secured Party, which consent is hereby deemed given by its execution ofthe Credit Agreement or its Assignment and Assumption.  Nothing in the 

 

31

----

 

previoussentence shall in any way limit the Administrative Agent’s right to act in theprotection or preservation of rights under or to enforce any CollateralDocument (or to do any act reasonably incidental to the foregoing).

 

32

----

 

IN WITNESS WHEREOF, each of the undersignedhas caused this Guarantee and Collateral Agreement to be duly executed anddelivered as of the date first above written.

 

 
|   | RDA HOLDING CO. |
|--------|-----------------|
|   |            |
|   |            |
|   | By:             |   |
|   |            | Name: |
|   |            | Title: |

 

 

[Signature Page to Guarantee & CollateralAgreement]

 

----

 
|   | DOCTOR ACQUISITION CO. |
|--------|------------------------|
|   |                   |
|   |                   |
|   | By:                    |   |
|   |                   | Name: |
|   |                   | Title: |

 

 

*[SIGNATURE PAGE TO GUARANTEE AND COLLATERALAGREEMENT]*

 

----

 
|   | THE READER’S DIGEST ASSOCIATION, INC. |
|--------|--------------------------------------------|
|   |                                       |
|   |                                       |
|   | By:                                        |   |
|   |                                       | Name: |
|   |                                       | Title: |

 

 

*[SIGNATURE PAGE TO GUARANTEE AND COLLATERALAGREEMENT]*

 

----

 
|   | Solely for purposes of Sections 8.18 and 8.19: |
|--------|------------------------------------------------|
|   | RD GERMAN HOLDINGS GmbH                        |
|   |                                           |
|   |                                           |
|   | By:                                            |   |
|   |                                           | Name: |
|   |                                           | Title: |

 

 

*[SIGNATURE PAGE TO GUARANTEE AND COLLATERALAGREEMENT]*

 

----

 
|   | [CERTAIN SUBSIDIARIES OF THE READER’S DIGEST ASSOCIATION, INC.] |
|--------|----------------------------------------------------------------------|
|   |                                                                 |
|   |                                                                 |
|   | By:                                                                  |   |
|   |                                                                 | Name: |
|   |                                                                 | Title: |

 

 

*[SIGNATUREPAGE TO GUARANTEE AND COLLATERAL AGREEMENT]*

 

----

 
|   | JPMORGAN CHASE BANK, N.A., as Administrative Agent |
|--------|----------------------------------------------------|
|   |                                               |
|   |                                               |
|   | By:                                                |   |
|   |                                               | Name: |
|   |                                               | Title: |

 

 

*[SIGNATURE PAGE TO GUARANTEE AND COLLATERAL AGREEMENT]*

 

----

 

ACKNOWLEDGMENT AND CONSENT***

 

The undersigned hereby acknowledges receiptof a copy of the Guarantee and Collateral Agreement dated as of March 2,2007 (the “Agreement”), made by the Grantors parties thereto for thebenefit of JPMORGAN CHASE BANK, N.A., as Administrative Agent.  The undersigned agrees for the benefit of theAdministrative Agent and the Lenders as follows:

 

###### 1.               The undersignedwill be bound by the terms of the Agreement and will comply with such termsinsofar as such terms are applicable to the undersigned.

######  

###### 2.               The undersignedwill notify the Administrative Agent promptly in writing of the occurrence ofany of the events described in Section 5.6(a) of the Agreement.

######  

###### 3.               The terms ofSections 6.3(c) and 6.7 of the Agreement shall apply to it, mutatismutandis, with respect to all actions that may be required of itpursuant 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 andCollateral 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”) partiesto the Credit Agreement referred to below. All capitalized terms not defined herein shall have the meaning ascribedto them in such Credit Agreement.

 

WITNESSETH :

 

WHEREAS, RDA HOLDING CO., a Delaware corporation(“Holdings”), THE READER’S DIGEST ASSOCIATION, INC., a Delawarecorporation (the “Company”), the Overseas Borrowers, the Lenders and theAdministrative Agent have entered into a Credit Agreement, dated as of March 2,2007 (as amended, supplemented or otherwise modified from time to time, the “CreditAgreement”);

 

WHEREAS, in connection with the CreditAgreement, Holdings, the Company and certain of the Company’s Subsidiaries(other than the Additional Grantor) have entered into the Guarantee and CollateralAgreement, dated as of March 2, 2007 (as amended, supplemented orotherwise modified from time to time, the “Guarantee and CollateralAgreement”) in favor of the Administrative Agent for the benefit of theLenders;

 

WHEREAS, the Credit Agreement requires theAdditional Grantor to become a party to the Guarantee and Collateral Agreement;and

 

WHEREAS, the Additional Grantor has agreed toexecute and deliver this Assumption Agreement in order to become a party to theGuarantee and Collateral Agreement;

 

NOW, THEREFORE, IT IS AGREED:

 

###### 1.                                       Guarantee andCollateral Agreement.  By executingand delivering this Assumption Agreement, the Additional Grantor, as providedin Section 8.14 of the Guarantee and Collateral Agreement, hereby becomesa party to the Guarantee and Collateral Agreement as a Guarantor and a Grantorthereunder with the same force and effect as if originally named therein as aGuarantor and a Grantor and, without limiting the generality of the foregoing,hereby expressly assumes all obligations and liabilities of a Guarantor and aGrantor thereunder.  The information setforth in Annex 1-A hereto is hereby added to the information set forth inthe Schedules to the Guarantee and Collateral Agreement.  The Additional Grantor hereby represents andwarrants that each of the representations and warranties contained in Section 4of the Guarantee and Collateral Agreement is true and correct on and as thedate hereof (after giving effect to this Assumption Agreement) as if made onand as of such date.

 

----

 

###### **2.****              GOVERNING LAW.  THIS ASSUMPTION AGREEMENT SHALL BE GOVERNEDBY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.**

###### ** **

IN WITNESS WHEREOF, the undersigned hascaused this Assumption Agreement to be duly executed and delivered as of thedate first above written.

 
|   | [ADDITIONAL GRANTOR] |
|--------|----------------------|
|   |                 |
|   |                 |
|   | By:                  |   |
|   |                 | Name: |
|   |                 | Title: |

 

----

 

Annex 1-A to

Assumption Agreement

 

Supplement to Schedule 1

 

Supplement to Schedule 2

 

Supplement to Schedule 3

 

Supplement to Schedule 4

 

Supplement to Schedule 5

 

Supplement to Schedule 6

 

Supplement to Schedule 7

 

----

 

**EXHIBIT G**

 
| Document Number                                                                   | Document Title                          |       |
|-----------------------------------------------------------------------------------|-----------------------------------------|------------|
|                                                                              |                                    |
| Mortgage, Security Agreement, Assignment of Leases  and Rents, and Fixture Filing |                                    |
|                                                                              |                                    |
|                                                                              |                                    |
|                                                                              | Recording Area                          |
|                                                                              |                                    |
|                                                                              | Name and Return Address:                |
|                                                                              |                                    |
|                                                                              | After recording **please**  return to:  |
|                                                                              |                                    |
|                                                                              | Simpson Thacher & Bartlett LLP |
|                                                                              | 425 Lexington Avenue                    |
|                                                                              | New York, New York 10017                |
|                                                                              | Attention: Christopher Garcia           |
|                                                                              |                                    |
| ** **                                                                        | **648-0016-020**                        | ** ** |
|                                                                              | **(Parcel Identification Number)**      |       |

 

 

As required by Wisconsin Statutes Chapter 59.43(5),this document has been drafted by Yulia Rubin, Simpson Thacher &Bartlett LLP, 425 Lexington Avenue, New York, New York 10017.

 

----

 
| After  recording please return to:       | ** ** | ** **  |
|------------------------------------------|------------|-------------|
|                                     |       |        |
| Simpson  Thacher & Bartlett LLP |       | [WISCONSIN] |
| 425  Lexington Avenue                    |       |        |
| New  York, New York 10017                |       |        |
| Attention:  Christopher Garcia           |       |        |

 

** **

MORTGAGE, SECURITY AGREEMENT, ASSIGNMENT OFLEASES AND RENTS,AND FIXTURE FILING

 

made by

REIMAN MEDIA GROUP, INC.,

 

Mortgagor,

 

to

 

JPMORGAN CHASE BANK, N.A.,as Administrative Agent, Mortgagee

 

Dated as of March 2, 2007

 

 

THIS INSTRUMENT IS TO BE INDEXED AS BOTH AMORTGAGE AND A FIXTURE FILING FILED AS A FINANCING STATEMENT

 

----

 

TABLE OF CONTENTS

 
| ** **            | ** ** | ** **                                                        | ** ** | **Page** |
|-----------------------|------------|-------------------------------------------------------------------|------------|----------|
| Background            |       | 2                                                                 |
|                  |       |                                                              |
| Granting  Clauses     |       | 3                                                                 |
|                  |       |                                                              |
| Terms  and Conditions |       | 5                                                                 |
| 1.                    |       | Defined  Terms                                                    |       | 5        |
| 2.                    |       | Warranty  of Title                                                |       | 6        |
| 3.                    |       | Payment  of Obligations                                           |       | 6        |
| 4.                    |       | Requirements                                                      |       | 6        |
| 5.                    |       | Payment  of Taxes and Other Impositions                           |       | 6        |
| 6.                    |       | Insurance                                                         |       | 7        |
| 7.                    |       | Restrictions  on Liens and Encumbrances                           |       | 7        |
| 8.                    |       | Due  on Sale and Other Transfer Restrictions                      |       | 8        |
| 9.                    |       | Condemnation/Eminent  Domain                                      |       | 8        |
| 10.                   |       | Leases                                                            |       | 8        |
| 11.                   |       | Further  Assurances                                               |       | 8        |
| 12.                   |       | Mortgagee’s  Right to Perform                                |       | 8        |
| 13.                   |       | Remedies                                                          |       | 8        |
| 14.                   |       | Right  of Mortgagee to Credit Sale                                |       | 9        |
| 15.                   |       | Appointment  of Receiver                                          |       | 10       |
| 16.                   |       | Extension,  Release, etc                                          |       | 10       |
| 17.                   |       | Security  Agreement under Uniform Commercial Code; Fixture Filing |       | 11       |
| 18.                   |       | Assignment  of Rents                                              |       | 11       |
| 19.                   |       | Additional  Rights                                                |       | 12       |
| 20.                   |       | Notices                                                           |       | 12       |
| 21.                   |       | No  Oral Modification                                             |       | 13       |
| 22.                   |       | Partial  Invalidity                                               |       | 13       |
| 23.                   |       | Mortgagor’s  Waiver of Rights                                |       | 13       |
| 24.                   |       | Remedies  Not Exclusive                                           |       | 14       |
| 25.                   |       | Multiple  Security                                                |       | 14       |
| 26.                   |       | Successors  and Assigns                                           |       | 15       |
| 27.                   |       | No  Waivers, etc.                                                 |       | 15       |
| 28.                   |       | Governing  Law, etc.                                              |       | 15       |
| 29.                   |       | Certain  Definitions                                              |       | 16       |
| 30.                   |       | Duty  of Mortgagee; Authority of Mortgagee                        |       | 16       |
| 31.                   |       | Last  Dollars Secured; Priority                                   |       | 17       |
| 32.                   |       | Enforcement  Expenses; Indemnification                            |       | 17       |
| 33.                   |       | Release                                                           |       | 17       |
| 34.                   |       | Shortened  Redemption Election                                    |       | 17       |
| 35.                   |       | Receivership                                                      |       | 18       |
| 36.                   |       | Revolving  Loans                                                  |       | 18       |
|                       |            |                                                                   |            |          |  |

 

----

 

MORTGAGE, SECURITY AGREEMENT,ASSIGNMENT OF LEASES AND RENTS, AND FIXTURE FILING

 

THISMORTGAGE, SECURITY AGREEMENT, ASSIGNMENT OF LEASES AND RENTS, AND FIXTUREFILING, dated as of March 2, 2007 is made by REIMAN MEDIA GROUP, INC. (f/k/aREADER’S DIGEST MEDIA GROUP, INC.), a Delaware corporation (“Mortgagor”), whose address is 5400 South 60th Street,Greendale, Wisconsin 53129, to JPMORGAN CHASE BANK, N.A., as AdministrativeAgent (in such capacity, “Mortgagee”) whose address is 270 Park Avenue, New York,New York 10017. References to this “Mortgage” shall mean this instrument and any and allrenewals, modifications, amendments, supplements, extensions, consolidations,substitutions, spreaders and replacements of this instrument.

 

Background

 

A.            Doctor AcquisitionCo. (to be merged with and into Reader’s Digest, “Borrower,” together with RD German Holdings GmbH andthe other Overseas Borrowers, collectively, “Borrowers”), aDelaware corporation, RDA Holding Co., a Delaware corporation, The Reader’sDigest Association, Inc., a Delaware corporation, Mortgagee, the severalbanks and other financial institutions or entities from time to time partiesthereto (the “Lenders”), Citicorp North America, Inc. and MerrillLynch, Pierce, Fenner & Smith Incorporated, as Co- Syndication Agents,and The Royal Bank of Scotland plc, as Documentation Agent, are parties to thatcertain Credit Agreement, dated as of March 2, 2007 (as amended,supplemented, restated, replaced, substituted, or otherwise modified from timeto time, the “Credit Agreement”). The terms of the Credit Agreement are incorporated by reference inthis Mortgage as if the terms thereof were fully set forth herein;

 

B.            Pursuant to theCredit Agreement, the Lenders have severally agreed to make extensions ofcredit to the Borrowers upon the terms and subject to the conditions set forththerein;

 

C.            The Borrowers aremembers of an affiliated group of companies that includes Mortgagor;

 

D.            The proceeds of theextensions of credit under the Credit Agreement will be used in part to enablethe Borrowers to make valuable transfers to Mortgagor in connection with theoperation of its business;

 

E.             The Borrowers andMortgagor are engaged in related businesses, and Mortgagor will derivesubstantial direct and indirect benefit from the making of the extensions ofcredit under the Credit Agreement;

 

F.             It is a conditionprecedent to the obligation of the Lenders to make their respective extensionsof credit to the Borrowers under the Credit Agreement that Mortgagor shall haveexecuted and delivered this Mortgage to Mortgagee for the ratable benefit ofthe Secured Parties;

 

2

----

 

G.              Mortgagor (i) isthe owner of the fee simple estate in the parcel(s) of real property, ifany, described on Schedule A attached hereto (the “Land”); and (ii) owns,leases or otherwise has the right to use all of the buildings, improvements,structures, and fixtures now or subsequently located on the Land (the “Improvements;”the Land and the Improvements being collectively referred to as the “RealEstate”); and

 

H.              In considerationof the premises and to induce Mortgagee and the Lenders to enter into theCredit Agreement, and to induce the Lenders to make their respective extensionsof credit to the Borrowers, Mortgagor hereby agrees with Mortgagee, for theratable benefit of the Secured Parties, as follows:

 

Granting Clauses

 

Forgood and valuable consideration, the receipt and sufficiency of which arehereby acknowledged, Mortgagor agrees that to secure the payment of allobligations and liabilities of Mortgagor which may arise under or in connectionwith the Guarantee and Collateral Agreement (including, without limitation, Section 2thereof) or any other Loan Document or any Secured Hedge Agreement to whichMortgagor is a party, in each case whether on account of guarantee obligations,reimbursement obligations, fees, indemnities, costs, expenses or otherwise(including, without limitation, all Attorney Costs and disbursements of counselto Mortgagee or to any Secured Party that are required to be paid by Mortgagorpursuant to the terms of this Mortgage or any other Loan Document)(collectively, the “Obligations”);

 

MORTGAGORHEREBY GRANTS TO MORTGAGEE A LIEN UPON AND A SECURITY INTEREST IN, AND HEREBYMORTGAGES AND WARRANTS, GRANTS, ASSIGNS, TRANSFERS AND SETS OVER TO MORTGAGEE,WITH MORTGAGE COVENANTS:

 

(a)             theLand;

 

(b)             allright, title and interest Mortgagor now has or may hereafter acquire in and tothe Improvements or any part thereof and all the estate, right, title, claim ordemand whatsoever of Mortgagor, in possession or expectancy, in and to the RealEstate or any part thereof;

 

(c)             alltight, title and interest of Mortgagor in, to and under all easements, rightsof way, licenses, operating agreements, abutting strips and gores of land,streets, ways, alleys, passages, sewer rights, waters, water courses, water andflowage rights, development rights, air rights, mineral and soil rights,plants, standing and fallen timber, and all estates, rights, titles, interests,privileges, licenses, tenements, hereditaments and appurtenances belonging,relating or appertaining to the Real Estate, and any reversions, remainders,rents, issues, profits and revenue thereof and all land lying in the bed of anystreet, road or avenue, in front of or adjoining the Real Estate to the centerline thereof;

 

(d)             allof the fixtures, chattels, business machines, machinery, apparatus, equipment,furnishings, fittings, appliances and articles of personal property of everykind and nature whatsoever, and all appurtenances and additions thereto andsubstitutions or replacements thereof (together with, in each case,attachments, components, parts and accessories) currently owned or subsequentlyacquired by Mortgagor and now or subsequently attached to, or contained in orused or usable in any way in connection with

 

3

----

 

anyoperation or letting of the Real Estate, including but without limiting thegenerality of the foregoing, all screens, awnings, shades, blinds, curtains,draperies, artwork, carpets, rugs, storm doors and windows, furniture andfurnishings, heating, electrical, and mechanical equipment, lighting,switchboards, plumbing, ventilating, air conditioning and air-coolingapparatus, refrigerating, and incinerating equipment, escalators, elevators,loading and unloading equipment and systems, stoves, ranges, laundry equipment,cleaning systems (including window cleaning apparatus), telephones,communication systems (including satellite dishes and antennae), televisions,computers, sprinkler systems and other fire prevention and extinguishingapparatus and materials, security systems, motors, engines, machinery, pipes,pumps, tanks, conduits, appliances, fittings and fixtures of every kind anddescription (all of the foregoing in this paragraph (e) being referred toas the “Equipment”);

 

(e)           allright, title and interest of Mortgagor in and to all substitutes andreplacements of, and all additions and improvements to, the Real Estate and theEquipment, subsequently acquired by or released to Mortgagor or constructed,assembled or placed by Mortgagor on the Real Estate, immediately upon suchacquisition, release, construction, assembling or placement, including, withoutlimitation, any and all building materials whether stored at the Real Estate oroffsite, and, in each such case, without any further deed, conveyance,assignment or other act by Mortgagor;

 

(f)            allright, title and interest of Mortgagor in, to and under all leases, subleases,underlettings, concession agreements, management agreements, licenses and otheragreements relating to the use or occupancy of the Real Estate or the Equipmentor any part thereof, now existing or subsequently entered into by Mortgagor andwhether written or oral and all guarantees of any of the foregoing(collectively, as any of the foregoing may be amended, restated, extended,renewed or modified from time to time, the “Leases”), and all rights ofMortgagor in respect of cash and securities deposited thereunder and the rightto receive and collect the revenues, income, rents, issues and profits thereof,together with all other rents, royalties, issues, profits, revenue, income andother benefits arising from the use and enjoyment of the Mortgaged Property (asdefined below) (collectively, the “Rents”);

 

(g)           allunearned premiums under insurance policies now or subsequently obtained byMortgagor relating to the Real Estate or Equipment and Mortgagor’s interest inand to all proceeds of any such insurance policies (including title insurancepolicies) including the right to collect and receive such proceeds, subject tothe provisions relating to insurance generally set forth below; and all awardsand other compensation, including the interest payable thereon and the right tocollect and receive the same, made to the present or any subsequent owner ofthe Real Estate or Equipment for the taking by eminent domain, condemnation or otherwise,of all or any part of the Real Estate or any easement or other right therein;

 

(h)           tothe extent not prohibited under the applicable contract, consent, license orother item unless the appropriate consent has been obtained, all right, titleand interest of Mortgagor in and to (i) all contracts from time to timeexecuted by Mortgagor or any manager or agent on its behalf relating to theownership, construction, maintenance, repair, operation, occupancy, sale orfinancing of the Real Estate or Equipment or any

 

4

----

 

part thereof and all agreements and options relatingto the purchase or lease of any portion of the Real Estate or any propertywhich is adjacent or peripheral to the Real Estate, together with the right toexercise such options and all leases of Equipment, (ii) all consents,licenses, building permits, certificates of occupancy and other governmentalapprovals relating to construction, completion, occupancy, use or operation ofthe Real Estate or any part thereof, and (iii) all drawings, plans,specifications and similar or related items relating to the Real Estate; and

 

(i)            allproceeds, both cash and noncash, of the foregoing;

 

(All of the foregoing property and rights andinterests now owned or held or subsequently acquired by Mortgagor and describedin the foregoing clauses (a) through (c) are collectively referred toas the “Premises”, and those described in the foregoing clauses (a) through(i) are collectively referred to as the “Mortgaged Property”).

 

TO HAVE AND TO HOLD the Mortgaged Property and therights and privileges hereby mortgaged unto Mortgagee, its successors andassigns for the uses and purposes set forth, until the Obligations are fullypaid and performed, provided, however, that the condition of this Mortgage issuch that if the Obligations (other than contingent indemnification andcontingent expense reimbursement obligations, any Obligations in respect ofSecured Hedge Agreements, and Cash Management Obligations) are fully paid andperformed, then the estate hereby granted shall cease, terminate and becomevoid but shall otherwise remain in full force and effect.

 

This Mortgage covers present and future advances andre-advances, in the aggregate amount of the obligations secured hereby, made bythe Secured Parties for the benefit of Mortgagor, and the lien of such futureadvances and re-advances shall relate back to the date of this Mortgage.

 

Pursuant to Wisconsin Statutes Section 706.11,the lien of this Mortgage with respect to any future advances, modifications,extensions, and renewals referred to herein and made from time to time shallhave the same priority to which this Mortgage otherwise would be entitled as ofthe date this Mortgage is executed and recorded without regard to the fact thatany such future advance, modification, extension, or renewal may occur afterthe Mortgage is executed.

 

Terms and Conditions

 

Mortgagor further represents, warrants, covenantsand agrees with Mortgagee and the Secured Parties as follows:

 

1.                                      Defined Terms. Capitalized termsused herein (including in the “Background” and “Granting Clauses” sectionsabove) and not otherwise defined herein shall have the meanings ascribedthereto in the Credit Agreement. References herein to the “Secured Parties”shall mean the collective reference to (i) Mortgagee, as AdministrativeAgent, (ii) the other Agents, (iii) the L/C Issuers, (iv) theLenders, (v) the Hedge Banks, (vi) any Affiliate of a Lender, (vii) theSupplemental Administrative Agent, and (viii) each co-agent or sub-agentappointed by Mortgagee from time to time pursuant to Section 9.01(c) ofthe Credit Agreement, to which Borrower Obligations (as defined in the CreditAgreement) or Guarantor Obligations (as defined in the Credit Agreement), asapplicable, are owed.

 

5

----

 

2.                                 Warranty of Title. Mortgagor warrants that it has good recordtitle in fee simple to, or a valid leasehold interest in, the Real Estate, andgood title to, or a valid leasehold interest in, the rest of the MortgagedProperty, subject only to the matters that are set forth in Schedule B****of the title insurance policy orpolicies, if any, being issued to Mortgagee to insure the lien of this Mortgageand any other lien or encumbrance as permitted by Section 7.01 of theCredit Agreement (collectively, the “Permitted Exceptions”). Mortgagorshall warrant, defend and preserve such title and the lien of this Mortgageagainst all claims of all persons and entities (not including the holders ofthe Permitted Exceptions). Mortgagor represents and warrants that it has theright to mortgage the Mortgaged Property.

 

3.                                 Payment of Obligations. Mortgagor shall pay and perform theObligations at the times and places and in the manner specified in the LoanDocuments.

 

4.                                 Requirements. Mortgagor shall comply with all covenants,restrictions and conditions now or later of record which may be applicable toany of the Mortgaged Property, or to the use, manner of use, occupancy,possession, operation, maintenance, alteration, repair or reconstruction of anyof the Mortgaged Property, except where a failure to do so could not reasonablybe expected to have a material adverse effect (considered both individually andtogether with other such failures) on (i) the current business, operationsor condition (financial or otherwise) of Mortgagor, (ii) the current useof the Mortgaged Property or (iii) the value of the Mortgaged Property(assuming its current use).

 

5.                                 Payment of Taxes and Other Impositions. (a) Prior to the date on which anyfine, penalty, interest or cost may be added thereto or imposed, Mortgagorshall pay and discharge all taxes, charges and assessments of every kind andnature, all charges for any easement or agreement maintained for the benefit ofany of the Real Estate, all general and special assessments, levies, permits,inspection and license fees, all water and sewer rents and charges, vault taxesand all other public charges even if unforeseen or extraordinary, imposed uponor assessed against or which may become a lien on any of the Real Estate, orarising in respect of the occupancy, use or possession thereof, together withany penalties or interest on any of the foregoing (all of the foregoing arecollectively referred to herein as the “Impositions”), except where (i) thevalidity or amount thereof is being contested in good faith by appropriateproceedings, and (ii) Mortgagor has set aside on its books adequatereserves with respect thereto in accordance with GAAP. Upon request by Mortgagee,Mortgagor shall deliver to Mortgagee evidence reasonably acceptable toMortgagee showing the payment of any such Imposition. If by law any Imposition,at Mortgagor’s option, may be paid in installments (whether or not interestshall accrue on the unpaid balance of such Imposition), Mortgagor may elect topay such Imposition in such installments and shall be responsible for thepayment of such installments with interest, if any.

 

(b)           Nothing herein shallaffect any right or remedy of Mortgagee under this Mortgage or otherwise,without notice or demand to Mortgagor, to pay any Imposition after the datesuch Imposition shall have become delinquent, and add to the Obligations theamount so paid, together with interest from the time of payment at the DefaultRate. Any sums paid by Mortgagee in discharge of any Impositions shall be (i) alien on the Premises secured hereby prior to any right or title to, interestin, or claim upon the Premises subordinate to the lien of this Mortgage, and (ii) payableon demand by Mortgagor to Mortgagee together with interest at the Default Rateas set forth above.

 

6

----

 

6.                                 Insurance. (a) Mortgagorshall maintain, with financially sound and reputable companies, insurancepolicies (i) insuring the Real Estate against loss by fire, explosion,theft and such other casualties as may be reasonably satisfactory to Mortgagee,and (ii) insuring Mortgagor, Mortgagee and the other Secured Partiesagainst liability for personal injury and property damage relating to such RealEstate, such policies to be in such form and amounts and having such coverageas may be reasonably satisfactory to Mortgagee. All such insurance shall (i) providethat no cancellation, material reduction in amount or material change incoverage thereof shall be effective until at least thirty (30) days or, in thecase of insurance existing as of the date hereof, at least ten (10) daysafter receipt by Mortgagee of written notice thereof, (ii) name Mortgageeas an additional insured party or loss payee, and (iii) includedeductibles consistent with past practice or consistent with industry practiceor otherwise reasonably satisfactory to Mortgagee.

 

(b)             Ifany portion of the Premises is located in an area identified as a special floodhazard area by the Federal Emergency Management Agency or other applicableagency, Mortgagor shall maintain or cause to be maintained, flood insurance inan amount reasonably satisfactory to Mortgagee, but in no event less than themaximum limit of coverage available under the National Flood Insurance Act of1968, as amended.

 

(c)             Mortgagorpromptly shall comply with and conform in all material respects to (i) allprovisions of each such insurance policy, and (ii) all requirements of theinsurers applicable to Mortgagor or to any of the Mortgaged Property or to theuse, manner of use, occupancy, possession, operation, maintenance, alterationor repair of any of the Mortgaged Property. Mortgagor shall not use or permitthe use of the Mortgaged Property in any manner which would permit any insurerto cancel any insurance policy or void coverage required to be maintained bythis Mortgage.

 

(d)             IfMortgagor is in default of its obligations to insure or deliver any suchprepaid policy or policies, then Mortgagee, at its option upon five (5) days’notice to Mortgagor, may effect such insurance from year to year at ratessubstantially similar to the rate at which Mortgagor had insured the Premises,and pay the premium or premiums therefor, and Mortgagor shall pay to Mortgageeon demand such premium or premiums so paid by Mortgagee with interest from thetime of payment at the Default Rate.

 

(e)             Ifthe Mortgaged Property, or any part thereof, shall be destroyed or damaged andthe reasonably estimated cost thereof would exceed $500,000, Mortgagor shallgive prompt notice thereof to Mortgagee. All insurance proceeds paid or payablein connection with any damage or casualty to the Real Estate shall be deemedproceeds from a Casualty Event and applied in the manner specified in theCredit Agreement.

 

(f)              Inthe event of foreclosure of this Mortgage or other transfer of title to theMortgaged Property, all right, title and interest of Mortgagor in and to anyinsurance policies then in force shall pass to the purchaser or grantee.

 

7.                                      Restrictions onLiens and Encumbrances. Except for the lien of this Mortgage and thePermitted Exceptions, Mortgagor shall not further mortgage, nor otherwiseencumber the Mortgaged Property nor create or suffer to exist any lien, charge or encumbrance on the

 

7

----

 

Mortgaged Property, or any part thereof, whethersuperior or subordinate to the lien of this Mortgage and whether recourse ornon-recourse.

 

8.                                      Due on Sale andOther Transfer Restrictions. Except as expressly permitted under Section 7.05of the Credit Agreement, Mortgagor shall not sell, transfer, convey or assignall or any portion of, or any interest in, the Mortgaged Property.

 

9.                                      Condemnation/EminentDomain.Promptly upon obtaining knowledge of the institution of any proceedings for thecondemnation of the Mortgaged Property, or any material portion thereof,Mortgagor will notify Mortgagee of the pendency of such proceedings. All awardsand proceeds relating to such condemnation shall be deemed proceeds from aCasualty Event and applied in the manner specified in the Credit Agreement.

