Document:

Exhibit 10.2

 

EXECUTION COPY

 

 

UNSECURED TERM LOAN CREDIT AND GUARANTEE AGREEMENT

 

Dated as of August 12, 2011

 

among

 

RDA HOLDING CO.,

 

THE READER’S DIGEST ASSOCIATION, INC.,

 

THE OTHER GUARANTORS NAMED HEREIN

 

The Lenders Party Hereto

 

and

 

LUXOR CAPITAL GROUP, LP,
 as Administrative Agent

 

 

 

TABLE OF CONTENTS

 

	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    
	
ARTICLE I DEFINITIONS AND ACCOUNTING TERMS
    	
1
    
	
 
    	
 
    	
 
    
	
 
    	
Defined Terms
    	
1
    
	
 
    	
Other Interpretive Provisions
    	
37
    
	
 
    	
Accounting Terms
    	
37
    
	
 
    	
Rounding
    	
38
    
	
 
    	
References to Agreements, Laws, Etc.
    	
38
    
	
 
    	
Times of Day
    	
38
    
	
 
    	
Timing of Payment of Performance
    	
38
    
	
 
    	
Currency Equivalents Generally
    	
38
    
	
 
    	
Change of Currency
    	
39
    
	
 
    	
 
    	
 
    
	
ARTICLE II THE LOANS
    	
39
    
	
 
    	
 
    	
 
    
	
 
    	
The Loans
    	
39
    
	
 
    	
Procedure for Term Loan Borrowing
    	
39
    
	
 
    	
Reserved
    	
39
    
	
 
    	
Prepayments
    	
39
    
	
 
    	
Termination of Commitments
    	
40
    
	
 
    	
Repayment of Loans
    	
40
    
	
 
    	
Interest
    	
40
    
	
 
    	
Fees
    	
40
    
	
 
    	
Computation of Interest and Fees
    	
41
    
	
 
    	
Evidence of Indebtedness
    	
41
    
	
 
    	
Payments Generally
    	
41
    
	
 
    	
Sharing of Payments
    	
43
    
	
 
    	
 
    	
 
    
	
ARTICLE III TAXES, INCREASED COSTS PROTECTION AND ILLEGALITY
    	
43
    
	
 
    	
 
    	
 
    
	
 
    	
Taxes
    	
43
    
	
 
    	
[Reserved]
    	
45
    
	
 
    	
[Reserved]
    	
45
    
	
 
    	
Increased Cost and Reduced Return;   Capital Adequacy
    	
45
    
	
 
    	
[Reserved]
    	
46
    
	
 
    	
Matters Applicable to All Requests for   Compensation
    	
46
    
	
 
    	
[Reserved]
    	
47
    
	
 
    	
Survival
    	
47
    
	
 
    	
 
    	
 
    
	
ARTICLE IV CONDITIONS PRECEDENT
    	
47
    
	
 
    	
 
    	
 
    
	
 
    	
Conditions to Effectiveness
    	
47
    
	
 
    	
 
    	
 
    
	
ARTICLE V REPRESENTATIONS AND WARRANTIES
    	
49
    
	
 
    	
 
    	
 
    
	
 
    	
Existence,   Qualification and Power; Compliance with Laws
    	
49
    
	
 
    	
Authorization; No Contravention
    	
49
    
	
 
    	
Governmental Authorization; Other   Consents
    	
49
    

 

i

 

	
 
    	
Binding Effect
    	
49
    
	
 
    	
Financial Statements; No Material   Adverse Effect
    	
50
    
	
 
    	
Litigation
    	
50
    
	
 
    	
No Default
    	
50
    
	
 
    	
Ownership of Property; Liens
    	
50
    
	
 
    	
Environmental Compliance
    	
50
    
	
 
    	
Taxes
    	
51
    
	
 
    	
ERISA Compliance
    	
51
    
	
 
    	
Subsidiaries; Equity Interests
    	
52
    
	
 
    	
Margin Regulations; Investment Company   Act
    	
52
    
	
 
    	
Disclosure
    	
52
    
	
 
    	
Intellectual Property; Licenses, Etc.
    	
52
    
	
 
    	
Solvency
    	
53
    
	
 
    	
Labor Matters
    	
53
    
	
 
    	
[Reserved]
    	
53
    
	
 
    	
[Reserved]
    	
53
    
	
 
    	
Certain Documents
    	
53
    
	
 
    	
[Reserved]
    	
53
    
	
 
    	
 
    	
 
    
	
ARTICLE VI AFFIRMATIVE COVENANTS
    	
53
    
	
 
    	
 
    	
 
    
	
 
    	
Financial Statements
    	
53
    
	
 
    	
Certificates; Other Information
    	
55
    
	
 
    	
Update Calls
    	
57
    
	
 
    	
Notices
    	
57
    
	
 
    	
Payment of Obligations
    	
57
    
	
 
    	
Preservation of Existence, Etc.
    	
57
    
	
 
    	
Maintenance of Properties
    	
57
    
	
 
    	
Maintenance of Insurance
    	
57
    
	
 
    	
Compliance with Laws
    	
58
    
	
 
    	
Inspection Rights; Books and Records;   Discussions
    	
58
    
	
 
    	
Covenant to Guarantee Obligations
    	
58
    
	
 
    	
Compliance with Environmental Laws
    	
58
    
	
 
    	
[Reserved]
    	
58
    
	
 
    	
Use of Proceeds
    	
58
    
	
 
    	
Right of First Refusal to Provide   Additional Financing
    	
59
    
	
 
    	
 
    	
 
    
	
ARTICLE VII NEGATIVE COVENANTS
    	
59
    
	
 
    	
 
    	
 
    
	
 
    	
Limitation on   Restricted Payments
    	
59
    
	
 
    	
Limitation on incurrence of Indebtedness   and issuance of Disqualified Stock and preferred stock
    	
66
    
	
 
    	
Liens
    	
71
    
	
 
    	
Merger, Consolidation or Sale of All or   Substantially All Assets
    	
71
    
	
 
    	
Limitations on Guarantors
    	
72
    
	
 
    	
Transactions with Affiliates
    	
73
    
	
 
    	
Dividend and Other Payment Restrictions   Affecting Restricted Subsidiaries
    	
75
    
	
 
    	
Asset Sales
    	
76
    
	
 
    	
Prepayments, Etc. of Indebtedness
    	
77
    
	
 
    	
Holding Company
    	
78
    

 

ii

 

	
 
    	
Payments for Consent
    	
78
    
	
 
    	
Limitation on Lines of Business
    	
78
    
	
 
    	
Limitation on Guarantees of Indebtedness   by Restricted Subsidiaries
    	
78
    
	
 
    	
Financial Condition Covenant
    	
80
    
	
 
    	
Receivables
    	
80
    
	
 
    	
Accounting Changes
    	
80
    
	
 
    	
 
    	
 
    
	
ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES
    	
81
    
	
 
    	
 
    	
 
    
	
 
    	
Events of Default
    	
81
    
	
 
    	
Remedies Upon Event of Default
    	
83
    
	
 
    	
Application of Funds
    	
83
    
	
 
    	
 
    	
 
    
	
ARTICLE IX ADMINISTRATIVE AGENT
    	
84
    
	
 
    	
 
    	
 
    
	
 
    	
Appointment and   Authorization of Administrative Agent
    	
84
    
	
 
    	
Delegation of Duties
    	
84
    
	
 
    	
Liability of Administrative Agent
    	
84
    
	
 
    	
Reliance by Administrative Agent
    	
85
    
	
 
    	
Notice of Default
    	
85
    
	
 
    	
Credit Decision; Disclosure of   Information by Administrative Agent
    	
85
    
	
 
    	
Indemnification of Administrative Agent
    	
86
    
	
 
    	
Administrative Agent in its Individual   Capacity
    	
86
    
	
 
    	
Successor Agents
    	
86
    
	
 
    	
Administrative Agent May File   Proofs of Claim
    	
87
    
	
 
    	
Guarantee Matters
    	
88
    
	
 
    	
[Reserved]
    	
88
    
	
 
    	
Appointment of Supplemental   Administrative Agents
    	
88
    
	
 
    	
 
    	
 
    
	
ARTICLE X GUARANTEE
    	
88
    
	
 
    	
 
    	
 
    
	
 
    	
Guarantee
    	
88
    
	
 
    	
Right of Contribution
    	
89
    
	
 
    	
No Subrogation
    	
89
    
	
 
    	
Amendments, etc. with Respect to   the Obligations
    	
89
    
	
 
    	
Guarantee Absolute and Unconditional
    	
90
    
	
 
    	
Reinstatement
    	
91
    
	
 
    	
Payments
    	
91
    
	
 
    	
 
    	
 
    
	
ARTICLE XI MISCELLANEOUS
    	
91
    
	
 
    	
 
    	
 
    
	
 
    	
Amendments, Etc.
    	
91
    
	
 
    	
Notices and Other Communications;   Facsimile Copies
    	
92
    
	
 
    	
No Waiver; Cumulative Remedies
    	
94
    
	
 
    	
Attorney Costs, Expenses and Taxes
    	
94
    
	
 
    	
Indemnification by the Borrower
    	
95
    
	
 
    	
Payments Set Aside
    	
95
    
	
 
    	
Successors and Assigns
    	
96
    
	
 
    	
Confidentiality
    	
99
    
	
 
    	
Setoff
    	
100
    
	
 
    	
Interest Rate Limitation
    	
100
    

 

iii

 

	
 
    	
Counterparts
    	
100
    
	
 
    	
Integration
    	
101
    
	
 
    	
Survival of Representations and   Warranties
    	
101
    
	
 
    	
Severability
    	
101
    
	
 
    	
Tax Forms
    	
101
    
	
 
    	
GOVERNING LAW
    	
103
    
	
 
    	
Submission To Jurisdiction; Waivers
    	
103
    
	
 
    	
WAIVER OF RIGHT TO TRIAL BY JURY
    	
103
    
	
 
    	
Binding Effect
    	
103
    
	
 
    	
Lender Action
    	
104
    
	
 
    	
USA PATRIOT Act
    	
104
    
	
 
    	
Acknowledgements
    	
104
    
	
 
    	
Releases of Guarantee
    	
104
    

 

iv

 

	
SCHEDULES
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
1.01C
    	
Designated Non-Debtors
    
	
 
    	
2.01
    	
Loans
    
	
 
    	
5.11(c)
    	
Foreign Benefits Matters
    
	
 
    	
5.12
    	
Subsidiaries and Other Equity Investments
    
	
 
    	
 
    	
 
    
	
EXHIBITS
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
Form of
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
A
    	
[Reserved]
    
	
 
    	
B
    	
Note
    
	
 
    	
C
    	
Compliance Certificate
    
	
 
    	
D
    	
Assignment and Assumption
    
	
 
    	
E
    	
[Reserved]
    
	
 
    	
F
    	
Opinion of Weil, Gotshal &   Manges LLP
    
	
 
    	
G
    	
[Reserved]
    
	
 
    	
H
    	
U.S. Tax Compliance Certificate
    
	
 
    	
I
    	
[Reserved]
    
	
 
    	
J
    	
[Reserved]
    
	
 
    	
K
    	
Warrants
    

 

v

 

UNSECURED TERM LOAN CREDIT AND GUARANTEE AGREEMENT

 

This UNSECURED TERM LOAN CREDIT AND GUARANTEE AGREEMENT (“Agreement”) is entered into as of August 12, 2011, among RDA HOLDING CO., a Delaware corporation (“Holdings”), THE READER’S DIGEST ASSOCIATION, INC., a Delaware corporation (the “Borrower”), the subsidiary guarantors from time to time party hereto, LUXOR CAPITAL GROUP, LP, as Administrative Agent, and the several banks and other financial institutions or entities from time to time parties to this Agreement (collectively, the “Lenders” and each a “Lender”).

 

The parties hereto hereby agree as follows:

 

ARTICLE I

 

DEFINITIONS AND ACCOUNTING TERMS

 

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

 

“Acquired Indebtedness” means, with respect to any specified Person,

 

(1) Indebtedness or Disqualified Stock of any other Person existing at the time such other Person is merged with or into or became a Restricted Subsidiary of such specified Person, including, without limitation, Indebtedness or Disqualified Stock incurred in connection with, or in contemplation of, such other Person merging with or into or becoming a Restricted Subsidiary of such specified Person; and

 

(2) Indebtedness secured by a Lien encumbering any asset acquired by such specified Person.

 

“Additional Interest” means all additional interest then owing pursuant to the Registration Rights Agreement.

 

“Additional Notes” means additional notes issued from time to time under the Senior Secured Note Indenture after the initial offering.

 

“Administrative Agent” means Luxor Capital Group in its capacity as administrative agent under any of the Loan Documents, or any permitted successor administrative agent.

 

“Administrative Agent’s Office” means the Administrative Agent’s address and, as appropriate, account as set forth in Section 11.02 or such other address or account as the Administrative Agent may from time to time notify the Borrower and the Lenders in writing (including by electronic mail or by posting to Intralinks or other similar information transmission systems).

 

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

 

“Affiliate” of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, “control” (including, with correlative meanings, the terms “controlling,” “controlled by” and “under common control with”), as used with respect to any Person, shall mean the

 

 

possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise.

 

“Affiliate Transaction” has the meaning set forth in Section 7.06

 

“Agent-Related Persons” means the Administrative Agent, together with its Affiliates, and the officers, directors, employees, agents and attorneys-in-fact of such Person and Affiliates.

 

“Aggregate Commitments” means the Commitments of all the Lenders. The original aggregate amount of the Aggregate Commitments is $10,000,000.

 

“Agreement” has the meaning specified in the introductory paragraph hereto.

 

“Allrecipes.com Sale” means the sale, conveyance, transfer or other disposition, whether in a single transaction or a series of related transactions, of all or substantially all of the property or assets of or Equity Interests in Allrecipes.com, Inc.

 

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

 

“Asset Sale” means:

 

(1) the sale, conveyance, transfer or other disposition, whether in a single transaction or a series of related transactions, of property or assets (including by way of a sale and leaseback) of the Borrower, a Guarantor or any Restricted Subsidiary (each referred to in this definition as a “disposition”); or

 

(2) the issuance or sale of Equity Interests of any Restricted Subsidiary (other than directors’ qualifying shares or shares required by applicable law to be held by a Person other than the Borrower or a Restricted Subsidiary), whether in a single transaction or a series of related transactions (other than preferred stock of Restricted Subsidiaries issued in compliance with Section 7.02) in each case, other than:

 

(a) a disposition of Cash Equivalents or obsolete, damaged or worn out equipment in the ordinary course of business or the sale or lease of equipment, inventory or accounts receivable in the ordinary course of business and dispositions of property in the ordinary course of business that is no longer used or useful in the conduct of the business of the Borrower and its Restricted Subsidiaries;

 

(b) the disposition of all or substantially all of the assets of the Borrower and the Restricted Subsidiaries in a manner permitted pursuant to Section 7.04;

 

(c) the making of any Restricted Payment or Permitted Investment that is permitted to be made, and is made, under Section 7.01 or the granting of a Lien permitted by Section 7.03;

 

(d) any disposition of assets or issuance or sale of Equity Interests of any Restricted Subsidiary in any transaction or series of transactions with an aggregate fair market value of less than $5.0 million;

 

(e) any disposition of property or assets or issuance of securities by (i) a Restricted Subsidiary to the Borrower, (ii) the Borrower or a Restricted Subsidiary to another Subsidiary Guarantor

 

2

 

or (iii) a Restricted Subsidiary that is not a Subsidiary Guarantor to another Restricted Subsidiary that is not a Subsidiary Guarantor;

 

(f) to the extent allowable under Section 1031 of the Internal Revenue Code of 1986, any exchange of like property (excluding any boot thereon) for use in a Similar Business;

 

(g) the lease, assignment or sublease of any real or personal property in the ordinary course of business;

 

(h) licenses or sub-licenses of intellectual property in the ordinary course of business;

 

(i) solely with respect to Section 7.08(a)(i)(A) and (B), foreclosures on assets, involuntary asset transfers or transfers by reason of eminent domain;

 

(j) sales of accounts receivable, or participations therein, in connection with any Receivables Facility;

 

(k) any financing transaction with respect to property built or acquired by the Borrower or any Restricted Subsidiary after the Closing Date, including, without limitation, sale leasebacks and asset securitizations permitted by this Agreement;

 

(l) any issuance or sale of Equity Interests in, or Indebtedness or other securities of, an Unrestricted Subsidiary, including in connection with any merger or consolidation;

 

(m) dispositions of accounts receivable in connection with the compromise, settlement or collection thereof in the ordinary course of business or in bankruptcy or similar proceedings and not in connection with a Receivables Facility;

 

(n) the factoring by Foreign Subsidiaries at maturity or collection of any accounts receivable pursuant to factoring programs entered into in the ordinary course of business on customary market terms and with respect to receivables of, and generated by, Foreign Subsidiaries;

 

(o) the sale, lease, assignment, transfer or disposal of any property or assets in connection with any office move or relocation in the ordinary course of business;

 

(p) solely for purposes of satisfying Section 7.08(a)(i)(A), the sale, lease, assignment, transfer or disposal of Investments in joint ventures to the extent required by, or made pursuant to customary sell arrangements between, the joint venture parties set forth in joint venture arrangements and similar binding arrangements; and

 

(q) the sale, lease, assignment, transfer or disposal of any and all of the art collections owned by the Borrower or its Restricted Subsidiaries on the Existing Agreement Closing Date;

 

provided, that, notwithstanding the foregoing clauses (a) through (q), the Allrecipes.com Sale shall be deemed an Asset Sale.