 

10.                                Leases. Except asexpressly permitted under the Credit Agreement, Mortgagor shall not (a) executean assignment or pledge of any Lease relating to all oranyportion of the Mortgaged Property other than in favor of Mortgagee, or (b) executeor permit to exist any Lease of any of the Mortgaged Property.

 

11.                                Further Assurances. To further assureMortgagee’s rights under this Mortgage, Mortgagor agrees promptly upon demandof Mortgagee to do any act or execute any additional documents (including, butnot limited to, security agreements on any personalty included or to beincluded in the Mortgaged Property and a separate assignment of each Lease in recordableform) as may be reasonably required by Mortgagee to confirm the lien of thisMortgage and all other rights or benefits conferred on Mortgagee by thisMortgage.

 

12.                                Mortgagee’s Rightto Perform.If Mortgagor fails to perform any of the covenants or agreements of Mortgagorin the Loan Documents, within the applicable grace period, if any, provided forin the Credit Agreement, Mortgagee, without waiving or releasing Mortgagor fromany obligation or default under this Mortgage, may, at any time upon five (5) days’notice to Mortgagor (but shall be under no obligation to) pay or perform thesame, and the amount or cost thereof, with interest at the Default Rate, shallimmediately be due from Mortgagor to Mortgagee and the same shall be secured bythis Mortgage and shall be a lien on the Mortgaged Property prior to any right,title to, interest in, or claim upon the Mortgaged Property attachingsubsequent to the lien of this Mortgage. No payment or advance of money byMortgagee under this Section shall be deemed or construed to cureMortgagor’s default or waive any right or remedy of Mortgagee.

 

13.                                Remedies. (a) Upon theoccurrence and during the continuance of any Event of Default, Mortgagee mayimmediately take such action, without notice or demand, as it deems advisableto protect and enforce its rights against Mortgagor and in and to the MortgagedProperty, including, but not limited to, the following actions, each of whichmay be pursued concurrently or otherwise, at such time and in such manner as Mortgageemay determine, in its sole discretion, without impairing or otherwise affectingthe other rights and remedies of Mortgagee:

 

(i)            Mortgagee may, to the extentpermitted by applicable law, (A) institute and maintain an action ofmortgage foreclosure against all or any part of the Mortgaged Property, (B) instituteand maintain an action on the Credit

 

8

----

 

Agreement, the Guarantee and Collateral Agreement orany other Loan Document, (C) sell all or part of the Mortgaged Property(Mortgagor expressly granting to Mortgagee the power of sale), or (D) takesuch other action at law or in equity for the enforcement of this Mortgage orany of the Loan Documents as the law may allow. Mortgagee may proceed in any suchaction to final judgment and execution thereon for all sums due hereunder,together with interest thereon at the Default Rate and all costs of suit,including, without limitation, reasonable attorneys’ fees and disbursements.Interest at the Default Rate shall be due on any judgment obtained by Mortgageefrom the date of judgment until actual payment is made of the full amount ofthe judgment; and

 

(ii)           Mortgagee may personally, or by itsagents, attorneys and employees and without regard to the adequacy orinadequacy of the Mortgaged Property or any other collateral as security forthe Obligations enter into and upon the Mortgaged Property and each and everypart thereof and exclude Mortgagor and its agents and employees therefromwithout liability for trespass, damage or otherwise (Mortgagor hereby agreeingto surrender possession of the Mortgaged Property to Mortgagee upon demand atany such time) and use, operate, manage, maintain and control the MortgagedProperty and every part thereof. Following such entry and taking of possession,Mortgagee shall be entitled, without limitation, (x) to lease all or anypart or parts of the Mortgaged Property for such periods of time and upon suchconditions as Mortgagee may, in its discretion, deem proper, (y) to enforce,cancel or modify any Lease as Mortgagee may in its discretion deem proper, and (z) generallyto execute, do and perform any other act, deed, matter or thing concerning theMortgaged Property as Mortgagee shall deem appropriate as fully as Mortgagormight do.

 

(b)             Incase of a foreclosure sale, the Real Estate may be sold, at Mortgagee’selection, in one parcel or in more than one parcel and Mortgagee isspecifically empowered (without being required to do so, and in its sole andabsolute discretion) to cause successive sales of portions of the MortgagedProperty to be held.

 

(c)             Inthe event of any breach of any of the covenants, agreements, terms orconditions contained in this Mortgage, Mortgagee shall be entitled to enjoinsuch breach and obtain specific performance of any covenant, agreement, term orcondition and Mortgagee shall have the right to invoke any equitable right orremedy as though other remedies were not provided for in this Mortgage.

 

(d)             Itis agreed that if an Event of Default shall occur and be continuing, any andall proceeds of the Mortgaged Property received by Mortgagee shall be held byMortgagee for the benefit of the Secured Parties as collateral security for theObligations (whether matured or unmatured), and shall be applied in payment ofthe Obligations in the manner and in the order set forth in Section 6.5 ofthe Guarantee and Collateral Agreement.

 

14.           Rightof Mortgagee to Credit Sale. Upon the occurrence of any sale made under thisMortgage, whether made under the power of sale or by virtue of judicialproceedings or of a judgment or decree of foreclosure and sale, Mortgagee maybid for and acquire the Mortgaged Property or any part thereof. In lieu ofpaying cash therefor, Mortgagee may make settlement for

 

9

----

 

thepurchase price by crediting upon the Obligations or other sums secured by thisMortgage, the net sales price after deducting therefrom the expenses of saleand the cost of the action and any other sums which Mortgagee is authorized todeduct under this Mortgage. In such event, this Mortgage, the Credit Agreement,the Guarantee and Collateral Agreement and documents evidencing expendituressecured hereby may be presented to the person or persons conducting the sale inorder that the amount so used or applied may be credited upon the Obligationsas having been paid.

 

15.           Appointment ofReceiver. If an Event of Default shall have occurred and be continuing,Mortgagee as a matter of right and without notice to Mortgagor, unlessotherwise required by applicable law, and without regard to the adequacy orinadequacy of the Mortgaged Property or any other collateral or the interest ofMortgagor therein as security for the Obligations, shall have the right toapply to any court having jurisdiction to appoint a receiver or receivers orother manager of the Mortgaged Property, without requiring the posting of asurety bond, and without reference to the adequacy or inadequacy of the valueof the Mortgaged Property or the solvency or insolvency of Mortgagor or any otherparty obligated for payment of all or any part of the Obligations, and whetheror not waste has occurred with respect to the Mortgaged Property, and Mortgagorhereby irrevocably consents to such appointment and waives notice of anyapplication therefor (except as may be required by law). Any such receiver orreceivers or manager shall have all the usual powers and duties of receivers inlike or similar cases and all the powers and duties of Mortgagee in case ofentry as provided in this Mortgage, including, without limitation and to theextent permitted by law, the right to enter into leases of all or any part ofthe Mortgaged Property, and shall continue as such and exercise all such powersuntil the date of confirmation of sale of the Mortgaged Property unless suchreceivership is sooner terminated.

 

16.           Extension,Release, etc. (a) Without affecting the lien or charge of thisMortgage upon any portion of the Mortgaged Property not then or theretoforereleased as security for the full amount of the Obligations, Mortgagee may,from time to time and without notice, agree to (i) release any personliable for the indebtedness borrowed or guaranteed under the Loan Documents, (ii) extendthe maturity or alter any of the terms of the indebtedness borrowed or guaranteedunder the Loan Documents or any other guaranty thereof, (iii) grant otherindulgences, (iv) release or reconvey, or cause to be released orreconveyed at any time at Mortgagee’s option any parcel, portion or all of the Mortgaged Property, (v) takeor release any other or additional security for any obligation hereinmentioned, or (vi) make compositions or other arrangements with debtors inrelation thereto.

 

(b)           No recovery of anyjudgment by Mortgagee and no levy of an execution under any judgment upon theMortgaged Property or upon any other property of Mortgagor shall affect thelien of this Mortgage or any liens, rights, powers or remedies of Mortgageehereunder, and such liens, rights, powers and remedies shall continueunimpaired.

 

(c)           If Mortgagee shallhave the right to foreclose this Mortgage or to direct a power of sale,Mortgagor authorizes Mortgagee at its option to foreclose the lien of thisMortgage (or direct the sale of the Mortgaged Property, as the case may be)subject to the rights of any tenants of the Mortgaged Property. The failure tomake any such tenants parties defendant to any such foreclosure proceeding andto foreclose their rights, or to provide notice to such tenants as required inany statutory procedure governing a sale of the Mortgaged Property,

 

10

----

 

orto terminate such tenant’s rights in such sale will not be asserted byMortgagor as a defense to any proceeding instituted by Mortgagee to collect theObligations or to foreclose the lien of this Mortgage.

 

(d)           Unless expresslyprovided otherwise, in the event that ownership of this Mortgage and title tothe Mortgaged Property or any estate therein shall become vested in the sameperson or entity, this Mortgage shall not merge in such title but shallcontinue as a valid lien on the Mortgaged Property for the amount securedhereby.

 

17.           SecurityAgreement under Uniform Commercial Code; Fixture Filing. (a) It is theintention of the parties hereto that this Mortgage shall constitute a securityagreement within the meaning of the Uniform Commercial Code (the “Code”)of the State in which the Mortgaged Property is located. If an Event of Defaultshall occur and be continuing, then in addition to having any other right orremedy available at law or in equity, Mortgagee shall have the option of either(i) proceeding under the Code and exercising such rights and remedies asmay be provided to a secured party by the Code with respect to all or anyportion of the Mortgaged Property which is personal property (including,without limitation, taking possession of and selling such property) or (ii) treatingsuch property as real property and proceeding with respect to both the real andpersonal property constituting the Mortgaged Property in accordance withMortgagee’s rights, powers and remedies with respect to the real property (inwhich event the default provisions of the Code shall not apply). If Mortgageeshall elect to proceed under the Code, then ten (10) days’ notice of saleof the personal property shall be deemed reasonable notice and the reasonableexpenses of retaking, holding, preparing for sale, selling and the likeincurred by Mortgagee shall include, but not be limited to, attorneys’ fees andlegal expenses. At Mortgagee’s request, Mortgagor shall assemble the personalproperty and make it available to Mortgagee at a place designated by Mortgageewhich is reasonably convenient to both parties.

 

(b)           Certain portions ofthe Mortgaged Property are or will become “fixtures” (as that term is definedin the Code) on the Land, and this Mortgage, upon being filed for record in thereal estate records of the county wherein such fixtures are situated, shalloperate also as a financing statement filed as a fixture filing in accordance withthe applicable provisions of said Code upon such portions of the MortgagedProperty that are or become fixtures. The real property to which the fixturesrelate is described in Schedule A hereto. The record owner of the realproperty described in Schedule A hereto, if any, is Mortgagor. The name,type of organization and jurisdiction of organization of the debtor forpurposes of this financing statement are the name, type of organization andjurisdiction of organization of Mortgagor set forth in the first paragraph ofthis Mortgage, and the name of the secured party for purposes of this financingstatement is the name of Mortgagee set forth in the first paragraph of thisMortgage. The mailing address of Mortgagor/debtor is the address of Mortgagorset forth in the first paragraph of this Mortgage. The mailing address ofMortgagee/secured party from which information concerning the security interesthereunder may be obtained is the address of Mortgagee set forth in the firstparagraph of this Mortgage. Mortgagor’s organizational identification number is146599.

 

18.           Assignment ofRents. (a) Mortgagor hereby assigns to Mortgagee the Rents as furthersecurity for the payment of and performance of the Obligations, and Mortgagorgrants to Mortgagee the right to enter the Mortgaged Property for the purposeof collecting the same and to let the Mortgaged Property or any part thereof,and to apply the Rents on account of the

 

11

----

 

Obligations. The foregoing assignment and grant ispresent and absolute and shall continue in effect until the Obligations arefully paid and performed, but Mortgagee hereby waives the right to enter theMortgaged Property for the purpose of collecting the Rents and Mortgagor shallbe entitled to collect, receive, use and retain the Rents until the occurrenceof an Event of Default; such right of Mortgagor to collect, receive, use andretain the Rents may be revoked by Mortgagee upon the occurrence and during thecontinuance of any Event of Default by giving not less than five (5) days’written notice of such revocation to Mortgagor; in the event such notice isgiven, Mortgagor shall pay over to Mortgagee, or to any receiver appointed tocollect the Rents, any lease security deposits, and shall pay monthly inadvance to Mortgagee, or to any such receiver, the fair and reasonable rentalvalue as determined by Mortgagee forthe use and occupancy of such part of theMortgaged Property as may be in the possession of Mortgagor or any affiliate ofMortgagor, and upon default in any such payment Mortgagor and any suchaffiliate will vacate and surrender the possession of the Mortgaged Property toMortgagee or to such receiver, and in default thereof may be evicted by summaryproceedings or otherwise. Mortgagor shall not accept prepayments ofinstallments of Rent to become due for a period of more than one month inadvance (except for security deposits and estimated payments of percentagerent, if any).

 

(b)           Mortgagorhas not affirmatively done any act which would prevent Mortgagee from, or limitMortgagee in, acting under any of the provisions of the foregoing assignment.

 

(c)           Exceptfor any matter disclosed in the Credit Agreement, no action has been broughtor, so far as is known to Mortgagor, is threatened, which would interfere in any way with the right ofMortgagor to execute the foregoing assignment and perform all of Mortgagor’sobligations contained in this Section and in the Leases.

 

(d)           TheAssignment of Rents set forth therein shall constitute an assignment of rentsas set forth in Wisconsin Statute Section 708.11, and as provided therein,will create a security interest in the Rents that will be perfected upon therecording of this Mortgage.

 

19.           AdditionalRights. The holder of any subordinate lien orsubordinate deed of trust on the Mortgaged Property shall have no right toterminate any Lease whether or not such Lease is subordinate to this Mortgagenor shall Mortgagor consent to any holder of any subordinate lien orsubordinate deed of trust joining any tenant under any Lease in any action toforeclose the lien or modify, interfere with, disturb or terminate the rightsof any tenant under any Lease. By recordation of this Mortgage all subordinatelienholders and the mortgagees and beneficiaries under subordinate mortgagesare subject to and notified of this provision, and any action taken by any suchlienholder or beneficiary contrary to this provision shall be null and void.Any such application shall not be construed to cure or waive any Default orEvent of Default or invalidate any act taken by Mortgagee on account of suchDefault or Event of Default.

 

20.           Notices. All notices, requests and demands to or upon Mortgagee or Mortgagorhereunder shall be effected in the manner provided for in Section 10.02 ofthe Credit Agreement; provided that any such notice, request or demand to orupon Mortgagor shall be addressed to Mortgagor at its address set forth above.

 

12

----

 

21.           No OralModification. This Mortgage may not be amended, supplemented or otherwisemodified except in accordance with the provisions of Section 10.01 of theCredit Agreement. Any agreement made by Mortgagor and Mortgagee after the dateof this Mortgage relating to this Mortgage shall be superior to the rights ofthe holder of any intervening or subordinate lien or encumbrance.

 

22.           PartialInvalidity. In the event any one or more of the provisions contained inthis Mortgage shall for any reason be held to be invalid, illegal orunenforceable in any respect, such invalidity, illegality or unenforceabilityshall not affect any other provision hereof, but each shall be construed as ifsuch invalid, illegal or unenforceable provision had never been included.Notwithstanding to the contrary anything contained in this Mortgage or in anyprovisions of any Loan Document, the obligations of Mortgagor and of any otherobligor under any Loan Document shall be subject to the limitation thatMortgagee shall not charge, take or receive, nor shall Mortgagor or any otherobligor be obligated to pay to Mortgagee, any amounts constituting interest inexcess of the maximum rate permitted by law to be charged by Mortgagee.

 

23.           Mortgagor’sWaiver of Rights. (a) Mortgagor hereby voluntarily and knowinglyreleases and waives any and all rights to retain possession of the MortgagedProperty after the occurrence of an Event of Default and any and all rights ofredemption from sale under any order or decree of foreclosure (whether full orpartial), pursuant to rights, if any, therein granted, as allowed under anyapplicable law, on its own behalf, on behalf of all persons claiming or havingan interest (direct or indirectly) by, through or under each constituent ofMortgagor and on behalf of each and every person acquiring any interest in theMortgaged Property subsequent to the date hereof, it being the intent hereofthat any and all such rights or redemption of each constituent of Mortgagor andall such other persons are and shall be deemed to be hereby waived to the fullestextent permitted by applicable law or replacement statute. Each constituent ofMortgagor shall not invoke or utilize any such law or laws or otherwise hinder,delay, or impede the execution of any right, power, or remedy herein orotherwise granted or delegated to Mortgagee, but shall permit the execution ofevery such right, power, and remedy as though no such law or laws had been madeor enacted.

 

(b)           To the fullestextent permitted by law, Mortgagor waives the benefit of all laws now existingor that may subsequently be enacted providing for (i) any appraisementbefore sale of any portion of the Mortgaged Property, (ii) any extensionof the time for the enforcement of the collection of the Obligations or thecreation or extension of a period of redemption from any sale made incollecting such debt and (iii) exemption of the Mortgaged Property fromattachment, levy or sale under execution or exemption from civil process. Tothe full extent Mortgagor may do so, Mortgagor agrees that Mortgagor will notat any time insist upon, plead, claim or take the benefit or advantage of anylaw now or hereafter in force providing for any appraisement, valuation, stay,exemption, extension or redemption, or requiring foreclosure of this Mortgagebefore exercising any other remedy granted hereunder and Mortgagor, forMortgagor and its successors and assigns, and for any and all persons everclaiming any interest in the Mortgaged Property, to the extent permitted bylaw, hereby waives and releases all rights of redemption, valuation,appraisement, stay of execution, notice of election to mature (except asexpressly provided in the Credit Agreement) or declare due the whole of thesecured indebtedness and marshalling in the event of exercise by Mortgagee ofthe foreclosure rights, power of sale, or other rights hereby created.

 

13

----

 

24.           RemediesNot Exclusive. Mortgagee shall be entitled to enforce payment andperformance of the Obligations and to exercise all rights and powers under thisMortgage or under any of the other Loan Documents or other agreement or anylaws now or hereafter in force,notwithstanding some or all of the Obligations may now or hereafter beotherwise secured, whether by deed of trust, mortgage, security agreement,pledge, lien, assignment or otherwise. Neither the acceptance of this Mortgagenor its enforcement, shall prejudice or in any manner affect Mortgagee’s rightsto realize upon or enforce any other security now or hereafter held byMortgagee, it being agreed that Mortgagee shall be entitled to enforce thisMortgage and any other security now or hereafter held by Mortgagee in suchorder and manner as Mortgagee may determine in its absolute discretion. Noremedy herein conferred upon or reserved to Mortgagee is intended to beexclusive of any other remedy herein or by law provided or permitted, but eachshall be cumulative and shall be in addition to every other remedy givenhereunder or now or hereafter existing at law or in equity or by statute. Everypower or remedy given by any of the Loan Documents to Mortgagee or to whicheither may otherwise be entitled, may be exercised, concurrently orindependently, from time to time and as often as may be deemed expedient byMortgagee, as the case may be. In no event shall Mortgagee, in the exercise ofthe remedies provided in this Mortgage (including, without limitation, inconnection with the assignment of Rents to Mortgagee, or the appointment of areceiver and the entry of such receiver on to all or any part of the MortgagedProperty), be deemed a “mortgagee in possession,” and Mortgagee shall not inany way be made liable for any act, either of commission or omission, inconnection with the exercise of such remedies.

 

25.           MultipleSecurity. If (a) the Premises shall consist of one or more parcels,whether or not contiguous and whether or not located in the same county, or(b) in addition to this Mortgage, Mortgagee shall now or hereafter hold orbe the beneficiary of one or more additional mortgages, liens, deeds of trustor other security (directly or indirectly) for the Obligations upon otherproperty in the State in which the Premises are located (whether or not suchproperty is owned by Mortgagor or by others) or (c) both the circumstancesdescribed in clauses (a) and (b) shall be true, then to the fullestextent permitted by law, Mortgagee may, at its election, commence orconsolidate in a single foreclosure action all foreclosure proceedings againstall such collateral securing the Obligations (including the MortgagedProperty), which action may be brought or consolidated in the courts of, orsale conducted in, any county in which any of such collateral is located.Mortgagor acknowledges that the right to maintain a consolidated foreclosureaction is a specific inducement to Mortgagee to extend the indebtednessborrowed pursuant to or guaranteed by the Loan Documents, and Mortgagorexpressly and irrevocably waives any objections to the commencement orconsolidation of the foreclosure proceedings in a single action and anyobjections to the laying of venue or based on the grounds of forum nonconveniens which it may now or hereafter have. Mortgagor further agrees that ifMortgagee shall be prosecuting one or more foreclosure or other proceedingsagainst a portion of the Mortgaged Property or against any collateral otherthan the Mortgaged Property, which collateral directly or indirectly securesthe Obligations, or if Mortgagee shall have obtained a judgment of foreclosureand sale or similar judgment against such collateral, then, whether or not suchproceedings are being maintained or judgments were obtained in or outside theState in which the Premises are located, Mortgagee may commence or continue anyforeclosure proceedings and exercise its other remedies granted in thisMortgage against all or any part of the Mortgaged Property and Mortgagor waivesany objections to the commencement or continuation of a foreclosure of thisMortgage or exercise of any other remedies hereunder based on such other proceedingsor judgments, and waives any right to seek to dismiss, stay, remove, transfer

 

14

----

 

or consolidate either any action under this Mortgageor such other proceedings on such basis. Neither the commencement norcontinuation of proceedings to foreclose this Mortgage, nor the exercise of anyother rights hereunder nor the recovery of any judgment by Mortgagee in anysuch proceedings or the occurrence of any sale in any such proceedings shallprejudice, limit or preclude Mortgagee’s right to commence or continue one ormore foreclosure or other proceedings or obtain a judgment against any othercollateral (either in or outside the State in which the Premises are located)which directly or indirectly secures the Obligations, and Mortgagor expresslywaives any objections to the commencement of, continuation of, or entry of ajudgment in such other sales or proceedings or exercise of any remedies in suchsales or proceedings based upon any action or judgment connected to thisMortgage, and Mortgagor also waives any right to seek to dismiss, stay, remove,transfer or consolidate either such other sales or proceedings or any sale oraction under this Mortgage on such basis. It is expressly understood and agreedthat to the fullest extent permitted by law, Mortgagee may, at its election,cause the sale of all collateral which is the subject of a single foreclosureaction at either a single sale or at multiple sales conducted simultaneouslyand take such other measures as are appropriate in order to effect theagreement of the parties to dispose of and administer all collateral securingthe Obligations (directly or indirectly) in the most economical and leasttime-consuming manner.

 

26.           Successorsand Assigns. All covenants ofMortgagor contained in this Mortgage are imposed solely and exclusively for thebenefit of Mortgagee, and its successors and assigns, and no other person orentity shall have standing to require compliance with such covenants or bedeemed, under any circumstances, to be a beneficiary of such covenants, any orall of which may be freely waived in whole or in part by Mortgagee at any timeif in the sole discretion of either of them such a waiver is deemed advisable.All such covenants of Mortgagor shall run with the land and bind Mortgagor, thesuccessors and assigns of Mortgagor (and each of them) and all subsequentowners, encumbrancers and tenants of the Mortgaged Property, and shall inure tothe benefit of Mortgagee and its successors and assigns. The word “Mortgagor”shall be construed as if it read “Mortgagors” whenever the sense of thisMortgage so requires, and if there shall be more than one Mortgagor, theobligations of Mortgagors shall be joint and several.

 

27.           NoWaivers, etc. Any failure by Mortgageeto insist upon the strict performance by Mortgagor of any of the terms andprovisions of this Mortgage shall not be deemed to be a waiver of any of theterms and provisions hereof, and Mortgagee, notwithstanding any such failure,shall have the right thereafter to insist upon the strictperformance by Mortgagor of any and all of the terms and provisions of thisMortgage to be performed by Mortgagor. Mortgagee may release, regardless ofconsideration and without the necessity for any notice to or consent by theholder of any subordinate lien on the Mortgaged Property, any part of thesecurity held for the obligations secured by this Mortgage without, as to theremainder of the security, in any way impairing or affecting the lien of thisMortgage or the priority of such lien over any subordinate lien or deed oftrust.

 

28.           GoverningLaw, etc. This Mortgage shall begoverned by and construed and interpreted in accordance with the laws of theState in which the Mortgaged Property is located, except that Mortgagorexpressly acknowledges that by their respective terms the Credit Agreement andthe Guarantee and Collateral Agreement shall be governed and construed inaccordance with the laws of the State of New York, and for purposes ofconsistency, Mortgagor agrees that in any in personam proceeding related tothis Mortgage the rights of the parties to this

 

15

----

 

Mortgageshall also be governed by and construed in accordance with the laws of theState of New York governing contracts made and to be performed in that State.

 

Anythingelsewhere herein contained to the contrary notwithstanding, in the event thatany provision in this Mortgage shall be inconsistent with any provision ofWisconsin Statutes Chapter 846 (the “Act”), the provisions of the Actshall take precedence over the provisions of this Mortgage, but shall notinvalidate or render unenforceable any other provision of this Mortgage thatcan be construed in a manner consistent with the Act.

 

29.           Certain Definitions.Unless the context clearly indicates a contrary intent or unless otherwisespecifically provided herein, words used in this Mortgage shall be usedinterchangeably in singular or plural form and the word “Mortgagor” shall mean“each Mortgagor or any subsequent owner or owners of the Mortgaged Property orany part thereof or interest therein,” the word “Mortgagee” shall mean“Mortgagee or any successor agent for the Lenders,” the word “Person” shallinclude any individual, corporation, partnership, limited liability company,trust, unincorporated association, government, governmental authority, or otherentity, and the words “Mortgaged Property” shall include any portion of theMortgaged Property or interest therein. Whenever the context may require, anypronouns used herein shall include the corresponding masculine, feminine orneuter forms, and the singular form of nouns and pronouns shall include theplural and vice versa. The captions in this Mortgage are for convenience orreference only and in no way limit or amplify the provisions hereof.

 

30.           Duty of Mortgagee;Authority of Mortgagee. (a) Mortgagee’s sole duty with respect to thecustody, safekeeping and physical preservation of the Mortgaged Property whichis in its possession, or otherwise, shall be to deal with it in the same manneras Mortgagee deals with similar property for its own account. NeitherMortgagee, any Secured Party nor any of their respective officers, directors,employees or agents shall be liable for failure to demand, collect or realizeupon any of the Mortgaged Property or for any delay in doing so or shall beunder any obligation to sell or otherwise dispose of any Mortgaged Propertyupon the request of Mortgagor or any other Person or to take any other actionwhatsoever with regard to the Mortgaged Property or any part thereof. Thepowers conferred on Mortgagee and the Secured Parties hereunder are solely toprotect Mortgagee’s and the Secured Parties’ interests in the MortgagedProperty and shall not impose any duty upon Mortgagee or any Secured Party toexercise any such powers. Mortgagee and the Secured Parties shall beaccountable only for amounts that they actually receive as a result of theexercise of such powers, and neither they nor any of their officers, directors,employees or agents shall be responsible to Mortgagor for any act or failure toact hereunder, except for their own gross negligence or willful misconduct.

 

(b)           Mortgagoracknowledges that the rights and responsibilities of Mortgagee under thisMortgage with respect to any action taken by Mortgagee or the exercise ornon-exercise by Mortgagee of any option, voting right, request, judgment orother right or remedy provided for herein or resulting or arising out of thisMortgage shall, as between Mortgagee and the Secured Parties, be governed bythe Credit Agreement and by such other agreements with respect thereto as mayexist from time to time among them, but, as between Mortgagee and Mortgagor,Mortgagee shall be conclusively presumed to be acting as agent for the SecuredParties with full and valid authority so to act or refrain from acting, andMortgagor shall be under no obligation, or entitlement, to make any inquiryrespecting such authority.

 

16

----

 

31.           LastDollars Secured; Priority. To the extent that this Mortgage secures only a portionof the indebtedness owing or which may become owing by Mortgagor to the SecuredParties, the parties agree that any payments or repayments of such indebtednessshall be and be deemed to be applied first to the portion of the indebtednessthat is not secured hereby, it being the parties’ intent that the portion ofthe indebtedness last remaining unpaid shall be secured hereby. If at any timethis Mortgage shall secure less than all of the principal amount of theObligations, it is expressly agreed that any repayments of the principal amountof the Obligations shall not reduce the amount of the lien of this Mortgageuntil the lien amount shall equal the principal amount of the Obligationsoutstanding.

 

32.           Enforcement Expenses; Indemnification.(a) Mortgagor agrees to pay, orreimburse each Secured Party and Mortgagee for, all its reasonableout-of-pocket costs and expenses incurred in collecting against Mortgagor orotherwise enforcing or preserving any rights under this Mortgage and the otherLoan Documents to which Mortgagor is a party, including, without limitation,the reasonable fees and disbursements of counsel to each Secured Party and ofcounsel to Mortgagee.

 

(b)           Mortgagoragrees to pay, and to save Mortgagee and the Secured Parties harmless from, anyand all liabilities with respect to, or resulting from any delay in paying, anyand all stamp, excise, sales or other taxes which may be payable or determinedto be payable with respect to any of the Mortgaged Property or in connectionwith any of the transactions contemplated by this Mortgage.

 

(c)           Mortgagoragrees to pay, and to save Mortgagee and the Secured Parties harmless from, anyand 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 theexecution, delivery, enforcement, performance and administration of thisMortgage to the extent the Borrowers would be required to do so pursuant toSection 10.05 of the Credit Agreement.

 

(d)           Theagreements in this Section shall survive repayment ofthe Obligations and all other amounts payable under the Credit Agreement andthe other Loan Documents.

 

33.           Release.If any of the Mortgaged Property shall be sold, transferred or otherwise disposedof by any Mortgagor in a transaction permitted by the Credit Agreement and theNet Cash Proceeds are applied in accordance with the terms of the CreditAgreement, then Mortgagee, at the request and sole expense of such Mortgagor,shall execute and deliver to such Mortgagor all releases or other documentsreasonably necessary or desirable for the release of the Liens created herebyon such Mortgaged Property. Mortgagor shall deliver to Mortgagee, at least five(5) Business Days prior to thedate of the proposed release, a written request for release identifying the sale or other disposition in reasonable detail, includingthe price thereof and any expenses in connection therewith, together with acertification by Mortgagor stating that such transaction is in compliance with,and permitted by, the Credit Agreement and the other Loan Documents.

 

34.           ShortenedRedemption Election. Mortgagor agrees to the provisions of Section 846.103of the Wisconsin Statutes, or any successor provision, permitting Mortgagee, atits

 

17

----

 

optionupon waiving the right to judgment for deficiency, to hold a foreclosure saleof real estate three (3) months after a foreclosure judgment is entered.

 

35.           Receivership.Any receiver appointed under this Mortgage shall have all of the usual powersand duties of receivers pursuant to Wisconsin common and statutory law,including, but not limited to, Wisconsin Statutes Section 813.16, et al.,as amended, modified and/or replaced from time to time.

 

36.           Revolving Loans.Notwithstanding anything contained in this Mortgage or the other Loan Documentsto the contrary, this Mortgage shall secure: (i) a maximum principalamount of $2,110,000,000, exclusive of any items described in (ii) below,including any additional advances made from time to time after the date hereofpursuant to the Loan Documents whether made as part of the secured indebtednesssecured hereby, made at the option of Mortgagee and/or the Lenders, made aftera reduction to a zero (0) or other balance, or made otherwise, and (ii) allother amounts payable by Mortgagor, or advanced by Mortgagee or the Lenders forthe account, or on behalf, of Borrowers, pursuant to the Loan Documents,including amounts advanced with respect to the Property for the payment oftaxes, assessments, insurance premiums and other costs and impositions incurredfor the protection of the Property to the same extent as if the futureobligations and advances were made on the date of execution of the Mortgage.

 

18

----

 

ThisMortgage has been duly executed by Mortgagor as of the date first above writtenand is intended to be effective as of such date.

 

 
|   | REIMAN  MEDIA GROUP, INC., |
|--------|----------------------------|
|   | a  Delaware corporation    |
|   |                       |
|   |                       |
|   | By:                        |   |
|   | Name:                      |   |
|   | Title:                     |   |

 

*[SIGNATURE PAGE TO WISCONSIN MORTGAGE]*

 

----

 

STATEOF  New York                                                 )

 

) ss

 

Westchester COUNTY             )

 

Onthis             dayof March, 2007, before me a Notary Public in and for the State of New York, personallyappeared to me personally known, who being by me first duly sworn, did say thathe/she is the Vice President & Treasurer of Reiman Media Group, Inc.and as said Vice President & Treasurer acknowledged said instrument to bethe free act and deed of Reiman Media Group, Inc.

 

 
|   |                     |
|--------|--------------------------|
|   |                     |
|   | Notary  Public, State of |                                                       |
|   | My  Commission expires   |                                                    |
|        |                          |  |  |

 

*[SIGNATURE PAGE TO WISCONSIN MORTGAGE]*

 

----

 

TITLE AFFIDAVIT, AFFIDAVIT OF NO CHANGES AND GAP INDEMNITY

 

 

STATEOF                                 ,  )

                                                        )          ss.:

COUNTYOF                                 )

 

The undersigned,                          ,in his/her capacity as                ,of Reiman Media Group, Inc., f/k/a Reader’s Digest Media Group, Inc.,a Delaware corporation (“Reiman”), intending that Reiman (and not theundersigned individually) shall be bound hereby, being duly sworn, deposes andsays:

 

(1)   Reiman is the record owner of the real property known as and bythe street address 5400 South 60th Street, Greendale, WI (the “Property”) whichis more particularly identified in the title commitment bearing commitment CaseNumber WA261291, Other Company File Number NCS 120162 (the “Title Commitment”)issued by LandAmerica Lawyers Title Insurance Corporation (the “TitleCompany”). The undersigned is familiar with the Property and with the facts setforth herein.

 

(2)   To the best of my knowledge, Reiman has paid all real estatetaxes, special assessments, water and sewer charges and management fees, ifany, with respect to the Property which would be delinquent if not paid on orprior to the date hereof (and to the extent that any of the foregoing has notbeen paid by the date hereof, same will be paid within 30 days of the datehereof).

 

(3)   A survey of the Property dated April 4, 2002 was made by PaulA. Kubicek (the “Survey”). To the best of my knowledge, no improvements orchanges, which would be reflected in a current survey, have been made to thesurveyed Property since the performance of the Survey, and the Surveyaccurately represents the existing condition of the surveyed Property.

 

(4)   To the best of my knowledge, no labor has been supplied to theProperty and no materials have been delivered to the Property that might becomethe subject of a labor, mechanic’s or materialmen’s lien on the Property,except for labor and/or materials which will be paid for in the ordinary courseof business.

 

(5)   There are no existing tenancies, leases or other occupancyagreements affecting the Property.

 

(6)   To the best of my knowledge, there are no judgments, decrees ororders before any court or judicial officer against Reiman for the

 

[[2683760]]

 

----

 

payment of money and no proceedings before any courtor officer of the United States or any state affecting Reiman or the Propertywhich are likely to result in such an order, judgment or decree except in eachcase for orders, judgments or decrees which will be paid in the ordinary courseof business by Reiman after Reiman exhausts or waives any and all rights it mayhave to appeal the same.

 

(7)   In order to effectuate a New York-styleclosing, Reiman agrees, with respect to the Property, that it will not in anyway encumber the Property from the date of the Commitment forward to the datethat the Mortgage, Security Agreement, Assignment of Leases and Rents, andFixture Filing (the “Mortgage”) to be insured pursuant to the Title Commitmentand to be dated as of the date of the closing (“Closing”) under the “CreditAgreement” (as defined in the Mortgage), which Mortgage was made by Reiman infavor of JPMorgan Chase Bank, N.A. (“JPMorgan”), acting as AdministrativeAgent, is recorded, and Reiman hereby agrees to indemnify and hold the TitleCompany harmless from any loss, cost, claim or damage that the Title Companymay sustain or incur by reason of any encumbrance of the Property by Reimanfrom this date to the date the Mortgage is recorded against the Property.

 

(8)   This Affidavit is made for the purpose ofinducing the Title Company to issue, pursuant to the Title Commitment, alender’s policy of title insurance with respect to the Mortgage in connectionwith the Closing.

 

(9)   Reiman hereby indemnifies and agrees to holdthe Title Company harmless from and against any damages or expenses, includingreasonable attorney’s fees sustained by the Title Company as a result of thefalsity of any statement contained herein.

 

 
|   |                                                                                                                            |
|--------|---------------------------------------------------------------------------------------------------------------------------------|
|   | Name:                                                                                                                           |
|   | in his/her official capacity as  Vice President & Treasurer**of                                                             |
|   | Reiman Media Group, Inc. f/k/a  Readers Digest Media Group, Inc.  (not intending to be personally liable  hereunder). |

 

Sworn to before me this            

       dayof                          ,2007.

 

----

 

**Schedule A**

** **

**Description of the Land**

** **

**OUTLOT A OF CERTIFIED SURVEY MAP NO. 5875, RECORDED AUGUST31, 1993, ON REEL 3109, IMAGE 1422, AS DOCUMENT NUMBER 6820334,****BEINGA REDIVISION OF ALL****OF PARCEL 3 OF CERTIFIEDSURVEY MAP NO.****5801,****BEING IN THESOUTHWEST 1/4 OF THE SOUTHWEST 1/4 OF SECTION 26, TOWNSHIP 6 NORTH, RANGE21 EAST, IN THE VILLAGE OF GREENDALE, COUNTY OF MILWAUKEE, STATE OF WISCONSIN.**

** **

**ALSO;**

** **

**PARCEL 1 OF CERTIFIED SURVEY MAP NO. 4015, RECORDED APRIL 27,1981, ON REEL 1371, IMAGE 198, AS DOCUMENT NUMBER 5471063, BEING A REDIVISIONOF PART OF LOTS 6, 7, 8, 19 AND 20 IN THE REIGH AND SALENTINE CO’S SUBDIVISONNO. 1 AND PART OF PARCEL 1 IN CERTIFIED SURVEY MAP NO. 719 AND LANDS INTHE NORTHWEST 1/4, SOUTHWEST****1/4 AND THESOUTHEAST 1/4 OF THE****SOUTHWEST 1/4 OF SECTION 26,TOWNSHIP 6 NORTH, RANGE 21 EAST, IN THE VILLAGE OF GREENDALE AND IN THE CITY OFGREENFIELD, COUNTY OF MILWAUKEE, STATE OF WISCONSIN.**

** **

**ALSO;**

** **

**THAT PART OF THE SOUTHWEST 1/4 OF SECTION 26, INTOWNSHIP 6 NORTH, RANGE 21 EAST, IN THE VILLAGE OF GREENDALE,****COUNTY****OFMILWAUKEE, STATE OF WISCONSIN, DESCRIBED AS FOLLOWS: BEGINNING 145.34 FEETNORTH 0°45’****12”****WEST AND 187.20 FEET NORTH 88°29’49” EAST OF THE****SOUTHWEST****CORNER OFTHE SOUTHWEST 1/4, AS MEASURED ALONG THE WEST LINE AND PARALLEL WITH THE SOUTHLINE OF THE SOUTHWEST 1/4; THENCE NORTH 88° 29’ 49” EAST 501.86 FEET; THENCENORTH 39°21’ 18” EAST 324.14 FEET; THENCE NORTH 50°38’ 42” WEST 117.25 FEET TOTHE SOUTH LINE OF CERTIFIED SURVEY MAP NO. 4015; THENCE SOUTH 79°51’ 25” WEST411.56 FEET; THENCE SOUTH 38°30’****57”****WEST339.54 FEET TO THE POINT OF BEGINNING.**

** **

**ALSO;**

** **

**PARCEL 4 OF CERTIFIED SURVEY MAP NO. 5801, BEING A REDIVISIONOF PARCELS 1, 2****AND******3OF********CERTIFIED SURVEY MAP NO. 4721, ANDLANDS ALL IN THE NORTH WEST 1/4, SOUTH WEST 1/4 AND THE SOUTH EAST 1/4 OF THESOUTH WEST 1/4 OF SECTION 26, TOWNSHIP 6 NORTH, RANGE 21 EAST, IN THEVILLAGE OF GREENDALE, COUNTY OF MILWAUKEE, STATE OF WISCONSIN, RECORDED ONFEBRUARY 3, 1993, AS DOCUMENT NO. 6725380. AFFIDAVIT OF****CORRECTIONRECORDED APRIL 26,****1993, IN REEL 3020, IMAGE780, AS DOCUMENT NUMBER 6757193.**

** **

**TOGETHER WITH EASEMENT FOR EMERGENCY EGRESS CONTAINED INEASEMENT AGREEMENT RECORDED****ON****DECEMBER8, 1993 IN**********REEL3178, IMAGE 230, AS DOCUMENT NUMBER 6868082.**

** **

**PARCEL NO. 648-0016-020**

 

----

** **

**OPEN-END MORTGAGE, SECURITYAGREEMENT, ASSIGNMENT OF LEASESAND RENTS, AND FIXTURE FILING**

 

**Preparer Information:**

Yulia Rubin, 425 Lexington Avenue, New York,New York 10017Telephone number: (212) 455-2646

 

**After Recording, Please Return Document to:**

Simpson Thacher & Bartlett LLP, 425Lexington Avenue, New York, New York 10017Attention: Christopher Garcia

 

**Name of Taxpayer:**

Books Are Fun, Ltd., 1680 Highway 1 North,Fairfield, Iowa 52556

 

**Name of Mortgagor:**

Books Are Fun, Ltd.

** **

**Address of Mortgagor:**

1680 Highway 1 North,Fairfield, Iowa 52556

 

**Name of Mortgagee:**

JPMorgan Chase Bank, N.A.

 

**Address of Mortgagee:**

270 Park Avenue, New York, New York 10017

 

**Legal Description:**See attached Schedule A.

 

**ATTENTION COUNTY CLERK****:****THIS INSTRUMENT COVERSGOODS THAT ARE OR ARE TO BECOME FIXTURES ON THE REAL PROPERTY DESCRIBED HEREINAND IS TO BE FILED IN THE COUNTY RECORDS WHERE MORTGAGES ON REAL PROPERTY ARERECORDED. ADDITIONALLY, THIS INSTRUMENT SHOULD BE APPROPRIATELY INDEXED, NOTONLY AS A MORTGAGE, BUT ALSO AS A FINANCING STATEMENT COVERING GOODS THAT AREOR ARE TO BECOME FIXTURES ON THE REAL PROPERTY DESCRIBED HEREIN.****THE****MAILING ADDRESSES OF THEBORROWER/MORTGAGOR (GRANTOR OR DEBTOR) AND OF THE BENEFICIARY/MORTGAGEE(SECURED PARTY) ARE SET FORTH ABOVE AND ON THE FIRST PAGE OF THEMORTGAGE/FIXTURE FILING.**

 

----

 

TABLE OF CONTENTS

 
| ** **            | **Page**                                                          |
|-----------------------|-------------------------------------------------------------------|
|                  |                                                              |
| Background            | 2                                                                 |
|                  |                                                              |
| Granting  Clauses     | 3                                                                 |
|                  |                                                              |
| Terms  and Conditions | 5                                                                 |
| 1.                    | Defined  Terms                                                    | 5 |
| 2.                    | Warranty  of Title                                                | 6 |
| 3.                    | Payment  of Obligations                                           | 6 |
| 4.                    | Requirements                                                      | 6 |
| 5.                    | Payment  of Taxes and Other Impositions                           | 6 |
| 6.                    | Insurance                                                         | 7 |
| 7.                    | Restrictions  on Liens and Encumbrances                           | 8 |
| 8.                    | Due  on Sale and Other Transfer Restrictions                      | 8 |
| 9.                    | Condemnation/Eminent  Domain                                      | 8 |
| 10.                   | Leases                                                            | 8 |
| 11.                   | Further  Assurances                                               | 8 |
| 12.                   | Mortgagee’s  Right to Perform                                | 8 |
| 13.                   | Remedies                                                          | 8 |
| 14.                   | Right  of Mortgagee to Credit Sale                                | 10 |
| 15.                   | Appointment  of Receiver                                          | 10 |
| 16.                   | Extension,  Release, etc                                          | 10 |
| 17.                   | Security  Agreement under Uniform Commercial Code; Fixture Filing | 11 |
| 18.                   | Assignment  of Rents                                              | 12 |
| 19.                   | Additional  Rights                                                | 12 |
| 20.                   | Notices                                                           | 12 |
| 21.                   | No  Oral Modification                                             | 13 |
| 22.                   | Partial  Invalidity                                               | 13 |
| 23.                   | Mortgagor’s  Waiver of Rights                                | 13 |
| 24.                   | Remedies  Not Exclusive                                           | 14 |
| 25.                   | Multiple  Security                                                | 14 |
| 26.                   | Successors  and Assigns                                           | 15 |
| 27.                   | No  Waivers, etc                                                  | 16 |
| 28.                   | Governing  Law, etc                                               | 16 |
| 29.                   | Certain  Definitions                                              | 16 |
| 30.                   | Duty  of Mortgagee; Authority of Mortgagee                        | 16 |
| 31.                   | Last  Dollars Secured; Priority                                   | 17 |
| 32.                   | Enforcement  Expenses; Indemnification                            | 17 |
| 33.                   | Redemption                                                        | 18 |
| 34.                   | No  Agricultural Use                                              | 18 |
| 35.                   | Brokers                                                           | 18 |
| 36.                   | Release                                                           | 19 |

 

----

 

NOTICE: THIS OPEN-END MORTGAGE SECURES CREDIT IN THEAGGREGATE PRINCIPAL AMOUNT OF $2,110,000,000. LOANS AND ADVANCES UP TO THISAMOUNT, TOGETHER WITH INTEREST, ARE SENIOR TO INDEBTEDNESS TO OTHER CREDITORSUNDER SUBSEQUENTLY RECORDED OR FILED MORTGAGES AND LIENS

 

OPEN-END MORTGAGE,SECURITY AGREEMENT,ASSIGNMENT OF LEASES AND RENTS, AND FIXTURE FILING

 

THIS OPEN-END MORTGAGE, SECURITY AGREEMENT,ASSIGNMENT OF LEASES AND RENTS, AND FIXTURE FILING, dated as of March 2,2007 is made by BOOKS ARE FUN, LTD., an Iowa corporation (“Mortgagor”),whose address is 1680 Highway 1 North, Fairfield, Iowa 52556, to JPMORGAN CHASEBANK, N.A., as Administrative Agent (in such capacity, “Mortgagee”)whose address is 270 Park Avenue, New York, New York 10017. References to this “Mortgage”shall mean this instrument and any and all renewals, modifications, amendments,supplements, extensions, consolidations, substitutions, spreaders andreplacements of this instrument.

 

Background

 

A.                              Doctor AcquisitionCo. (to be merged with and into Reader’s Digest, “Borrower,” togetherwith RD German Holdings GmbH and the other Overseas Borrowers, collectively, “Borrowers”),a Delaware corporation, RDA Holding Co., a Delaware corporation, The Reader’sDigest Association, Inc., a Delaware corporation, Mortgagee, the severalbanks and other financial institutions or entities from time to time partiesthereto (the “Lenders”), Citicorp North America, Inc. and MerrillLynch, Pierce, Fenner & Smith Incorporated, as Co-Syndication Agents,and The Royal Bank of Scotland plc, as Documentation Agent, are parties to thatcertain Credit Agreement, dated as of March 2, 2007 (as amended,supplemented, restated, replaced, substituted, or otherwise modified from timeto time, the “Credit Agreement”). The terms of the Credit Agreement areincorporated by reference in this Mortgage as if the terms thereof were fullyset forth herein;

 

B.                                Pursuant to theCredit Agreement, the Lenders have severally agreed to make extensions ofcredit to the Borrowers upon the terms and subject to the conditions set forththerein;

 

C.                                The Borrowers aremembers of an affiliated group of companies that includes Mortgagor;

 

D.                               The proceeds of theextensions of credit under the Credit Agreement will be used in part to enablethe Borrowers to make valuable transfers to Mortgagor in connection with theoperation of its business;

 

E.                                 The Borrowers andMortgagor are engaged in related businesses, and Mortgagor will derivesubstantial direct and indirect benefit from the making of the extensions ofcredit under the Credit Agreement;

 

2

----

 

F.                                 It is a condition precedent to the obligationof the Lenders to make their respective extensions of credit to the Borrowersunder the Credit Agreement that Mortgagor shall have executed and deliveredthis Mortgage to Mortgagee for the ratable benefit of the Secured Parties;

 

G.                                Mortgagor (i) is the owner of the feesimple estate in the parcel(s) of real property, if any, described on ScheduleA attached hereto (the “Land”); and (ii) owns, leases orotherwise has the right to use all of the buildings, improvements, structures,and fixtures now or subsequently located on the Land (the “Improvements;”the Land and the Improvements being collectively referred to as the “RealEstate”); and

 

H.                               In consideration of the premises and toinduce Mortgagee and the Lenders to enter into the Credit Agreement, and toinduce the Lenders to make their respective extensions of credit to theBorrowers, Mortgagor hereby agrees with Mortgagee, for the ratable benefit ofthe Secured Parties, as follows:

 

Granting Clauses

 

For good and valuable consideration, the receipt and sufficiency ofwhich are hereby acknowledged, Mortgagor agrees that to secure the payment ofall obligations and liabilities of Mortgagor which may arise under or inconnection with the Guarantee and Collateral Agreement (including, withoutlimitation, Section 2 thereof) or any other Loan Document or any SecuredHedge Agreement to which Mortgagor is a party, in each case whether on accountof guarantee obligations, reimbursement obligations, fees, indemnities, costs,expenses or otherwise (including, without limitation, all Attorney Costs anddisbursements of counsel to Mortgagee or to any Secured Party that are requiredto be paid by Mortgagor pursuant to the terms of this Mortgage or any otherLoan Document) (collectively, the “Obligations”);

 

MORTGAGORHEREBY GRANTS TO MORTGAGEE A LIEN UPON AND A SECURITY INTEREST IN, AND HEREBYMORTGAGES AND WARRANTS, GRANTS, ASSIGNS, TRANSFERS AND SETS OVER TO MORTGAGEE,WITH MORTGAGE COVENANTS:

 

(a)                             the Land;

 

(b)                            all right, title and interest Mortgagor nowhas or may hereafter acquire in and to the Improvements or any part thereof andall the estate, right, title, claim or demand whatsoever of Mortgagor, in possessionor expectancy, in and to the Real Estate or any part thereof;

 

(c)                             all right, title and interest of Mortgagorin, to and under all easements, rights of way, licenses, operating agreements,abutting strips and gores of land, streets, ways, alleys, passages, sewerrights, waters, water courses, water and flowage rights, development rights,air rights, mineral and soil rights, plants, standing and fallen timber, andall estates, rights, titles, interests, privileges, licenses, tenements,hereditaments and appurtenances belonging, relating or appertaining to the RealEstate, and any reversions, remainders, rents, issues, profits and revenuethereof and all land lying in the bed of any street, road or avenue, in frontof or adjoining the Real Estate to the center line thereof;

 

3

----

 

(d)                            all of thefixtures, chattels, business machines, machinery, apparatus, equipment,furnishings, fittings, appliances and articles of personal property of everykind and nature whatsoever, and all appurtenances and additions thereto andsubstitutions or replacements thereof (together with, in each case,attachments, components, parts and accessories) currently owned or subsequentlyacquired by Mortgagor and now or subsequently attached to, or contained in orused or usable in any way in connection with any operation or letting of theReal Estate, including but without limiting the generality of the foregoing,all screens, awnings, shades, blinds, curtains, draperies, artwork, carpets,rugs, storm doors and windows, furniture and furnishings, heating, electrical,and mechanical equipment, lighting, switchboards, plumbing, ventilating, airconditioning and air-cooling apparatus, refrigerating, incinerating equipment,escalators, elevators, loading and unloading equipment and systems, stoves,ranges, laundry equipment, cleaning systems (including window cleaningapparatus), telephones, communication systems (including satellite dishes andantennae), televisions, computers, sprinkler systems and other fire preventionand extinguishing apparatus and materials, security systems, motors, engines,machinery, pipes, pumps, tanks, conduits, appliances, fittings and fixtures ofevery kind and description (all of the foregoing in this paragraph (e) beingreferred to as the “Equipment”);

 

(e)                             all right, titleand interest of Mortgagor in and to all substitutes and replacements of, andall additions and improvements to, the Real Estate and the Equipment,subsequently acquired by or released to Mortgagor or constructed, assembled orplaced by Mortgagor on the Real Estate, immediately upon such acquisition,release, construction, assembling or placement, including, without limitation,any and all building materials whether stored at the Real Estate or offsite,and, in each such case, without any further deed, conveyance, assignment orother act by Mortgagor;

 

(f)                               all right, titleand interest of Mortgagor in, to and under all leases, subleases,underlettings, concession agreements, management agreements, licenses and otheragreements relating to the use or occupancy of the Real Estate or the Equipmentor any part thereof, now existing or subsequently entered into by Mortgagor andwhether written or oral and all guarantees of any of the foregoing (collectively,as any of the foregoing may be amended, restated, extended, renewed or modifiedfrom time to time, the “Leases”), and all rights of Mortgagor in respect of cash andsecurities deposited thereunder and the right to receive and collect therevenues, income, rents, issues and profits thereof, together with all otherrents, royalties, issues, profits, revenue, income and other benefits arisingfrom the use and enjoyment of the Mortgaged Property (as defined below)(collectively, the “Rents”);

 

(g)                            all unearnedpremiums under insurance policies now or subsequently obtained by Mortgagorrelating to the Real Estate or Equipment and Mortgagor’s interest in and to allproceeds of any such insurance policies (including title insurance policies)including the right to collect and receive such proceeds, subject to theprovisions relating to insurance generally set forth below; and all awards andother compensation, including the interest payable thereon and the right tocollect and receive the same, made to the present or any subsequent owner ofthe Real Estate or Equipment for the taking by eminent domain, condemnation orotherwise, of all or any part of the Real Estate or any easement or other righttherein;

 

4

----

 

(h)                            to the extent notprohibited under the applicable contract, consent, license or other item unlessthe appropriate consent has been obtained, all right, title and interest ofMortgagor in and to (i) all contracts from time to time executed byMortgagor or any manager or agent on its behalf relating to the ownership,construction, maintenance, repair, operation, occupancy, sale or financing ofthe Real Estate or Equipment or any part thereof and all agreements and optionsrelating to the purchase or lease of any portion of the Real Estate or anyproperty which is adjacent or peripheral to the Real Estate, together with theright to exercise such options and all leases of Equipment, (ii) allconsents, licenses, building permits, certificates of occupancy and othergovernmental approvals relating to construction, completion, occupancy, use oroperation of the Real Estate or any part thereof, and (iii) all drawings,plans, specifications and similar or related items relating to the Real Estate;and

 

(i)                                all proceeds, bothcash and noncash, of the foregoing;

 

(All of the foregoing property and rights andinterests now owned or held or subsequently acquired by Mortgagor and describedin the foregoing clauses (a) through (c) are collectively referred toas the “Premises”, and those described in the foregoing clauses (a) through(i) are collectively referred to as the “Mortgaged Property”).

 

TO HAVE AND TO HOLD the Mortgaged Propertyand the rights and privileges hereby mortgaged unto Mortgagee, its successorsand assigns for the uses and purposes set forth, until the Obligations arefully paid and performed, provided, however, that the condition of thisMortgage is such that if the Obligations (other than contingent indemnificationand contingent expense reimbursement obligations, any Obligations in respect ofSecured Hedge Agreements, and Cash Management Obligations) are fully paid andperformed, then the estate hereby granted shall cease, terminate and becomevoid but shall otherwise remain in full force and effect.

 

This Mortgage covers present and futureadvances and re-advances, in the aggregate amount of the obligations securedhereby, made by the Secured Parties for the benefit of Mortgagor, and the lienof such future advances and re-advances shall relate back to the date of thisMortgage.

 

The maturity date of the Obligations is March 2,2013 with respect to the Revolving Credit Facility, and March 2, 2014 withrespect to the Term Loans.

 

Terms andConditions

 

Mortgagor further represents, warrants,covenants and agrees with Mortgagee and the Secured Parties as follows:

 

1.                                            Defined Terms. Capitalized termsused herein (including in the “Background” and “Granting Clauses” sectionsabove) and not otherwise defined herein shall have the meanings ascribedthereto in the Credit Agreement. References herein to the “Secured Parties”shall mean the collective reference to (i) Mortgagee, as AdministrativeAgent, (ii) the other Agents, (iii) the L/C Issuers, (iv) theLenders, (v) the Hedge Banks, (vi) any Affiliate of a Lender, (vii) theSupplemental Administrative Agent, and (viii) each co-agent or sub-agentappointed by Mortgagee from time to time pursuant to Section 9.01(c) ofthe Credit Agreement, to which

 

5

----

 

Borrower Obligations (as defined in the CreditAgreement) or Guarantor Obligations (as defined in the Credit Agreement), asapplicable, are owed.

 

2.                                       Warranty of Title. Mortgagorwarrants that it has good record title in fee simple to, or a valid leaseholdinterest in, the Real Estate, and good title to, or a valid leasehold interestin, the rest of the Mortgaged Property, subject only to the matters that areset forth in Schedule B of the title insurance policy or policies, if any,being issued to Mortgagee to insure the lien of this Mortgage and any otherlien or encumbrance as permitted by Section 7.01 of the Credit Agreement(collectively, the “Permitted Exceptions”). Mortgagor shall warrant,defend and preserve such title and the lien of this Mortgage against all claimsof all persons and entities (not including the holders of the PermittedExceptions). Mortgagor represents and warrants that it has the right tomortgage the Mortgaged Property.

 

3.                                       Payment ofObligations. Mortgagor shall pay and perform the Obligations at the times and placesand in the manner specified in the Loan Documents.

 

4.                                       Requirements. Mortgagor shallcomply with all covenants, restrictions and conditions now or later of recordwhich may be applicable to any of the Mortgaged Property, or to the use, mannerof use, occupancy, possession, operation, maintenance, alteration, repair orreconstruction of any of the Mortgaged Property, except where a failure to doso could not reasonably be expected to have a material adverse effect(considered both individually and together with other such failures) on (i) thecurrent business, operations or condition (financial or otherwise) ofMortgagor, (ii) the current use of the Mortgaged Property or (iii) thevalue of the Mortgaged Property (assuming its current use).

 

5.                                       Payment of Taxesand Other Impositions. (a) Prior to the date on which any fine,penalty, interest or cost may be added thereto or imposed, Mortgagor shall payand discharge all taxes, charges and assessments of every kind and nature, allcharges for any easement or agreement maintained for the benefit of any of theReal Estate, all general and special assessments, levies, permits, inspectionand license fees, all water and sewer rents and charges, vault taxes and allother public charges even if unforeseen or extraordinary, imposed upon orassessed against or which may become a lien on any of the Real Estate, orarising in respect of the occupancy, use or possession thereof, together withany penalties or interest on any of the foregoing (all of the foregoing arecollectively referred to herein as the “Impositions”), except where (i) thevalidity or amount thereof is being contested in good faith by appropriateproceedings, and (ii) Mortgagor has set aside on its books adequatereserves with respect thereto in accordance with GAAP. Upon request byMortgagee, Mortgagor shall deliver to Mortgagee evidence reasonably acceptableto Mortgagee showing the payment of any such Imposition. If by law anyImposition, at Mortgagor’s option, may be paid in installments (whether or notinterest shall accrue on the unpaid balance of such Imposition), Mortgagor mayelect to pay such Imposition in such installments and shall be responsible forthe payment of such installments with interest, if any.