 

“Assignees” has the meaning specified in Section 11.07(b).

 

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

 

3

 

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

 

“Audited Financial Statements” means the audited consolidated balance sheets of the Borrower and its consolidated Subsidiaries as of each of June 30, 2008, June 30, 2009 and December 31, 2010, and the related audited consolidated statements of income, stockholders’ equity and cash flows for the Borrower and its consolidated Subsidiaries for the periods ended on such dates.

 

“Bank Priority Obligations” has the meaning specified in the Security Agreement.

 

“Bankruptcy Code” means the Bankruptcy Reform Act of 1978, as heretofore and hereafter amended, and codified as 11 U.S.C. §§101 et seq.

 

“Bankruptcy Court” means the United States Bankruptcy Court for the Southern District of New York presiding over the Chapter 11 cases of The Reader’s Digest Association, Inc. and its affiliates, Case No. 09-23529 (RDD).

 

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

 

“Board of Directors” means:

 

(1) with respect to a corporation, the board of directors of the corporation or any committee thereof duly authorized to act on behalf of such board;

 

(2) with respect to a partnership, the Board of Directors of the general partner of the partnership;

 

(3) with respect to a limited liability company, the managing member or members or any controlling committee of managing members thereof; and

 

(4) with respect to any other Person, the board or committee of such Person serving a similar function.

 

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

 

“Business Day” means any day other than a Saturday, Sunday or other day on which commercial banks are authorized to close under the Laws of, or are in fact closed in, the state where the Administrative Agent’s Office is located or in The City of New York.

 

“Capital Expenditures” means, for any period, the sum, without duplication, of the additions to property, plant or equipment and other capital expenditures, including replacements, capitalized repairs and improvements during such period, of the Borrower and its Restricted Subsidiaries for such period, determined in accordance with GAAP.

 

“Capital Stock” means:

 

(1) in the case of a corporation, corporate stock;

 

(2) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock;

 

4

 

(3) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited); and

 

(4) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person.

 

“Capitalized Lease Obligation” means, at the time any determination thereof is to be made, the amount of the liability in respect of a capital lease that would at such time be required to be capitalized and reflected as a liability on a balance sheet (excluding the footnotes thereto) in accordance with GAAP.

 

“Cases” means the jointly administered chapter 11 cases of the captioned In re The Reader’s Digest Association, Inc., Case No. 09-23529 (RDD), arising upon the filing of voluntary petitions for relief with the Bankruptcy Court on August 24, 2009.

 

“Cash Equivalents” means:

 

(1) U.S. dollars and any other foreign currency held by the Borrower and the Restricted Subsidiaries in the ordinary course of business;

 

(2) securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality thereof (provided that the full faith and credit of the United States is pledged in support thereof), maturing, unless such securities are deposited to defease any Indebtedness, not more than two years from the date of acquisition;

 

(3) securities issued by U.S. government-sponsored entities (“GSE”) and federally related institutions, maturing and not more than two years from the date of acquisition;

 

(4) repurchase agreements with primary dealers of eligible banks, and

 

(a) with a maturity of not more than one year from the date of acquisition; and

 

(b) supported by underlying collateral that is U.S. Treasury of U.S. government-sponsored entities;

 

(5) certificates of deposit, time deposits, Eurodollar time deposits, and bankers’ acceptances

 

(a) with a rated bank that has received a short-term rating from a nationally recognized statistical rating organization (“NRSRO”) in the highest short-term rating category for debt obligations (within which there may be subcategories or gradations indicating relative standing). Long-term ratings may be used if short-term ratings are not available; and

 

(b) with a maturity of not more than two years from the date of acquisition;

 

(6) securities issued or fully guaranteed or insured by any state, commonwealth or territory of the United States, or by any political subdivision or taxing authority thereof; and

 

(a) such security is a rated security that has received a short-term rating from a NRSRO (provided, that long-term ratings may be used if short term ratings are not available) in the

 

5

 

highest short-term rating category for debt obligations (within which there may be subcategories or gradations indicating relative standing); and

 

(b) such security has a maturity of not more than two years from the date of acquisition;

 

(7) money market funds assets of which are consistent with the quality standards of Cash Equivalents described herein (but excluding for purposes of this clause (7) money market funds that invest primarily in auction rate securities);

 

(8) commercial paper and corporate obligations of corporations, provided that such security:

 

(a) is a rated security that has received a short-term rating from a NRSRO in the highest short-term rating category for debt obligations (within which there may be sub-categories or gradations indicating relative standing); and

 

(b) has a stated final maturity of not more than one year from the date of acquisition; and

 

(9) instruments equivalent to those referred to in clauses (1) to (8) above denominated in euro or pounds sterling or any other foreign currency comparable in credit quality and tenor to those referred to above and customarily used by corporations for cash management purposes in any jurisdiction outside the United States to the extent reasonably required in connection with any business conducted by any Restricted Subsidiary organized in such jurisdiction and not for speculative purposes.

 

“Cash Management Obligations” means obligations owed by any Loan Party in respect of any overdraft and related liabilities arising from treasury, depository and cash management services or any automated clearing house transfers of funds.

 

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

 

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

 

“Change of Control” means the earliest to occur of:

 

(a)           the acquisition of ownership, directly or indirectly, beneficially or of record, by any Person or group (within the meaning of the Exchange Act and the rules of the SEC thereunder as in effect on the date hereof), of Equity Interests representing 35% or more of the aggregate ordinary voting power represented by the issued and outstanding Equity Interests of Holdings;

 

(b)           the board of directors of Holdings ceasing to consist of a majority of the Continuing Directors;

 

(c)           Holdings ceasing to own, directly, all of the outstanding Equity Interests in the Borrower;

 

(d)           a Specified Change of Control; or

 

6

 

(e)           the Disposition of all or substantially all of the assets of the Loan Parties other than any Disposition to which Section 7.04 applies, but only to the extent expressly permitted by Section 7.04 and so long as any requirements set forth therein are satisfied.

 

“Charges” has the meaning specified in Section 11.10.

 

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

 

“Code” means the U.S. Internal Revenue Code of 1986.

 

“Collateral” means all property of the Loan Parties, now or hereafter acquired, upon which a Lien in favor of the Collateral Agent for the benefit of the Secured Parties is required to be created in accordance with the terms and conditions of the Secured Obligations, provided that in no event shall any Excluded Property constitute Collateral.

 

“Collateral Agent” means Wilmington Trust FSB and its successors and assigns.

 

“Collateral Documents” means such agreements, pledge agreements, mortgages, collateral assignments, agency agreements and related agreements, instruments and documents executed and delivered pursuant to the Secured Obligations (including, without limitation, finance statements under the Uniform Commercial Code of the relevant states), as amended, supplemented, restated, renewed, refunded, replaced, restructured, repaid, refinanced or otherwise modified from time to time, and pursuant to which Collateral is pledged, assigned or granted to or on behalf of the Collateral Agent for the ratable benefit of the Secured Parties (as defined in the Existing Credit Agreement) or notice of such pledge, assignment or grant is given.

 

“Commitment” means as to any Lender, the obligation of such Lender, if any, to make a Loan to the Borrower in a principal amount not to exceed the amount set forth under the heading “Commitment” opposite such Lender’s name on Schedule 2.01.

 

“Compensation Period” has the meaning specified in Section 2.11(c)(ii).

 

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

 

“Confirmation Order” means the order of the United States Bankruptcy Court for the Southern District of New York, dated January 19, 2010, confirming the Reorganization Plan.

 

“Consolidated Depreciation and Amortization Expense” means with respect to any Person for any period, the total amount of depreciation and amortization expense, including the amortization of deferred financing fees, of such Person and its Restricted Subsidiaries for such period on a consolidated basis and otherwise determined in accordance with GAAP.

 

“Consolidated Interest Expense” means, with respect to any Person for any period, the sum, without duplication, of:

 

(a) consolidated interest expense of such Person and its Restricted Subsidiaries for such period, to the extent such expense was deducted (and not added back) in computing Consolidated Net Income (including (a) amortization of original issue discount resulting from the issuance of Indebtedness at less than par, (b) all commission, discounts and other fees and charges owed with respect to letters of credit or bankers’ acceptances, (c) non-cash interest payments (but excluding any non-cash interest

 

7

 

expense attributable to the movement in the mark to market valuation of obligations under Swap Contracts or other derivative instruments pursuant to ASC No. 815—“Derivatives and Hedging Overview”), (d) the interest component of Capitalized Lease Obligations and (e) net payments, if any, without duplication, pursuant to interest rate obligations under Swap Contracts with respect to Indebtedness, and excluding (1) any Additional Interest, (2) amortization of deferred financing fees and (3) any expensing of bridge or other financing fees); plus

 

(b) consolidated capitalized interest of such Person and its Restricted Subsidiaries for such period, whether paid or accrued; less

 

(c) interest income for such period.

 

“Consolidated Leverage Ratio” means, with respect to any Person for any period, the ratio of:

 

(1) the Consolidated Total Indebtedness of such Person and its Restricted Subsidiaries at the time of determination (the “Calculation Date”), to

 

(2) the EBITDA of such Person for the four most recent full fiscal quarters  ending immediately prior to the date for which internal financial statements are available.

 

If the Borrower or any Restricted Subsidiary has incurred, assumed, guaranteed, redeemed, retired or extinguished any Indebtedness (other than Indebtedness incurred under any revolving credit facility unless such Indebtedness has been permanently repaid and has not been replaced) or issues or redeems Disqualified Stock or preferred stock subsequent to the commencement of the period for which the Consolidated Leverage Ratio is being calculated but prior to or substantially concurrently with the event for which the calculation of the Consolidated Leverage Ratio is made, then the Consolidated Leverage Ratio shall be calculated giving pro forma effect to such incurrence, assumption, guarantee, redemption, retirement or extinguishment of Indebtedness, or such issuance or redemption of Disqualified Stock or preferred stock, as if the same had occurred at the beginning of the applicable four-quarter period.

 

For purposes of making the computation referred to above, Investments, acquisitions, dispositions, mergers, consolidations and disposed operations (as determined in accordance with GAAP) that have been made by the Borrower or any of its Restricted Subsidiaries during the four-quarter reference period or subsequent to such reference period and on or prior to or simultaneously with the Calculation Date shall be calculated on a pro forma basis assuming that all such Investments, acquisitions, dispositions, mergers, consolidations and disposed operations (and the change in any associated fixed charge obligations and the change in EBITDA resulting therefrom) had occurred on the first day of the four-quarter reference period. If since the beginning of such period any Person that subsequently became a Restricted Subsidiary or was merged with or into the Borrower or any of its Restricted Subsidiaries since the beginning of such period shall have made any Investment, acquisition, disposition, merger, consolidation or disposed operation that would have required adjustment pursuant to this definition, then the Consolidated Leverage Ratio shall be calculated giving pro forma effect thereto for such period as if such Investment, acquisition, disposition, merger, consolidation or disposed operation had occurred at the beginning of the applicable four-quarter period.

 

For purposes of this definition, whenever pro forma effect is to be given to a transaction, the pro forma calculations shall be (x) made in good faith by a responsible financial or accounting officer of the Borrower (and may include, for the avoidance of doubt, cost savings and operating expense reductions resulting from such Investments acquisition, disposition, merger or consolidation or

 

8

 

disposition which is being given pro forma effect that have been or are reasonably expected to be realized within twelve (12) months after the date of such Investment, acquisition, disposition, merger, consolidation or disposed operation as the result of specified actions taken or to be taken within six (6) months after such date) and which are reasonably identifiable and factually supportable, except as otherwise provided herein or (y) determined in accordance with Regulation S-X. If any Indebtedness bears a floating rate of interest and is being given pro forma effect, the interest on such Indebtedness shall be calculated as if the rate in effect on the Calculation Date had been the applicable rate for the entire period (taking into account any obligations under Swap Contracts applicable to such Indebtedness). Interest on a Capitalized Lease Obligations shall be deemed to accrue at an interest rate reasonably determined by a responsible financial or accounting officer of the Borrower to be the rate of interest implicit in such Capitalized Lease Obligation in accordance with GAAP. For purposes of making the computation referred to above, interest on any Indebtedness under a revolving credit facility computed on a pro forma basis shall be computed based upon the average daily balance of such Indebtedness during the applicable period except as set forth in the first paragraph of this definition. Interest on Indebtedness that may optionally be determined at an interest rate based upon a factor of a prime or similar rate, a eurocurrency interbank offered rate, or other rate, shall be deemed to have been based upon the rate actually chosen, or, if none, then based upon such optional rate chosen as the Borrower may designate.

 

For the purposes of this definition, any amount in a currency other than U.S. dollars will be converted to U.S. dollars based on the average exchange rate for such currency for the most recent twelve month period immediately prior to the date of determination determined in a manner consistent with that used in calculating EBITDA for the applicable period.

 

“Consolidated Net Income” means, with respect to any Person for any period, the aggregate of the Net Income, of such Person and its Restricted Subsidiaries for such period, on a consolidated basis, and otherwise determined in accordance with GAAP; provided, however, that, without duplication,

 

(1) any net after-tax effect of extraordinary, non-recurring or unusual gains or losses, costs, charges or expenses (less all fees and expenses relating thereto) shall be excluded (including, without limitation, severance, relocation, transition and other restructuring costs and curtailments or modifications to pension and post-retirement employee benefit plans),

 

(2) the Net Income for such period shall not include the cumulative effect of a change in accounting principles during such period,

 

(3) any net after-tax effect of income (loss) from disposed, abandoned or discontinued operations and any net after-tax gains or losses on disposal, abandoned of disposed or discontinued operations shall be excluded,

 

(4) any net after-tax gains or losses (less all fees and expenses relating thereto) attributable to asset dispositions other than in the ordinary course of business, as determined in good faith by the Board of Directors of the Borrower, shall be excluded,

 

(5) the Net Income for such period of any Person that is not a Subsidiary, or is an Unrestricted Subsidiary, or that is accounted for by the equity method of accounting, shall be excluded; provided that Consolidated Net Income of the Borrower shall be increased by the amount of dividends or distributions or other payments that are actually paid in cash (or to the extent converted into cash) to the referent Person or a Restricted Subsidiary thereof in respect of such period (without duplication for purposes of Section 7.01 of any amounts included under Section 7.01(a)(vii)(D)(1));

 

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(6) solely for the purpose of determining the amount available for Restricted Payments under Section 7.01(a)(vii)(A), the Net Income for such period of any Restricted Subsidiary (other than any Subsidiary Guarantor) shall be excluded if the declaration or payment of dividends or similar distributions by that Restricted Subsidiary of its Net Income is not at the date of determination wholly permitted without any prior governmental approval (which has not been obtained) or, directly or indirectly, by the operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule, or governmental regulation applicable to that Restricted Subsidiary or its stockholders, unless such restriction with respect to the payment of dividends or in similar distributions has been legally waived; provided that Consolidated Net Income of the Borrower will be increased by the amount of dividends or other distributions or other payments actually paid in cash (or to the extent converted into cash) to the Borrower or a Restricted Subsidiary thereof in respect of such period, to the extent not already included therein;

 

(7) the effects of adjustments (including the effects of such adjustments pushed down to the Borrower and the Restricted Subsidiaries) in any line item of such Person’s consolidated financial statements pursuant to GAAP resulting from the application of purchase accounting in relation to any consummated acquisition, net of taxes, shall be excluded;

 

(8) any net after-tax income (loss) from the early extinguishment or cancellation of Indebtedness or obligations under Swap Contracts or other derivative instruments shall be excluded;

 

(9) any impairment charge or asset write-off pursuant to ASC No. 350—“Intangible Assets” and No. 360—“Impairments” and the amortization of intangibles arising pursuant to ASC No. 805 (excluding any such impairment charge to the extent that it represents an accrual of or reserve for cash expenditures in any future period) shall be excluded;

 

(10) the amount of any expense will be excluded to the extent a corresponding amount is received in cash by the Borrower and the Restricted Subsidiaries from a Person other than the Borrower or any Restricted Subsidiaries under any agreement providing for reimbursement of any such expense, provided such reimbursement payment has not been included in determining Consolidated Net Income (it being understood that if the amounts received in cash under any such agreement in any period exceed the amount of expense in respect of such period, such excess amounts received may be carried forward and applied against expense in future periods);

 

(11) any non-cash compensation charge or expense recorded from grants of stock appreciation or similar rights, stock options or other rights to officers, directors or employees shall be excluded; and

 

(12) any increase in amortization or depreciation or other non-cash charges or the impact of write-off of deferred revenues resulting from the application of SOP 90-7 in relation to the Emergence Transactions shall be excluded.

 

Notwithstanding the foregoing, for the purpose of Section 7.01 only (other than Section 7.01(a)(vii)(D)), there shall be excluded from Consolidated Net Income any income arising from any sale or other disposition of Restricted Investments made by the Borrower and the Restricted Subsidiaries, any repurchases and redemptions of Restricted Investments from the Borrower and the Restricted Subsidiaries, any repayments of loans and advances which constitute Restricted Investments by the Borrower or any Restricted Subsidiary, any sale of the stock of an Unrestricted Subsidiary or any distribution or dividend from an Unrestricted Subsidiary, in each case only to the extent such amounts increase the amount of Restricted Payments permitted under Section 7.01(a)(vii)(D).

 

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“Consolidated Secured Debt Ratio” means, with respect to any specified Person, as of any date of determination, the ratio of (1) the sum, without duplication, of (a) the aggregate principal amount of the Specified Notes, plus (b) the aggregate amount outstanding under any Receivables Facility, plus (c) the aggregate principal amount (or accreted value) outstanding under any Pari Passu Payment Lien Obligations, plus (d) the aggregate principal amount (or accreted value) of outstanding obligations under the Existing Credit Agreement and Credit Facilities which constitute Priority Payment Lien Obligations (including letters of credit) and any other Priority Payment Lien Obligations, and plus (e) the aggregate amount of any incremental Indebtedness and other obligations permitted to be incurred under Section 7.02(b)(i) after giving effect to any amounts of Indebtedness and other obligations incurred under such Section 7.02(b)(i), as of the last day of the most recent fiscal quarter for which internal financial statements are available immediately preceding the date on which such event for which such calculation is being made shall occur to (2) the EBITDA of the specified Person and its Restricted Subsidiaries (on a consolidated basis) for the most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on which such event for which such calculation is being made shall occur, in each case with such pro forma adjustments as are appropriate and consistent with the pro forma adjustment provisions set forth in the definition of Consolidated Leverage Ratio.

 

“Consolidated Total Indebtedness” means, as at any date of determination, an amount equal to the sum of (1) the aggregate amount of all outstanding Indebtedness of the Borrower and its Restricted Subsidiaries on a consolidated basis consisting of Indebtedness for borrowed money, Obligations in respect of Capitalized Lease Obligations and debt obligations evidenced by promissory notes and similar instruments, (2) the aggregate amount of all outstanding Disqualified Stock of the Borrower and all preferred stock of its Restricted Subsidiaries on a consolidated basis, with the amount of such Disqualified Stock and preferred stock equal to the greater of their respective voluntary or involuntary liquidation preferences and maximum fixed repurchase prices, in each case determined on a consolidated basis in accordance with GAAP, and (3) all obligations relating to Receivables Facilities.

 

For purposes hereof, the “maximum fixed repurchase price” of any Disqualified Stock or preferred stock that does not have a fixed repurchase price shall be calculated in accordance with the terms of such Disqualified Stock or preferred stock as if such Disqualified Stock or preferred stock were repurchased on any date on which Consolidated Total Indebtedness shall be required to be determined pursuant to this Agreement, and if such price is based upon, or measured by, the fair market value of such Disqualified Stock or preferred stock, such fair market value shall be determined reasonably and in good faith by the Borrower.

 

“Contingent Obligations” means, with respect to any Person, any obligation of such Person guaranteeing any leases, dividends or other obligations that do not constitute Indebtedness (“primary obligations”) of any other Person (the “primary obligor”) in any manner, whether directly or indirectly, including, without limitation, any obligation of such Person, whether or not contingent,

 

(1) to purchase any such primary obligation or any property constituting direct or indirect security therefor,

 

(2) to advance or supply funds

 

(a) for the purchase or payment of any such primary obligation, or

 

(b) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, or

 

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(c) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation against loss in respect thereof.

 

“Continuing Directors” means, as of any date of determination, any member of the Board of Directors of the Borrower who:

 

(1) was a member of such Board of Directors on the Closing Date; or

 

(2) was nominated for election or elected to such Board of Directors with the approval of at least 75% of the Continuing Directors who were members of such Board of Directors at the time of such nomination or election.

 

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

 

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

 

“Credit Facilities” means, with respect to the Borrower or any of its Restricted Subsidiaries, one or more debt facilities, other than the facility hereunder, or other financing arrangements (including, without limitation, the Existing Credit Agreement, the Secured Credit Facility, commercial paper facilities or indentures) providing for revolving credit loans, term loans, letters of credit or other long-term Indebtedness, including any notes, mortgages, guarantees, security documents, instruments and agreements executed in connection therewith, and any amendments, supplements, modifications, extensions, renewals, restatements or refundings thereof and any indentures or credit facilities or commercial paper facilities that replace, refund or refinance any part of the loans, notes, other credit facilities or commitments thereunder, including any such replacement, refunding or refinancing facility or indenture that increases the amount permitted to be borrowed thereunder or alters the maturity thereof (provided that such increase in borrowings is permitted under Section 7.02) or adds Restricted Subsidiaries as additional borrowers or guarantors thereunder and whether by the same or any other agent, lender or investor or group of lenders or investors.

 

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

 

“Default” means any event that is, or with the passage of time or the giving of notice or both would be, an Event of Default provided that any Default that results solely from the taking of any action that would have been permitted but for the continuation of a previous Default will be deemed to be cured if such previous Default is cured prior to becoming an Event of Default.

 

“Default Rate” means an interest rate equal to the interest rate otherwise applicable to the Loan plus 2.0% per annum.

 

“Defaulting Lender” means any Lender that (a) has failed to pay over to the Administrative Agent or any other Lender any amount required to be paid by it hereunder within one (1)

 

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Business Day of the date when due, unless subsequently cured or (b) has been deemed insolvent or become the subject of a bankruptcy or insolvency proceeding.

 

“Designated Noncash Consideration” means the fair market value of noncash consideration received by the Borrower or a Restricted Subsidiary in connection with an Asset Sale that is so designated as Designated Noncash Consideration pursuant to an Officers’ Certificate, setting forth the basis of such valuation, less the amount of cash or Cash Equivalents received in connection with a subsequent sale of such Designated Noncash Consideration.

 

“Designated Non-Debtors” means the Subsidiaries set forth on Schedule 1.01C.

 

“Designated Preferred Stock” means preferred stock of the Borrower or any direct or indirect parent thereof (in each case other than Disqualified Stock) that is issued for cash (other than to a Restricted Subsidiary or an employee stock ownership plan or trust established by the Borrower or any of its Subsidiaries) and is so designated as Designated Preferred Stock, pursuant to an Officers’ Certificate, as the case may be, on the issuance date thereof, the cash proceeds of which are excluded from the calculation set forth in Section 7.01(a)(vii).

 

“Disposition” or “Dispose” means the sale, transfer, license, lease or other disposition (including any sale and leaseback transaction and any sale of Equity Interests held in another Person) of any property by any Person, including any sale, assignment, transfer or other disposal, with or without recourse, of any notes or accounts receivable or any rights and claims associated therewith; and, shall include any issuance by a Person of any of its Equity Interests to another Person.

 

“Disqualified Stock” means, with respect to any Person, any Capital Stock of such Person which, by its terms, or by the terms of any security into which it is convertible or for which it is putable or exchangeable, or upon the happening of any event, matures or is mandatorily redeemable, other than as a result of a change of control or asset sale, pursuant to a sinking fund obligation or otherwise, or is redeemable at the option of the holder thereof, other than as a result of a change of control or asset sale, in whole or in part, in each case prior to the date 91 days after the Maturity Date; provided, however, that only the portion of Capital Stock that so matures or is mandatorily redeemable, is so convertible or exchangeable or is so redeemable at the option of the holder thereof prior to such date will be deemed to be Disqualified Stock; and, provided further, that if such Capital Stock is issued to any plan for the benefit of employees of the Borrower or its Subsidiaries or by any such plan to such employees, such Capital Stock shall not constitute Disqualified Stock solely because it may be required to be repurchased by the Borrower or any of its Subsidiaries in order to satisfy applicable statutory or regulatory obligations.

 

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

 

“Domestic Subsidiary” means, with respect to any Person, any Restricted Subsidiary of such Person other than a Foreign Subsidiary.

 

“EBITDA” means, with respect to any Person for any period, the Consolidated Net Income of such Person for such period plus (without duplication):

 

(a) provision for taxes based on income or profits, plus franchise or similar taxes, of such Person for such period deducted (and not added back) in computing Consolidated Net Income, plus

 

(b) Consolidated Interest Expense of such Person for such period to the extent the same was deducted (and not added back) in calculating such Consolidated Net Income, plus

 

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(c) Consolidated Depreciation and Amortization Expense of such Person for such period to the extent such depreciation and amortization were deducted (and not added back) in computing Consolidated Net Income, plus

 

(d) any fees, expenses or charges related to any Equity Offering, Permitted Investment, acquisition, disposition, recapitalization or Indebtedness permitted to be incurred by this Agreement (whether or not successful), including such fees, expenses or charges related to the offering of the Senior Secured Notes, and, in each case, deducted (and not added back) in computing Consolidated Net Income, plus

 

(e) the amount of any restructuring charges deducted (and not added back) in such period in computing Consolidated Net Income, including any one-time costs incurred in connection with acquisitions after the Existing Agreement Closing Date; provided that the aggregate amount of restructuring charges incurred during 2011 and thereafter added to EBITDA pursuant to this clause (e) or excluded in the calculation of Consolidated Net Income pursuant to clause (1) of the definition thereof shall not exceed $35,000,000 for any twelve-month period, and any restructuring charges incurred during any fiscal quarter of 2011 and thereafter shall be set forth in reasonable detail on a schedule provided to the Administrative Agent, as part of the Compliance Certificate with respect to such quarter required to be delivered pursuant to Section 6.02(b), plus

 

(f) any other non-cash charges, expenses or losses reducing Consolidated Net Income for such period (including any impairment charges or the impact of purchase accounting and the effects of fresh start accounting under SOP 90-7), excluding any such charge that represents an accrual or reserve for a cash expenditure for a future period, plus

 

(g) the amount of any minority interest expense or non-controlling interest in income of consolidated subsidiaries deducted (and not added back) in such period in calculating Consolidated Net Income (less the amount of any cash dividends paid to the holders of such minority interests), plus

 

(h) all non-recurring costs and expenses of the Borrower and its Restricted Subsidiaries incurred in connection with the Emergence Transactions; plus

 

(i) any net loss resulting from obligations under Swap Contracts (including pursuant to the application of SFAS No. 133), plus

 

(j) foreign exchange losses resulting from the impact of foreign currency changes on the valuation of assets or liabilities on the balance sheet of the Borrower and its consolidated Subsidiaries, plus

 

(k) any deductions consisting of subsidiary income attributable to minority interests in Reader’s Digest Association Limited, except to the extent actually paid to a holder of Equity Interests in such Subsidiary (or any designee of such Person) other than the Borrower and its Subsidiaries (with such payments to be deducted in the period made), less

 

(l) any net gain resulting from obligations under Swap Contracts (including pursuant to the application of SFAS No. 133), less

 

(m) foreign exchange gains resulting from the impact of foreign currency changes on the valuation of assets or liabilities on the balance sheet of the Borrower and its consolidated Subsidiaries, less

 

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(n) any additions resulting from subsidiary losses attributable to minority interests in Reader’s Digest Association Limited, less

 

(o) non-cash items increasing Consolidated Net Income of such Person for such period (including the effects of fresh start accounting under SOP 90-7), excluding any non-cash gains which represent the reversal of any accrual of, or cash reserve for, anticipated cash charges that reduced EBITDA in any prior period.

 

It is understood that (i) if the EBITDA for any fiscal quarter is less than zero, then such EBITDA shall be deemed to be equal to zero and (ii) each calculation of EBITDA hereunder shall include such pro forma adjustments as are appropriate and consistent with the pro forma adjustment provisions set forth in the definition of Consolidated Leverage Ratio (without duplication thereof).

 

“Eligible Assignee” means any Assignee permitted by and consented to in accordance with Section 11.07(b).

 

“Emergence Date” means the day (a) that is the Business Day selected by the Debtors (as defined under the Reorganization Plan) after the date of the Confirmation Order on which all conditions specified in Article IX.A of the Reorganization Plan have been satisfied or waived pursuant to Article IX.B of the Reorganization Plan; (b) the Emergence Transactions shall have occurred; and (c) the Reorganization Plan shall have been substantially consummated.

 

“Emergence Transactions” mean the various transactions set forth in the Reorganization Plan entered into by the Borrower and certain of its affiliates in connection with the Emergence Date and substantial consummation of the Reorganization Plan.

 

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

 

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

 

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

 

“Equity Interests” means Capital Stock and all warrants, options or other rights to acquire Capital Stock, but excluding any debt security that is convertible into, or exchangeable for, Capital Stock.

 

“Equity Offering” means any public or private sale of common or preferred equity of the Borrower or any of its direct or indirect parent companies (excluding Disqualified Stock), other than (a) public offerings with respect to the Borrower’s or any direct or indirect parent company’s common stock

 

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registered on Form S-8, (b) any sales to Holdings, the Borrower or any of its Subsidiaries, and (c) any such public or private sale that constitutes an Excluded Contribution or representing Designated Preferred Stock.