 

(b)                            Nothing hereinshall affect any right or remedy of Mortgagee under this Mortgage or otherwise,without notice or demand to Mortgagor, to pay any Imposition after the datesuch Imposition shall have become delinquent, and add to the Obligations theamount so paid, together with interest from the time of payment at the DefaultRate. Any sums paid by Mortgagee in discharge of any Impositions shall be (i) alien on the Premises secured hereby

 

6

----

 

prior to any right or title to, interest in, orclaim upon the Premises subordinate to the lien of this Mortgage, and (ii) payableon demand by Mortgagor to Mortgagee together with interest at the Default Rateas set forth above.

 

6.                                       Insurance. (a) Mortgagorshall maintain, with financially sound and reputable companies, insurancepolicies (i) insuring the Real Estate against loss by fire, explosion,theft and such other casualties as may be reasonably satisfactory to Mortgagee,and (ii) insuring Mortgagor, Mortgagee and the other Secured Partiesagainst liability for personal injury and property damage relating to such RealEstate, such policies to be in such form and amounts and having such coverageas may be reasonably satisfactory to Mortgagee. All such insurance shall (i) providethat no cancellation, material reduction in amount or material change incoverage thereof shall be effective until at least thirty (30) days or, in thecase of insurance existing as of the date hereof, at least ten (10) daysafter receipt by Mortgagee of written notice thereof, (ii) name Mortgageeas an additional insured party or loss payee, and (iii) includedeductibles consistent with past practice or consistent with industry practiceor otherwise reasonably satisfactory to Mortgagee.

 

(b)                            If any portion ofthe Premises is located in an area identified as a special flood hazard area bythe Federal Emergency Management Agency or other applicable agency, Mortgagorshall maintain or cause to be maintained, flood insurance in an amountreasonably satisfactory to Mortgagee, but in no event less than the maximumlimit of coverage available under the National Flood Insurance Act of 1968, asamended.

 

(c)                             Mortgagor promptlyshall comply with and conform in all material respects to (i) allprovisions of each such insurance policy, and (ii) all requirements of theinsurers applicable to Mortgagor or to any of the Mortgaged Property or to theuse, manner of use, occupancy, possession, operation, maintenance, alterationor repair of any of the Mortgaged Property. Mortgagor shall not use or permitthe use of the Mortgaged Property in any manner which would permit any insurerto cancel any insurance policy or void coverage required to be maintained bythis Mortgage.

 

(d)                            If Mortgagor is indefault of its obligations to insure or deliver any such prepaid policy orpolicies, then Mortgagee, at its option upon five (5) days’ notice toMortgagor, may effect such insurance from year to year at rates substantiallysimilar to the rate at which Mortgagor had insured the Premises, and pay thepremium or premiums therefor, and Mortgagor shall pay to Mortgagee on demandsuch premium or premiums so paid by Mortgagee with interest from the time ofpayment at the Default Rate.

 

(e)                             If the MortgagedProperty, or any part thereof, shall be destroyed or damaged and the reasonablyestimated cost thereof would exceed $500,000, Mortgagor shall give promptnotice thereof to Mortgagee. All insurance proceeds paid or payable inconnection with any damage or casualty to the Real Estate shall be deemedproceeds from a Casualty Event and applied in the manner specified in theCredit Agreement.

 

(f)                               In the event offoreclosure of this Mortgage or other transfer of title to the MortgagedProperty, all right, title and interest of Mortgagor in and to any insurancepolicies then in force shall pass to the purchaser or grantee.

 

7

----

 

7.                                  Restrictions onLiens and Encumbrances. Except for the lien of this Mortgage and thePermitted Exceptions, Mortgagor shall not further mortgage, nor otherwiseencumber the Mortgaged Property nor create or suffer to exist any lien, chargeor encumbrance on the Mortgaged Property, or any part thereof, whether superioror subordinate to the lien of this Mortgage and whether recourse or non-recourse.

 

8.                                  Due on Sale andOther Transfer Restrictions. Except as expressly permitted under Section 7.05of the Credit Agreement, Mortgagor shall not sell, transfer, convey or assignall or any portion of, or any interest in, the Mortgaged Property.

 

9.                                  Condemnation/EminentDomain. Promptly upon obtaining knowledge of the institution of any proceedingsfor the condemnation of the Mortgaged Property, or any material portionthereof; Mortgagor will notify Mortgagee of the pendency of such proceedings. Allawards and proceeds relating to such condemnation shall be deemed proceeds froma Casualty Event and applied in the manner specified in the Credit Agreement.

 

10.                            Leases. Except asexpressly permitted under the Credit Agreement, Mortgagor shall not (a) executean assignment or pledge of any Lease relating to all or any portion of theMortgaged Property other than in favor of Mortgagee, or (b) execute orpermit to exist any Lease of any of the Mortgaged Property.

 

11.                            Further Assurances. To further assureMortgagee’s rights under this Mortgage, Mortgagor agrees promptly upon demandof Mortgagee to do any act or execute any additional documents (including, butnot limited to, security agreements on any personalty included or to beincluded in the Mortgaged Property and a separate assignment of each Lease inrecordable form) as may be reasonably required by Mortgagee to confirm the lienof this Mortgage and all other rights or benefits conferred on Mortgagee bythis Mortgage.

 

12.                            Mortgagee’s Rightto Perform. If Mortgagor fails to perform any of the covenants or agreements of Mortgagor in the LoanDocuments, within the applicable grace period, if any, provided for in theCredit Agreement, Mortgagee, without waiving or releasing Mortgagor from anyobligation or default under this Mortgage, may, at any time upon ten (10) days’notice to Mortgagor (but shall be under no obligation to) pay or perform thesame, and the amount or cost thereof, with interest at the Default Rate, shallimmediately be due from Mortgagor to Mortgagee and the same shall be secured bythis Mortgage and shall be a lien on the Mortgaged Property prior to any right,title to, interest in, or claim upon the Mortgaged Property attachingsubsequent to the lien of this Mortgage. No payment or advance of money byMortgagee under this Section shall be deemed or construed to cureMortgagor’s default or waive any right or remedy of Mortgagee.

 

13.                            Remedies. (a) Upon theoccurrence and during the continuance of any Event of Default, Mortgagee mayimmediately take such action, without notice or demand, as it deems advisableto protect and enforce its rights against Mortgagor and in and to the MortgagedProperty, including, but not limited to, the following actions, each of whichmay be pursued concurrently or otherwise, at such time and in such manner asMortgagee may determine, in its sole discretion, without impairing or otherwiseaffecting the other rights and remedies of Mortgagee:

 

8

----

 

(i)                                Mortgagee may, to the extent permitted byapplicable law, (A) institute and maintain an action of mortgageforeclosure against all or any part of the Mortgaged Property, (B) institute and maintain an action on theCredit Agreement, the Guarantee and Collateral Agreement or any other LoanDocument, (C) sell all or part of the Mortgaged Property (Mortgagorexpressly granting to Mortgagee the power of sale, to the extent permitted byapplicable law), or (D) take such otheraction at law or in equity for the enforcement of this Mortgage or any of theLoan Documents as the law may allow. Mortgagee may proceed in any such actionto final judgment and execution thereon for all sums due hereunder, togetherwith interest thereon at the Default Rate and all costs of suit, including,without limitation, reasonable attorneys’ fees and disbursements. Interest atthe Default Rate shall be due on any judgment obtained by Mortgagee from thedate of judgment until actual payment is made of the full amount of thejudgment; and

 

(ii)                             Mortgagee may personally, or by its agents,attorneys and employees and without regard to the adequacy or inadequacy of theMortgaged Property or any other collateral as security for the Obligationsenter into and upon the Mortgaged Property and each and every part thereof andexclude Mortgagor and its agents and employees therefrom without liability fortrespass, damage or otherwise (Mortgagor hereby agreeing to surrenderpossession of the Mortgaged Property to Mortgagee upon demand at any such time)and use, operate, manage, maintain and control the Mortgaged Property and everypart thereof. Following such entry and taking of possession, Mortgagee shall beentitled, without limitation, (x) to lease all or any part or parts of theMortgaged Property for such periods of time and upon such conditions asMortgagee may, in its discretion, deem proper, (y) to enforce, cancel ormodify any Lease as Mortgagee may in its discretion deem proper, and (z) generallyto execute, do and perform any other act, deed, matter or thing concerning theMortgaged Property as Mortgagee shall deem appropriate as fully as Mortgagormight do.

 

(b)                            In case of a foreclosure sale, the RealEstate may be sold, at Mortgagee’s election, in one parcel or in more than oneparcel and Mortgagee is specifically empowered (without being required to doso, and in its sole and absolute discretion) to cause successive sales ofportions of the Mortgaged Property to be held.

 

(c)                             In the event of any breach of any of thecovenants, agreements, terms or conditions contained in this Mortgage,Mortgagee shall be entitled to enjoin such breach and obtain specificperformance of any covenant, agreement, term or condition and Mortgagee shallhave the right to invoke any equitable right or remedy as though other remedieswere not provided for in this Mortgage.

 

(d)                            It is agreed that if an Event of Defaultshall occur and be continuing, any and all proceeds of the Mortgaged Propertyreceived by Mortgagee shall be held by Mortgagee for the benefit of the SecuredParties as collateral security for the Obligations (whether matured orunmatured), and shall be applied in payment of the Obligations in the mannerand in the order set forth in Section 6.5 of the Guarantee and CollateralAgreement.

 

9

----

 

14.         Right of Mortgagee to Credit Sale. Upon the occurrence of any sale made underthis Mortgage, whether made under the power of sale, to the extent permitted byapplicable law, or by virtue of judicial proceedings or of a judgment or decreeof foreclosure and sale, Mortgagee may bid for and acquire the MortgagedProperty or any part thereof. In lieu of paying cash therefor, Mortgagee maymake settlement for the purchase price by crediting upon the Obligations orother sums secured by this Mortgage, the net sales price after deductingtherefrom the expenses of sale and the cost of the action and any other sumswhich Mortgagee is authorized to deduct under this Mortgage. In such event,this Mortgage, the Credit Agreement, the Guarantee and Collateral Agreement anddocuments evidencing expenditures secured hereby may be presented to the personor persons conducting the sale in order that the amount so used or applied maybe credited upon the Obligations as having been paid.

 

15.         Appointment of Receiver. If an Event of Default shall have occurredand be continuing, Mortgagee as a matter of right and without notice toMortgagor, unless otherwise required by applicable law, and without regard tothe adequacy or inadequacy of the Mortgaged Property or any other collateral orthe interest of Mortgagor therein as security for the Obligations, shall havethe right to apply to any court having jurisdiction to appoint a receiver orreceivers or other manager of the Mortgaged Property, without requiring theposting of a surety bond, and without reference to the adequacy or inadequacyof the value of the Mortgaged Property or the solvency or insolvency ofMortgagor or any other party obligated for payment of all or any part of theObligations, and whether or not waste has occurred with respect to theMortgaged Property, and Mortgagor hereby irrevocably consents to suchappointment and waives notice of any application therefor (except as may berequired by law). Any such receiver or receivers or manager shall have all theusual powers and duties of receivers in like or similar cases and all thepowers and duties of Mortgagee in case of entry as provided in this Mortgage,including, without limitation and to the extent permitted by law, the right toenter into leases of all or any part of the Mortgaged Property, and shallcontinue as such and exercise all such powers until the date of confirmation ofsale of the Mortgaged Property unless such receivership is sooner terminated.

 

16.         Extension, Release, etc. (a) Without affecting the lien orcharge of this Mortgage upon any portion of the Mortgaged Property not then ortheretofore released as security for the full amount of the Obligations,Mortgagee may, from time to time and without notice, agree to (i) releaseany person liable for the indebtedness borrowed or guaranteed under the LoanDocuments, (ii) extend the maturity or alter any of the terms of theindebtedness borrowed or guaranteed under the Loan Documents or any otherguaranty thereof, (iii) grant other indulgences, (iv) release orreconvey, or cause to be released or reconveyed at any time at Mortgagee’soption any parcel, portion or all of the Mortgaged Property, (v) take orrelease any other or additional security for any obligation herein mentioned,or (vi) make compositions or other arrangements with debtors in relationthereto.

 

(b)         No recovery of any judgment by Mortgagee andno levy of an execution under any judgment upon the Mortgaged Property or uponany other property of Mortgagor shall affect the lien of this Mortgage or anyliens, rights, powers or remedies of Mortgagee hereunder, and such liens,rights, powers and remedies shall continue unimpaired.

 

(c)          If Mortgagee shall have the right toforeclose this Mortgage or to direct a power of sale, to the extent permittedby applicable law, Mortgagor authorizes Mortgagee at its

 

10

----

 

option to foreclose the lien of this Mortgage (ordirect the sale of the Mortgaged Property, as the case may be) subject to therights of any tenants of the Mortgaged Property. The failure to make any suchtenants parties defendant to any such foreclosure proceeding and to foreclosetheir rights, or to provide notice to such tenants as required in any statutoryprocedure governing a sale of the Mortgaged Property, or to terminate suchtenant’s rights in such sale will not be asserted by Mortgagor as a defense toany proceeding instituted by Mortgagee to collect the Obligations or toforeclose the lien of this Mortgage.

 

(d)           Unless expressly provided otherwise, in theevent that ownership of this Mortgage and title to the Mortgaged Property orany estate therein shall become vested in the same person or entity, thisMortgage shall not merge in such title but shall continue as a valid lien onthe Mortgaged Property for the amount secured hereby.

 

17.           Security Agreementunder Uniform Commercial Code; Fixture Filing. (a) It is the intention of the parties hereto that this Mortgage shall constitutea security agreement within the meaning of the Uniform Commercial Code (the “Code”)of the State in which the Mortgaged Property is located. If an Event of Defaultshall occur and be continuing, then in addition to having any other right orremedy available at law or in equity, Mortgagee shall have the option of either(i) proceeding under the Code and exercising such rights and remedies asmay be provided to a secured party by the Code with respect to all or anyportion of the Mortgaged Property which is personal property (including,without limitation, taking possession of and selling such property) or (ii) treatingsuch property as real property and proceeding with respect to both the real andpersonal property constituting the Mortgaged Property in accordance withMortgagee’s rights, powers and remedies with respect to the real property (inwhich event the default provisions of the Code shall not apply). If Mortgageeshall elect to proceed under the Code, then ten (10) days’ notice of saleof the personal property shall be deemed reasonable notice and the reasonableexpenses of retaking, holding, preparing for sale, selling and the like incurredby Mortgagee shall include, but not be limited to, attorneys’ fees and legalexpenses. At Mortgagee’srequest, Mortgagor shall assemble the personal property and make it availableto Mortgagee at a place designated by Mortgagee which is reasonably convenientto both parties.

 

(b)           Certain portions of the Mortgaged Propertyare or will become “fixtures” (as that term is defined in the Code) on theLand, and this Mortgage, upon being filed for record in the real estate recordsof the county wherein such fixtures are situated, shall operate also as afinancing statement filed as a fixture filing in accordance with the applicableprovisions of said Code upon such portions of the Mortgaged Property that areor become fixtures. The real property to which the fixtures relate is describedin ScheduleAhereto. The record owner of the real property described in Schedule A hereto, if any, isMortgagor. The name, type of organization and jurisdiction of organization ofthe debtor for purposes of this financing statement are the name, type oforganization and jurisdiction of organization of Mortgagor set forth in thefirst paragraph of this Mortgage, and the name of the secured party forpurposes of this financing statement is the name of Mortgagee set forth in thefirst paragraph of this Mortgage. The mailing address of Mortgagor/debtor isthe address of Mortgagor set forth in the first paragraph of this Mortgage. Themailing address of Mortgagee/secured party from which information concerningthe security interest hereunder may be obtained is the address of Mortgagee setforth in the first paragraph of this Mortgage. Mortgagor’s organizationalidentification number is 146599.

 

11

----

 

18.           Assignment of Rents. (a) Mortgagorhereby assigns to Mortgagee the Rents as further security for the payment ofand performance of the Obligations, and Mortgagor grants to Mortgagee the rightto enter the Mortgaged Property for the purpose of collecting the same and tolet the Mortgaged Property or any part thereof, and to apply the Rents onaccount of the Obligations. The foregoing assignment and grant is present andabsolute and shall continue in effect until the Obligations are fully paid andperformed, but Mortgagee hereby waives the right to enter the MortgagedProperty for the purpose of collecting the Rents and Mortgagor shall beentitled to collect, receive, use and retain the Rents until the occurrence ofan Event of Default; such right of Mortgagor to collect, receive, use andretain the Rents may be revoked by Mortgagee upon the occurrence and during thecontinuance of any Event of Default by giving not less than ten (10) days’written notice of such revocation to Mortgagor; in the event such notice isgiven, Mortgagor shall pay over to Mortgagee, or to any receiver appointed tocollect the Rents, any lease security deposits, and shall pay monthly inadvance to Mortgagee, or to any such receiver, the fair and reasonable rentalvalue as determined by Mortgagee for the use and occupancy of such part of theMortgaged Property as may be in the possession of Mortgagor or any affiliate ofMortgagor, and upon default in any such payment Mortgagor and any suchaffiliate will vacate and surrender the possession of the Mortgaged Property toMortgagee or to such receiver, and in default thereof may be evicted by summaryproceedings or otherwise. Mortgagor shall not accept prepayments ofinstallments of Rent to become due for a period of more than one month inadvance (except for security deposits and estimated payments of percentagerent, if any).

 

(b)           Mortgagor has not affirmatively done any actwhich would prevent Mortgagee from, or limit Mortgagee in, acting under any ofthe provisions of the foregoing assignment.

 

(c)           Except for any matter disclosed in the CreditAgreement, no action has been brought or, so far as is known to Mortgagor, isthreatened, which would interfere in any way with the right of Mortgagor toexecute the foregoing assignment and perform all of Mortgagor’s obligationscontained in this Section and in the Leases.

 

19.           Additional Rights. The holder of anysubordinate lien or subordinate deed of trust on the Mortgaged Property shallhave no right to terminate any Lease whether or not such Lease is subordinateto this Mortgage nor shall Mortgagor consent to any holder of any subordinatelien or subordinate deed of trust joining any tenant under any Lease in anyaction to foreclose the lien or modify, interfere with, disturb or terminatethe rights of any tenant under any Lease. By recordation of this Mortgage allsubordinate lienholders and the mortgagees and beneficiaries under subordinatemortgages are subject to and notified of this provision, and any action takenby any such lienholder or beneficiary contrary to this provision shall be nulland void. Any such application shall not be construed to cure or waive anyDefault or Event of Default or invalidate any act taken by Mortgagee on accountof such Default or Event of Default.

 

20.           Notices. All notices,requests and demands to or upon Mortgagee or Mortgagor hereunder shall beeffected in the manner provided for in Section 10.02 of the CreditAgreement; provided that any such notice, request or demand to or uponMortgagor shall be addressed to Mortgagor at its address set forth above.

 

12

----

 

21.           No OralModification. This Mortgage may not be amended, supplemented or otherwise modifiedexcept in accordance with the provisions of Section 10.01 of the CreditAgreement. Any agreement made by Mortgagor and Mortgagee after the date of thisMortgage relating to this Mortgage shall be superior to the rights of theholder of any intervening or subordinate lien or encumbrance.

 

22.           Partial Invalidity. In the event anyone or more of the provisions contained in this Mortgage shall for any reasonbe held to be invalid, illegal or unenforceable in any respect, suchinvalidity, illegality or unenforceability shall not affect any other provisionhereof, but each shall be construed as if such invalid, illegal orunenforceable provision had never been included. Notwithstanding to thecontrary anything contained in this Mortgage or in any provisions of any Loan Document,the obligations of Mortgagor and of any other obligor under any Loan Documentshall be subject to the limitation that Mortgagee shall not charge, take orreceive, nor shall Mortgagor or any other obligor be obligated to pay toMortgagee, any amounts constituting interest in excess of the maximum ratepermitted by law to be charged by Mortgagee.

 

Mortgagor agrees that notwithstanding thefact that the Mortgage contains matters which may not be appropriate, availableor enforceable in Iowa, the inclusion of such matters does not affect thevalidity or enforceability of the Mortgage as appropriate and available underIowa law. To the extent the laws of the State of Iowa limit (i) theavailability of the exercise of any of the remedies set forth herein, including,without limitation, remedies such as a power of sale and taking possession ofthe property, or (ii) the enforcement of waivers and indemnities made byMortgagor, such remedies, waivers, or indemnities shall be exercisable orenforceable, any provisions in this Mortgage to the contrary notwithstanding,if, and to the extent, permitted by the laws in force at the time of theexercise of such remedies or the enforcement of such waivers or indemnitieswithout regard to the enforceability of such remedies, waiver or indemnities atthe time of the execution and delivery of this Mortgage.

 

23.           Mortgagor’s Waiverof Rights. (a) Mortgagor hereby voluntarily and knowingly releases and waivesany and all rights to retain possession of the Mortgaged Property after theoccurrence of an Event of Default and any and all rights of redemption fromsale under any order or decree of foreclosure (whether full or partial),pursuant to rights, if any, therein granted, as allowed under any applicablelaw, on its own behalf, on behalf of all persons claiming or having an interest(direct or indirectly) by, through or under each constituent of Mortgagor andon behalf of each and every person acquiring any interest in the MortgagedProperty subsequent to the date hereof, it being the intent hereof that any andall such rights or redemption of each constituent of Mortgagor and all suchother persons are and shall be deemed to be hereby waived to the fullest extentpermitted by applicable law or replacement statute. Each constituent ofMortgagor shall not invoke or utilize any such law or laws or otherwise hinder,delay, or impede the execution of any right, power, or remedy herein orotherwise granted or delegated to Mortgagee, but shall permit the execution ofevery such right, power, and remedy as though no such law or laws had been madeor enacted.

 

(b)           To the fullest extent permitted by law,Mortgagor waives the benefit of all laws now existing or that may subsequentlybe enacted providing for (i) any appraisement before sale of any portionof the Mortgaged Property, (ii) any extension of the time for theenforcement of the collection of the Obligations or the creation or extensionof a period of redemption from any sale made in collecting such debt and (iii) exemptionof the Mortgaged Property from

 

13

----

 

attachment, levy or sale under execution orexemption from civil process. To the full extent Mortgagor may do so, Mortgagoragrees that Mortgagor will not at any time insist upon, plead, claim or takethe benefit or advantage of any law now or hereafter in force providing for anyappraisement, valuation, stay, exemption, extension or redemption, or requiringforeclosure of this Mortgage before exercising anyotherremedy granted hereunder and Mortgagor, for Mortgagor and its successors andassigns, and for any and all persons ever claiming any interest in theMortgaged Property, to the extent permitted by law, hereby waives and releasesall rights of redemption, valuation, appraisement, stay of execution, notice ofelection to mature (except as expressly provided in the Credit Agreement) ordeclare due the whole of the secured indebtedness and marshalling in the eventof exercise by Mortgagee of the foreclosure rights, power of sale, to theextent permitted by applicable law, or other rights hereby created.

 

24.         Remedies NotExclusive. Mortgagee shall be entitled to enforce payment and performance of theObligations and to exercise all rights and powers under this Mortgage or underany of the other Loan Documents or other agreement or any laws now or hereafterin force, notwithstanding some or all of the Obligations may now or hereafterbe otherwise secured, whether by deed of trust, mortgage, security agreement,pledge, lien, assignment or otherwise. Neither the acceptance of this Mortgagenor its enforcement, shall prejudice or in any manner affect Mortgagee’s rightsto realize upon or enforce any other security now or hereafter held byMortgagee, it being agreed that Mortgagee shall be entitled to enforce thisMortgage and any other security now or hereafter held by Mortgagee in suchorder and manner as Mortgagee may determine in its absolute discretion. Noremedy herein conferred upon or reserved to Mortgagee is intended to be exclusiveof any other remedy herein or by law provided or permitted, but each shall becumulative and shall be in addition to every other remedy given hereunder ornow or hereafter existing at law or in equity or by statute. Every power orremedy given by any of the Loan Documents to Mortgagee or to which either mayotherwise be entitled, may be exercised, concurrently or independently, fromtime to time and as often as may be deemed expedient by Mortgagee, as the casemay be. In no event shall Mortgagee, in the exercise of the remedies providedin this Mortgage (including, without limitation, in connection with theassignment of Rents to Mortgagee, or the appointment of a receiver and theentry of such receiver on to all or any part of the Mortgaged Property), bedeemed a “mortgagee in possession,” and Mortgagee shall not in any way be madeliable for any act, either of commission or omission, in connection with theexercise of such remedies.

 

25.         Multiple Security. If (a) thePremises shall consist of one or more parcels, whether or not contiguous andwhether or not located in the same county, or (b) in addition to thisMortgage, Mortgagee shall now or hereafter hold or be the beneficiary of one ormore additional mortgages, liens, deeds of trust or other security (directly orindirectly) for the Obligations upon other property in the State in which thePremises are located (whether or not such property is owned by Mortgagor or byothers) or (c) both the circumstances described in clauses (a) and (b) shallbe true, then to the fullest extent permitted by law, Mortgagee may, at itselection, commence or consolidate in a single foreclosure action allforeclosure proceedings against all such collateral securing the Obligations(including the Mortgaged Property), which action may be brought or consolidatedin the courts of, or sale conducted in, any county in which any of suchcollateral is located. Mortgagor acknowledges that the right to maintain aconsolidated foreclosure action is a specific inducement to Mortgagee to extendthe indebtedness borrowed pursuant to or guaranteed by the Loan Documents, andMortgagor expressly and irrevocably waives any objections to the commencementor consolidation of the foreclosure

 

14

----

 

proceedingsin a single action and any objections to the laying of venue or based on thegrounds of forum non conveniens which it may now or hereafter have. Mortgagorfurther agrees that if Mortgagee shall be prosecuting one or more foreclosureor other proceedings against a portion of the Mortgaged Property or against anycollateral other than the Mortgaged Property, which collateral directly orindirectly secures the Obligations, or if Mortgagee shall have obtained ajudgment of foreclosure and sale or similar judgment against such collateral,then, whether or not such proceedings are being maintained or judgments wereobtained in or outside the State in which the Premises are located, Mortgageemay commence or continue any foreclosure proceedings and exercise its otherremedies granted in this Mortgage against all or any part of the MortgagedProperty and Mortgagor waives any objections to the commencement orcontinuation of a foreclosure of this Mortgage or exercise of any otherremedies hereunder based on such other proceedings or judgments, and waives anyright to seek to dismiss, stay, remove, transfer or consolidate either anyaction under this Mortgage or such other proceedings on such basis. Neither thecommencement nor continuation of proceedings to foreclose this Mortgage, northe exercise of any other rights hereunder nor the recovery of any judgment byMortgagee in any such proceedings or the occurrence of any sale in any suchproceedings shall prejudice, limit or preclude Mortgagee’s right to commence orcontinue one or more foreclosure or other proceedings or obtain a judgmentagainst any other collateral (either in or outside the State in which thePremises are located) which directly or indirectly secures the Obligations, andMortgagor expressly waives any objections to the commencement of, continuationof, or entry of a judgment in such other sales or proceedings or exercise ofany remedies in such sales or proceedings based upon any action or judgmentconnected to this Mortgage, and Mortgagor also waives any right to seek todismiss, stay, remove, transfer or consolidate either such other sales orproceedings or any sale or action under this Mortgage on such basis. It isexpressly understood and agreed that to the fullest extent permitted by law,Mortgagee may, at its election, cause the sale of all collateral which is thesubject of a single foreclosure action at either a single sale or at multiplesales conducted simultaneously and take such other measures as are appropriatein order to effect the agreement of the parties to dispose of and administerall collateral securing the Obligations (directly or indirectly) in the mosteconomical and least time-consuming manner.

 

In the event of foreclosure of this Mortgage, Mortgagor hereby agreesthat the court may, and requests the court to, enter a special order directingthe clerk to enter and record the judgment contained in the foreclosure decreeon the Credit Agreement secured by this Mortgage without requiring that theCredit Agreement be first filed with the clerk of the court for cancellation.Mortgagor further agrees, because the Credit Agreement secured by this Mortgageis also secured by other mortgages and will be necessary to a foreclosure ofthose mortgages, that notwithstanding Iowa Rule of Civil Procedure 228, aspresently enacted or as hereinafter amended or replaced, the clerk of the courtmay, in the event of foreclosure of this Mortgage, enter and record thejudgment contained in the foreclosure decree on the Credit Agreement secured bythis Mortgage without requiring that the Credit Agreement be first filed withthe clerk of court for cancellation.

 

26.         Successors and Assigns. All covenants of Mortgagor contained inthis Mortgage are imposed solely and exclusively for the benefit of Mortgagee,and its successors and assigns, and no other person or entity shall havestanding to require compliance with such covenants or be deemed, under anycircumstances, to be a beneficiaryof such covenants, any or all ofwhich may be freely waived in whole or in part by Mortgagee at any time if inthe sole discretion of

 

15

----

 

eitherof them such a waiver is deemed advisable. All such covenants of Mortgagorshall run with the land and bind Mortgagor, the successors and assigns ofMortgagor (and each of them) and all subsequent owners, encumbrancers andtenants of the Mortgaged Property, and shall inure to the benefit of Mortgageeand its successors and assigns. The word “Mortgagor” shall be construed as if itread “Mortgagors” whenever the sense of this Mortgage so requires, and if thereshall be more than one Mortgagor, the obligations of Mortgagors shall be jointand several.

 

27.         No Waivers, etc. Any failure by Mortgagee to insist upon thestrict performance by Mortgagor of any of the terms and provisions of thisMortgage shall not be deemed to be a waiver of any of the terms and provisionshereof, and Mortgagee, notwithstanding any such failure, shall have the rightthereafter to insist upon the strict performance by Mortgagor of any and all ofthe terms and provisions of this Mortgage to be performed by Mortgagor.Mortgagee may release, regardless of consideration and without the necessityfor any notice to or consent by the holder of any subordinate lien on theMortgaged Property, any part of the security held for the obligations securedby this Mortgage without, as to the remainder of the security, in any wayimpairing or affecting the lien of this Mortgage or the priority of such lienover any subordinate lien or deed of trust.

 

28.         Governing Law, etc. This Mortgage shall be governed by andconstrued and interpreted in accordance with the laws of the State in which theMortgaged Property is located, except that Mortgagor expressly acknowledgesthat by their respective terms the Credit Agreement and the Guarantee andCollateral Agreement shall be governed and construed in accordance with thelaws of the State of New York, and for purposes of consistency, Mortgagoragrees that in any in personam proceeding related to this Mortgage the rights of the parties to this Mortgage shall also begoverned by and construed in accordance with the laws of the State of New Yorkgoverning contracts made and to be performed in that State.

 

29.         Certain Definitions. Unless the context clearly indicates acontrary intent or unless otherwise specifically provided herein, words used inthis Mortgage shall be used interchangeably in singular or plural form and theword “Mortgagor” shall mean “each Mortgagor or any subsequent owner or ownersof the Mortgaged Property or any part thereof or interest therein,” the word “Mortgagee”shall mean “Mortgagee or any successor agent for the Lenders,” the word “Person”shall include any individual, corporation, partnership, limited liability company,trust, unincorporated association, government, governmental authority, or otherentity, and the words “Mortgaged Property” shall include any portion of theMortgaged Property or interest therein. Whenever the context may require, anypronouns used herein shall include the corresponding masculine, feminine orneuter forms, and the singular form of nouns and pronouns shall include theplural and vice versa. The captions in this Mortgage are for convenience orreference only and in no way limit or amplify the provisions hereof.

 

30.         Duty of Mortgagee; Authority of Mortgagee. (a) Mortgagee’s sole duty with respectto the custody, safekeeping and physical preservation of the Mortgaged Propertywhich is in its possession, or otherwise, shall be to deal with it in the samemanner as Mortgagee deals with similar property for its own account. NeitherMortgagee, any Secured Party nor any of their respective officers, directors,employees or agents shall be liable for failure to demand, collect or realizeupon any of the Mortgaged Propertyor for any delay in doing so or shall be under any obligation to sell or otherwise dispose of any Mortgaged Propertyupon the request of Mortgagor or any other Person or to take any other actionwhatsoever with regard to the Mortgaged Property

 

16

----

 

or any part thereof. The powers conferred onMortgagee and the Secured Parties hereunder are solely to protect Mortgagee’sand the Secured Parties’ interests in the Mortgaged Property and shall notimpose any duty upon Mortgagee or any Secured Party to exercise any suchpowers. Mortgagee and the Secured Parties shall be accountable only for amountsthat they actually receive as a result of the exercise of such powers, andneither they nor any of their officers, directors, employees or agents shall beresponsible to Mortgagor for any act or failure to act hereunder, except fortheir own gross negligence or willful misconduct.

 

(b)           Mortgagor acknowledges that the rights andresponsibilities of Mortgagee under this Mortgage with respect to any actiontaken by Mortgagee or the exercise or non-exercise by Mortgagee of any option,voting right, request, judgment or other right or remedy provided for herein orresulting or arising out of this Mortgage shall, as between Mortgagee and theSecured Parties, be governed by the Credit Agreement and by such otheragreements with respect thereto as may exist from time to time among them, but,as between Mortgagee and Mortgagor, Mortgagee shall be conclusively presumed tobe acting as agent for the Secured Parties with full and valid authority so toact or refrain from acting, and Mortgagor shall be under no obligation, orentitlement, to make any inquiry respecting such authority.

 

31.         Last DollarsSecured; Priority. To the extent that this Mortgage secures only a portion of theindebtedness owing or which may become owing by Mortgagor to the SecuredParties, the parties agree that any payments or repayments of such indebtednessshall be and be deemed to be applied first to the portion of the indebtednessthat is not secured hereby, it being the parties’ intent that the portion ofthe indebtedness last remaining unpaid shall be secured hereby. If at any timethis Mortgage shall secure less than all of the principal amount of theObligations, it is expressly agreed that any repayments of the principal amountof the Obligations shall not reduce the amount of the lien of this Mortgageuntil the lien amount shall equal the principal amount of the Obligations outstanding.

 

32.         Enforcement Expenses; Indemnification. (a) Mortgagor agrees to pay or reimburse eachSecured Party and Mortgagee for all its reasonable out-of-pocket costs andexpenses incurred in collecting against Mortgagor or otherwise enforcing orpreserving any rights under this Mortgage and the other Loan Documents to whichMortgagor is a party, including, without limitation, the reasonable fees anddisbursements of counsel to each Secured Party and of counsel to Mortgagee.

 

(b)           Mortgagor agrees to pay, and to saveMortgagee and the Secured Parties harmless from, any and all liabilities withrespect 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 withrespect to any of the Mortgaged Property or in connection with any of thetransactions contemplated by this Mortgage.

 

(c)           Mortgagor agrees to pay, and to saveMortgagee and the Secured Parties harmless from, any and all liabilities,obligations, losses, damages, penalties, claims, demands, actions, judgmentsand suits and related reasonable out-of-pocket expenses (including AttorneyCosts) of any kind or nature whatsoever with respect to the execution,delivery, enforcement, performance and administration of this Mortgage to theextent the Borrowers would be required to do so pursuant to Section 10.05of the Credit Agreement.

 

17

----

 

(d)           The agreements in this Section shallsurvive repayment of the Obligations and all other amounts payable under theCredit Agreement and the other Loan Documents.

 

33.         Redemption. It is agreed that, if this Mortgage covers less than ten (10) acresof land, in the event of the foreclosure of this Mortgage and sale of theMortgaged Property by sheriff’s sale in such foreclosure proceedings, the timeof one (1) year for redemption from said sale provided by the statutes ofthe State of Iowa shall be reduced to six (6) months; provided Mortgageein such action files an election to waive any deficiency judgment againstMortgagor which may arise out of the foreclosure proceedings; all to beconsistent with the provisions of Section 628.26and of Chapter 628, Iowa Code. If the redemption period is so reduced,Mortgagor or its successors in interest or the owner shall have the exclusiveright to redeem for the first three (3) months after such sale, and thetime periods in Sections 628.5, 628.15 and 628.16 of the Iowa Code shall bereduced to four (4) months. It is further agreed that the period ofredemption after a foreclosure of this Mortgage shall be reduced to sixty (60)days if all of the three (3) following contingencies exist: (1) theMortgaged Property is less than ten (10) acres in size; (2) the courtfinds affirmatively that said real estate has been abandoned by the owners andthose persons personally liable under this Mortgage at the time of suchforeclosure; and (3) Mortgagee in such action files an election to waiveany deficiency judgment against Mortgagor or its successors in interest in suchaction, all to be consistent with the provisions of Section 628.27 and ofChapter 628, Iowa Code. If the redemption period is so reduced, Mortgagor orits successors in interest or the owner shall have the exclusive right toredeem for the first thirty (30) days after such sale, and the time providedfor redemption by creditors as provided in Sections 628.5, 628.15 and 628.16,Iowa Code, shall be reduced to forty (40) days. Entry of appearance by pleadingor docket entry by or on behalf of Mortgagor shall give rise to a presumptionthat the Premises are not abandoned. Any such short redemption period shall beconsistent with all of the provisions of Chapter 628, Iowa Code, as amended;provided, however, that any statement in this Section or elsewhere to thecontrary notwithstanding, Mortgagor does, if permitted by law at the time offoreclosure, waive any and all rights of redemption. In addition to the above-describedprovisions regarding the possible reduction of the redemption period applicablein the event of foreclosure of this Mortgage by Mortgagee, Mortgagor andMortgagee agree that in the event of the foreclosure of this Mortgage and saleof the real estate included within the Mortgaged Property by sheriff’s sale insuch foreclosure proceedings, the time of one hundred eighty (180) days forredemption from said sale provided by the statutes shall be reduced to ninety(90) days provided Mortgagee waives in such foreclosure proceedings any rightsto a deficiency judgment against Mortgagor which may arise out of theforeclosure proceedings; all to be consistent with all provisions of Section 628.28and of Chapter 628, Iowa Code.

 

34.         No Agricultural Use. Mortgagor warrants that the Premises is notused for agricultural purposes as defined in Iowa Code Section 535.13 andis not agricultural land as defined in Iowa Code Section 9H. 1. Mortgagorfurther warrants the Premises is not a one-family or two-family dwelling.Mortgagor hereby waives and renounces all homestead and similar exemptionrights with respect to the Mortgaged Property provided for by the Constitutionand the laws of the United States and the State of Iowa.

 

35.         Brokers. Mortgagor further represents and warrants to Mortgagee that no loanbroker as defined in Iowa Code Chapter 535C was involved either directly orindirectly in connection with the transactions contemplated by the Mortgage.

 

18

----

 

36.         Release. If any of theMortgaged Property shall be sold, transferred or otherwise disposed of by anyMortgagor in a transaction permitted by the Credit Agreement and the Net CashProceeds are applied in accordance with the terms of the Credit Agreement, thenMortgagee, at the request and sole expense of such Mortgagor, shall execute anddeliver to such Mortgagor all releases or other documents reasonably necessary or desirable for the release of theLiens created hereby on such Mortgaged Property. Mortgagor shall deliver toMortgagee, at least five (5) Business Days prior to the date of theproposed release, a written request for release identifying the sale or otherdisposition in reasonable detail, including the price thereof and any expensesin connection therewith, together with a certification by Mortgagor statingthat such transaction is in compliance with, and permitted by, the CreditAgreement and the other Loan Documents.

 

**IMPORTANT: READ BEFORE SIGNING. THE TERM OF THISAGREEMENT SHOULD BE READ CAREFULLY BECAUSE ONLY THOSE TERMS IN WRITING AREENFORCEABLE. NO OTHER TERMS OR ORAL PROMISES NOT CONTAINED IN THIS WRITTENCONTRACT MAY BE LEGALLY ENFORCED. YOU MAY CHANGE THE TERMS OF THISAGREEMENT ONLY BY ANOTHER WRITTEN AGREEMENT.**

 

19

----

 

This Mortgage has been dulyexecuted by Mortgagor as of the date first above written and is intended to beeffective as of such date.

 

 
|   | BOOKS ARE FUN, LTD., |
|--------|----------------------|
|   | an Iowa corporation  |
|   |                 |
|   |                 |
|   | By:                  |   |
|   |                 | Name: |
|   |                 | Title: |

 

*[SIGNATUREPAGE TO IOWA MORTGAGE]*

 

----

 
| STATE OF New York     | )      |
|-----------------------|--------|
|                  |   |
|                  | : SS.: |
|                  |   |
| COUNTY OF Westchester | )      |

 

On the             dayof March, in the year 2007, before me, the undersigned, personally appearedpersonally known to me or proved to me on thebasis of satisfactory evidence to be the individual whose name is subscribed tothe within instrument and acknowledged to me that s/he executed the same inhis/her capacity, and that by his/her signature on the instrument, theindividual, the person or entity upon behalf of which the individual acted,executed the instrument.

 

 
|                                  |   |   |
|---------------------------------------|--------|--------|
| ** **                            |   |   |
| Notary Public

[affix stamp and seal] |   |   |
|                                       |        |        |  |

 

*[SIGNATUREPAGE TO IOWA MORTGAGE]*

 

----

 

TITLE AFFIDAVIT AND GAP INDEMNITY

 
| STATE  OF                    , | )                                   |
|------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------|
|                                                                                                                               | )     SS.: |
| COUNTY  OF                                                                                                                         | )                                   |

 

The undersigned,                                                  ,in his/her capacity as                                   ,of Books Are Fun, Ltd., an Iowa corporation (“Books”), intending that Books(and not the undersigned individually) shall be bound hereby, being duly sworn,deposes and says:

 

(1)          Books is the record owner of three real properties located in Firfield,Iowa, known, respectively, as and by the street addresses 111 North MainStreet, 123 North Main Street and 1680 Highway 1 (collectively the “Properties”)which Properties are more particularly identified in the title commitmentbearing Commitment No. 214639 (the “Title Commitment”) issued by LandAmericaLawyers Title Insurance Corporation (the “Title Company”). The undersigned isfamiliar with the Properties and with the facts set forth herein.

 

(2)          To the best of my knowledge, Books has paid all real estate taxes,special assessments, water and sewer charges and management fees, if any, withrespect to the Properties which would be delinquent if not paid on or prior tothe date hereof (and to the extent that any of the foregoing has not been paidby the date hereof, same will be paid within 30 days of the date hereof).

 

(3)          To the best of my knowledge, no labor has been supplied to theProperties and no materials have been delivered to the Properties that mightbecome the subject of a labor, mechanic’s or materialmen’s lien on theProperties, except for labor and/or materials which will be paid for in theordinary course of business.

 

(4)          There are no existing tenancies, leases or other occupancy agreementsaffecting the Properties.

 

(5)          To the best of my knowledge, there are no judgments,**decrees or orders before any court or judicial officer against Booksfor the payment of money and no proceedings before any court or officer of theUnited States or any state affecting Books or the Properties which are likelyto result in such an order, judgment or decree except in each case for orders,judgments or decrees which will be paid in the ordinary course of business byBooks after Books exhausts or waives any and all rights it may have to appealthe same.

 

[[2683796]]

 

----

 

(6)          Inorder to effectuate a New York-style closing, Books agrees, with respect to theProperties, that it will not in any way encumber the Properties from the dateof the Commitment forward to the date that the Mortgage, Security Agreement,Assignment of Leases and Rents, and Fixture Filing (the “Mortgage”) to beinsured pursuant to the Title Commitment and to be dated as of the date of theclosing (“Closing”) under the “Credit Agreement” (as defined in the Mortgage),which Mortgage was made by Books in favor of JPMorgan Chase Bank, N.A. (“JPMorgan”),acting as Administrative Agent, is recorded, and Books hereby agrees toindemnify and hold the Title Company harmless from any loss, cost, claim ordamage that the Title Company may sustain or incur by reason of any encumbranceof the Properties by Books from this date to the date the Mortgage is recordedagainst the Properties.

 

(7)          ThisAffidavit is made for the purpose of inducing the Title Company to issue,pursuant to the Title Commitment, a lender’s policy of title insurance withrespect to the Mortgage in connection with the Closing.

 

(8)          Bookshereby indemnifies and agrees to hold the Title Company harmless from andagainst any damages or expenses, including reasonable attorney’s fees sustainedby the Title Company as a result of the falsity of any statement containedherein.

 
|   |                                 |
|--------|--------------------------------------|
|   | Name:                                |
|   | in his/her official capacity as      |
|   | Vice President and Treasurer of      |
|   | Books Are Fun, Ltd. (not  intending  |
|   | to be personally liable  hereunder). |

 

Sworn to before me this

        dayof         , 2007.

 
|          |   |
|---------------|--------|
| Notary Public |   |

 

----

 

Schedule A

 

Description of the Land

 

Parcel1:

 

The North Forty-Four (44) feet of Lots Three (3) and Four (4) inBlock Eight (8) of the Old Plat to the City of Fairfield, JeffersonCounty, Iowa, and a strip of land which is part of the former right of way ofBriggs and Main Streets adjacent to the North 44 feet of Lots Three (3) andFour (4) in Block Eight (8), Old Plat to the City of Fairfield, JeffersonCounty, Iowa, described as follows:

 

Beginning at the Northeast Corner of Lot 3, Block 8, Old Plat; thenceWest 59.9 feet to the Point of Beginning; thence North 1.4 feet; thence West 72.4 feet; thence South 45.4 feet; thence East .3 feet; thenceNorth 44 feet to the Northwest Corner of Lot 4, Block 8, Old Plat; thence East 72.1 feet to the Place of Beginning, situated in JeffersonCounty, Iowa.

 

Parcel2:

 

The West Two-Thirds (2/3) of Lot Five (5), Block Eight (8) of Old Plat of the City of Fairfield,Jefferson County, Iowa.

 

Parcel3:

 

Auditor’s designated parcel “A”**ofthe East Half of the SoutheastQuarter of Section 2, Township 72 North, Range 10 West of the FifthPrincipal Meridian in Jefferson County, Iowa, more particularly described asfollows:

 

Commence at the Southeast Corner of said Section 2; thence runNorth 00 degrees 42 minutes 22 seconds East along the East line of theSoutheast Quarter of said Section 2 for 767.01 feet; thence run North 90degrees 00 minutes 00 seconds West for 128.65 feet to the Westerly right-of-wayline of Iowa Highway No. 1 and the Point of Beginning; thence continueNorth 90 degrees 00 minutes 00seconds West for 200.00 feet;thence run South 00 degrees 00 minutes 00 seconds West for 65.00 feet; thencerun South 90 degrees 00 minutes 00 seconds West for 839.03 feet; thence run North 00 degrees 00 minutes 00 seconds East for 1038.30 feet; thence runSouth 90 degrees 00 minutes 00 seconds East for 1036.12 feet to the Westerlyright-of-way line of Iowa Highway No. 1; thence**run South10 degrees 28 minutes 28 seconds East along said right-of-way line for 132.68feet; thence run South 01 degrees 47 minutes 25 seconds West along saidright-of-way line for 299.60 feet to the beginning of a tangentcircular curve; thence run Southerly for 543.51 feet along an arc of a curveconcave Easterly with a radius of 28,770 feet and a chord of 543.50 feetbearing South 01 degrees 14 minutes 57 seconds West to the Point of Beginning.

 

----

 

**EXHIBIT H-1**

 

**[FORM OF]**

**CRAVATH, SWAINE & MOORE LLP**

 

| ** ** | ** ** | ** ** | **March 2, 2007** |
|------------|------------|------------|------------------------|

 

**RDA Holding Co. Credit Agreement dated as of March 2, 2007**

 

Ladies and Gentlemen:

 

We have acted as special New York counsel to RDAHolding Co., a Delaware corporation (“Holdings”), in connection with theCredit Agreement dated as of the date hereof (the “Credit Agreement”),among Holdings, Doctor Acquisition Co., a Delaware corporation (to be mergedwith and into Reader’s Digest (as defined below), the “Borrower”), TheReader’s Digest Association, Inc., a Delaware corporation (“Reader’sDigest”), RD German Holdings GmbH, a company organized under the laws ofGermany (the “German Borrower”), the lending institutions party thereto(the “Lenders”), JPMorgan Chase Bank, N.A., as administrative agent forthe Lenders (the “Administrative Agent”), Citicorp North America, Inc.and Merrill Lynch, Pierce, Fenner & Smith Incorporated, asco-syndication agents for the Lenders (the “Co-Syndication Agents”), andThe Royal Bank of Scotland PLC, as documentation agent for the Lenders (the “DocumentationAgent”). This opinion is being delivered to you pursuant to Section 4.01(a)(v)(u) ofthe Credit Agreement. Capitalized terms used but not defined herein have themeanings assigned to them in the Credit Agreement.

 

In that connection, we have examined originals, orcopies certified or otherwise identified to our satisfaction, of suchdocuments, corporate records and other instruments as we have deemed necessaryor appropriate for purposes of this opinion, including:

 

(i)        the Credit Agreement,

 

(ii)       the Guarantee and Collateral Agreement dated as of the date hereof (the “SecurityAgreement”), made by Holdings, the Borrower, Reader’s Digest and theentities listed on Schedule I hereto (together with the German

 

----

 

Borrower, each a “Loan Party” andcollectively, the “Loan Parties”), in favor of the Administrative Agent,

 

(iii)     the Mortgages identified on Schedule II hereto,

 

(iv)     the agreements identified on Schedule III hereto (collectively, the “SpecifiedAgreements”),

 

(v)      the UCC-1 financing statement listed on Schedule IV hereto, together withall schedules and exhibits to such financing statement, to be filed in theOffice of the Secretary of State of the State of New York (the “New YorkFiling Office”) (the “New York Financing Statement”),

 

(vi)     the Certificate of Incorporation of Direct Holdings Libraries Inc., acorporation organized under the laws of the State of New York (the “New YorkLoan Party”), as amended,

 

(vii)    the By laws of the New York Loan Party,

 

(viii)   resolutions adopted by the Board of Directors of the New York Loan Partyon March 2, 2007, and

 

(ix)      a certificate dated as of the date hereof, from officers of each of theLoan Parties (the “Officer’s Certificate”), attached as Exhibit Ahereto.

 

The documents described in clauses (i), (ii) and(iii) of the immediately preceding sentence are sometimes referred toherein as the “Agreements”, and the documents described in clauses (ii) and(iii) are sometimes referred to herein as the “Collateral Agreements”.We have also relied, with respect to certain factual matters, on therepresentations and warranties of each Loan Party contained in the Agreementsand have assumed compliance by each Loan Party with the terms of theAgreements.

 

In rendering our opinion, we have assumed (a) thegenuineness of all signatures, (b) the due existence of each Loan Partynot organized under the laws of the State of New York (each, a “Non-New YorkLoan Party”), (c) that each Non-New York Loan Party has all necessarypower, authority and legal right to execute and deliver the Agreements to whichit is a party and to perform its obligations thereunder, (d) the dueauthorization, execution and delivery of the Agreements by all parties theretoother than the New York Loan Party, (e) the authenticity of all documentssubmitted to us as originals, (f) the conformity to original documents ofall documents submitted to us as copies, (g) that the choice of New Yorklaw contained in the Agreements is legal and valid under**the laws ofGermany and that insofar as any obligation under any Agreement is to beperformed in, or by a party organized under the laws of, any jurisdictionoutside the State of New York, its performance will not be illegal orineffective in any jurisdiction by virtue of the law of that jurisdiction and (h) thatthe First Supplemental Indenture dated as of February 8, 2007, among TheReader’s Digest Association, Inc. and The Bank of New York, as successortrustee, to the Indenture dated as of March 3, 2004,

 

2

----

 

between The Reader’s Digest Association, Inc.and The Bank of New York, as successor trustee, is effective and has becomeoperative in accordance with the terms thereof.

 

Based on the foregoing and subject to thequalifications hereinafter set forth, we are**of opinion as follows:

 

1.   Based solely on a certificate from the Secretary of State of the State ofNew York, the New York Loan Party is a subsisting corporation under the laws ofthe State of New York. The New York Loan Party has all necessary corporate power**andauthority to execute and deliver the Agreements to which it is a party and toperform its obligations thereunder.

 

2.   (a) The execution and delivery by the New York Loan Party of theAgreements to which it is a party, the performance by the New**YorkLoan Party of its obligations thereunder and the grant by the New York LoanParty of security interests pursuant to the Collateral Agreements to which itis a party (i) have been duly authorized by all requisite corporate actionon the part of the New York Loan Party and (ii) do not violate theCertificate of Incorporation or By-laws of the New York Loan Party.

 

(b) The execution and delivery by eachLoan Party of the Agreements to which it is a party, the performance by eachLoan Party of its obligations thereunder and the grant by each Loan Party ofsecurity interests pursuant to the Collateral Agreements to which it is a party(i) do not violate any law, rule or regulation of the United Statesof America or the State of New York and (ii) do not result in a breach ofor constitute a default under the express terms and conditions of the SpecifiedAgreements. Our opinion in clause (ii) of the preceding sentence relatingto the Specified Agreements does not extend to compliance with any financialratio or any limitation in any contractual restriction expressed as a dollaramount (or an amount expressed in another currency) or to performance under anycontractual restriction in the Agreements to the extent it restricts actionsrequired under the Specified Agreements.

 

3.   The Agreements to which the New York Loan Party is a party have each beenduly executed and delivered by the New York Loan Party. To the extent governedby New York law, each Agreement constitutes a legal, valid and bindingobligation of each Loan Party party thereto, enforceable against such LoanParty in accordance with its terms, subject in each case to applicablebankruptcy, insolvency, reorganization, moratorium, fraudulent transfer andother similar laws relating to or affecting creditors’ rights generally fromtime to time in effect and to general principles of equity (including, withoutlimitation, concepts of materiality, reasonableness, good faith and fairdealing), regardless of whether considered in a proceeding in equity or at law.The foregoing opinion is subject to the following qualifications: (i) certainprovisions of the Collateral Agreements are or may be unenforceable in whole orpart under the laws of the State of New York, but the inclusion of suchprovisions does not affect the validity of the Collateral Agreements**or the liens and security interests purported to be createdby the Collateral Agreements, and the Collateral Agreements contain adequateprovisions for the practical realization of the principal rights and benefitsintended to be afforded thereby, (ii) insofar as provisions contained inthe

 

3

----

 

Agreements provide for indemnification orlimitations on liability, the enforceability thereof may be limited by publicpolicy considerations, (iii) the availability of a decree for specificperformance or an injunction is subject to the discretion of the courtrequested to issue any such decree or injunction and (iv) we express**noopinion as to the effect of the laws of any jurisdiction other than the Stateof New York where any Lender may be located or where enforcement of theAgreements may be sought that limit the rates of interest legally chargeable orcollectible.

 

4.   No authorization, approval or other action by, and no notice to, consentof, order of or filing with, any United States Federal or New York Stategovernmental authority is required to be made or obtained by any Loan Party inconnection with the execution, delivery and performance by any Loan Party ofthe Agreements to which it is a party or the grant by each Loan Party of thesecurity interests under the Collateral Agreements to which it is a party,other than (i) such reports to United States governmental authoritiesregarding international capital and foreign currency transactions as may berequired pursuant to 31 C.F.R. Part 128, (ii) those that have beenmade or obtained and are in full force and effect or as to which the failure tobe made or obtained or to be in full force and effect should not result,individually or in the aggregate, in a material adverse effect on Holdings andits Subsidiaries, taken as a whole, (iii) such registrations, filings andapprovals under Federal or state laws as may be necessary in connection withthe exercise of remedies or sale of collateral or the granting of additionalsecurity interests or guarantees pursuant**to the Agreements, (iv) such**registrations,filings or approvals that are required in order to perfect or record securityinterests granted under the Agreements and (v) such registrations, filingsand approvals that may be required because of the legal or regulatory status ofany Lender or because of any other facts specifically pertaining to any Lender.

 

5.   Assuming that the Borrower and the German Borrower comply with theprovisions of the Credit Agreement relating to the use of proceeds of theLoans, the making of the Loans under the Credit Agreement on the date hereofdoes not violate Regulation T, U or X of the Board of Governors of the FederalReserve System.

 

6.   Based solely on the Officer’s Certificate, none of the Loan Parties isrequired to register as an “investment company” as such term is defined in theInvestment Company Act of 1940, as amended.

 

7.   The provisions of the Security Agreement are sufficient to create infavor of the Administrative Agent for the benefit of the Secured Parties asecurity interest in all right, title and interest of each Loan Party partythereto in such of the Collateral (as defined therein) as constitutes “accounts”,“chattel paper”, “deposit accounts” , “documents”, “equipment”, “generalintangibles”, “instruments”, “inventory”, “investment property” and “letter-of-creditrights” within the meaning of the Uniform Commercial Code of the State of NewYork as in effect on the date hereof (the “New York UCC”) (such of theCollateral being hereinafter referred to as the “Specified UCC Collateral”and the Specified UCC Collateral other than any Collateral that constitutes “depositaccounts”, “letter-of-credit rights” or “fixtures” (as defined in Section 9-102of the New York UCC) being hereinafter referred to as the “UCC FilingCollateral”), to the

 

4

----

 

extent that the creation of security interests inthe Specified UCC Collateral is governed by the New York UCC.

 

8.   The New York Financing Statement is in proper form for filing in theState of New York. Upon the filing and proper indexing of the New YorkFinancing Statement in the New York Filing Office, describing the UCC FilingCollateral, the security interest granted to the Administrative Agent in theUCC Filing Collateral described in the New York Financing Statement will beperfected, to the extent perfection is governed by the New York UCC and may beaccomplished by the filing in the State of New York of financing statementsunder the New York UCC.

 

The opinion expressed in this paragraph 8 is basedon the assumption that all filings and recordings necessary to maintain theeffectiveness of the New York Financing Statement will be made, includingwithout limitation (i) continuation statements and (ii) such otherstatements as may be required by (x) any change in name, identity orcorporate structure of the New York Loan Party or the Administrative Agent, or (y) anychange in the location of the New York Loan Party.

 

9.   Upon delivery to and the continued possession by the Administrative Agentfor the benefit of the Secured Parties, in each case in the State of New York,of all certificates evidencing the Pledged Equity (as defined in the SecurityAgreement) in registered form and described in Schedule 2 attached to theSecurity Agreement and pledged on the date hereof under the Security Agreementthat constitute certificated securities within the meaning of Article 8 ofthe New York UCC (the “Pledged Certificates”), issued or endorsed in thename of the Administrative Agent or in blank or together with stock powersproperly executed in the name of the Administrative Agent or in blank withrespect thereto, the security interest in favor of the Administrative Agent forthe benefit of the Secured Parties in such Pledged Certificates will beperfected, which security interest in such Pledged Certificates will be priorto any security interest, lien, charge or encumbrance that must be perfected bypossession or filing under the New York UCC, to the extent that the creationand perfection of security interests in such Pledged Certificates is governedby the New York UCC.

 

The opinion expressed in this paragraph 9 is basedon the assumption that the Administrative Agent has obtained control (forpurposes of Article 9 of the New York UCC) of, and the Secured Partieshave acquired their security interest in, the Pledged Certificates for value.For purposes of the foregoing sentence, the term “value” shall have the meaninggiven to such term in the New York UCC.