 

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

 

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

 

“ERISA Event” means (a) a Reportable Event with respect to a Pension Plan; (b) a withdrawal by any Loan Party or any ERISA Affiliate from a Pension Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation of operations that is treated as such a withdrawal under Section 4062(e) of ERISA; (c) a complete or partial withdrawal by any Loan Party or any ERISA Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is in reorganization or is in endangered or critical status (within the meaning of Section 432 of the Code or Section 305 or Title IV of ERISA); (d) the filing of a notice of intent to terminate, the treatment of a Plan amendment as a termination under Sections 4041 or 4041A of ERISA, or the commencement of proceedings by the PBGC to terminate a Pension Plan or Multiemployer Plan; (e) an event or condition which constitutes grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan or Multiemployer Plan; (f) the imposition of any liability under Title IV of ERISA, other than for PBGC premiums due but not delinquent under Section 4007 of ERISA, upon any Loan Party or any ERISA Affiliate; (g) a determination that any Pension Plan is, or is expected to be, in “at risk” status (within the meaning of Section 430 of the Code or Section 303 of ERISA); (h) the filing pursuant to Section 412 of the Code or Section 303 of ERISA of an application for a waiver of the minimum funding standard with respect to any Pension Plan, the failure to make by its due date a required installment under Section 430(j) of the Code with respect to any Pension Plan or the failure of any Loan Party or any ERISA Affiliates to make any required contribution to a Multiemployer Plan; or (i) any failure by any Pension Plan to satisfy the minimum funding standards (within the meaning of Section 412 of the Code or Section 302 of ERISA) applicable to such Pension Plan, whether or not waived.

 

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

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC promulgated thereunder.

 

“Exchange Notes” means any notes issued in exchange for notes pursuant to the Registration Rights Agreement or similar agreement.

 

“Excluded Contribution” means net cash proceeds, marketable securities or Qualified Proceeds received by the Borrower and its Restricted Subsidiaries from

 

(a) contributions to its common equity capital, and

 

(b) the sale (other than to a Subsidiary of the Borrower or to any management equity plan or stock option plan or any other management or employee benefit plan or agreement of the Borrower or a Subsidiary) of Capital Stock (other than Disqualified Stock and Designated Preferred Stock) of the Borrower or any direct or indirect parent of the Borrower,

 

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in each case designated as Excluded Contributions pursuant to an Officers’ Certificate on the date such capital contributions are made or the date such Equity Interests are sold, as the case may be, which are excluded from the calculation set forth in Section 7.01(a)(vii).

 

“Excluded Property” has the meaning specified in the Security Agreement.

 

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

 

“Existing Agreement Closing Date” means the “Closing Date” as defined in the Existing Credit Agreement.

 

“Existing Credit Agreement” means the Credit Agreement, dated as of February 19, 2010, among the Borrower, Holdings, the guarantors party thereto, the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent, as amended, supplemented, waived or otherwise modified from time to time in a manner not prohibited by the provisions hereof.

 

“Existing Indebtedness” means Indebtedness of the Borrower and its Restricted Subsidiaries existing on the Closing Date.

 

“Federal Funds Rate” means, for any day, the rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank on the Business Day next succeeding such day; provided that (a) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (b) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate (rounded upward, if necessary, to a whole multiple of 1/100 of 1%) charged to JPMorgan Chase Bank, N.A. (or, if the Existing Credit Agreement is no longer outstanding, the administrative agent under the Borrower’s then-existing primary credit facility) on such day on such transactions as determined by the Administrative Agent.

 

“Fee Letter” has the meaning specified in Section 2.08(b).

 

“Foreign Benefit Arrangement” means any employee benefit arrangement mandated by non-U.S. law that is maintained or contributed to by any Loan Party or any ERISA Affiliate.

 

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

 

“Foreign Lender” has the meaning specified in Section 11.15.

 

“Foreign Plan” means each employee benefit plan (within the meaning of Section 3(3) of ERISA, whether or not subject to ERISA) that is not subject to U.S. law and is maintained or contributed to by any Loan Party or any ERISA Affiliate.

 

“Foreign Subsidiary” means, with respect to any Person, any Restricted Subsidiary of such Person that is not organized or existing under the laws of the United States, any state thereof or the District of Columbia, and any Restricted Subsidiary of such Restricted Subsidiary.

 

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

 

“GAAP” means generally accepted accounting principles in the United States which are in effect on the Existing Agreement Closing Date.

 

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

 

“Government Securities” means securities that are:

 

(a) direct obligations of the United States of America for the timely payment of which its full faith and credit is pledged, or

 

(b) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America the timely payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America,

 

which, in either case, are not callable or redeemable at the option of the issuer thereof, and shall also include a depository receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act), as custodian with respect to any such Government Securities or a specific payment of principal of or interest on any such Government Securities held by such custodian for the account of the holder of such depository receipt; provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the Government Securities or the specific payment of principal of or interest on the Government Securities evidenced by such depository receipt.

 

“Granting Lender” has the meaning specified in Section 11.07(h).

 

“Group Member” means Holdings, the Borrower and the Subsidiaries.

 

“guarantee” means a guarantee (other than by endorsement of negotiable instruments for collection in the ordinary course of business), direct or indirect, in any manner (including, without limitation, letters of credit and reimbursement agreements in respect thereof), of all or any part of any Indebtedness or other obligations.

 

“Guarantee” means the guarantee by any Guarantor of the Borrower’s Obligations under this Agreement.

 

“Guarantee Requirement” means, at any time, the requirement that, all Obligations shall have been unconditionally guaranteed (the “Guaranty”) by Holdings and each Domestic Subsidiary (other than Direct Holdings IP LLC), or, in the case of Domestic Subsidiaries formed or acquired after the Closing Date, each wholly-owned Domestic Subsidiary with assets with either a book value or fair market value equal to or greater than $250,000 (each, a “Guarantor”).

 

“Guarantors” has the meaning specified in the definition of “Guarantee Requirement”.

 

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“Guarantor Obligations”:  with respect to any Guarantor, all obligations and liabilities of such Guarantor which may arise under or in connection with this Agreement (including, without limitation, Article X), or any other Loan Document to which such Guarantor 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 that are required to be paid by such Guarantor pursuant to the terms of this Agreement or any other Loan Document).

 

“Guaranty” has the meaning specified in the definition of “Guarantee Requirement”.

 

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

 

“Holdings” has the meaning specified in the preamble of this Agreement.

 

“Indebtedness” means, with respect to any Person,

 

(a) any Indebtedness (including principal and premium) of such Person, whether or not contingent:

 

(1) in respect of borrowed money,

 

(2) evidenced by bonds, notes, debentures or similar instruments or letters of credit or bankers’ acceptances (or, without double counting, reimbursement agreements in respect thereof),

 

(3) representing the deferred and unpaid balance of the purchase price of any property (including Capitalized Lease Obligations), except any such balance that constitutes a trade payable or similar obligation to a trade creditor, in each case accrued in the ordinary course of business, or

 

(4) representing any obligations under Swap Contracts,

 

if and to the extent that any of the foregoing Indebtedness (other than letters of credit and obligations under Swap Contracts) would appear as a liability upon a balance sheet (excluding the footnotes thereto) of such Person prepared in accordance with GAAP,

 

(b) to the extent not otherwise included, any obligation by such Person to be liable for, or to pay, as obligor, guarantor or otherwise, on the Indebtedness of another Person (whether or not such items would appear upon the balance sheet of such obligor or guarantor), other than by endorsement of negotiable instruments for collection in the ordinary course of business, and

 

(c) to the extent not otherwise included, Indebtedness of another Person secured by a Lien on any asset owned by such Person, whether or not such Indebtedness is assumed by such Person (with the amount of such Indebtedness deemed to be the lower of (i) the principal amount of the Indebtedness of such other person and (ii) the fair market value of the assets securing such Indebtedness at the date of determination);

 

provided, however, that (x) Contingent Obligations incurred in the ordinary course of business, (y) and obligations under or in respect of Receivables Facilities, and (z) in the case of the Borrower and its Restricted Subsidiaries, statutory or other legal requirements to make deposits in

 

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connection with sweepstakes or similar contests, or surety bonds or letters of credit posted pursuant to such requirements in the ordinary course of business shall be deemed not to constitute Indebtedness.

 

“Indemnified Liabilities” has the meaning specified in Section 11.05.

 

“Indemnitees” has the meaning specified in Section 11.05.

 

“Independent Financial Advisor” means an accounting, appraisal, investment banking firm or consultant to Persons engaged in Similar Businesses of nationally recognized standing that is, in the good faith judgment of the Borrower, qualified to perform the task for which it has been engaged.

 

“Information” has the meaning specified in Section 11.08.

 

“Initial Purchasers” means J.P. Morgan Securities Inc., Banc of America Securities LLC, Credit Suisse Securities (USA) LLC, Goldman, Sachs & Co. and Moelis & Company LLC.

 

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

 

“Interest Payment Date” means, (a) the first Business Day of each fiscal quarter and (b) the date of any repayment or prepayment made in respect of any Loan.

 

“Investments” means, with respect to any Person, all investments by such Person in other Persons (including Affiliates) in the form of loans (including guarantees), advances or capital contributions (excluding accounts receivable, trade credit, advances to customers, commission, travel and similar advances to officers and employees, in each case made in the ordinary course of business), purchases or other acquisitions for consideration of Indebtedness, Equity Interests or other securities issued by any other Person and investments that are required by GAAP to be classified on the balance sheet (excluding the footnotes) of such Person in the same manner as the other investments included in this definition to the extent such transactions involve the transfer of cash or other property. For purposes of the definition of “Unrestricted Subsidiary” and Section 7.01,

 

(1) “Investments” shall include the portion (proportionate to the Borrower’s direct or indirect equity interest in such Subsidiary) of the fair market value of the net assets of a Subsidiary of the Borrower at the time that such Subsidiary is designated an Unrestricted Subsidiary; provided, however, that upon a redesignation of such Subsidiary as a Restricted Subsidiary, the Borrower or applicable Restricted Subsidiary shall be deemed to continue to have a permanent “Investment” in an Unrestricted Subsidiary in an amount (if positive) equal to

 

(x) the Borrower’s direct or indirect “Investment” in such Subsidiary at the time of such redesignation; less

 

(y) the portion (proportionate to the Borrower’s direct or indirect equity interest in such Subsidiary) of the fair market value of the net assets of such Subsidiary at the time of such redesignation; and

 

(2) any property transferred to or from an Unrestricted Subsidiary shall be valued at its fair market value at the time of such transfer, in each case as determined in good faith by the Borrower.

 

“Issue Date” means the date on which the Senior Secured Notes were initially issued.

 

“Junior Financing” has the meaning specified in Section 7.09.

 

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

 

“Junior Lien Indebtedness” means any Indebtedness incurred by the Borrower or any Restricted Subsidiary which is permitted to be secured by the Collateral on a junior basis to the security interest in favor of the Secured Obligations.

 

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

 

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

 

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

 

“Lien” means, with respect to any asset, any mortgage, lien (statutory or otherwise), pledge, charge, security interest, preference, priority or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law, including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction; provided that in no event shall an operating lease be deemed to constitute a Lien.

 

“Liquidity” means, as of the most recent date for which internal financial statements are available, the sum of (i) cash, (ii) Cash Equivalents and (iii) unutilized commitments available to be borrowed under revolving credit arrangements of the Borrower and its Restricted Subsidiaries, after giving effect to outstanding letters of credit thereunder.

 

“Loan” means an extension of credit by a Lender to the Borrower under Article II.

 

“Loan Documents” means, collectively, (i) this Agreement, (ii) the Notes, (iii) the Warrants and (iv) the Fee Letter.

 

“Loan Parties” means, collectively, the Borrower and each Guarantor.

 

“Luxor Capital Group” means Luxor Capital Group, LP and any successor thereto.

 

“Material Adverse Effect” means any event, development or circumstance that, individually or in the aggregate, has had or could reasonably be expected to have a material adverse effect on (a) the business, property, operations or financial condition of Holdings and its Subsidiaries, taken as a whole, in each case, (b) the business, property, operations or financial condition of Holdings, the Borrower and the Restricted Subsidiaries, taken as a whole, in each case, or (c) the validity or enforceability of this Agreement or any of the other Loan Documents or the rights and remedies of the Administrative Agent and the Lenders hereunder or thereunder.

 

“Maturity Date” means May 12, 2014.

 

“Maximum Rate” has the meaning specified in Section 11.10.

 

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

 

“Net Award” means any awards or proceeds in respect of any condemnation or other eminent domain proceeding.

 

“Net Cash Balance” means, at any time, the total cash balance (including cash, Cash Equivalents and restricted cash) of the Borrower and its Subsidiaries at such time, less their respective outstanding checks and drafts, wire transfer instructions and similar payment directions that have not, at such time, cleared the respective accounts of the Borrower and its Subsidiaries.

 

“Net Income” means, with respect to any Person, the net income (loss) of such Person, determined in accordance with GAAP and before any reduction in respect of preferred stock dividends.

 

“Net Insurance Proceeds” means any awards or proceeds in respect of any casualty insurance or title insurance claim relating to any Collateral deposited in the Collateral Account pursuant to the Collateral Documents.

 

“Net Proceeds” from an Asset Sale means the aggregate cash proceeds received by the Borrower or any Restricted Subsidiary (including any cash received by way of deferred payment of principal pursuant to a note or installment receivable or otherwise and net proceeds from the sale of other disposition of any Designated Noncash Consideration and securities or other assets received as consideration, but only as and when received, but excluding any other consideration received in the form of assumption by the acquiring Person of Indebtedness or other obligations relating to the properties or assets that are the subject of such Asset Sale or received in any other non-cash form) therefrom, in each case net of:

 

(1) all brokerage, legal, accounting, investment banking, title and recording tax expenses, commissions and other fees and expenses incurred, and all federal, state, provincial, foreign and local taxes required to be paid or accrued as a liability under GAAP or distributed or distributable to its members as a tax distribution (after taking into account any available tax credits or deductions and any tax sharing agreements), as a direct cost relating to such Asset Sale;

 

(2) all payments made on any Indebtedness (other than Secured Obligations) that is secured by any assets subject to such Asset Sale, in accordance with the terms of any Lien upon such assets, or that must by its terms, or in order to obtain a necessary consent to such Asset Sale, or by applicable law, be repaid out of the proceeds from such Asset Sale;

 

(3) all distributions and other payments required to be made to minority interest holders (other than the Borrower or Restricted Subsidiaries) in Subsidiaries or joint ventures as a result of such Asset Sale;

 

(4) the deduction of appropriate amounts to be provided by the seller as a reserve, in accordance with GAAP, against any liabilities associated with the property or other assets disposed of in such Asset Sale and retained by the Borrower or any Restricted Subsidiary after such Asset Sale; and

 

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(5) any portion of the purchase price from an Asset Sale placed in escrow in accordance with GAAP (whether as a reserve for adjustment of the purchase price, or for satisfaction of indemnities in respect of such Asset Sale);

 

provided, however, that, in the cases of clauses (4) and (5), upon reversal of any such reserve or the termination of any such escrow, Net Proceeds shall be increased by the amount of such reversal or any portion of funds released from escrow to the Borrower or any Restricted Subsidiary.

 

“Note” means a promissory note of the Borrower payable to any Lender, in substantially the form of Exhibit B hereto, evidencing the aggregate Indebtedness of the Borrower to such Lender resulting from the Loans of such Lender.

 

“NPL” means the National Priorities List under CERCLA.

 

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

 

“Officer” means the Chairman of the Board of Directors, the Chief Executive Officer, the Chief Financial Officer, the President, any Executive Vice President, Senior Vice President or Vice President, the Treasurer or the Secretary of the Borrower. “Officer” of any Guarantor has a correlative meaning.

 

“Officers’ Certificate” means a certificate signed on behalf of the Borrower by two Officers of the Borrower, one of whom must be the principal executive officer, the principal financial officer, the treasurer or the principal accounting officer of the Borrower that meets the requirements set forth in this Agreement.

 

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

 

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

 

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“Pari Passu Payment Lien Obligations” means any Additional Notes and any other Indebtedness that has a stated maturity date that is longer than the Senior Secured Notes and that is permitted to have Pari Passu Payment Lien Priority relative to the Senior Secured Notes with respect to the Collateral and is not secured by any other assets; provided that an authorized representative of the holders of such Indebtedness (other than any Additional Notes) shall have executed a joinder to the Collateral Documents in the form provided therein.

 

“Pari Passu Payment Lien Priority” means, relative to specified Indebtedness and other obligations, having equal Lien priority to the Senior Secured Notes and the guarantees thereof, as the case may be, on the Collateral.