 

10.Our opinions expressed in paragraphs 7, 8 and 9 are further qualified asfollows:

 

(a)       we express no opinion as to (i) rights in or title to the PledgedCertificates or any Collateral held by any Loan Party or (ii) thecompleteness or accuracy of the description in such documents of anyCollateral;

 

5

----

 

(b)      we express no opinion as tothe creation or perfection of any security interests (i) in any item ofCollateral other than (as to creation and perfection) the Pledged Certificates,and (as to creation and, solely with respect to the UCC Filing Collateraldescribed in the New York Financing Statement, perfection) the Specified UCCCollateral, (ii) in any item of Collateral that is expressly excluded fromthe application of the New York UCC pursuant to Section 9-109 thereof or (iii) inany item of Collateral that is subject to (x) a statute or treaty of theUnited States that provides for a national or international registration or anational or international certificate of title for the perfection of a securityinterest therein or that specifies a place of filing different from thatspecified in the New York UCC for filing to perfect such security interest or (y) acertificate of title statute;

 

(c)       we express no opinion as to the perfection of any security interest inany “proceeds” (as such term is defined in the New York UCC) and note that the creationor perfection of any such interest is limited to the extent set forth inSection 9-315 of the New York UCC;

 

(d)      except as specifically set forth in paragraph 9, we express no opinion asto the priority of any security interest created under the Agreements, and weexpress no opinion in paragraph 9 as to the relative priority of the securityinterest in the Pledged Certificates as against (i) any claim or lien infavor of the United States of America or any agency or instrumentality thereof(including, without limitation, Federal tax liens and liens under Title IV ofthe Employee Retirement Income Security Act of 1974, as amended), (ii) theclaim of a lien creditor to the extent set forth in Section 9-317 or 9-323of the New York UCC, (iii) another secured party with a perfected securityinterest in other property of any Loan Party to the extent any item ofCollateral constitutes proceeds of such other creditor’s property to the extentset forth in Section 9-322 of the New York UCC or (iv) in the case ofcertificated securities, negotiable documents or instruments (as defined inSection 9-102(a)(47) of the New York UCC), another secured party with asecurity interest perfected without filing or the taking of possession to theextent set forth in Section 9-312(e) of the New York UCC;

 

(e)       in the case of property that becomes Collateral after the date hereof,Section 552 of Title 11 of the United States Code (the “Bankruptcy Code”)limits the extent to which property acquired by a debtor after the commencementof a case under the Bankruptcy Code may be subject to a security interestarising from a security agreement entered into by the debtor before thecommencement of such case;

 

(f)       we express no opinion as to the validity or enforceability of any securityinterest in goods (as defined in the New York UCC) that have been bought by abuyer in the ordinary course of business (as defined in Section 1-201 ofthe New York UCC);

 

6

----

 

(g)      we express no opinion as to perfection of any security interest in“deposit accounts”, “letter of credit rights” or “fixtures”;

 

(h)      we express no opinion regarding any copyrights, patents, trademarks,service marks or other intellectual property, the proceeds thereof, or money duewith respect to the lease, license or use thereof except to the extentArticle 9 of the New York UCC may be applicable to the foregoing, and weexpress no opinion as to the effect of any Federal laws relating to copyrights,patents, trademarks, service marks or other intellectual property on theopinions expressed herein;

 

(i)        we express no opinion as to security interests in any item of collateralsubject to any restriction on or prohibition against assignment or transfercontained in or otherwise applicable to such item of collateral or anycontract, agreement, license, permit, security, instrument or documentconstituting, evidencing or relating to such item, except to the extent thatany such restriction or prohibition is rendered ineffective pursuant to any ofSections 9-406 through 9-409, inclusive, of the New York UCC. We note that eventhough the New York UCC may render such a restriction or prohibitionineffective for purposes of creation or perfection of a security interest,nonetheless, in many cases, such a security interest may represent only limitedrights in the related items of collateral and be subject to variousrestrictions (including restrictions on rights of use, assignment andenforcement);

 

(j)        we express no opinion as to any Collateral constituting claims againstany government or governmental agency, including any Collateral that is subjectto the Federal Assignment of Claims Act; and

 

(k)       we note that certain issuers of the Pledged Certificates are organizedunder the laws of jurisdictions outside the United States of America, and,accordingly, it may be necessary to comply with the laws of such jurisdictionsproperly to create, perfect, maintain, enforce or preserve the priority of asecurity interest in any such Pledged Certificates and we express no opinionwith respect to whether or to what extent the New York UCC would govern thecreation, perfection or priority of a security interest in any such PledgedCertificates or the effect, if any, of the laws of such jurisdictions on therights of a secured party in such Pledged Certificates.

 

Weexpress no opinion herein as to any provision in any Agreement that (a) relatesto the subject matter jurisdiction of any Federal court of the United States ofAmerica, or any Federal appellate court, to adjudicate any controversy relatedto the Agreements (such as the provision found in Section 10.16(b) ofthe Credit Agreement), (b) contains a waiver of an inconvenient forum(such as the provision found in Section 10.16(b) of the CreditAgreement), (c) relates to a right of setoff in respect of purchases ofinterests in loans (such as the provision found in Section 2.13 of theCredit Agreement) or with respect to parties that may not hold mutual debts(such as the provision found in Section 10.09 of the Credit Agreement), (d) providesfor liquidated

 

7

----

 

damagesor penalty interest, (e) relates to the waiver of rights to jury trial(such as the provision found in Section 10.17 of the Credit Agreement), (f) relatesto governing law to the extent that it purports to affect the choice of lawgoverning perfection and the effect of perfection and non-perfection ofsecurity interests or (g) relates to any arrangement or similar feepayable to any arranger (including the Arrangers and the Administrative Agent)of the commitments or loans under the Credit Agreement or any fee not set forthin the Agreements. We also express no opinion as to (i) the enforceabilityof the provisions of any Agreement to the extent that such provisionsconstitute a waiver ofillegality as a defense to performance of contract obligations or any otherdefense to performance which cannot, as a matter of law, be effectively waived,(ii) whether a state court outside the State of New York or a Federalcourt of the United States would give effect to the choice of New York lawprovided for in the Agreements or (iii) Section 8.06 or 10.24 of theCredit Agreement or Section 8.18 or 8.19 of the Security Agreement.

 

Courtsin the United States have not customarily rendered judgments for money damagesdenominated in any currency other than United States dollars. Section 27(b) ofthe Judiciary Law of the State of New York provides, however, that a judgmentor decree in an action based upon an obligation denominated in a currency otherthan United States dollars shall be rendered in the foreign currency of theunderlying obligation and converted into United States dollars at the rate ofexchange prevailing on the date of the entry of the judgment or decree. Weexpress no opinion as to whether a Federal court would render a judgment otherthan in United States dollars.

 

Wenote that the Specified Agreements purport to restrict assignment by a partywithout the consent of the other parties thereto and we express no view inparagraph 2 above as to the granting of security interests in the rights ofLoan Parties under the Specified Agreements or the exercise of the rights orremedies of the Administrative Agent underthe Collateral Agreements with respect to the Specified Agreements.

 

Weunderstand that you are satisfying yourselves as to the status under Section 548of the Bankruptcy Code and applicable state fraudulent conveyance laws of theobligations of each Loan Party and the security interests of the AdministrativeAgent and the Lenders under the Agreements, and we express no opinion thereon.

 

Weare admitted to practice only in the State of New York, and we express noopinion as to matters governed by any laws other than the laws of the State ofNew York and the Federal law of the United States of America. In particular, wedo not purport to pass on any matter governed by the laws of Germany. Ouropinions relating to security interests are limited to Article 8 and Article 9of the New York UCC and do not address (i) laws of jurisdictions otherthan New York, and laws of New York except for Article 8 or Article 9,as the case may be, (ii) collateral of a type not subject to Article 8or Article 9 of the New York UCC, (iii) what law governs perfectionand the effect of perfection ornon-perfection of such security interests or (iv) the effect, if any, oflaws of jurisdictions other than New York on the creation, perfection orpriority of such security interests.

 

8

----

 

Thisopinion is rendered only to the Administrative Agent, the Co-SyndicationAgents, the Documentation Agent and the Lenders under the Credit Agreement andis solely for their benefit in connection with the above transactions. Inaddition, we hereby consent to reliance on this opinion by a permitted assignof a Lender’s interest in the Credit Agreement, provided that suchpermitted assign becomes a Lender on or prior to the 30th day after the date ofthis opinion. We are opining as to the matters herein only as of the datehereof, and, while you are authorized to deliver copies of this opinion to suchpermitted assigns and they are permitted to rely on this opinion, the rights todo so do not imply any obligation on our part to update this opinion. Thisopinion may not be relied upon by any other person or for any other purpose orused, circulated, quoted or otherwise referred to for any other purpose.

 
|   | Very truly yours, |
|--------|-------------------|

 

JPMorganChase Bank, N.A.,

asAdministrative Agent,

CiticorpNorth America, Inc. and

MerrillLynch, Pierce, Fenner & Smith Incorporated,

asCo-Syndication Agents,

TheRoyal Bank of Scotland PLC,

asDocumentation Agent,

underthe Credit Agreement referred

toabove, and the Lenders party

tothe Credit Agreement

 

Incare of:

JPMorganChase Bank, N.A.

270Park Avenue

NewYork, New York 10017

 

9

----

**EXHIBIT H-2**

** **

**[FORM OF]**

**RICHARDS, LAYTON & FINGER****A PROFESSIONAL ASSOCIATIONONE RODNEY SQUARE920 NORTH KING STREETWILMINGTON, DELAWARE 19801(302) 651-7700FAX (302) 651-7701WWW.RLF.COM**

 

March 2, 2007

 

ToEach of the Persons Listedon Schedule A Attached Hereto

 

Re:                               The Reader’sDigest Association, Inc.

 

Ladiesand Gentlemen:

 

Wehave acted as special Delaware counsel for Ripplewood Holdings L.L.C., aDelaware limited liability company, in connection with (i) the CreditAgreement, dated as of March 2, 2007 (the “Credit Agreement”), amongDoctor Acquisition Co., a Delaware corporation (“Acquisition Co.”), RDA HoldingCo., a Delaware corporation (“Holding Co.”), The Reader’s Digest Association, Inc.,a Delaware corporation (“Reader’s Digest”), the Overseas Borrowers (as definedtherein) from time to time party thereto, JPMorgan Chase Bank, N.A., asadministrative agent (the “Administrative Agent”), the lenders from time totime party thereto, Citicorp North America, Inc. and Merrill Lynch,Pierce, Fenner & Smith Incorporated, as co-syndication agents, and TheRoyal Bank of Scotland plc, as documentation agent; and (ii) the mattersset forth herein relating to each of the Delaware corporations listed onSchedule B attached hereto (each, a “Delaware Corporation” and collectively,the “Delaware Corporations”) and each of the Delaware limited liabilitycompanies listed on Schedule C attached hereto (each, a “Delaware LLC” andcollectively, the “Delaware LLCs”). At your request, this opinion is beingfurnished to you.

 

Forpurposes of giving the opinions hereinafter set forth, our examination ofdocuments has been limited to the examination of executed or conformedcounterparts, or copies otherwise proved to our satisfaction, of the following:

 

(a)                                  The Certificateof Incorporation of Holding Co., dated October 24, 2006, as filed in theoffice of the Secretary of State of the State of Delaware (the “Secretary ofState”) on October 24, 2006, as amended by the Certificate of Amendment ofCertificate of Incorporation of Holding Co., dated January 5, 2007, asfiled in the office of the Secretary of State on January 5, 2007, asfurther amended by the Certificate of Amendment of Certificate of Incorporationof Holding Co., dated February 9, 2007, as filed in the office of theSecretary of State on February 9, 2007 (as so amended, the “Holding Co.Certificate of Incorporation”);

 

(b)                                 Each of thedocuments listed on Schedule D attached hereto (collectively, the “SubsidiaryCertificates of Incorporation”);

 

----

 

(c)                                  The bylaws of eachof the Delaware Corporations, as amended through the date hereof (each, “Bylaws”and collectively, the “Delaware Corporations Bylaws”);

 

(d)                                 Resolutionsadopted by the unanimous written consent of the board of directors of each ofthe Delaware Corporations, each dated March 2, 2007;

 

(e)                                  Each of thedocuments listed on Schedule E attached hereto (collectively, the “LLCCertificates”);

 

(f)                                    Each of thedocuments listed on Schedule F attached hereto (each, an “LLC Agreement” andcollectively, the “LLC Agreements”);

 

(g)                                 Resolutionsadopted by the written consent of the sole member of each of the Delaware LLCs,each dated March 2, 2007;

 

(h)                                 A certificateof the secretary of each of the Delaware Corporations and the Delaware LLCs(collectively, the “Delaware Companies”), dated March 2, 2007, as tocertain matters;

 

(i)                                     The CreditAgreement;

 

(j)                                     The Guaranteeand Collateral Agreement, dated as of March 2, 2007 (the “CollateralAgreement”), made by each of the Delaware Companies and certain other grantorsidentified therein in favor of the Administrative Agent;

 

(k)                                  The financingstatements on form UCC-1, naming each of the Delaware Companies as a debtor andthe Administrative Agent as secured party, each in the form attached hereto andmarked as Exhibit “A” (collectively, the “Financing Statements”), to befiled with the Secretary of State (Uniform Commercial Code Section) (the “Division”);and

 

(1)                                  A Certificateof Good Standing for each of the Delaware Companies, each dated March 2,2007, obtained from the Secretary of State.

 

Initiallycapitalized terms used herein and not otherwise defined are used as defined inthe Collateral Agreement. The Holding Co. Certificate of Incorporation and theSubsidiary Certificates of Incorporation are hereinafter referred to each, as a“Certificate of Incorporation” and collectively, as the “Certificates ofIncorporation.” The Certificates of Incorporation and the LLC Certificates arehereinafter referred to collectively as the “Certificates.” The CreditAgreement and the Collateral Agreement are hereinafter referred to jointly asthe “Transaction Documents.”

 

Forpurposes of this opinion, we have not reviewed any documents other than thedocuments listed in paragraphs (a) through (1) above. In particular,we have not reviewed any document (other than the documents listed inparagraphs (a) through (1) above) that is referred to

 

2

----

 

inor incorporated by reference into any document reviewed by us. We have assumedthat there exists no provision in any document that we have not reviewed thatis inconsistent with the opinions stated herein. We have conducted noindependent factual investigation of our own but rather have relied solely uponthe foregoing documents, the statements and information set forth therein andthe additional matters recited or assumed herein, all of which we have assumedto be true, complete and accurate in all material respects.

 

Withrespect to all documents examined by us, we have assumed that (i) allsignatures on documents examined by us are genuine, (ii) all documentssubmitted to us as originals are authentic, and (iii) all documentssubmitted to us as copies conform with the original copies of those documents.

 

Forpurposes of this opinion, we have assumed (i) that each of the LLCAgreements constitutes the entire agreement among the parties thereto withrespect to the subject matter thereof, including with respect to the admissionof members to, and the creation, operation, management and termination of, therelevant Delaware LLC, and that each of the LLC Agreements, the Certificatesand the Delaware Corporations Bylaws are in full force and effect, have notbeen amended, and, except as may be contemplated by the M&A Transactions(as defined below), no amendments of such documents are pending or have beenproposed, (ii) that any amendment or restatement of any document reviewedby us has been accomplished in accordance with, and was permitted by, therelevant provisions of said document prior to its amendment or restatement fromtime to time, (iii) that at all times since its formation, WAPLA (asdefined in Schedule E attached hereto) has had at least one member, (iv) thatexcept for the M&A Transactions, there are no proceedings pending for (A) themerger, consolidation, conversion, dissolution, liquidation or termination ofany of the Delaware Companies, or (B) any of the Delaware Companies’transfer to or domestication in any other jurisdiction, (v) except to theextent provided in paragraphs 1 and 6 below, the due organization, formation orcreation, as the case may be, and valid existence in good standing of eachparty to the documents examined by us under the laws of the jurisdictiongoverning its organization, formation or creation, (vi) the legal capacityof natural persons who are signatories to the documents examined by us, (vii) exceptto the extent provided in paragraphs 2 and 7 below, that each of the parties tothe documents examined by us has the power and authority to execute anddeliver, and to perform its obligations under, such documents, (viii) exceptto the extent provided in paragraphs 3 and 8 below, the due authorization,execution and delivery by all parties thereto of all documents examined by us, (ix) thateach of the documents examined by us constitutes a valid and binding obligationof the parties thereto, and is enforceable against the parties thereto, inaccordance with its terms, (x) that all of the members of the board ofdirectors of each of the Delaware Corporations meet any applicablequalifications contained in the Bylaws of such Delaware Corporation, (xi) thatthe restrictions on “business combinations” established in Section 203(a) ofthe General Corporation Law of the State of Delaware (8 Del. C. § 101, etseq.) (the “DGCL”) are not applicable to the transactions contemplatedby the Transaction Documents, (xii) that the execution, delivery andperformance by each of the Delaware Corporations of each of the TransactionDocuments to which it is a party is necessary and convenient to the conduct,

 

3

----

 

promotionor attainment of the business of each such Delaware Corporation, (xiii) thateach of the Delaware Companies (other than the Excluded Entities (as defined inSchedule D attached hereto)) derives no income from or connected with sourceswithin the State of Delaware and has no assets, activities (other than themaintenance of a registered office and registered agent in the State ofDelaware and the filing of documents with the Secretary of State) or employeesin the State of Delaware, (xiv) that each of the Excluded Entities (other thanQSP (as defined in Schedule D attached hereto)) has no assets or employees inthe State of Delaware, and (xv) that there have been obtained such authorizations,consents, approvals and orders as are customarily required in the conduct ofthe business of each of the Delaware Companies. We have not participated in thepreparation of any offering material relating to any of the Delaware Companiesand assume no responsibility for the contents of any such material. Inaddition, we assume no responsibility for the filing of the FinancingStatements (or any continuation statements or amendments with respect thereto)with the Division or any other governmental office or agency.

 

Thisopinion is limited to the laws of the State of Delaware (excluding theinsurance, securities and blue sky laws of the State of Delaware), and we havenot considered and express no opinion on the laws of any other jurisdiction, includingfederal laws and rules and regulations relating thereto. Our opinions arerendered only with respect to Delaware laws and rules, regulations and ordersthereunder that are currently in effect.

 

Basedupon the foregoing, and upon our examination of such questions of law andstatutes of the State of Delaware as we have considered necessary orappropriate, and subject to the assumptions, qualifications, limitations andexceptions set forth herein, we are of the opinion that:

 

1.                                       Each of theDelaware Corporations has been duly incorporated and is validly existing ingood standing as a corporation under the DGCL.

 

2.                                       Each of theDelaware Corporations has all necessary corporate power and authority under theDGCL and under its respective Certificate of Incorporation and Bylaws toexecute and deliver, and to perform its obligations under, the TransactionDocuments to which it is a party.

 

3.                                       The executionand delivery by each of the Delaware Corporations of the Transaction Documentsto which it is a party, and the performance by each of the DelawareCorporations of its obligations thereunder, have been duly authorized by allnecessary corporate action on the part of each of the Delaware Corporationsunder the DGCL and under its respective Certificate of Incorporation andBylaws.

 

4.                                       The execution,delivery and performance by each of the Delaware Corporations of theTransaction Documents to which it is a party do not violate (i) itsrespective Certificate of Incorporation or Bylaws, or (ii) the DGCL.

 

4

----

 

5.                                       Noauthorization, consent, approval or order of any Delaware court or any Delawaregovernmental or administrative body is required to be obtained by any of theDelaware Corporations solely as a result of the execution and delivery by anysuch Delaware Corporation of the Transaction Documents to which it is a party,or the performance by any such Delaware Corporation of its obligationsthereunder.

 

6.                                       Each of theDelaware LLCs has been duly formed and is validly existing in good standing asa limited liability company under the Delaware Limited Liability Company Act (6Del. C. § 18-101, etseq.) (the “Act”).

 

7.                                       Each of theDelaware LLCs has all necessary limited liability company power and authorityunder the Act and under its respective LLC Agreement to execute and deliver,and to perform its obligations under, the Collateral Agreement.

 

8.                                       The executionand delivery by each of the Delaware LLCs of the Collateral Agreement, and theperformance by each of the Delaware LLCs of its obligations thereunder, havebeen duly authorized by all necessary limited liability company action on thepart of each of the Delaware LLCs under the Act and under its respective LLCAgreement.

 

9.                                       The execution,delivery and performance by each of the Delaware LLCs of the CollateralAgreement do not violate (i) its respective LLC Agreement, or (ii) theAct.

 

10.                                 Noauthorization, consent, approval or order of any Delaware court or any Delawaregovernmental or administrative body is required to be obtained by any of theDelaware LLCs solely as a result of the execution and delivery by any suchDelaware LLC of the Collateral Agreement, or the performance by any suchDelaware LLC of its obligations thereunder.

 

11.                                 Each of theFinancing Statements is in an appropriate form for filing with the Division.

 

12.                                 Insofar as Article 9of the Uniform Commercial Code as in effect in the State of Delaware on thedate hereof (the “Delaware UCC”) is applicable (without regard to conflict oflaws principles), upon the filing of the Financing Statements with theDivision, the Administrative Agent will have a perfected security interest inthe Delaware Companies’ rights in that portion of the Collateral in which asecurity interest may be perfected by the filing of a UCC financing statementwith the Division (the “Filing Collateral”) and the proceeds (as defined in Section 9-102(a)(64)of the Delaware UCC) thereof.

 

Theopinions expressed above are subject to the following additional assumptions,qualifications, limitations and exceptions:

 

A.                                   We have assumedthat (i) each of the Delaware Companies has sufficient rights in theCollateral and has received sufficient value and consideration in connectionwith the

 

5

----

 

securityinterests granted under the Collateral Agreement for the security interests ofthe Administrative Agent to attach, and we express no opinion as to the natureor extent of any of the Delaware Companies’ rights in, or title to, any portionof the Collateral, and (ii) the Collateral Agreement reasonably identifiesthe Collateral. Accordingly, we have assumed that the security interests in theFiling Collateral and the proceeds (as defined in Section 9-102(a)(64) of theDelaware UCC) thereof have been duly created and have attached. In addition, wehave assumed that none of the Filing Collateral consists of a type ofcollateral described in Section 9-501(a)(1) of the Delaware UCC. Further, wehave assumed that the Delaware Companies have authorized the filing of theFinancing Statements with the Division.

 

B.                                     The opinionsset forth in paragraphs 11 and 12 above are limited to Article 9 of theDelaware UCC, and therefore such opinions do not address (i) laws ofjurisdictions other than the State of Delaware, and of the State of Delawareexcept for Article 9 of the Delaware UCC, (ii) collateral of a typenot subject to Article 9 of the Delaware UCC, and (iii) what lawgoverns perfection of the security interests granted in the collateral coveredby this opinion.

 

C.                                     We note thatfurther filings under the Delaware UCC may be necessary to preserve andmaintain (to the extent established and perfected by the filing of theFinancing Statements as described herein) the perfection of the securityinterests of the Administrative Agent in the Filing Collateral, including,without limitation, the following:

 

(i)                                appropriatecontinuation filings to be made within the period of six months prior to theexpiration of five year anniversary dates from the date of the original filingof the Financing Statements;

 

(ii)                             filingsrequired with respect to proceeds of collateral under Section 9-315(d) ofthe Delaware UCC;

 

(iii)                          filingsrequired within four months of the change of name, identity or structure madeby or with respect to any of the Delaware Companies, to the extent set forth inSections 9-507 and 9-508 of the Delaware UCC;

 

(iv)                         filingsrequired within four months of a change by any of the Delaware Companies of itslocation to another jurisdiction, to the extent set forth in Sections 9-301 and9-316 of the Delaware UCC; and

 

(v)                            filingsrequired within one year after the transfer of collateral to a person or entitythat becomes a debtor and is located in another jurisdiction, to the extent setforth in Section 9-316 of the Delaware UCC.

 

D.                                    We do notexpress any opinion as to the perfection of any security interest in anyportion of the Collateral in which a security interest cannot be perfected bythe filing of a financing statement with the Division. In addition, no opinionis expressed herein concerning (i)

 

6

----

 

anycollateral other than the Filing Collateral and the proceeds (as defined in Section 9-102(a)(64)of the Delaware UCC) thereof, (ii) any portion of the Filing Collateralthat constitutes a “commercial tort claim” (as defined in Section 9-102(a)(13)of the Delaware UCC), (iii) any consumer transaction, or (iv) anysecurity interest in goods covered by a certificate of title statute. Further,we do not express any opinion as to the perfection of any security interest in (i) FilingCollateral acquired by any of the Delaware Companies after the date hereof, or (ii) proceeds(as defined in Section 9-102(a)(64) of the Delaware UCC) of the FilingCollateral, except to the extent that such proceeds consist of cash proceeds(as defined in Section 9-102(a)(9) of the Delaware UCC) that areidentifiable cash proceeds (as contemplated by Sections 9-315(b) and (d) ofthe Delaware UCC), subject, however, to the limitations of Section 9-315of the Delaware UCC.

 

E.                                      We do notexpress any opinion as to the priority of any security interest.

 

F.                                      We call to yourattention that under the Delaware UCC, actions taken by a secured party (e.g.,releasing or assigning the security interest, delivering possession of thecollateral to the debtor or another person and voluntarily subordinating asecurity interest) may affect the validity, perfection or priority of asecurity interest.

 

G.                                     The opinionexpressed in paragraph 12 above is subject to the effect of (i) bankruptcy,insolvency, moratorium, receivership, reorganization, liquidation, fraudulentconveyance and transfer and other similar laws relating to or affecting therights and remedies of creditors generally, and (ii) principles of equity(regardless of whether considered and applied in a proceeding in equity or atlaw).

 

H.                                    In renderingthe opinions expressed in paragraphs 11 and 12 above, we have assumed that theword “Copy” imprinted on the UCC-1 cover page of each of the Financing Statementsattached hereto as Exhibit “A” will be removed prior to the filing of theFinancing Statements with the Division.

 

I.                                         We note thatnotwithstanding any covenants to the contrary contained in the TransactionDocuments: (i) the stockholders of any of the Delaware Corporations maydissolve such Delaware Corporation under Section 275(c) of the DGCLupon the consent of all the stockholders entitled to vote thereon; (ii) astockholder owning at least 90% of the outstanding shares of each class ofstock of any of the Delaware Corporations entitled to vote thereon may effect amerger with such Delaware Corporation under Section 253 of the DGCL; and (iii) thestockholders of each of the Delaware Corporations may amend the Bylaws of suchDelaware Corporation.

 

J.                                        We understandthat (i) pursuant to the Agreement and Plan of Merger, dated as of November 16,2006, among Holding Co. (formerly known as Doctor Acquisition Holding Co.),Acquisition Co. and Reader’s Digest, Acquisition Co. proposes to merge with andinto Reader’s Digest; (ii) pursuant to the Agreement and Plan of Merger,dated as of January 23, 2007, WRC (as defined on Schedule D hereto) willbe acquired by Holding Co.; (iii) pursuant to

 

7

----

 

theStock Acquisition Agreement, dated January 23, 2007, Direct Holdings U.S.(as defined on Schedule D hereto) will be acquired by Holding Co.; and (iv) HoldingCo. will take additional actions that will ultimately result in WRC, DirectHoldings U.S. and their respective subsidiaries becoming direct or indirectsubsidiaries of Reader’s Digest (collectively, the “M&A Transactions”),such M&A Transactions being effective on or about the date hereof but afterthe delivery of this opinion. Accordingly, the opinions expressed above arerendered prior to the effective time of the M&A Transactions.

 

Weunderstand that you will rely as to matters of Delaware law upon this opinionin connection with the transactions contemplated by the Transaction Documents.In addition, your successors and assigns may rely as to matters of Delaware lawupon this opinion in connection with the matters set forth herein, subject tothe understanding that the opinions rendered herein are given on the datehereof and such opinions are rendered only with respect to facts existing onthe date hereof and laws, rules and regulations currently in effect. Inconnection with the foregoing, we hereby consent to your and your successors’and assigns’ relying as to matters of Delaware law upon this opinion. Except asstated above, without our prior written consent, this opinion may not befurnished or quoted to, or relied upon by, any other person or entity for anypurpose.

 

 

Verytruly yours,

 

 

8

----

** **

**EXHIBIT H-3**

 

[FORM OF]

[THE READER’S DIGEST ASSOCIATION, INC.]
| CLIFFORD H.R. DUPREE *Vice President, Corporate Secretary   and Associate General Counsel* |   | TELEPHONE: (914)  244-5622  FAX: (914) 244-5007  clifford_dupree@rd.com |
|--------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------|

 

March 2, 2007

 
| To     | The  Lenders and the Agents referred to below           |
|--------|---------------------------------------------------------|
|   | c/o  JPMorgan Chase Bank, N.A., as Administrative Agent |

 

Ladiesand Gentlemen:

 

I am Associate General Counsel of The Reader’sDigest Association, Inc., a Delaware corporation (“Reader’s Digest”),and have acted as counsel to the entities listed on Schedule 1 attached hereto(each, a “Loan Party” and collectively, the “Loan Parties”) inconnection with the preparation, execution and delivery of (i) the CreditAgreement dated as of the date hereof (the “Credit Agreement”), amongRDA Holding Co., a Delaware corporation (“Holdings”), Doctor AcquisitionCo., a Delaware corporation (the “Borrower”), Reader’s Digest, theLenders from time to time party thereto, JPMorgan Chase Bank, N.A., asadministrative agent for the Lenders (the “Administrative Agent”),Citicorp North America, Inc. and Merrill Lynch, Pierce, Fenner &Smith Incorporated, as co-syndication agents for the Lenders (the “Co-SyndicationAgents”), and The Royal Bank of Scotland plc, as documentation agent forthe Lenders (the “Documentation Agent” and, together with theAdministrative Agent and the Co-Syndication Agents, the “Agents”), (ii) theGuarantee and Collateral Agreement dated as of the date hereof (the “Guaranteeand Collateral Agreement”), made by Holdings, the Borrower, Reader’s Digestand the other Loan Parties in favor of the Administrative Agent, (iii) thePerfection Certificate dated as of the date hereof, (vii) the Mortgagesidentified on Schedule 2 attached hereto (the “Mortgages”), (viii) the[foreign security documents] (the “Foreign Security Agreement”) and (viii) theother Loan Documents executed in connection with the above documents. Unlessotherwise indicated, capitalized terms used and not defined in this opinion areused herein as defined in the Credit Agreement. This opinion is being renderedto you at the request of the Loan Parties and pursuant to Section 4.01(a)(v)(z) ofthe Credit Agreement.