 

“Participant” has the meaning specified in Section 11.07(e).

 

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

 

“PBGC” means the Pension Benefit Guaranty Corporation.

 

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

 

“Permitted Investments” means

 

(a) any Investment in the Borrower or any Domestic Subsidiary or any Investment by a Restricted Subsidiary that is not a Subsidiary Guarantor in a Restricted Subsidiary that is not a Subsidiary Guarantor;

 

(b) any Investment in cash and Cash Equivalents;

 

(c) any Investment by the Borrower or any Domestic Subsidiary in a Person that is engaged in a Similar Business if as a result of such Investment:

 

(1) such Person becomes a Domestic Subsidiary; or

 

(2) such Person, in one transaction or a series of related transactions, is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, the Borrower or a Domestic Subsidiary,

 

provided that all such Investments made pursuant to this clause (c) shall not exceed $5.0 million from and after the Closing Date;

 

(d) any Investment by a Restricted Subsidiary that is not a Subsidiary Guarantor in a Person that is engaged in a Similar Business if as a result of such Investment:

 

(1) such Person becomes a Restricted Subsidiary; or

 

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(2) such Person, in one transaction or a series of related transactions, is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, the Borrower or a Restricted Subsidiary,

 

provided that all such Investments made pursuant to this clause (d) shall not exceed $5.0 million from and after the Closing Date;

 

(e) any Investment in securities or other assets not constituting cash or Cash Equivalents and received in connection with an Asset Sale made pursuant to Section 7.08 or any other disposition of assets not constituting an Asset Sale;

 

(f) any Investment existing or pursuant to agreements or arrangements in effect on the Existing Agreement Closing Date and any modification, replacement, renewal or extension thereof; provided that the amount of any such Investment may not be increased except (x) as required by the terms of such Investment as in existence on the Existing Agreement Closing Date or (y) as otherwise permitted under this Agreement;

 

(g) any Investment acquired by the Borrower or any Restricted Subsidiary:

 

(1) in exchange for any other Investment or accounts receivable held by the Borrower or any such Restricted Subsidiary in connection with or as a result of a bankruptcy, workout, reorganization or recapitalization of the issuers of such other Investment or accounts receivable; or

 

(2) as a result of a foreclosure by the Borrower or any Restricted Subsidiary with respect to any secured Investment or other transfer of title with respect to any secured Investment in default;

 

(i) obligations under Swap Contracts permitted under Section 7.02(b)(i) and Section 7.02(b)(xii);

 

(j) loans and advances to officers, directors and employees for business-related travel expenses, moving expenses and other expenses, in each case incurred in the ordinary course of business and in compliance with applicable law or to finance the purchase of Equity Interests of the Borrower or any of its direct or indirect parents and in an amount not to exceed $5.0 million at any one time outstanding;

 

(k) Investments the payment for which consists of Equity Interests of the Borrower or any of its direct or indirect parents (exclusive of Disqualified Stock of the Borrower); provided, however, that such Equity Interests will not increase the amount available for Restricted Payments under Section 7.01(a)(vii);

 

(l) guarantees of Indebtedness permitted under Section 7.02; provided that if such Indebtedness can only be incurred by the Borrower or Subsidiary Guarantors, then such guarantees are only permitted by this clause to the extent made by the Borrower or a Subsidiary Guarantor, and (ii) performance guarantees with respect to obligations incurred by the Borrower or any of its Restricted Subsidiaries that are permitted by this Agreement;

 

(m) any transaction to the extent it constitutes an Investment that is permitted and made in accordance with Section 7.06(b) (except transactions described in clauses (ii), (iv), (v), (vi), (viii) and (ix) of such Section 7.06(b));

 

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(n) Investments consisting of purchases and acquisitions of inventory, supplies, material or equipment in the ordinary course of business or the non-exclusive licensing of intellectual property pursuant to joint marketing arrangements with other Persons;

 

(o) additional Investments having an aggregate fair market value, taken together with all other Investments made pursuant to this clause (o) that are at that time outstanding, not to exceed $25.0 million (with the fair market value of each Investment being measured at the time made and without giving effect to subsequent changes in value) plus the amount of any distributions, dividends, payments or other returns in respect of such Investments (without duplication for purposes of Section 7.01 of any amounts applied pursuant to Section 7.01(a)(vii)); provided that if such Investment is in Capital Stock of a Person that subsequently becomes a Restricted Subsidiary, such Investment shall thereafter be deemed permitted under clause (a) or (d) above and shall not be included as having been made pursuant to this clause (o);

 

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

 

(q) the creation of Liens on the assets of the Borrower or any of its Restricted Subsidiaries in compliance with Section 7.03;

 

(r) Investments relating to any special-purpose wholly owned subsidiary of the Borrower organized in connection with a Receivables Facility that, in the good faith determination of the Board of Directors of the Borrower, are necessary or advisable to effect such Receivables Facility;

 

(s) Investments consisting of earnest money deposits required in connection with a purchase agreement or letter of intent permitted by this Agreement;

 

(t) Investments in Reader’s Digest Association Limited in an amount not to exceed £10.9 million to settle under-funded pension liabilities; and

 

(u) Investments in the form of contributions of the Capital Stock or intercompany notes of first-tier Foreign Subsidiaries to other first-tier Foreign Subsidiaries to effectuate a tax reorganization of the Borrower and its Foreign Subsidiaries.

 

“Permitted Liens” means, with respect to any Person:

 

(1) Liens, pledges, prepayments or deposits by such Person in connection with workmen’s compensation laws, unemployment insurance laws and other social security legislation or similar legislation, Liens, pledges, prepayments or deposits (including deposits made to satisfy statutory or other legal obligations in connection with sweepstakes or similar contests and Liens in favor of postal authorities) in connection with, or to secure the performance of, bids, tenders, contracts (other than for the payment of Indebtedness) or leases to which such Person is a party, or Liens, pledges, prepayments or deposits to secure public or statutory obligations of such Person or Liens or deposits of cash or U.S. government bonds to secure surety or appeal bonds to which such Person is a party, or Liens or deposits as security for contested taxes or import duties or for the payment of rent, in each case incurred in the ordinary course of business;

 

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(2) Liens imposed by law, such as carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s, workmen’s, suppliers’ or construction contractor’s Liens, in each case which secure amounts which are not overdue for a period of more than forty-five (45) days or if more than forty-five (45) days overdue, are unfiled and no other action has been taken to enforce such Lien or being contested in good faith by appropriate proceedings or other Liens arising out of judgments or awards against such Person with respect to which such Person shall then be proceeding with an appeal or other proceedings for review;

 

(3) Liens for taxes, assessments or other governmental charges not yet due or payable or which are being contested in good faith by appropriate proceedings;

 

(4) Liens (including rights of set-off), deposits, prepayments or cash pledges in connection with or to secure the performance of statutory bonds, stay, customs and appeal bonds, performance bonds and surety bonds or bid bonds and other obligations of a like nature (including those to secure health, safety and environmental obligations) or with respect to other regulatory requirements or letters of credit issued pursuant to the request of and for the account of such Person in the ordinary course of its business;

 

(5) easements, rights-of-way, restrictions (including zoning restrictions), covenants, licenses, encroachments, protrusions and other similar minor encumbrances and minor title defects affecting real property and zoning or other restrictions as to the use of real properties or Liens incidental which are imposed by any governmental authority having jurisdiction over such real property which do not in the aggregate materially adversely affect the value of said properties or materially impair their use in the operation of the business of such Person;

 

(6) Liens securing Indebtedness permitted to be incurred pursuant to Section 7.02(b)(iv); provided that Liens securing Indebtedness incurred pursuant to Section 7.02(b)(iv) are solely on acquired property or the assets of the acquired entity; provided, further, however, that individual financings of equipment provided by one lender may be cross collateralized to other financings of equipment provided by such lender;

 

(7) Liens existing on the Existing Agreement Closing Date (other than Liens securing the Secured Credit Facility, Liens securing the Existing Credit Agreement and Liens securing the Senior Secured Notes);

 

(8) Liens on property or shares of stock of or held by a Person at the time such Person becomes a Restricted Subsidiary; provided, however, such Liens are not created or incurred in connection with, or in contemplation of, such other Person becoming such a subsidiary; provided, further, however, that such Liens may not extend to any other property owned by the Borrower or any Restricted Subsidiary;

 

(9) Liens on property at the time the Borrower or a Restricted Subsidiary acquired the property, including any acquisition by means of a merger or consolidation with or into the Borrower or any Restricted Subsidiary; provided, however, that such Liens are not created or incurred in connection with, or in contemplation of, such acquisition; provided, further, however, that the Liens may not extend to any other property owned by the Borrower or any Restricted Subsidiary;

 

(10) Liens securing Indebtedness or other obligations of a Restricted Subsidiary that is not a Subsidiary Guarantor to another Restricted Subsidiary that is not a Subsidiary Guarantor, in each case permitted to be incurred in accordance with Section 7.02; provided that the Liens extend only to assets of Restricted Subsidiaries that are not Subsidiary Guarantors;

 

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(11) Liens securing obligations under Swap Contracts so long as the related Indebtedness is, and is permitted to be under this Agreement, secured by a Lien on the same property securing such obligations under Swap Contracts;

 

(12) Liens on specific items of inventory of other goods and proceeds of any Person securing such Person’s obligations in respect of bankers’ acceptances issued or created for the account of such Person to facilitate the purchase, shipment or storage of such inventory or other goods;

 

(13) Leases, licenses, sublicenses and subleases of real property granted to others in the ordinary course of business which do not materially interfere with the ordinary conduct of the business of the Borrower or any of the Restricted Subsidiaries;

 

(14) Liens arising from Uniform Commercial Code financing statement filings regarding operating leases entered into by the Borrower and its Restricted Subsidiaries in the ordinary course of business;

 

(15) Liens in favor of the Borrower or any Domestic Subsidiary;

 

(16) Liens on equipment of the Borrower or any Restricted Subsidiary granted in the ordinary course of business to the Borrower’s or any Restricted Subsidiary’s clients at which such equipment is located;

 

(17) Liens to secure any refinancing, refunding, extension, renewal, modification or replacement (or successive refinancing, refunding, extensions, renewals, modifications or replacements) as a whole, or in part, of any Indebtedness secured by any Lien referred to in clauses (6), (7), (8), (9), (10), (15), (19) and (22); provided, however, that (x) such new Lien shall be limited to all or part of the same property that secured the original Lien (plus improvements on such property and after acquired-property that is affixed or incorporated into the property covered by such Lien) and (y) the Indebtedness secured by such Lien at such time is not increased to any amount greater than the sum of (A) the outstanding principal amount or, if greater, committed amount of the Indebtedness secured by a Lien described under clauses (6), (7), (8), (9), (10), (15), (19) and (22) at the time the original Lien became a Permitted Lien under this Agreement, and (B) an amount necessary to pay any fees and expenses, including premiums and defeasance costs, related to such refinancing, refunding, extension, renewal or replacement;

 

(18) Liens to secure Indebtedness of any Foreign Subsidiary permitted by Section 7.02(b)(xxi) covering only the assets of such Foreign Subsidiary;

 

(19) Liens securing the Senior Secured Notes outstanding on the Closing Date and the Exchange Notes in respect thereof, the guarantees relating to such Senior Secured Notes and Exchange Notes and any obligations with respect to such Senior Secured Notes and Exchange Notes and guarantees relating thereto;

 

(20) Liens on the Collateral in favor of any collateral agent (including for the benefit of the Secured Parties) relating to such collateral agent’s administrative expenses with respect to the Collateral;

 

(21) Liens securing judgments, attachments or awards not giving rise to an Event of Default and notices of lis pendens and associated rights related to litigation being contested in good faith by appropriate proceedings and for which adequate reserves have been made;

 

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(22) Liens on Collateral securing Pari Passu Payment Lien Obligations or Junior Lien Indebtedness that has a stated maturity date that is longer than the Indebtedness permitted to be incurred pursuant to Section 7.02(a); provided that any such Indebtedness has Pari Passu Payment Lien Priority or junior Lien priority relative to the Secured Obligations and after giving pro forma effect thereto, the Consolidated Secured Debt Ratio would be no greater than 2.25 to 1.0;

 

(23) Any interest or title of a lessor, sublessor, licensor or sublicensor in the property subject to any lease, sublease, license or sublicense (other than any property that is the subject of a sale and leaseback transaction);

 

(24) Liens on assets or securities deemed to arise in connection with and solely as a result of the execution, delivery or performance of contracts to sell such assets or securities if such sale is otherwise permitted by this Agreement;

 

(25) Liens on Capital Stock of Unrestricted Subsidiaries securing Indebtedness of such Unrestricted Subsidiaries;

 

(26) Liens on (x) Collateral securing Indebtedness incurred pursuant to, and obligations described in, Section 7.02(b)(i); provided that any such Indebtedness may be Bank Priority Obligations, Pari Passu Payment Lien Obligations or have junior Lien priority relative to the Secured Obligations and (y) Liens on property and assets of Foreign Subsidiaries securing Indebtedness of Foreign Subsidiaries incurred pursuant to Section 7.02(b)(i).

 

(27) Liens on Collateral securing Junior Lien Indebtedness that has a stated maturity date that is longer than the Loans and that is permitted to be incurred pursuant to Section 7.02(a);

 

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

 

(29) Liens arising out of conditional sale, title retention, consignment or similar arrangements for the sale of goods entered into by the Borrower or any of its Restricted Subsidiaries in the ordinary course of business;

 

(30) Liens that are contractual rights of set-off or, in the case of clause (i) or (ii) below, other bankers’ Liens (i) relating to treasury, depository and cash management services or any automated clearing house transfers of funds in the ordinary course of business and not given in connection with the issuance of Indebtedness, (ii) relating to pooled deposit or sweep accounts to permit satisfaction of overdraft or similar obligations incurred in the ordinary course of business of the Borrower or any Subsidiary or (iii) relating to purchase orders and other agreements entered into with customers of the Borrower or any Restricted Subsidiary in the ordinary course of business;

 

(31) Liens (i) of a collection bank arising under Section 4-210 of the Uniform Commercial Code on items in the course of collection, (ii) in favor of a banking institution arising as a matter of law encumbering deposits (including the right of set-off) arising in the ordinary course of business in connection with the maintenance of such accounts and (iii) arising under customary general terms of the account bank in relation to any bank account maintained with such bank and attaching only to such account and the products and proceeds thereof;

 

(32) Liens arising by operation of law or contract on insurance policies and the proceeds thereof to secure premiums thereunder, and Liens, pledges and deposits in the ordinary course of business

 

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securing liability for premiums or reimbursement or indemnification obligations of (including obligations in respect of letters of credit or bank guarantees for the benefit of) insurance carriers;

 

(33) Liens attaching solely to cash earnest money deposits in connection with fully collateralized repurchase agreements that are permitted by Section 7.02 that constitute temporary cash investments and that do not extend to any assets other than those that are the subject of such repurchase agreement;

 

(34) Liens solely on any cash earnest money deposits made in connection with any letter of intent or purchase agreement permitted hereunder;

 

(35) Liens on accounts receivable and related assets incurred in connection with a Receivables Facility;

 

(36) Liens on deposits in the ordinary course of business securing credit card programs maintained in the ordinary course of business in an amount not to exceed $15.0 million (plus the amount, up to an additional $20.0 million, of such deposits sought by JPMorgan Chase Bank, N.A. or its subsidiaries (including Paymentech)) in the aggregate at any one time outstanding;

 

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

 

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

 

(39) Utility and other similar deposits made in the ordinary course of business;

 

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

 

(41) Liens (i) on cash advances in favor of the seller of any property to be acquired in an Investment permitted pursuant to Permitted Investments to be applied against the purchase price for such Investment, and (ii) consisting of an agreement to sell any property in an Asset Sale permitted under Section 7.08, in each case, solely to the extent such Investment or Asset Sale, as the case may be, would have been permitted on the date of the creation of such Lien;

 

(42) Liens on cash collateral securing letters of credit existing on the Existing Agreement Closing Date; and

 

(43) Liens securing Indebtedness and other obligations in an aggregate principal amount not to exceed $5.0 million at any one time outstanding.