 

Forthe purposes of this opinion, I have reviewed the following documents:

 

(a)                                       the CreditAgreement;

 

(b)                                      the Guaranteeand Collateral Agreement;

 

(c)                                       the PerfectionCertificate;

 

----

 

(d)                                      the Mortgages;

 

(e)                                       the ForeignSecurity Agreement; and

 

(f)                                         such otherdocuments as I have deemed necessary or appropriate as a basis for the opinionsset forth below.

 

Thedocuments listed in clauses (a) - (e) above are referred to hereincollectively as the “Loan Documents”. The document listed inclause (b) above are referred to herein collectively as the “CollateralDocument”.

 

Ihave examined originals or copies, certified or otherwise identified to oursatisfaction, of such documents, corporate records, certificates of publicofficials and other instruments and have conducted such other investigations offact and law as I have deemed necessary or advisable for purposes of theopinions expressed below. In such examination, I have assumed the genuinenessof all signatures, the authenticity of all documents submitted to me asoriginals, the conformity to authentic original documents of all documentssubmitted to me as copies and the legal capacity of all individuals executingsuch documents. As to questions of fact material to this opinion, which I didnot independently establish or verify, I have, with your consent, relied uponthe statements, certificates and representations of officers and otherrepresentatives of the Loan Parties and on the representations and warrantiesof each Loan Party contained in the Loan Documents. In addition, I haveobtained and relied upon such certificates and assurances from public officials,as I have deemed necessary.

 

Ihave also assumed the valid authorization, execution, and delivery of each ofthe Loan Documents by each party thereto, and I have assumed that each suchparty has been duly organized and is validly existing and in good standingunder its jurisdiction of organization, and that each such party has the legalcapacity, power and authority to perform its obligations thereunder, and thateach Loan Document constitutes the valid and binding obligation of all partiesparty thereto, enforceable against them in accordance with its terms.

 

Iam a member of the Bar of the State of New York, and I have not considered, andI express no opinion as to, the laws of any jurisdiction other than the laws ofthe State of New York, the General Corporation Law of the State of Delaware andthe laws of the United States of America, in each case as in effect on the datehereof.

 

Basedupon the foregoing, and subject to the comments and qualifications set forthbelow, it is my opinion that:

 

1.             The execution,delivery and performance of each of the Loan Documents by the LoanParties partythereto, the borrowings by Reader’s Digest under the Credit Agreement and thegrant of the security interests in the Collateral by any Loan Party under theCollateral Document, (a) will not (i) materially be in conflict with,contravene, result in a breach of or constitute (alone or with notice or lapseof time or both) a material default under, or give rise to any right toaccelerate or to require the prepayment, repurchase or redemption

 

2

----

 

ofany obligation under any provisions of any order binding upon any Loan Party ofany Governmental Authority of the State of New York, the State of Delaware or,to my knowledge, any other state, or the United States of America or anymaterial agreement, note, deed of trust, license, franchise, permit, agreement,contract, indenture, mortgage, lease, or other instrument (a “MaterialAgreement”) to which any Loan Party is a party or by which itor any of its property is or may be bound or (ii) result in the creationor imposition of any Lien upon or with respect to any property or assets nowowned or hereafter acquired by any of the Loan Parties pursuant to any suchMaterial Agreement (other than any Lien created under the Loan Documents).

 

2.             To the best ofmy knowledge, there is no action, litigation, proceeding, or governmentalinvestigation pending or threatened by or against any Loan Party or against anyof its properties or revenues which questions the validity of any Loan Documentor any action taken or to be taken pursuant to any Loan Document.

 

Theopinions expressed above are subject to the following qualifications andcomments:

 

(A)                         In connectionwith the foregoing, I point out that certain of the Material Agreements are ormay be governed by laws other than the laws of the State of New York. Forpurposes of the opinion expressed in paragraph 1 above with respect to MaterialAgreements, my opinion is based solely upon my understanding, or theunderstanding of lawyers working under my supervision, of the plain language ofsuch Material Agreements, and I do not express any opinion as to thevalidity, binding nature or enforceability of any such Material Agreement, andI do not assume any responsibility with respect to the effect on my opinion ofany interpretation thereof which may be inconsistent with such understanding.My opinion also does not extend to compliance by any Loan Party with anyfinancial ratio or limitation in any Material Agreement expressed as a dollaramount (or an amount expressed in another currency).

 

(B)                           Except asexpressly covered in this opinion, I am not expressing any opinion as to theeffect of compliance by any Secured Party with any state or federal laws orregulations applicable to the transactions because of the nature of any of itsbusinesses.

 

Thisopinion is being furnished only to you and is solely for the benefit of theaddressees. In addition, I hereby consent to reliance on this opinion by a permittedassign of a Lender’s interest in the Credit Agreement, provided that suchpermitted assign becomes a Lender on or prior to the 30th day after the date ofthis opinion. I am opining as to the matters herein only as of the date hereof,and, while you are authorized to deliver copies of this opinion to such

 

3

----

 

permittedassigns and they are permitted to rely on this opinion, the rights to do so donot imply any obligation on my part to update this opinion. This opinion maynot to be used, circulated, quoted, relied upon, or otherwise referred to byany other person or for any other purpose without my prior written consent.

 
|   | Very  truly yours, |
|--------|--------------------|

 

4

----

 

**EXHIBIT H-4**

 

[FORM OF WRC MEDIA]

 

KarenE. Andrews

 

March 2, 2007

 
| To     | The  Lenders and the Agents referred to below           |
|--------|---------------------------------------------------------|
|   | c/o  JPMorgan Chase Bank, N.A., as Administrative Agent |

 

Ladiesand Gentlemen:

 

Iam General Counsel of WRC Media Inc., a Delaware corporation (“WRC Media”).I have been asked to give certain opinions regarding the entities listed onSchedule 1 attached hereto (each, a “Loan Party” andcollectively, the “Loan Parties”) in connection with thepreparation, execution and delivery of (1) the Credit Agreement dated asof the date hereof (the “Credit Agreement”), among RDAHolding Co., a Delaware corporation (“Holdings”), DoctorAcquisition Co., a Delaware corporation (“Acquisition Co”), TheReader’s Digest Association, Inc., a Delaware corporation (“Reader’sDigest”), the Overseas Borrowers party thereto, the Lendersfrom time to time party thereto, JPMorgan Chase Bank, N.A., as administrativeagent for the Lenders (the “Administrative Agent”), Citicorp NorthAmerica, Inc. and Merrill Lynch, Pierce, Fenner & SmithIncorporated, as co-syndication agents for the Lenders (the “Co-SyndicationAgents”), and The Royal Bank of Scotland plc, as documentation agent for theLenders (the “Documentation Agent” and, togetherwith the Administrative Agent and the Co- Syndication Agents, the “Agents”), (ii) theGuarantee and Collateral Agreement dated as of the date hereof (the “Guaranteeand Collateral Agreement”), made by Holdings,Acquisition Co, Reader’s Digest and the other Loan Parties in favor of theAdministrative Agent, and (iii) the other Loan Documents executed inconnection with the above documents. Unless otherwise indicated, capitalizedterms used and not defined in this opinion are used herein as defined in theCredit Agreement. This opinion is being rendered to you at the request of theLoan Parties and pursuant to Section 4.01(a)(v)(y) of the CreditAgreement.

 

----

 

Forthe purposes of this opinion, I have reviewed the following documents:

 

(a)                 the CreditAgreement;

 

(b)                the Guaranteeand Collateral Agreement; and

 

(c)                 such otherdocuments as I have deemed necessary or appropriate as a basis for the opinionsset forth below.

 

Thedocuments listed in clauses (a) - (b) above are referred to hereincollectively as the “Loan Documents”. The document listed inclause (b) above are referred to herein collectively as the “CollateralDocument”.

 

Ihave examined originals or copies, certified or otherwise identified to oursatisfaction, of such documents, corporate records, certificates of publicofficials and other instruments and have conducted such other investigations offact and law as I have deemed necessary or advisable for purposes of theopinions expressed below. In such examination, I have assumed the genuinenessof all signatures, the authenticity of all documents submitted to me asoriginals, the conformity to authentic original documents of all documentssubmitted to me as copies and the legal capacity of all individuals executingsuch documents. As to questions of fact material to this opinion, which I didnot independently establish or verify, I have, with your consent, relied uponthe statements, certificates and representations of officers and otherrepresentatives of the Loan Parties and on the representations and warrantiesof each Loan Party contained in the Loan Documents. In addition, I haveobtained and relied upon such certificates and assurances from publicofficials, as I have deemed necessary.

 

Ihave also assumed the valid authorization, execution, and delivery of each ofthe Loan Documents by each party thereto and I have assumed that each suchparty has been duly organized and is validly existing and in good standingunder its jurisdiction of organization, and that each such party has the legalcapacity, power and authority to perform its obligations thereunder, and thateach Loan Document constitutes the valid and binding obligation of all partiesparty thereto, enforceable against them in accordance with its terms.

 

Iam a member of the Bar of the State of New York, and I have not considered, andI express no opinion as to, the laws of any jurisdiction other than the laws ofthe State of New York and the laws of the United States of America, in eachcase as in effect on the date hereof.

 

Basedupon the foregoing, and subject to the comments and qualifications set forthbelow, it is my opinion that:

 

2

----

 

1.                                 The execution,delivery and performance of each of the Loan Documents by the Loan Partiesparty thereto and the grant of the security interests in the Collateral by anyLoan Party under the Collateral Document, (a) will not (i) materially bein conflict with, contravene, result in a breach of or constitute (alone orwith notice or lapse of time or both) a default under, or give rise to anyright to accelerate or to require the prepayment, repurchase or redemption ofany obligation under any provisions of any order binding upon any Loan Party ofany Governmental Authority of the State of New York or, to my knowledge, anyother state, or the United States of America or any material agreement, note,deed of trust, license, franchise, permit, agreement, contract, indenture,mortgage, lease, or other instrument (a “Material Agreement”) to whichany Loan Party is a party or by which it or any of its property is or may bebound or (ii) result in the creation or imposition of any Lien upon orwith respect to any property or assets now owned or hereafter acquired by anyof the Loan Parties pursuant to any such Material Agreement (other than anyLien created under the Loan Documents).

 

2.                                 To the best ofmy knowledge, there is no action, litigation, proceeding, or governmentalinvestigation pending or threatened by or against any Loan Party or against anyof its properties or revenues which questions the validity of any Loan Documentor any action taken or to be taken pursuant to any Loan Document.

 

Theopinions expressed above are subject to the following qualifications andcomments:

 

(A)                             In connectionwith the foregoing, I point out that certain of the Material Agreements are ormay be governed by laws other than the laws of the State of New York. Forpurposes of the opinion expressed in paragraph 1 above with respect to MaterialAgreements, my opinion is based solely upon my understanding, or the understandingof lawyers working under my supervision, of the plain language of such MaterialAgreements, and I do not express any opinion as to the validity, binding natureor enforceability of any such Material Agreement, and I do not assume anyresponsibility with respect to the effect on my opinion of any interpretationthereof which may be inconsistent with such understanding. My opinion also doesnot extend to compliance by any Loan Party with any financial ratio orlimitation in any Material Agreement expressed as a dollar amount (or an amountexpressed in another currency).

 

(B)                               Except asexpressly covered in this opinion, I am not expressing any opinion as to theeffect of compliance by any Secured Party with any state or federal laws orregulations applicable to the transactions because of the nature of any of itsbusinesses.

 

3

----

 

(C)                               I note thatcertain leases of the Loan Parties purport to restrict assignment by, or pledgeof a security interest in the rights thereunder of, a Loan Party without theconsent of the other parties thereto and I express no view in paragraph 1 aboveas to the granting of security interests in the rights of Loan Parties undersuch leases or the exercise of the rights or remedies of the AdministraiveAgent under the Collateral Documents with respect to such leases.

 

Thisopinion is being furnished only to you and is solely for the benefit of theaddressees. In addition, I hereby consent to reliance on this opinion by apermitted assign of a Lender’s interest in the Credit Agreement, providedthat such permitted assign becomes a Lender on or prior to the 30th day afterthe date of this opinion. I am opining as to the matters herein only as of thedate hereof, and, while you are authorized to deliver copies of this opinion tosuch permitted assigns and they are permitted to rely on this opinion, therights to do so do not imply any obligation on my part to update this opinion.This opinion may not to be used, circulated, quoted, relied upon, or otherwisereferred to by any other person or for any other purpose without my priorwritten consent.

 
|   | Very  truly yours, |
|--------|--------------------|

 

4

----

 

**EXHIBIT H-5**

 

**[FORM OF]**

**DIRECT HOLDINGS U.S. CORP.****8280 WILLOW OAKS CORPORATE DRIVEFAIRFAX, VA 22031**

 

March 2,2007

 
| To     | The  Lenders and the Agents referred to below           |
|--------|---------------------------------------------------------|
|   | c/o  JPMorgan Chase Bank, N.A., as Administrative Agent |

 

Ladiesand Gentlemen:

 

Iam General Counsel of Direct Holdings U.S. Corp., a Delaware corporation (“DHUS”),and have been asked to give certain opinions regarding the entities listed onSchedule 1 attached hereto (each, a “Loan Party” and collectively, the “LoanParties”) in connection with the execution and delivery of (i) theCredit Agreement dated as of the date hereof (the “Credit Agreement”),among RDA Holding Co., a Delaware corporation (“Holdings”), DoctorAcquisition Co., a Delaware corporation (“Acquisition Co”), The Reader’sDigest Association, Inc., a Delaware corporation (“Reader’s Digest”),the Overseas Borrowers party thereto, the Lenders from time to time partythereto, JPMorgan Chase Bank, N.A., as administrative agent for the Lenders(the “Administrative Agent”), Citicorp North America, Inc. andMerrill Lynch, Pierce, Fenner & Smith Incorporated, as co-syndicationagents for the Lenders (the “Co-Syndication Agents”), and The Royal Bankof Scotland plc, as documentation agent for the Lenders (the “DocumentationAgent” and, together with the Administrative Agent and the Co-SyndicationAgents, the “Agents”), (ii) the Guarantee and Collateral Agreementdated as of the date hereof (the “Guarantee and Collateral Agreement”),made by Holdings, Acquisition Co, Reader’s Digest and the other Loan Parties infavor of the Administrative Agent, and (iii) the other Loan Documentsexecuted in connection with the above documents. Unless otherwise indicated,capitalized terms used and not defined in this opinion are used herein asdefined in the Credit Agreement. This opinion is being rendered to you at therequest of the Loan Parties and pursuant to Section 4.01(a)(v)(z) ofthe Credit Agreement.

 

Forthe purposes of this opinion, I have reviewed the following documents:

 

(a)                  the Credit Agreement;

 

(b)                 the Guarantee and Collateral Agreement; and

 

(c)                  such other documents as I have deemednecessary or appropriate as a basis for the opinions set forth below.

 

----

 

Thedocuments listed in clauses (a) - (b) above are referred to hereincollectively as the “Loan Documents”. The document listed in clause (b) aboveis referred to herein as the “Collateral Document”.

 

Ihave examined originals or copies, certified or otherwise identified to oursatisfaction, of such documents, corporate records, certificates of publicofficials and other instruments and have conducted such other investigations offact and law as I have deemed necessary or advisable for purposes of theopinions expressed below. In such examination, I have assumed the genuinenessof all signatures, the authenticity of all documents submitted to me asoriginals, the conformity to authentic original documents of all documentssubmitted to me as copies and the legal capacity of all individuals executingsuch documents. As to questions of fact material to this opinion, which I didnot independently establish or verify, I have, with your consent, relied uponthe statements, certificates and representations of officers and otherrepresentatives of the Loan Parties and on the representations and warrantiesof each Loan Party contained in the Loan Documents. In addition, I haveobtained and relied upon such certificates and assurances from publicofficials, as I have deemed necessary.

 

Ihave also assumed the valid authorization, execution, and delivery of each ofthe Loan Documents by each party thereto and I have assumed that each suchparty has been duly organized and is validly existing and in good standingunder its jurisdiction of organization, and that each such party has the legalcapacity, power and authority to perform its obligations thereunder, and thateach Loan Document constitutes the valid and binding obligation of all partiesparty thereto, enforceable against them in accordance with its terms.

 

Iam a member of the Bar of the Commonwealth of Virginia, and I have notconsidered, and I express no opinion as to, the laws of any jurisdiction otherthan the laws of the Commonwealth of Virginia and the laws of the United Statesof America, in each case as in effect on the date hereof.

 

Basedupon the foregoing, and subject to the comments and qualifications set forthbelow, it is my opinion that:

 

1.                                 The execution,delivery and performance of each of the Loan Documents by the Loan Partiesparty thereto and the grant of the security interests in the Collateral by anyLoan Party under the Collateral Document, (a) will not (i) materiallybe in conflict with, contravene, result in a breach of or constitute (alone orwith notice or lapse of time or both) a default under, or give rise to anyright to accelerate or to require the prepayment, repurchase or redemption ofany obligation under any provisions of any order binding upon any Loan Party ofany Governmental Authority of the Commonwealth of Virginia or, to my knowledge,any other state, or the United States of America or any material agreement,note, deed of trust, license, franchise, permit, agreement, contract,indenture, mortgage, lease, or other instrument (a “Material Agreement”)to which any Loan Party is a party or by which it or any of its property is ormay be bound or (ii) result in the creation or imposition of any Lien uponor with respect to any property or assets now

 

2

----

 

ownedor hereafter acquired by any of the Loan Parties pursuant to any such MaterialAgreement (other than any Lien created under the Loan Documents).

 

2.                                 To the best ofmy knowledge, there is no action, litigation, proceeding, or governmentalinvestigation pending or threatened by or against any Loan Party or against anyof its properties or revenues which questions the validity of any Loan Documentor any action taken or to be taken pursuant to any Loan Document.

 

Theopinions expressed above are subject to the following qualifications andcomments:

 

(A)                             In connectionwith the foregoing, I point out that certain of the Material Agreements are ormay be governed by laws other than the laws of the Commonwealth of Virginia.For purposes of the opinion expressed in paragraph 1 above with respect toMaterial Agreements, my opinion is based solely upon my understanding, or theunderstanding of lawyers working under my supervision, of the plain language ofsuch Material Agreements, and I do not express any opinion as to the validity,binding nature or enforceability of any such Material Agreement, and I do notassume any responsibility with respect to the effect on my opinion of anyinterpretation thereof which may be inconsistent with such understanding. Myopinion also does not extend to compliance by any Loan Party with any financialratio or limitation in any Material Agreement expressed as a dollar amount (oran amount expressed in another currency).

 

(B)                              Except asexpressly covered in this opinion, I am not expressing any opinion as to theeffect of compliance by any Secured Party with any state or federal laws orregulations applicable to the transactions because of the nature of any of itsbusinesses.

 

(C)                              I note thatcertain leases of the Loan Parties purport to restrict assignment by, or pledgeof a security interest in the rights thereunder of, a Loan Party without theconsent of the other parties thereto and I express no view in paragraph 1 aboveas to the granting of security interests in the rights of Loan Parties undersuch leases or the exercise of the rights or remedies of the AdministrativeAgent under the Collateral Document with respect to such leases.

 

This opinion is being furnished only to you and issolely for the benefit of the addressees. In addition, I hereby consent toreliance on this opinion by a permitted assign of a Lender’s interest in theCredit Agreement, provided that such permitted assignbecomes a Lender on or prior to the 30th day after the date of this opinion. Iam opining as to the matters herein only as of the date hereof, and, while youare authorized to deliver copies of this opinion to such permitted assigns andthey are permitted to rely on

 

3

----

 

thisopinion, the rights to do so do not imply any obligation on my part to updatethis opinion. This opinion may not to be used, circulated, quoted, relied upon,or otherwise referred to by any other person or for any other purpose withoutmy prior written consent.

 
|   | Very  truly yours, |
|--------|--------------------|

 

4

----

 

**Exhibit I**

 
| Application for       | **Commercial** |  |
|-----------------------|----------------|--|
| **Letter of  Credit** | ** **     |

 

This application and the Letter of Credit issuedhereunder are subject to and governed by the **CONTINUINGAGREEMENT FOR COMMERCIAL & STANDBY LETTERS OF CREDIT**executed by the undersigned in favor of JPMorgan Chase Bank, N.A. on                        (the “Agreement”).

 

**When transmitting this application by facsimile all pages mustbe transmitted.**

 

**To:JPMorgan Chase Bank, N.A. and/or its subsidiaries and/or affiliates.  **Date:

 

**I.** Pursuant to theTerms and Conditions contained herein, please issue an IRREVOCABLE DOCUMENTARYCOMMERCIAL Letter of Credit (together with any replacements, extensions ormodifications, the “Credit”) and transmit it by:

 
| o   Teletransmission | o   Courier | o   Air  Mail (Domestic addresses only) |
|-------------------------------------|----------------------------|--------------------------------------------------------|

 

***If completing in Microsoft Word, please enterdata by ‘clicking’ on the gray boxes.***

 

| **Applicant/Obligor** (Full name and  address):                                                                                                                                                                                                                                                                                                                                                                                                                   |   | o                                                                                                                                                                                                                                                            | **Credit is  transferable**. (Issuer is authorized to include its standard  transfer conditions and is authorized to nominate a Transferring Bank.)                                                                                                                                                                                                                                                                                                        |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** **                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |                                                                                                                                                                                                                                                         | ** **                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |                                                                                                                                                                                                                                                         | **Partial  Shipment**                                                                                                                                                                                                                                                                                                                                                                                                                                      |   | **Transhipment** |
| [Signature lines are on  last page].                                                                                                                                                                                                                                                                                                                                                                                                                              |   | o                                                                                                                                                                                                                                                            | Not  Allowed (if blank, allowed)                                                                                                                                                                                                                                                                                                                                                                                                                           | o | Not  Allowed (if blank, allowed) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |   |
| **Account  Party** (Full name and address of entity to be named in Letter of Credit if  different than the above Applicant/Obligor):                                                                                                                                                                                                                                                                                                                              |   | **Shipment:**                                                                                                                                                                                                                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   | Shipment from:                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   | For Transportation to:                                                                                                                                                                                                                                       |                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   | Latest Shipment Date:                                                                                                                                                                                                                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   | **Credit  available:**                                                                                                                                                                                                                                       |                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |
| **Advising  Bank-Optional** (If blank, issuer will select its branch or  affiliate or correspondent in the domicile of the beneficiary):                                                                                                                                                                                                                                                                                                                          |   | o                                                                                                                                                                                                                                                            | At  sight.                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   | o                                                                                                                                                                                                                                                            | By  deferred payment at:                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   | o                                                                                                                                                                                                                                                            | By  acceptance of drafts at:                                                                                                                                                                                                                                                                                                                                                                                                                               |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   | o                                                                                                                                                                                                                                                            | **Discount  Charges, if any, for the account of the**                                                                                                                                                                                                                                                                                                                                                                                                      |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |                                                                                                                                                                                                                                                         |   (specify  only if credit is available by acceptance)                                                                                                                                                                                                                                                                                                                                                                                           |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |                                                                                                                                                                                                                                                         | o  Beneficiary                                                                                                                                                                                                                                                                                                                                                                                                                                   | o  Applicant |
| **Beneficiary** (Full name and  address):                                                                                                                                                                                                                                                                                                                                                                                                                         |   | Against  the documents detailed herein and Beneficiary’s draft(s) drawn on Issuer  or Issuer’s branch or affiliate or correspondent (at Issuer’s option) for  100% or         % of the invoice value. |
| ** **                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |                                                                                                                                                                                                                                                         |
| **Amount** (In Figures):                                                                                                                                                                                                                                                                                                                                                                                                                                          |   | **Insurance:**                                                                                                                                                                                                                                               |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   | o                                                                                                                                                                                                                                                            | Insurance  effected by us. We agree to keep insurance  in force until this transaction is complete (no document required if  checked).                                                                                                                                                                                                                                                                                                                     |
| **Amount** (In words):                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   | **If above  is not checked, the following documents are required:**                                                                                                                                                                                          |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |   |
| **Indicate  plus or minus percentage if applicable**                                                                                                                                                                                                                                                                                                                                                                                                              |   | o                                                                                                                                                                                                                                                            | Negotiable  Insurance Policy or Certificate covering the following risks:                                                                                                                                                                                                                                                                                                                                                                                  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| o  Plus     o   Minus      %                                                                                                                                                                                                                                                                                                                                                      |   | o                                                                                                                                                                                                                                                            | All  Risks   o  War  o  SR&CC  o  Other  Risks (specify)                                                                                                                                                                                                                                                                                                                                   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| **Expiry  Date:**                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |   |
| ** **                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |                                                                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| **Place of Expiry** Unless the undersigned or Issuer nominates  a bank which is authorized to pay, to accept, to incur a deferred payment  undertaking, or to negotiate, the Credit will be freely negotiable. Issuer  may nominate such a bank in its sole discretion or stipulate that the Credit  is available with Issuer only.

If the Credit is freely negotiable, it will be  considered to be freely negotiable by any bank anywhere. (Issuer in its sole |   | o

 

o                                                                                                                                                                                                                                                 | Indicate  if a full set is required.

 

Insurance  coverage for        % (Unless  otherwise specified the minimum amount of insurance must be for 100% of the  CIF or CIP value plus 10%. If the CIF or CIP value cannot be determined from  the documents on their face, insurance must be for a minimum amount of 110%  of the drawing amount or 110% of the gross invoice amount, whichever is  greater.) |

 

Rev. 04/07/2005

 

1

----

 

**Exhibit J**

 
| Application for               |       |  |
|-------------------------------|------------|--|
| **Standby  Letter of Credit** | ** ** |

 

This application and the Letterof Credit issued hereunder are subject to and governed by the **CONTINUING AGREEMENT FOR COMMERCIAL & STANDBY LETTERS OFCREDIT** executed by the undersigned in favor of JPMorgan Chase Bank,N.A. on                          (the“Agreement”).

 

**When Transmitting this application by facsimile all pages mustbe transmitted.**

 

**To: JPMorgan Chase Bank, N.A. and/or its subsidiaries and/oraffiliates.           **Date:

 

**I.** Pursuant to theTerms and Conditions contained herein, please issue an IRREVOCABLE STANDBYLetter of Credit (together with any replacements, extensions or modifications,the “Credit”) and transmit it by:

 
| o   Teletransmission | o   Courier | o   Air  Mail (Domestic addresses only) |
|-------------------------------------|----------------------------|--------------------------------------------------------|

 

***If completing in Microsoft Word, pleaseenter data by******‘******clicking’on the gray boxes.***

 

| **Applicant/Obligor**(Full name and address- jointly and severally if more than one,  individually and collectively, “Applicant/Obligor”):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                                                                                                                                                                                                                                                                                                           | **Beneficiary** (Full name and  address):                                                                                                         |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                                                                                                                                                                                                                                                                                                           |                                                                                                                                              |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                                                                                                                                                                                                                                                                                                           |                                                                                                                                              |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                                                                                                                                                                                                                                                                                                           |                                                                                                                                              |
| [Signature  lines are on last page].                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                                                                                                                                                                                                                                                                                                           |                                                                                                                                              |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                                                                                                                                                                                                                                                                                                           |                                                                                                                                              |
| **Account  Party** (Full name and address of entity to be named in Letter of Credit if  different than the above Applicant/Obligor):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                                                                                                                                                                                                                                                                                                           | **Advising  Bank****-****Optional** (If blank, Issuer  will select its branch or affiliate or correspondent in the domicile of the  beneficiary): |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                                                                                                                                                                                                                                                                                                           |                                                                                                                                              |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                                                                                                                                                                                                                                                                                                           |                                                                                                                                              |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                                                                                                                                                                                                                                                                                                           |                                                                                                                                              |
| **Amount:**Up to an aggregate amount of   If not USD, indicate currency                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |                                                                                                                                                                                                                                                                                                                           | **Expiry  Date:** Demands/claims must be presented to the counters of the Issuing bank  not later than                                            |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                                                                                                                                                                                                                                                                                                           |                                                                                                                                              |
| **Complete  only if Automatic Extension of the expiry date is required.**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                                                                                                                                                                                                                                                                                                           |                                                                                                                                              |
| Credit to contain Automatic Extension clause with  extension period of o one year/o other                                                 (please  specify).

 

No less than                                        calendar  days non-extension notice to the beneficiary.