 

For purposes of determining compliance with this definition, (A) Permitted Liens need not be incurred solely by reference to one category of Permitted Liens described above but are permitted to be incurred in part under any combination thereof and (B) in the event that a Lien (or any portion thereof) meets the criteria of one or more of the categories of Permitted Liens described above, the Borrower shall, in its sole discretion, classify (or reclassify) such item of Permitted Liens (or any portion thereof) in any manner that complies with this definition and will only be required to include the amount

 

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and type of such item of Permitted Liens in one of the above clauses and such Lien will be treated as having been incurred pursuant to only one of such clauses.

 

“Person” means any individual, corporation, limited liability company, partnership, joint venture, association, joint stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity.

 

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

 

“preferred stock” means any Equity Interest with preferential rights of payment of dividends or upon liquidation, dissolution, or winding up.

 

“Priority Payment Lien Obligations” means the Indebtedness and other obligations incurred or described in Section 7.02(b)(i).

 

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

 

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

 

“Qualified Proceeds” means assets that are used or useful in, or Capital Stock of any Person engaged in, a Similar Business; provided that the fair market value of any such assets or Capital Stock shall be determined by the Board of Directors of the Borrower in good faith.

 

“Receivables Facility” means one or more receivables financing facilities, as amended from time to time, the Indebtedness and obligations of which are non-recourse (except for standard representations, warranties, covenants and indemnities made in connection with such facilities) to the Borrower and the Restricted Subsidiaries pursuant to which any Restricted Subsidiaries that are Foreign Subsidiaries sell their accounts receivable to a Person that is not a Restricted Subsidiary.

 

“Receivables Fees” means distributions or payments made directly or by means of discounts with respect to any participation interest in accounts receivables issued or sold in connection with, and other fees paid to a Person that is not a Restricted Subsidiary in connection with, any Receivables Facility.

 

“Recovery Event” means any event, occurrence, claim or proceeding that results in any Net Award or Net Insurance Proceeds being deposited into the Collateral Account pursuant to the Collateral Documents.

 

“Refinancing Indebtedness” has the meaning specified in Section 7.02(b)(xv).

 

“Register” has the meaning specified in Section 11.07(d).

 

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“Registration Rights Agreement” means the Registration Rights Agreement with respect to the Senior Secured Notes dated as of the Issue Date, among the Borrower, the Guarantors and the Initial Purchasers and, with respect to any Additional Notes, one or more registration rights agreements among the Borrower, the Guarantors and the other parties thereto, relating to the rights given by the Borrower and the Guarantors to the purchasers of Additional Notes to register such Additional Notes under the Securities Act.

 

“Reinvestment Assets” means an investment in (1) any one or more businesses; provided that such investment in any business is in the form of the acquisition of Capital Stock of such business such that it constitutes a Restricted Subsidiary, (2) capital expenditures or (3) acquisitions of other assets (other than current assets), in each of (1), (2) and (3), used or useful in a Similar Business.

 

“Reorganization Plan” means the Third Amended Joint Chapter 11 Plan of Reorganization for The Reader’s Digest Association, Inc. and its Debtor Affiliates, dated as of November 30, 2009, Case No. 09-23529 (RDD) filed in the United States Bankruptcy Court for the Southern District of New York, as amended, supplemented or otherwise modified from time to time.

 

“Replacement Assets” means (1) non-current assets and property (including any such assets acquired by capital expenditures but excluding Indebtedness and Capital Stock) that shall be used or useful in a Similar Business by the Borrower or a Restricted Subsidiary or (2) substantially all the assets of a Similar Business or a majority of the Voting Stock of any Person engaged in a Similar Business that shall become on the date of acquisition thereof a Domestic Subsidiary (or a Restricted Subsidiary solely to the extent the assets being replaced were sold by a Foreign Subsidiary).

 

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

 

“Required Lenders” means, as of any date of determination, Lenders having more than 50% of the aggregate principal amount of the Loans then outstanding.

 

“Requirement of Law” means, as to any Person, any law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.

 

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

 

“Restricted Investment” means an Investment other than a Permitted Investment.

 

“Restricted Payment” has the meaning specified in Section 7.01(a).

 

“Restricted Subsidiary” means, at any time, any direct or indirect Subsidiary of the Borrower (including any Foreign Subsidiary) that is not then an Unrestricted Subsidiary; provided, however, that upon the occurrence of an Unrestricted Subsidiary ceasing to be an Unrestricted Subsidiary, such Subsidiary shall be included in the definition of “Restricted Subsidiary.”

 

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“Refunding Capital Stock” has the meaning set forth in Section 7.01(b)(ii).

 

“Retired Capital Stock” has the meaning set forth in Section 7.01(b)(ii).

 

“Same Day Funds” means immediately available funds.

 

“SEC” means the United States Securities and Exchange Commission.

 

“Secured Credit Facility” has the meaning specified in Section 4.01(m).

 

“Secured Hedge Agreement” means any Swap Contract permitted under Article VII that is entered into by any Loan Party and a “Hedge Bank” under the Existing Credit Agreement, in each case at the time such Secured Hedge Agreement is entered into.

 

“Secured Obligations” means the Priority Payment Lien Obligations, the Pari Passu Payment Lien Obligations, any obligations under the Specified Notes and any refinancings or replacements of any of the foregoing.

 

“Secured Parties” means the holders of the Secured Obligations and the holders of any Junior Lien Indebtedness.

 

“Securities Act” means the Securities Act of 1933 and the rules and regulations of the SEC promulgated thereunder.

 

“Security Agreement” means, collectively, the Security Agreement, dated February 19, 2010, executed by Holdings, the Borrower, each Guarantor, the Collateral Agent, the administrative agent under the Existing Credit Agreement and the Senior Secured Notes Trustee (as amended or supplemented from time to time).

 

“Senior Secured Indebtedness” means, as at any date, the aggregate principal amount of all Consolidated Total Indebtedness that is secured by a Lien on any assets of the Loan Parties.

 

“Senior Secured Leverage Ratio” means, as at any date, the ratio of (a) Senior Secured Indebtedness as at such date to (b) EBITDA for the Test Period most recently ended prior to such date, in each case with such pro forma adjustments as are appropriate and consistent with the pro forma adjustment provisions set forth in the definition of Consolidated Leverage Ratio, without duplication thereof.

 

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

 

“Senior Secured Note Trustee” means Wells Fargo Bank, N.A., in its capacity as indenture trustee under the Senior Secured Note Indenture, together with any of its successors.

 

“Senior Secured Notes” means the $525,000,000 aggregate principal amount of senior secured notes of the Borrower issued on the Existing Agreement Closing Date pursuant to the Senior Secured Note Indenture.

 

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“Similar Business” means any business conducted or proposed to be conducted by the Borrower and its Restricted Subsidiaries on the Closing Date or any business that is similar, reasonably related, incidental or ancillary thereto or any business that is a reasonable extension thereof.

 

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

 

“Specified Change of Control” means a “Change of Control” (or other defined term having a similar purpose) as defined in the Senior Secured Note Indenture, the Existing Credit Agreement or any document governing any refinancing of any of the Senior Secured Notes or the Existing Credit Agreement.

 

“Specified Notes” means, collectively, the Senior Secured Notes, the Additional Notes and the Exchange Notes.

 

“SPC” has the meaning specified in Section 11.07(h).

 

“Successor Borrower” has the meaning specified in Section 7.04(a)(i).

 

“Successor Person” has the meaning specified in Section 7.05(a)(i).

 

“Subsidiary” means, with respect to any Person,

 

(1) any corporation, association, or other business entity (other than a partnership, joint venture, limited liability company or similar entity) of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time of determination owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person or a combination thereof; and

 

(2) any partnership, joint venture, limited liability company or similar entity of which

 

(x) more than 50% of the capital accounts, distribution rights, total equity and voting interests or general or limited partnership interests, as applicable, are owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person or a combination thereof whether in the form of membership, general, special or limited partnership or otherwise, and

 

(y) such Person or any Restricted Subsidiary of such Person is a controlling general partner or managing member of such entity.

 

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“Subsidiary Guarantor” means each wholly owned Domestic Subsidiary of the Borrower on the Closing Date (other than Direct Holdings IP L.L.C.) and any other Restricted Subsidiaries that become Guarantors under this Agreement in accordance with the terms hereof until such time as such Person’s Guarantee may be released in accordance with this Agreement.

 

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

 

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

 

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

 

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

 

“Threshold Amount” means $18,000,000.

 

“Total Assets” means, with respect to any Person, the total consolidated assets of such Person and its Restricted Subsidiaries as shown on the most recent balance sheet of such Person.

 

“Treasury Rate” shall mean, as of any date of voluntary or mandatory prepayment of the Loans, the yield to maturity as of such date of the United States Treasury securities with a constant maturity (as compiled and published in the most recent Federal Reserve Statistical Release H.15 (519) that has become publicly available at least two Business Days prior to such date (or, if such Statistical Release is no longer published, any publicly available source of similar market data)) most nearly equal to the period from such date to the second anniversary of the Closing Date; provided, however, that if the period from such date to the second anniversary of the Closing Date is less than one year, the weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year will be used.

 

“Unaudited Financial Statements” means the unaudited consolidated balance sheets and related statements of income, stockholders’ equity and cash flows of the Borrower and its consolidated Subsidiaries for each subsequent fiscal quarter ended after the fiscal year ended December 31, 2010, in each case for which and to the extent such financial statements are available prior to the Closing Date.

 

“Uniform Commercial Code” means the Uniform Commercial Code as the same may from time to time be in effect in the State of New York or the Uniform Commercial Code (or similar code

 

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or statute) of another jurisdiction, to the extent it may be required to apply to any item or items of Collateral.

 

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

 

“Unrestricted Subsidiary” means:

 

(1) any Subsidiary of the Borrower, which at the time of determination is an Unrestricted Subsidiary (as designated by the Board of Directors of the Borrower, as provided below), and

 

(2) any Subsidiary of an Unrestricted Subsidiary.

 

The Board of Directors of the Borrower may designate any Subsidiary of the Borrower (including any existing Subsidiary and any newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary unless such Subsidiary or any of its Subsidiaries owns any Equity Interests or Indebtedness of, or owns or holds any Lien on, any property of, the Borrower or any Subsidiary of the Borrower (other than any Subsidiary of the Subsidiary to be so designated); provided that

 

(a) any Unrestricted Subsidiary must be an entity of which shares of the Capital Stock or other Equity Interests (including partnership interests) entitled to cast at least a majority of the votes that may be cast by all shares or Equity Interests having ordinary voting power for the election of directors or other governing body are owned, directly or indirectly, by the Borrower,

 

(b) such designation complies with Section 7.01, and

 

(c) each of:

 

(1) the Subsidiary to be so designated, and

 

(2) its Subsidiaries

 

has not at the time of designation, and does not thereafter, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable with respect to any Indebtedness pursuant to which the lender has recourse to any of the assets of the Borrower or any Restricted Subsidiary.

 

The Board of Directors of the Borrower may designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided that, immediately after giving effect to such designation no Default or Event of Default shall have occurred and be continuing and, on a pro forma basis taking into account such designation, the Borrower would be permitted to incur such Indebtedness pursuant to Section 7.02.

 

Any such designation by the Board of Directors of the Borrower shall be notified by the Borrower to the Administrative Agent by promptly filing with such Administrative Agent a copy of the resolution of the Board of Directors giving effect to such designation and an Officers’ Certificate certifying that such designation complied with the foregoing provisions.

 

“Voting Stock” of any Person as of any date means the Capital Stock of such Person that is at the time entitled to vote in the election of the Board of Directors of such Person.

 

“Warrants” means those warrants issued pursuant to the Class A Warrant to Purchase Shares of Common Stock and the Class B Warrant to Purchase Shares of Common Stock, each attached hereto as Exhibit K.

 

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“Weekly Reader Sale” means the sale, conveyance, transfer or other disposition, whether in a single transaction or series of related transactions, of all or substantially all of the property or assets of or Equity Interests in Weekly Reader Corporation and Weekly Reader Custom Publishing, Inc.

 

“Weighted Average Life to Maturity” means, when applied to any Indebtedness, Disqualified Stock or preferred stock, as the case may be, at any date, the quotient obtained by dividing

 

(1) the sum of the products of the number of years from the date of determination to the date of each successive scheduled principal payment of such Indebtedness or redemption or similar payment with respect to such Disqualified Stock or preferred stock multiplied by the amount of such payment, by

 

(2) the sum of all such payments.

 

“Wholly Owned Subsidiary” of any Person means a Subsidiary of such Person, 100% of the outstanding Capital Stock or other ownership interests of which (other than directors’ qualifying shares) shall at the time be owned by such Person or by one or more Wholly Owned Subsidiaries of such Person.

 

“Yield Maintenance Amount” has the meaning specified in Section 2.08(a).

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Section 1.03           Accounting Terms(a).  (a)  All accounting terms not specifically or completely defined herein shall be construed in conformity with, and all financial data (including financial ratios and other financial calculations) required to be submitted pursuant to this Agreement shall

 

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be prepared in conformity with, GAAP, applied in a manner consistent with that used in preparing the Audited Financial Statements, except as otherwise specifically prescribed herein.

 

(b)   Notwithstanding any other provision contained herein, all terms of an accounting or financial nature used herein shall be construed, and all computations of amounts and ratios referred to herein shall be made, without giving effect to any election under Statement of Financial Accounting Standards 159 (or any other Financial Accounting Standard having a similar result or effect) to value any Indebtedness or other liabilities of Holdings, the Borrower or any of their respective Subsidiaries at “fair value”, as defined therein.

 

Section 1.04           Rounding.  Any financial ratios required to be maintained by the Borrower pursuant to this Agreement (or required to be satisfied in order for a specific action to be permitted under this Agreement) shall be calculated by dividing the appropriate component by the other component, carrying the result to one place more than the number of places by which such ratio is expressed herein and rounding the result up or down to the nearest number (with a rounding-up if there is no nearest number).

 

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

 

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

 

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

 

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

 

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

 

ARTICLE II

 

THE LOANS

 

Section 2.01           The Loans.  Subject to the terms and conditions set forth herein, each Lender severally agrees to make a term loan denominated in Dollars to the Borrower (the “Loan”) on the Closing Date in an aggregate original principal amount not to exceed the amount of the Commitment of such Lender.

 

Section 2.02           Procedure for Term Loan Borrowing(a).  The Borrower shall give the Administrative Agent irrevocable notice (which notice must be received by the Administrative Agent prior to 12:00 noon, New York City time, on the Business Day of the anticipated Closing Date) requesting that the Lenders make the Loans on the Closing Date and specifying the amount to be borrowed.  Upon receipt of such notice the Administrative Agent shall promptly notify each Lender thereof.  Not later than 12:00 Noon, New York City time, on the Closing Date each Term Lender shall make available to the Administrative Agent at the Funding Office (or may make available to the Borrower at such account as has been notified to the Lenders by the Borrower) an amount in immediately available funds equal to the Loan to be made by such Lender.  The Administrative Agent shall credit the account of the Borrower on the books of such office of the Administrative Agent with the aggregate of the amounts made available to the Administrative Agent or the Borrower, as applicable, by the Lenders in immediately available funds.

 

Section 2.03           Reserved.

 

Section 2.04           Prepayments.  (a)  Optional.  (i)  The Borrower may, upon notice to the Administrative Agent, at any time or from time to time voluntarily prepay the Loans in whole or in part; provided that (1) such notice must be received by the Administrative Agent not later than 2:30 p.m. (New York time) on the date of prepayment of Loans; (2) any prepayment of Loans shall be in a principal amount of $1,000,000 or a whole multiple of $500,000 in excess thereof; and (3) any prepayment must be accompanied by the applicable Yield Maintenance Amount required pursuant to Section 2.08.  Each such notice shall specify the date and amount of such prepayment.  The Administrative Agent will promptly notify each Lender of its receipt of each such notice, and of the amount of such Lender’s Pro Rata Share of such prepayment.  If such notice is given by the Borrower, the Borrower shall make such prepayment and the payment amount specified in such notice shall be due and payable on the date specified therein.  Any prepayment of a Loan shall be accompanied by all accrued interest thereon.  Each prepayment of the Loans pursuant to this Section 2.04(a) shall be paid to the Lenders in accordance with their respective Pro Rata Shares.