 

Automatic  Extension final expiration date:                                                                             (the  date after which the Credit will no longer be subject to Automatic  Extension). |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                                                                                                                                                                                                                                                                                                           |                                                                                                                                              |
| **AVAILABLE  BY** (indicate A, B or C)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |                                                                                                                                                                                                                                                                                                                           |                                                                                                                                              |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                                                                                                                                                                                                                                                                                                           |                                                                                                                                              |   |
| o                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | A.   Beneficiary’s  dated statement referencing JPMorgan Chase Bank, N.A. Letter of Credit Number  indicating amount of demand/claim and purportedly signed by an authorized  person reading as follows (Please state within the quotation marks the wording  to appear on the statement to be presented): |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                                                                                                                                                                                                                                                                                                           |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | “  (insert appropriate reason for drawing)                                                                                                                                                                                                                                                                                |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |                                                                                                                                                                                                                                                                                                                                |                                                                                                                                                   |  |

 

Rev. 04/27/2006

 

1

----

 

**Exhibit ****K**

 

**JPMorgan Chase Bank, N.A.**

 

**March 2, 2007**

 

**CONTINUING AGREEMENT FORCOMMERCIAL & STANDBY LETTERS OF CREDIT BETWEEN**

** **

**THE READER’S DIGEST ASSOCIATION, INC.**

** **

**AND**

** **

**JPMORGAN CHASE BANK, N.A.**

 

To induce JPMorgan Chase Bank, N.A. and/orany of its domestic or foreign subsidiaries or affiliates (individually andcollectively, **“Bank”**), in its sole discretion, to issuefor the account of the Applicant or for the account of the Account Party namedin the Application, one or more standby or commercial letters of credit orother independent undertakings, from time to time at the request of theundersigned (individually and collectively, **“Applicant”**; jointly and severally, if more thanone), Applicant agrees as to each letter of credit or undertaking (togetherwith any replacements, extensions or modifications, a **“Credit”**, collectively, **“Credits”**) as follows.

 

All Credits issued pursuant to thisContinuing Agreement (the **“Agreement”**) are issued under and pursuant to theterms, provisions and covenants of the Credit Agreement (as amended, extended,restated or otherwise modified from time to time, the **“Credit Agreement”**) dated as of March 2, 2007 among Doctor Acquisition Co., RDAHolding Co., The Reader’s Digest Association, Inc., the Lenders partythereto, and JPMorgan Chase Bank, N.A. as Administrative Agent. Capitalizedterms used herein and not otherwise defined have the meaning assigned to themin the Credit Agreement. Unless otherwise indicated herein, all references madeherein to Sections shall be construed to refer to Sections of the CreditAgreement.

 

The provisions relating to letters of creditset forth in the Credit Agreement, including without limitation, rights andremedies of the Bank as issuing bank and lender shall apply to the Credit(s) andwill be secured by Collateral (if any), described in the Credit Agreement andother loan documents as such terms are defined in the Credit Agreement.Notwithstanding anything herein or in the applications referenced below, in theevent of any conflict between (a) the terms of this Agreement, anyapplication for a commercial letter of credit or any application for a standbyletter of credit and (b) the terms of the Credit Agreement, the terms ofthe Credit Agreement shall govern. In no event shall any such application orthis Agreement impose any additional obligations or liabilities on any LoanParty, except as set forth in Section 9 below.

 

**1.     Definitions:** The following terms shall have the meaningsset forth below:

 

**“Application”means each request to issue a Credit.**

 

**“Good Faith”** means honesty in fact in the conduct of thetransaction concerned.

 

**“Instructions”** means inquiries, communications andinstructions (whether oral, telephonic, written, telegraphic, facsimile,electronic or other) regarding a Credit; each Application and this Agreementare each referred to herein as **“Instructions”** (and the term “Application” issubsumed within the term “Instruction”).

 

**“ISP”** means International Standby Practices 1998(International Chamber of Commerce Publication No.590) and any subsequentrevision thereof adhered to by Bank on the date such Credit is issued.

 

**“LOI’s”** means steamshipguarantees, releases or lettersof indemnity in favor of a carrier issued by Bank upon Instruction ofApplicant.

 

**“Obligations”** means allobligations and liabilities ofApplicant to Bank in respect of any and all Credits and LOI’s issued hereunder(if any) and under this Agreement, whether matured or unmatured, absolute orcontingent, now existing or hereafter incurred.

 

**“Property”** means all propertyof any kind whatsoever (nowexisting or hereafter acquired) including, without limitation, any and allright, title and interest of Applicant in any goods, equipment, inventory,money, documents, letters of credit, warehouse receipts,

 

----

 

instruments,securities, security entitlements, financial assets, investment property, preciousand base metals, chattel paper, electronic chattel paper, accounts, commercialtort claims, deposit accounts, general intangibles (including any claims forbreach of contract, breach of warranty claims and any insurance policies andproceeds), letter of credit rights, choses in action and the proceeds of anyand all thereof (including any and all of the aforesaid referred to in anyCredit or the drawing documents relating thereto).

 

**“ReleasedMerchandise”** means all Property referred to in or relating tothe applicable Credit, released (including pursuant to a forwarders cargoreceipt or by any other means whatsoever) or consigned to Applicant or anyPerson designated by Applicant in connection with such Credit or a LOI.

 

**“StandardLetter of Credit Practice”** means, for Bank, any domestic or foreign lawor letter of credit practices applicable in the city in which Bank issued theapplicable Credit or for its branch or correspondent, such laws and practicesapplicable in the city in which it has advised, confirmed or negotiated suchCredit, as the case may be. Such practices shall be (i) of banks thatregularly issue Credits in the particular city and (ii) required orpermitted under the UCP or the ISP, as chosen in the applicable Credit.

 

**“UCP”** means UniformCustoms and Practice for Documentary Credits (1993 Revision), InternationalChamber of Commerce Publication No.500 and any subsequent revision thereofadhered to by Bank on the date such Credit is issued.

 

**“UNConvention”** means the United Nations Convention on Independent Guarantees andStandby Letters of Credit.

 

**2.    ****Applications/Instructions.** Each Applicationshall be irrevocable once the relevant Credit is issued, amended, extended,modified or renewed per the relevant Application and shall be in such form asBank shall from time to time require or agree to accept (including any type ofelectronic form or means of communication). Bank’s records of the content ofany Instruction shall be conclusive absent manifest error. Bank may transmit aCredit and any amendmentthereto by S.W.I.F.T. message and thereby bind Applicant directly and asindemnitor to the S.W.I.F.T. rules, including rules obligating Applicantor Bank to pay charges. Terms regarding LOI’s are set forth on Annex I.

 

**3.    ****Amendment;****Waiver.** Bank shall not be deemed to haveamended or modified any term hereof, or waived any of its rights unless Bankconsents in writing to such amendment, modification or waiver. No such waiver,unless expressly stated therein, shall be effective as to any transaction whichoccurs subsequent to such waiver, nor as to any continuance of a breach aftersuch waiver. Bank’s consent to any amendment, waiver, or modification does notmean that Bank shall consent or has consented to any other or subsequentInstruction to amend, modify, or waive a term of this Agreement or any Credit.

 

**4.    ****Indemnification; Limitationof Liability.**

 

**a)**     Withoutlimiting any other provisions of this Agreement or the Credit Agreement, Bankand each other Indemnitee (as defined in the Credit Agreement), shall not beresponsible to Applicant for, and Bank’s rights and remedies against Applicantand Applicant’s obligation to reimburse the Bank under the Credit Agreementshall not be impaired by: (i) honor of a presentation under any Creditwhich on its face substantially complies with the terms of such Credit; (ii) honorof a presentation of any drawing documents which appear on their face to havebeen signed, presented or issued (X) by any purported successor ortransferee of any beneficiary or other party required to sign, present or issuethe drawing documents or (Y) under a new name of the beneficiary; (iii) acceptanceas a draft of any written or electronic demand or request for payment under aCredit, even if nonnegotiable or not in the form of a draft, and may disregardany requirement that such draft, demand or request bear any or adequatereference to the Credit; (iv) the identity or authority of any presenteror signer of any drawing document or the form, accuracy, genuineness, or legaleffect of any presentation under any Credit or of any drawing documents; (v) disregardof any non-documentary conditions stated in any Credit; (vi) acting uponany Instruction which it, in Good Faith, believes to have been given by aPerson or entity authorized to give such Instruction; (vii) any errors,omissions, interruptions or delays in transmission or delivery of any message,advice or document (regardless of how sent or transmitted) or for errors ininterpretation of technical terms or in translation; (xiii) any delay in givingor failing to give any notice; (ix) any acts, omissions or fraud by, orthe solvency of, any beneficiary, any nominated Person or any other Person; (x) anybreach of contract between the beneficiary and Applicant or any of the partiesto the underlying transaction; (xi) assertion or waiver of any provision of theUCP or ISP which primarily benefits an issuer of a letter of credit, including,any requirement that any drawing document be presented to it at a particularhour or place; (xii) payment to any paying or negotiating bank (designated orpermitted by the terms of the applicable Credit) claiming that it rightfullyhonored or is entitled to reimbursement or indemnity under the Standard Letterof Credit Practice applicable to it; (xiii) dishonor of any presentation uponor during any Event of Default or for which Applicant is unable or unwilling toreimburse or indemnify Bank (provided that Applicant acknowledges thatif Bank shall later be required to honor the presentation, Applicant shall beliable therefor in accordance with Section 2.03 (e) of the CreditAgreement); or acting or failing to act as required or permitted under StandardLetter of Credit Practice applicable to where it has issued, confirmed, advisedor negotiated such Credit, as the case may be; provided that theforegoing shall not excuse the Bank from liability to the Applicant to theextent of any direct damages (as opposed to consequential damages, claims inrespect of which are waived by the Applicant to the extent permitted byapplicable Law) suffered by the Applicant that are caused by the Bank’s grossnegligence or willful misconduct when determining whether drafts and otherdocuments presented under a Credit comply with the terms thereof.

 

----

 

**b)**     Withoutlimiting Section 10.05 of the Credit Agreement, such Section 10.05shall apply to the Bank and each related Indemnitee notwithstanding theoccurrence of any of the events specified in clause (a) of this Section 4subject to the proviso set forth in such Section 10.05.

 

**c)**     Ifa Credit is to be governed by a law other than that of the State of New York,Bank shall not be liable for any costs resulting from any act or omission byBank in accord with the UCP or the ISP, as applicable, and Applicant shallindemnify Bank for all such costs.

 

**5.**     **Compliance with Laws.** Applicant will comply with all Laws(including the USA Patriot Act, foreign exchange control regulations, foreignasset control regulations and other trade-related regulations) now or hereafterapplicable to each Credit, the transactions underlying such Credit or Applicant’sexecution, delivery and performance of this Agreement, except if the failure tocomply therewith could not reasonably be expected to have a Material AdverseEffect.

 

**6.    ****Representations andWarranties.**Applicant herebyrepresents and warrants that this Agreement constitutes the legal, valid andbinding obligation of Applicant enforceable against it in accordance with itsterms (except as such enforceability may be limited by Debtor Relief Laws andby general principles of equity, regardless of whether considered in aproceeding in equity or at law) and makes each of the representations andwarranties set forth in the Credit Agreement as of the date of this Agreement(and with each request for the issuance of a Credit represents and warrants thesame as of the date of such issuance); provided that, on the ClosingDate, only the Specified Representations shall be made as to the Applicant andits Subsidiaries, and theSpecified Representations shall be made by Acquisition Co only).

 

**7.    ****Assertion of Rights.** To the extent Bank honors a presentation forwhich Bank remains unpaid, Bank may assert rights of Applicant and Applicantshall cooperate with Bank in its assertion of Applicant’s rights, if any,against the beneficiary, the beneficiary’s rights against Applicant and anyother rights that Bank may have by subordination, subrogation, reimbursement,indemnity or assignment.

 

**8.    ****Electronic Transmissions.** Bank is authorized to accept and process anyApplication and any amendments, transfers, assignments of proceeds,Instructions, consents, waivers and all documents relating to the Credit or theApplication which are sent to Bank by electronic transmission, including SWIFT,electronic mail, telex, telecopy, telefax, courier, mail or other computergenerated telecommunications and such electronic communication shall have thesame legal effect as if written and shall be binding upon and enforceableagainst the Applicant. Bank may, but shall not be obligated to, requireauthentication of such electronic transmission or that Bank receives originaldocuments prior to acting on such electronic transmission. If it is a conditionof the Credit that payment may be made upon receipt by Bank of an electronic transmissionadvising negotiation, Applicant hereby agrees to reimburse Bank on demand forthe amount indicated in such electronic transmission advice, and further agreesto hold Bank harmless if the documents fail to arrive, or if, upon the arrivalof the documents, Bank should determine that the documents do not comply withthe terms and conditions of the Credit.

 

**9.    ****COMMERCIAL CREDITS**

 

**Acceptanceof Drawing Documents; No Waiver.** Subjectto the proviso in Section 4(a), Applicant’s acceptance or retention of adrawing document presented under or in connection with any Credit (whether ornot the document is genuine) or of any Released Merchandise shall ratify Bank’shonor of the presentation and preclude Applicant from raising a defense,set-off or claim with respect to Bank’s honor of such Credit. Bank shall not berequired to seek any waiver of discrepancies from Applicant or to grant anywaiver of discrepancies which Applicant approves or requests.

 

**Possessionof Drawing Documents.** IfBank shall agree to honor (accept) drawing documents under a Credit on a timedraft or deferred payment basis, Applicant shall not take possession of thedrawing documents or the underlying Property except for the purpose of loading,unloading, storing, shipping, transshipping, manufacturing, processing orotherwise dealing with such Property in a manner preliminary to its sale orexchange. An Instruction to release any such drawing document or Property shall be deemed a representation byApplicant to Bank that Applicant seeks such release for one of said purposes.In each such case, Applicant immediately shall apply the sale proceeds of suchProperty to the Obligations relating to the applicable Credit.

 

**Absence ofWritten Instructions.** In theabsence of written instructions to the contrary, the Applicant agrees that (a) ifthe Credit authorizes drawings and/or shipments in installments and anyinstallment is not drawn and/or shipped within the period allowed for thatinstallment but the Applicant waives such discrepancy, the Bank is authorizedto honor any subsequent installments so long as documents for such installmentsare presented within the period allowed for such installments; and (b) eachnegotiation Credit shall expire at the counters of the nominated person even ifnotice of the presentation or any documents contained in the presentation isnot received by the Bank until after the expiry date of the Credit or anyinstallment thereof.

 

**Release ofDocuments or Claiming of Goods from the Carrier.** In the event Bank, upon Applicant’s request,agrees to deliver to Applicant, a customs broker or any other person designatedby the Applicant, any of the documents of title relating to the Credit, priorto having received payment in full of all the Obligations, Applicant agrees toobtain possession of any goods represented by such documents within twenty-onedays after the date of delivery of such documents, and if Applicant fails to doso, Applicant agrees to

 

----

 

return suchdocuments or to have them returned to Bank prior to the expiration of thetwenty-one day period. Applicant further agrees to execute and deliver to Bankreceipts for such documents and the goods represented thereby identifying anddescribing such documents and goods. If Applicant claims from the carrier anygoods identified in the shipping documents required under the Credit, (byvirtue of a steamship release, air release, letter of indemnity or any othermeans), with or without the assistance of Bank, and such goods have beenreleased to Applicant or a customs broker or agent acting on Applicant’sbehalf, the Applicant herebyauthorizes Bank to immediately, and without further inquiry and consideration,debit any account of Applicant in an amount equal to the fair market value ofsuch goods, that have been released, together with any reasonable out-of-pocketcharges or expenses owing to the Bank.

 

**10. ****Waiver of Defense; Joint andSeveral Liability.** Applicant waives any defense whatsoever which might constitute a defenseavailable to, or discharge of, a surety or a guarantor. If more than one Personsigns this Agreement or an Application hereunder, each of them shall be jointlyand severally liable hereunder and thereunder and all the terms and provisionsregarding liabilities, obligations and Property of such Persons shall apply toany liabilities, obligations and Property of any and all of them.

 

**11. ****Continuing Agreement.** This Agreement isa continuing agreement and may not be terminated by Applicant except upon (i) thirty(30) days’ prior written notice of such termination by Applicant to Bank at theaddress of Bank set forth on the most recent Credit issued hereunder, (ii) paymentof all Obligations and (iii) the expiration or cancellation of all Creditsissued hereunder. Notwithstanding the foregoing sentence, if a Credit is issuedin favor of a sovereign or commercial entity, which is to issue a guarantee orundertaking on Applicant’s behalf in connection therewith, or is issued assupport for such a guarantee, the Applicant shall remain liable with respect tosuch Credit until Bank is fully released in writing by such entity.

 

**12. ****Commencement of Action.** Any action orproceeding in respect of any matter arising under or in connection withCredits, the Applications or this Agreement may be brought by Applicant againstthe Bank within the time period specified in Section 5-115 of the UniformCommercial Code.

 

**13. ****Jurisdiction; Waiver of JuryTrial; Applicable Law. Applicant agrees to be bound by the provisions in theCredit Agreement relating to jurisdiction, venue, and waiver of jury trial andthat such provisions shall also apply to this Agreement.** This Agreementshall be construed in accordance with and governed by the law of the State ofNew York.

 

**14. ****No Third Party Benefits;Successor; Integration; Delivery by Facsimile; Notices.** This Agreementshall be binding upon and inure to the benefit of Bank and Applicant and theirrespective successors and permitted assigns. This Agreement shall not conferany right or benefit upon any Person other than the parties to this Agreement,the Indemnified Persons and their respective successors and permitted assigns.Applicant may not assign this Agreement without the prior written consent ofBank. This Agreement may be signed and delivered by facsimile transmission.Notices to Bank shall be sent to the address of Bank as set forth on the Creditand shall be delivered by hand, overnight courier or certified mail, returnreceipt requested. Notices to Applicant shall be sent to the address set forthbelow the signature line hereto. **THISAGREEMENT AND THE CREDIT AGREEMENT CONSTITUTE THE ENTIRE CONTRACT AND FINALAGREEMENT AMONG THE PARTIES RELATING TO THE SUBJECT MATTER AND MAY NOT BECONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORALAGREEMENTS OF THE PARTIES.**

 

----

 

THEUNDERSIGNED HEREBY AGREES TO ALL THE TERMS AND CONDITIONS SET FORTH HEREIN, ALLOF WHICH HAVE BEEN READ AND UNDERSTOOD BY THE UNDERSIGNED.

 

 
|   |                         |   |
|--------|------------------------------|--------|
|   | (Applicant/Obligor)          |   |
|   |                         |   |
|   |                         |   |
|   | (Authorized Signature/Title) |   |
|   |                         |   |
|   |                         |   |
|   | (Phone)                      |   |
|   |                         |   |
|   |                         |   |
|   | (Fax)                        |   |
|   |                         |   |
|   |                         |   |
|   | (Date)                       |   |

 

**THEFOLLOWING IS TO BE EXECUTED IF THE CREDIT IS TO BE ISSUED FOR THE ACCOUNT OF APERSON OTHER THAN THE PERSON SIGNING ABOVE:**

 

**AUTHORIZATIONAND AGREEMENT OF ADDITIONAL PARTY NAMED AS ACCOUNT PARTY**

 

To:THE ISSUER OF THE CREDIT

 

Wejoin in the above Agreement, naming us as Account Party, for the issuance ofthe Credit and, in consideration thereof, we irrevocably agree (i) that theabove Applicant has sole right to give instructions and make agreements withrespect to this Agreement and the Credit, and the disposition of documents, andwe have no right or claim against you, any of your affiliates or subsidiaries,or any correspondent in respect of any matter arising in connection with any ofthe foregoing and (ii) to be bound by the Agreement and all obligations of theApplicant thereunder as if we were a party thereto. The Applicant is authorizedto assign or transfer to you all or any part of any security held by theApplicant for our obligations arising in connection with this transaction and,upon any such assignment or transfer, you shall be vested with all powers andrights in respect of the security transferred or assigned to you and you mayenforce your rights under this Agreement against us or our Property inaccordance with the terms hereof.

 

 
|   |                         |   |
|--------|------------------------------|--------|
|   | (Account Party)              |   |
|   |                         |   |
|   |                         |   |
|   | (Authorized Signature/Title) |   |
|   |                         |   |
|   |                         |   |
|   | (Phone)                      |   |
|   |                         |   |
|   |                         |   |
|   | (Fax)                        |   |
|   |                         |   |
|   |                         |   |
|   | (Date)                       |   |

 

----

 

**AppendixA**

**Tothe Continuing Agreement for Commercial & Standby Letters of Credit**(To be completedby Account Party/Applicant/Correspondent Bank)

 

This Appendix will remainin effect until further notice in writing is received by the JPMorgan ChaseBank, N.A. from the Account Party/Applicant/Correspondent Bank. Changes to thisAppendix require a new Appendix A to be executed and delivered to JPMorganChase Bank, N A.

 

A)     In the event JPMorgan Chase Bank, N.A. issues oramends a Commercial or a Standby Letter of Credit (“Credit”), any one of thefollowing individual(s) shall be authorized to sign on the behalf of:

 

 

(Print Name of AccountParty/Applicant/Correspondent Bank)

 

 
|           |   |    |   |                   |   |   |
|----------------|--------|---------|--------|------------------------|--------|--------|
| (Printed Name) |   | (Title) |   | (Authorized Signature) |   | (Date) |
|           |   |    |   |                   |   |   |
|           |   |    |   |                   |   |   |
| (Printed Name) |   | (Title) |   | (Authorized Signature) |   | (Date) |

 

B)       In regards to any “Credit”, JPMorganChase Bank, N.A. may accept and rely on instructions including withoutlimitation, (a) waiving of discrepancies, (b) mailings/returning shippingdocuments, (c) changing Credit terms and conditions prior to issuance, andamendments to Credits which do not extend, increase or change the tenor of thedraft(s) transmitted by the following authorized representatives of:

 

 

(Print Name of AccountParty/Applicant/Correspondent Bank)

 

 
|           |   |    |   |                   |   |   |
|----------------|--------|---------|--------|------------------------|--------|--------|
| (Printed Name) |   | (Title) |   | (Authorized Signature) |   | (Date) |
|           |   |    |   |                   |   |   |
|           |   |    |   |                   |   |   |
|           |   |    |   |                   |   |   |
| (Printed Name) |   | (Title) |   | (Authorized Signature) |   | (Date) |
|           |   |    |   |                   |   |   |
|           |   |    |   |                   |   |   |
|           |   |    |   |                   |   |   |
| (Printed Name) |   | (Title) |   | (Authorized Signature) |   | (Date) |

 

C)       Signature Verification**(To be completed by “Bank”):**

The above individual(s) is/areauthorized to execute and sign applications, amendments and instructions onbehalf of the Account Party/Applicant/Correspondent Bank.

 

 
|                                              |   |                   |   |                                   |   |   |
|---------------------------------------------------|--------|------------------------|--------|----------------------------------------|--------|--------|
| (Print Relationship  Manager “RM” Name) |   | (“RM” Title) |   | (“RM” Authorized  Signature) |   | (Date) |

 

----

 

**ANNEXI TO AGREEMENT FOR COMMERCIAL LETTERS OF CREDIT ISSUED BYJPMORGAN CHASE BANK, N.A.**

 

IfBank issues a LOI orendorses a bill of lading at the Instruction of Applicant or otherwise pursuanthereto, Applicant agrees as follows:

 

Except as otherwise setforth in this Annex I or expressly set forth elsewhere in this Agreement, LOI’sshall be deemed issued by Bank subject to the same terms and conditions setforth herein for Credits, including, without limitation, payment obligations,indemnification provisions and limitations of liability benefiting Bank andother Indemnified Persons. Applicant shall be liable for payments made underany LOI on demand and otherwise subject to paragraph 2. Bank shall have theright in its sole discretion and without notice to or approval of Applicant, topay, settle or adjust any claim or demand made against or upon Bank inconnection therewith without inquiry or determination, on Bank’s part, of thecircumstances, merits or validity of any claim or demand. Applicant shall takewhatever steps are necessary to obtain the shipping documents concerning theReleased Merchandise. Upon Applicant’s receipt of such shipping documents,Applicant shall deliver them to the carrier, duly endorsed by all parties whoseendorsement is required by the carrier, and obtain from the carrier and deliverto Bank, the LOI and a release of Bank’s liability to the carrier. Bank maymake payments against any drawing under the Credit related to an LOI, whetheror not the drawing shall comply with the terms and conditions of such Credit,without any liability whatsoever to Bank. Applicant expressly acknowledges thatApplicant may be required to reimburse Bank for payments made by Bank underboth the LOI and such Credit with respect to the same Released Merchandise.Applicant shall account by delivering to Bank, immediately upon the receiptthereof by Applicant, the proceeds of the sale of the Released Merchandise orthe documents related thereto in whatever form received (with Applicant’sendorsement where necessary) to be applied by Bank to the payment of anydrawing under the Credit. If any proceeds shall be notes, accounts,acceptances, or in any form other than cash, they shall not be applied by Bankuntil paid in cash. Bank shall have the option at any time to sell or discountthese items and so apply the net proceeds, conditionally upon final payment ofthese items. Applicant shall pay all charges in connection with the ReleasedMerchandise and shall at all times hold it separate and apart from the Propertyof Applicant and shall definitively show such separation in all its records andentries. Applicant shall at all times keep the Released Merchandise fullyinsured at Applicant’s expense in favor of, and to the satisfaction of, Bankagainst loss by fire, theft, and any other risk to which it may be subject.Applicant shall deposit the insurance policies with Bank upon its demand. Iffor any reason any of such policies fail to provide for payment of the lossthereunder to Bank as its interest may appear, Applicant hereby (1) assigns andmakes the loss payable under any of such policies payable to Bank as itsinterest may appear, (2) assigns to Bank all of the avails and proceeds of anyand all of such policies, and (3) agrees to accept such avails and proceeds intrust for Bank and to forthwith deliver the same to Bank in the exact formreceived (with the endorsement of Applicant where necessary). Bank shall haveno responsibility for the existence, quantity, quality, condition, value ordelivery of any Released Merchandise or the correctness, validity orgenuineness of the documents purporting to represent Released Merchandise.

 

----

 

**Exhibit L**

 

**Formof German Tax Confirmation**

 

(a)                                  If, at any time after Closing Date, [theGerman Facility Borrower] determines that a confirmation by each of [the GermanFacility Lenders] substantially in the form of the Decree issued by the GermanFederal Ministry of Finance as of October 20, 2005 (substantially in the formof Exhibit M, the “**Tax Confirmation**”) is required underthe decrees to § 8a of the German Corporate Income Tax Act (*Körperschaftsteuergesetz or KStG)*dated July15, 2004, July 22, 2005, and October 20, 2005 (as in effect on the date hereof,the “**Decrees**”) with respect to [the GermanFacility], the Borrower may prepare and deliver to [the German FacilityLenders] (through the Administrative Agent) a complete and accurate draft TaxConfirmation listing in particular all guarantees and security interestssecuring the claims of [the German Facility Lenders] under the Loan Documentsand provide to [the German Facility Lenders] any further information which maybe required by the Administrative Agent or any [German Facility Lender] toissue the Tax Confirmation (based on the then applicable practice of the Germantax authorities).

 

(b)                                 The Tax Confirmation shall only includefactual but not legal statements to be issued by [the German Facility Lenders].The Tax Confirmation shall not contain any statement that any [German FacilityLender] is not permitted to issue by law, administrative rule or regulation ofthe jurisdiction to which the relevant [German Facility Lender] is subject.

 

(c)                                  Each [German Facility Lender] (includingany Person that becomes a German Facility Lender subsequent to the date hereofpursuant to Section 10.07) authorizes the Administrative Agent on behalf ofsuch [German Facility Lender] to issue a Tax Confirmation within 20 BusinessDays after such [German Facility Lender’s] receipt of the following (whichreceipt shall be deemed to have occurred upon the Administrative Agent’sposting of the following to Intralinks or other similar informationtransmission system):

 

(i)            [the German Facility Borrower’s] requesttherefor,

 

(ii)           a complete and accurate draft of such TaxConfirmation listing all guarantees and security interests pursuant to clause (a)above, and

 

(iii)          all further information required pursuantto clause (a) above to enable [the German Facility Lenders] to complete suchTax Confirmation,

 

unless such [GermanFacility Lender] notifies the Administrative Agent within such 20-Business Dayperiod that (x) it is prohibited from doing so by law, administrative rule orregulation of the jurisdiction to which such [German Facility Lender] issubject or (y) it has determined that the factual information provided by theBorrower is not correct or not complete or, in the view of such [GermanFacility Lender] (acting in good faith), is misleading.

 

(d)                                 The Borrower agrees to pay or reimbursethe Administrative Agent and each [German Facility Lender] for all costs andexpenses incurred in connection with any Tax Confirmation, including all legalfees, expenses and disbursements. The Borrower shall indemnify and holdharmless each Indemnitee from and against any and all liabilities, obligations,losses, damages, penalties, claims, demands, actions, judgments and suits and relatedexpenses (including all legal fees, expenses and disbursements) or any kind ornature whatsoever which may at any time be imposed on, incurred by or assertedagainst any such Indemnitee in any way relating to or arising out of or inconnection with any Tax Confirmation. The agreements in this clause (d) shallsurvive the resignation of the Administrative Agent, the replacement of anyLender, the

 

----

 

termination of theAggregate Commitments and repayment, satisfaction or discharge of all otherObligations.

 

(e)                                  The Borrowers confirm to theAdministrative Agent and each [German Facility Lender] that (i) [the GermanFacility Lenders] will issue their respective Tax Confirmations exclusively atthe request of [the German Facility Borrower] and solely for the purposes ofthis Section [    ] pursuant to theDecrees with respect to the Loan Documents, (ii) [the German Facility Lenders]are not responsible for examining any Borrower’s tax position or for achievingany certain tax treatment with respect to any Borrower and (iii) no Loan Partywill raise any claims against the Administrative Agent or any [German FacilityLender] based on, or in connection with, any Tax Confirmation and no [GermanFacility Lender] will have any liability to any Loan Party with respect to anyTax Confirmation.

 

(f)                                    It is the common understanding of theparties hereto that no party is providing any legal and/or tax advice to anyother party with respect to this Agreement or, in particular, with respect tothe application of § 8a KStG and the interpretation of § 8a KStG in theDecrees, and that it is the responsibility of each party, in particular eachLoan Party, to consult with its own legal/tax advisers.

 

----