 

(b)   Mandatory. (i) If the Borrower receives any Net Proceeds from Asset Sales or any Recovery Event, such amounts shall be used to prepay the Loan within five (5) Business Days of the receipt thereof to the extent required by Section 7.08; provided that an aggregate amount of Net Proceeds from Asset Sales not in excess of $5.0 million from all Asset Sales may be retained by the Borrower and shall not be required to be applied to the repayment of the Loan; provided, further, that any Net Proceeds received from (x) a Weekly Reader Sale shall not be required to be used to prepay the Loan (subject to Section 7.08(a)(iv)) and may be reinvested by the Borrower or any Guarantor in Reinvestment Assets

 

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within 180 days of the date of such Weekly Reader Sale so long as any such Net Proceeds that are not so reinvested within such time period shall be used to prepay the Loan on or before the 181st day after such Weekly Reader Sale or (y) any Recovery Event shall not be required to be used to prepay the Loan and may be reinvested by the Borrower or any Guarantor in Reinvestment Assets within 90 days of the date of such Recovery Event so long as any such Net Proceeds that are not so reinvested within such time period shall be used to prepay the Loan (subject to Section 7.08(a)(iv)) on or before the 91st day after such Recovery Event. Any such payment shall be accompanied by payment of the applicable Yield Maintenance Amount required pursuant to Section 2.08. (ii) The Borrower shall notify the Administrative Agent in writing of any mandatory prepayment of Loans required to be made pursuant to this Section 2.04(b) at least three (3) Business Days prior to the date of such prepayment.  Each such notice shall specify the date of such prepayment and provide a reasonably detailed calculation of the amount of such prepayment.  The Administrative Agent will promptly notify each Lender of the contents of the Borrower’s prepayment notice and of such Lender’s Pro Rata Share of the prepayment.

 

(c)   Each prepayment of Loans pursuant to this Section 2.04 shall be paid to the Lenders in accordance with their respective Pro Rata Shares.

 

Section 2.05           Termination of Commitments(a).  The Commitments shall automatically terminate upon the making of the Loans on the Closing Date.

 

Section 2.06           Repayment of Loans.  The aggregate outstanding principal amount of the Loans of each Lender shall be payable in full on the Maturity Date to such Lender.

 

Section 2.07           Interest.  (a)  Subject to the provisions of Section 2.07(b), the Loan shall bear interest on the outstanding principal amount thereof at a rate per annum equal to 11%.

 

(b)   If any Event of Default shall have occurred and be continuing, all outstanding Loans and other Obligations under the Loan Documents (whether or not overdue at such time) shall bear interest at a fluctuating interest rate per annum at all times equal to the Default Rate to the fullest extent permitted by applicable Laws.

 

(c)   Interest on each Loan shall be due and payable in arrears on each Interest Payment Date applicable thereto and at such other times as may be specified herein.  Notwithstanding the foregoing, interest accruing pursuant to Section 2.07(b) shall be payable from time to time on demand.  Interest hereunder shall be due and payable in accordance with the terms hereof before and after judgment, and before and after the commencement of any proceeding under any Debtor Relief Law.

 

Section 2.08           Fees.

 

(a)   Yield Maintenance. In the event all or any portion of the Loans are prepaid or repaid at any time after November 21, 2011 and prior to the second anniversary of the Closing Date through voluntary or mandatory prepayments or repayments, each such prepayment or repayment will be made with a payment premium in an amount (the “Yield Maintenance Amount”) equal to the sum of (I) the present value of the interest rate described in Section 2.07 that would have been applicable to the Loan calculated as a rate per annum on the amount of principal on the Loan through the second anniversary of the Closing Date (computed on the basis of actual days elapsed over a year of 360 days and using a discount rate equal to the Treasury Rate as of such payment date plus 50 basis points) plus (II) a call premium equal to 1% of the amount of the Loan so paid.

 

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(b)   Other Fees. The Borrower shall pay to the Administrative Agent such fees as shall have been separately agreed upon in writing in the amounts and at the times so specified (such separate agreement, the “Fee Letter”).  Such fees shall be fully earned when paid and shall not be refundable for any reason whatsoever (except as expressly agreed between the Borrower and the Administrative Agent).

 

Section 2.09           Computation of Interest and Fees.  All computations of interest shall be made on the basis of a three hundred and sixty (360) day year and actual days elapsed.  Interest shall accrue on each Loan for the day on which the Loan is made, and shall not accrue on a Loan, or any portion thereof, for the day on which the Loan or such portion is paid; provided that any Loan that is repaid on the same day on which it is made shall, subject to Section 2.11(a), bear interest for one (1) day.  Each determination by the Administrative Agent of an interest rate or fee hereunder shall be conclusive and binding for all purposes, absent manifest error.

 

Section 2.10           Evidence of Indebtedness.  (a)  The Loans made by each Lender shall be evidenced by one or more accounts or records maintained by such Lender and evidenced by one or more entries in the Register maintained by the Administrative Agent, acting solely for purposes of Treasury Regulation Section 5f.103-1(c), as agent for the Borrower, in each case in the ordinary course of business.  The accounts or records maintained by the Administrative Agent and each Lender shall be prima facie evidence absent manifest error of the amount of the Loans made by the Lenders to the Borrower and the interest and payments thereon.  Any failure to so record or any error in doing so shall not, however, limit or otherwise affect the obligation of the Borrower hereunder to pay any amount owing with respect to the Obligations.  In the event of any conflict between the accounts and records maintained by any Lender and the accounts and records of the Administrative Agent in respect of such matters, the accounts and records of the Administrative Agent shall control in the absence of manifest error.  Upon the request of any Lender made through the Administrative Agent, the Borrower shall execute and deliver to such Lender (through the Administrative Agent) a Note payable to such Lender, which shall evidence such Lender’s Loans in addition to such accounts or records.  Each Lender may attach schedules to its Note and endorse thereon the date, amount and maturity of its Loans and payments with respect thereto.

 

(b)   [Reserved]

 

(c)   Entries made in good faith by the Administrative Agent in the Register pursuant to Section 2.10(a), and by each Lender in its account or accounts pursuant to Section 2.10(a), shall be prima facie evidence of the amount of principal and interest due and payable or to become due and payable from the Borrower to, in the case of the Register, each Lender and, in the case of such account or accounts, such Lender, under this Agreement and the other Loan Documents, absent manifest error; provided that the failure of the Administrative Agent or such Lender to make an entry, or any finding that an entry is incorrect, in the Register or such account or accounts shall not limit or otherwise affect the obligations of the Borrower under this Agreement and the other Loan Documents.

 

Section 2.11           Payments Generally.  (a)  All payments to be made by the Borrower shall be made without condition or deduction for any counterclaim, defense, recoupment or setoff.  Except as otherwise expressly provided herein, all payments by the Borrower hereunder shall be made directly to the respective Lenders to which such payment is owed, pursuant to the instructions provided to the Borrower by the Administrative Agent, in Dollars and in Same Day Funds not later than 2:00 p.m. on the date specified herein.  In the event the Administrative Agent receives any payment owed to the Lenders, the Administrative Agent will promptly distribute to each Lender its Pro Rata Share (or other applicable share as provided herein) of such payment in like funds as received by wire transfer to such Lender’s Lending Office.  All payments received by the Administrative Agent after 2:00 p.m. (New 

41

 

York time) shall be deemed received on the next succeeding Business Day and any applicable interest or fee shall continue to accrue.

 

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

 

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

 

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

 

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

 

A notice of the Administrative Agent to any Lender or the Borrower with respect to any amount owing under this Section 2.11(c) shall be conclusive, absent manifest error.

 

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

 

(e)   The obligations of the Lenders hereunder to make Loans are several and not joint.  The failure of any Lender to make any Loan on any date required hereunder shall not relieve any other

 

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Lender of its corresponding obligation to do so on such date, and no Lender shall be responsible for the failure of any other Lender to so make its Loan or purchase its participation.

 

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

 

(g)   Whenever any payment received by the Administrative Agent under this Agreement or any of the other Loan Documents is insufficient to pay in full all amounts due and payable to the Administrative Agent and the Lenders under or in respect of this Agreement and the other Loan Documents on any date, such payment shall be distributed by the Administrative Agent and applied by the Administrative Agent and the Lenders in the order of priority set forth in Section 8.03.  If the Administrative Agent receives funds for application to the Obligations of the Loan Parties under or in respect of the Loan Documents under circumstances for which the Loan Documents do not specify the manner in which such funds are to be applied, the Administrative Agent may, but at the direction of Required Lenders shall, elect to distribute such funds to each of the Lenders in accordance with such Lender’s Pro Rata Share of the principal amount of all Loans outstanding at such time, in repayment or prepayment of such of the outstanding Loans or other Obligations then owing to such Lender.

 

Section 2.12           Sharing of Payments.  If, other than as expressly provided elsewhere herein, any Lender shall obtain on account of the Loans made by it, any payment (whether voluntary, involuntary, through the exercise of any right of setoff, or otherwise) in excess of its ratable share (or other share contemplated hereunder) thereof, such Lender shall immediately (a) notify the Administrative Agent of such fact, and (b) purchase from the other Lenders such participations in the Loans made by them, as shall be necessary to cause such purchasing Lender to share the excess payment in respect of such Loans, pro rata with each of them; provided that if all or any portion of such excess payment is thereafter recovered from the purchasing Lender under any of the circumstances described in Section 11.06 (including pursuant to any settlement entered into by the purchasing Lender in its discretion), such purchase shall to that extent be rescinded and each other Lender shall repay to the purchasing Lender the purchase price paid therefor, together with an amount equal to such paying Lender’s ratable share (according to the proportion of (i) the amount of such paying Lender’s required repayment to (ii) the total amount so recovered from the purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered, without further interest thereon.  The Borrower agrees that any Lender so purchasing a participation from another Lender may, to the fullest extent permitted by applicable Law, exercise all its rights of payment (including the right of setoff, but subject to Section 11.09) with respect to such participation as fully as if such Lender were the direct creditor of the Borrower in the amount of such participation.  The Administrative Agent will keep records (which shall be conclusive and binding in the absence of manifest error) of participations purchased under this Section 2.12 and will in each case notify the Lenders following any such purchases or repayments.  Each Lender that purchases a participation pursuant to this Section 2.12 shall from and after such purchase have the right to give all notices, requests, demands, directions and other communications under this Agreement with respect to the portion of the Obligations purchased to the same extent as though the purchasing Lender were the original owner of the Obligations purchased.

 

ARTICLE III

TAXES, INCREASED COSTS PROTECTION AND ILLEGALITY

 

Section 3.01           Taxes.  (a)  Except as provided in this Section 3.01, any and all payments by the Borrower to or for the account of the Administrative Agent or any Lender under any Loan Document shall be made free and clear of and without deduction for any and all present or future 

 

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taxes, duties, levies, imposts, deductions, assessments, fees, withholdings or similar charges, and all liabilities (including additions to tax, penalties and interest) with respect thereto, excluding in the case of the Administrative Agent and each Lender, taxes imposed on or measured by its net income or overall gross income (including branch profits), and franchise (and similar) taxes imposed on it in lieu of net income taxes, by the jurisdiction (or any political subdivision thereof) under the Laws of which the Administrative Agent or such Lender, as the case may be, is organized, managed or controlled or maintains a Lending Office or conducts business in (except to the extent the business is considered to be conducted in such jurisdiction solely as a result of the Administrative Agent or such Lender having executed, delivered or performed its obligations or received a payment under, or enforced, any Loan Document) and all liabilities (including additions to tax, penalties and interest) with respect thereto.  All non-excluded taxes, duties, levies, imposts, deductions, assessments, fees, withholdings or similar charges, and liabilities described in the immediately preceding sentence are hereinafter referred to as “Taxes”.  If the Borrower shall be required by any Laws to deduct any Taxes or Other Taxes from or in respect of any sum payable under any Loan Document to the Administrative Agent or any Lender, (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 3.01), each of the Administrative Agent and such Lender receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions, (iii) the Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable Laws, and (iv) within thirty (30) days after the date of such payment (or, if receipts or evidence are not available within thirty (30) days, as soon as possible thereafter), the Borrower shall furnish to the Administrative Agent or Lender (as the case may be) the original or a certified copy of a receipt evidencing payment thereof to the extent such a receipt is issued therefor.  If the Borrower fails to pay any Taxes or Other Taxes when due to the appropriate taxing authority or fails to remit to the Administrative Agent or any Lender the required receipts or other required documentary evidence, the Borrower shall indemnify the Administrative Agent and such Lender for any incremental taxes, interest or penalties that may become payable by the Administrative Agent or such Lender arising out of such failure.  Notwithstanding anything to the contrary in this Section 3.01(a), the Borrower shall not be required to increase the sum payable under any Loan Document, or to indemnify any Lender or the Administrative Agent, with respect to Taxes that (i) in the case of a Foreign Lender (other than an assignee pursuant to a request by the Borrower), are United States withholding taxes imposed on amounts payable to such Foreign Lender at the time such Foreign Lender becomes a party hereto (or designates a new lending office), except to the extent that such Foreign Lender (or its assignor, if any) was entitled, at the time of designation of a new lending office (or assignment), to receive additional amounts from the Borrower with respect to such withholding taxes or (ii) are withholding taxes that are excluded pursuant to Section 11.15(d).

 

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

 

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

 

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manifest error.  Payment under this Section 3.01(c) shall be made within thirty (30) days after the date such Lender or the Administrative Agent makes a demand therefor.

 

(d)   If any Lender or the Administrative Agent determines, in its reasonable discretion, that it has received a refund in respect of any Taxes or Other Taxes as to which indemnification or additional amounts have been paid to it by the Borrower pursuant to this Section 3.01, it shall promptly remit such refund (but only to the extent of indemnity payments made, or additional amounts paid, by the Borrower under this Section 3.01 with respect to the Taxes or Other Taxes giving rise to such refund plus any interest included in such refund by the relevant taxing authority attributable thereto) to the Borrower, net of all reasonable out-of-pocket expenses of the Lender or the Administrative Agent, as the case may be and without interest (other than any interest paid by the relevant taxing authority with respect to such refund); provided that the Borrower, upon the request of the Lender or the Administrative Agent, as the case may be, agrees promptly to return such refund (plus any penalties, interest or other charges imposed by the relevant taxing authority) to such party in the event such party is required to repay such refund to the relevant taxing authority.  Such Lender or the Administrative Agent, as the case may be, shall, at the Borrower’s request, provide the Borrower with a copy of any notice of assessment or other evidence of the requirement to repay such refund received from the relevant taxing authority (provided that such Lender or the Administrative Agent may delete any information therein that such Lender or the Administrative Agent deems confidential).  Nothing herein contained shall interfere with the right of a Lender or the Administrative Agent to arrange its tax affairs in whatever manner it thinks fit or to make available its tax returns or disclose any information relating to its tax affairs or any computations in respect thereof or require any Lender or the Administrative Agent to do anything that would prejudice its ability to benefit from any other refunds, credits, reliefs, remissions or repayments to which it may be entitled.

 

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

 

(f)    Each Lender shall indemnify the Administrative Agent, within 10 days after demand therefor, for the full amount of any taxes, duties, levies, imposts, deductions, assessments, fees, withholdings or similar charges with respect to which the Borrower is not required to pay additional amounts pursuant to Section 3.01(a) (“Excluded Taxes”) attributable to such Lender that are payable or paid by the Administrative Agent, and interest, penalties and reasonable expenses arising therefrom or with respect thereto, whether or not such Excluded Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority.  A certificate as to the amount of such payment or liability delivered to any Lender by the Administrative Agent shall be conclusive absent manifest error.

 

Section 3.02           [Reserved].

 

Section 3.03           [Reserved].

 

Section 3.04           Increased Cost and Reduced Return; Capital Adequacy.  (a)  If any Lender determines (in good faith) that as a result of the introduction of or any change in or in the interpretation of any Law, in each case after the date hereof, or such Lender’s compliance therewith, there shall be any increase in the cost to such Lender of agreeing to make or making, funding or maintaining Loans, or a reduction in the amount received or receivable by such Lender in connection with any of the 

 

45

 

foregoing (excluding for purposes of this Section 3.04(a) any such increased costs or reduction in amount resulting from (i) Taxes or Other Taxes (as to which Section 3.01 shall govern) and (ii) changes in the basis of taxation of overall net income or overall gross income (including branch profits), and franchise (and similar) taxes imposed in lieu of net income taxes, by the United States or any foreign jurisdiction or any political subdivision of either thereof under the Laws of which such Lender is organized or maintains a Lending Office), then from time to time within ten (10) days after demand by such Lender setting forth in reasonable detail such increased costs (with a copy of such demand to the Administrative Agent given in accordance with Section 3.06), the Borrower shall pay to such Lender such additional amounts as will compensate such Lender for such increased cost or reduction.

 

(b)   If any Lender determines (in good faith) that the introduction of any Law regarding capital adequacy or any change therein or in the interpretation thereof, in each case after the date hereof, or compliance by such Lender or such Lender’s holding company therewith, has the effect of reducing the rate of return on the capital of such Lender or such Lender’s holding company (or its Lending Office) as a consequence of its obligations hereunder to a level below that which such Lender or such Lender’s holding company could have achieved but for such introduction, change or compliance (taking into consideration its policies with respect to capital adequacy, by an amount deemed by such Lender to be material, then from time to time upon demand of such Lender setting forth in reasonable detail the charge and the calculation of such reduced rate of return (with a copy of such demand to the Administrative Agent given in accordance with Section 3.06), the Borrower shall pay to such Lender such additional amounts as will compensate such Lender or such Lender’s holding company for such reduction within ten (10) days after receipt of such demand.

 

(c)   [Reserved]

 

(d)   Failure or delay on the part of any Lender to demand compensation pursuant to this Section 3.04 shall not constitute a waiver of such Lender’s right to demand such compensation, provided that the Borrower shall not be required to compensate a Lender pursuant to Section 3.04(a) or (b) for any such increased cost or reduction incurred more than 180 days prior to the date that such Lender demands, or notifies the Borrower of its intention to demand, compensation therefor, provided further that, if the circumstance giving rise to such increased cost or reduction is retroactive, then such 180-day period referred to above shall be extended to include the period of retroactive effect thereof.

 

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

 

Section 3.05           [Reserved]

 

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

 

(b)   With respect to any Lender’s claim for compensation under Section 3.01 or 3.04, the Borrower shall not be required to compensate such Lender for any amount incurred more than 180 days prior to the date that such Lender notifies the Borrower of the event that gives rise to such claim; provided  

 

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that, if the circumstance giving rise to such claim is retroactive, then such 180-day period referred to above shall be extended to include the period of retroactive effect thereof.

 

(c)   [Reserved]

 

(d)   [Reserved]

 

Section 3.07           [Reserved](a)

 

Section 3.08           Survival.  All of the Borrower’s obligations under this Article III shall survive termination of the Aggregate Commitments and the repayment of all Obligations hereunder.

 

ARTICLE IV

CONDITIONS PRECEDENT

 

Section 4.01           Conditions to Effectiveness.  The effectiveness of this Agreement is subject to the satisfaction or waiver of the following conditions precedent:

 

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

 

(i)            counterparts of this Agreement, duly executed by Holdings, the Borrower, the Guarantors and the Administrative Agent;

 

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

 

(iii)          [Reserved];

 

(iv)          such resolutions or other action, in each case in form and substance satisfactory to the Administrative Agent, together with incumbency certificates and/or other certificates of Responsible Officers of each Loan Party as the Administrative Agent may reasonably require evidencing the identity, authority and capacity of each Responsible Officer thereof authorized to act as a Responsible Officer in connection with this Agreement and the other Loan Documents to which such Loan Party is a party or is to be a party on the Closing Date and with appropriate insertions and attachments, including the certificate of incorporation (or equivalent thereof) of each Loan Party that is a corporation certified by the relevant authority of the jurisdiction of organization of such Loan Party and a long form good standing certificate (or equivalent thereof) for each Loan Party from its jurisdiction of organization;

 

(v)           opinion from (i) Weil, Gotshal & Manges LLP, special New York counsel to Holdings substantially in the form of Exhibit F and (ii) local counsel in Washington as may be reasonably requested by the Administrative Agent;

 

(vi)          evidence that all insurance (including title insurance) required to be maintained pursuant to the Loan Documents has been obtained and is in effect; and

 

(vii)         [Reserved]; and

 

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(viii)        a certificate signed by a Responsible Officer of the Borrower certifying compliance with the conditions set forth in paragraphs (o) and (p) of this Section 4.01.

 

(b)   The Administrative Agent shall have received counterparts of the Fee Letter, duly executed by the Borrower and Holdings.

 

(c)   The Lenders and the Administrative Agent shall have received payment in full in cash of all costs, fees and expenses due and payable (including those required to be paid to such Lenders hereunder) and invoiced before the Closing Date.

 

(d)   [Reserved].

 

(e)   [Reserved].

 

(f)    The Lenders shall have received (i) the Audited Financial Statements and Unaudited Financial Statements and (ii) projections through December 31, 2014, in form reasonably satisfactory to the Administrative Agent, accompanied by a certificate of a Responsible Officer of the Borrower stating that such projections are based on estimates, information and assumptions believed by management of the Borrower to be reasonable on the Closing Date and that to his or her best knowledge, such Responsible Officer (not in his or her individual capacity, but solely as a Responsible Officer) has no reason to believe that such projections are incorrect or misleading in any material respect (it being understood and agreed that the projections are subject to significant uncertainties and contingencies, many of which are beyond the control of the Responsible Officer and that no assurance can be given that any of the projections will be realized, and that such projections are not a guarantee of financial performance and actual results may differ from the projected results and such differences may be material).

 

(g)   [Reserved].

 

(h)   [Reserved].

 

(i)    The Administrative Agent shall have received at least three days prior to the Closing Date all documentation and other information required by regulatory authorities under applicable “know your customer” and anti-money laundering rules and regulations, including the Patriot Act, requested by such Person.

 

(j)    [Reserved]

 

(k)   [Reserved]

 

(l)    No Default or Event of Default shall have occurred and be continuing under the Existing Credit Agreement at the time of or immediately after giving effect to such proposed Loan.

 

(m)  The Borrower shall close, at substantially the same time as the closing time hereof, that certain secured credit agreement among the Borrower, the Administrative Agent and the Lenders providing for a term loan in the aggregate principal amount of $45,000,000 (the “Secured Credit Facility”).

 

(n)   Holdings shall issue to the Lenders the Warrants.

 

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

 

(p)   No Default or Event of Default shall have occurred and be continuing at the time of or immediately after giving effect to such proposed Loan.

 

ARTICLE V

REPRESENTATIONS AND WARRANTIES

 

Each Loan Party hereby jointly and severally represents and warrants to the Administrative Agent and the Lenders that:

 

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

 

Section 5.02           Authorization; No Contravention.  The execution, delivery and performance by each Loan Party of each Loan Document to which such Person is a party, and the consummation of the transactions contemplated thereby, are within such Loan Party’s corporate or other powers, have been duly authorized by all necessary corporate or other organizational action, and do not and will not (a) violate the terms of any of such Person’s Organization Documents, (b) violate or result in any breach of, or the creation of any Lien under (other than Liens permitted by Section 7.03), or require any payment to be made under (i) any Contractual Obligation to which such Person is a party or which is binding upon such Person or the properties of such Person or any of its Subsidiaries or (ii) any order, injunction, writ or decree of any Governmental Authority or any arbitral award to which such Person or its property is subject; or (c) violate any Law; except with respect to any violation or breach (but not creation of Liens or payments) referred to in each case of clauses (b) and (c) above, to the extent that such violation or breach could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

Section 5.03           Governmental Authorization; Other Consents.  No approval, consent, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority is necessary or required in connection with the execution, delivery or performance by any Loan Party of this Agreement or any other Loan Document or the exercise by the Administrative Agent or any Lender of its rights under the Loan Documents, in each case of the foregoing, except for the approvals, consents, exemptions, authorizations, actions, notices and filings which have been duly obtained, taken, given or made and are in full force and effect.

 

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

 

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

 

(ii)           [Reserved]

 

(b)   Since June 30, 2011, there has been no event or circumstance, either individually or in the aggregate, that has had or could reasonably be expected to have a Material Adverse Effect.

 

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

 

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

 

Section 5.07           No Default.  Neither the Borrower nor any Subsidiary is in default under or with respect to any Contractual Obligation that, either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.  No Default or Event of Default has occurred and is continuing.

 

Section 5.08           Ownership of Property; Liens.  Each Loan Party and each of its Subsidiaries has good title to, or valid leasehold interests in, or (in the case of Intellectual Property) a license or other right to use, or easements or other limited property interests in, all its properties and assets material to the ordinary conduct of its business, free and clear of all Liens except for minor defects in title that do not materially interfere with its ability to conduct its business or to utilize such assets for their intended purposes and Liens permitted by Section 7.03.

 

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

 

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

 

(c)   The properties owned, leased or operated by the Borrower and the Subsidiaries do not contain any Hazardous Materials in amounts or concentrations which (i) constitute a violation of, (ii) require remedial action under, or (iii) could give rise to liability under, Environmental Laws, which violations, remedial actions and liabilities, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect.

 

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

 

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

 

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

 

Section 5.10           Taxes.  The Borrower and its applicable Subsidiaries have filed all U.S. Federal income and material state and other material tax returns and reports required to be filed, and have paid all U.S. Federal income and material state and other material taxes, assessments, fees and other governmental charges levied or imposed upon them or their properties, income or assets otherwise due and payable, except those which are being contested in good faith by appropriate proceedings diligently conducted and for which reserves have been provided to the extent required by GAAP.

 

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

 

(b)   (i)  Other than the commencement of the Cases, which is a Reportable Event, no ERISA Event has occurred during the five year period prior to the date on which this representation is made or deemed made with respect to any Pension Plan; (ii) neither any Loan Party nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability under Title IV of ERISA with respect to any Pension Plan (other than premiums due and not delinquent under Section 4007 of ERISA); (iii) neither any Loan Party nor any ERISA Affiliate has incurred, or reasonably expects to incur, any

 

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liability (and no event has occurred which, with the giving of notice under Section 4219 of ERISA, would reasonably be expected to result in such liability) under Sections 4201 or 4243 of ERISA with respect to a Multiemployer Plan; (iv) neither any Loan Party nor any ERISA Affiliate has engaged in a transaction that could reasonably be expected to be subject to Sections 4069 or 4212(c) of ERISA; and (v) the present value of all benefit liabilities under each Pension Plan does not exceed the aggregate current value of the assets of such Pension Plan (based on those assumptions used to fund the Pension Plans); except, with respect to each of the foregoing clauses (i) through (v) of this Section 5.11(b), as could not reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect.

 

(c)   Except as specifically disclosed in Schedule 5.11(c), (i) all employer and employee contributions required by applicable law or by the terms of any Foreign Benefit Arrangement or Foreign Plan have been made, or, if applicable, accrued in accordance with normal accounting practices; (ii) the accrued benefit obligations of each Foreign Plan (based on those assumptions used to fund such Foreign Plan) with respect to all current and former participants do not exceed the assets of such Foreign Plan; (iii) each Foreign Plan that is required to be registered has been registered and has been maintained in good standing with applicable regulatory authorities; and (iv) each such Foreign Benefit Arrangement and Foreign Plan is in compliance (A) with all material provisions of applicable law and all material applicable regulations and published interpretations thereunder with respect to such Foreign Benefit Arrangement or Foreign Plan and (B) with the terms of such plan or arrangement; except, with respect to each of the foregoing clauses (i) through (iv) of this Section 5.11(c), as could not reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect.

 

Section 5.12           Subsidiaries; Equity Interests.  As of the Closing Date, neither Holdings nor any other Loan Party has any Subsidiaries other than those specifically disclosed in Schedule 5.12, and all of the outstanding Equity Interests owned by the Loan Parties in such Subsidiaries have been validly issued, are fully paid and nonassessable and all Equity Interests owned by Holdings or a Loan Party are owned free and clear of all Liens except any Lien that is permitted under Section 7.03.  As of the Closing Date, Schedule 5.12 (a) sets forth the name and jurisdiction of each Subsidiary and (b) sets forth the ownership interest of Holdings, the Borrower and any other Subsidiary in each Subsidiary, including the percentage of such ownership.

 

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

 

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

 

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

 

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Section 5.15           Intellectual Property; Licenses, Etc.  Each of the Loan Parties and their Subsidiaries owns, or licenses or possesses the valid right to use, all Intellectual Property that is material to the operation of the business of the Borrower and its Subsidiaries, taken as a whole, as currently conducted, and, without known 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 best knowledge of the Borrower, the conduct of the business of the Borrower and its Subsidiaries, taken as a whole, as currently conducted, does not infringe upon, misappropriate or otherwise violate any Intellectual Property of any Person and, to the knowledge of the Borrower, no Person infringes upon, misappropriates or otherwise violates any Intellectual Property owned or exclusively licensed by the Borrower and its Subsidiaries, except in each case of the foregoing as could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.  No written or, to the knowledge of the Borrower, oral claim or litigation regarding any Intellectual Property owned or exclusively licensed by any Loan Party or its Subsidiaries is pending or, to the knowledge of the Loan Parties, threatened against any Loan Party or Subsidiary, which, either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.

 

Section 5.16           Solvency.  On the Closing Date, after giving effect to the incurrence of all Indebtedness and Obligations being incurred in connection herewith and in connection with the Secured Credit Facility, the Borrower and its Subsidiaries, on a consolidated basis, are Solvent.

 

Section 5.17           Labor Matters.  Except as, in the aggregate, could not reasonably be expected to have a Material Adverse Effect: (a) there are no strikes or other labor disputes against any Loan Party pending or, to the knowledge of the Borrower, threatened; (b) hours worked by and payment made to employees of each Loan Party have not been in violation of the Fair Labor Standards Act or any other applicable Laws dealing with such matters; and (c) all payments due from any Loan Party on account of employee health and welfare insurance have been paid or accrued as a liability on the books of the relevant party.

 

Section 5.18           [Reserved].

 

Section 5.19           [Reserved].

 

Section 5.20           Certain Documents.  The Borrower has delivered to the Administrative Agent a complete and correct copy of the Senior Secured Notes Indenture, the Existing Credit Agreement and any other documentation relating to the Senior Secured Notes and the Existing Credit Agreement reasonably requested by the Administrative Agent, including any amendments, supplements or modifications with respect to any of the foregoing.

 

Section 5.21           [Reserved].

 

ARTICLE VI

 

AFFIRMATIVE COVENANTS

 

So long as any Obligation shall remain outstanding (other than contingent indemnification and contingent expense reimbursement obligations), each Loan Party shall, and shall cause each of its Subsidiaries to:

 

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

 

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(a)   as soon as available, but in any event within ninety (90) days after the end of each fiscal year of the Borrower beginning with the fiscal year ending on December 31, 2011, a consolidated balance sheet of the Borrower and its consolidated Subsidiaries as at the end of such fiscal year and a consolidated balance sheet of the Borrower and its Restricted Subsidiaries as at the end of such fiscal year, and the related consolidated statements of income or operations, stockholders’ equity and cash flows for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, all prepared in accordance with GAAP (other than the consolidating financial statements, which shall be substantially in the form delivered to the Administrative Agent prior to the Closing Date), audited and accompanied by a report and opinion of an independent registered public accounting firm of nationally recognized standing, which report and opinion shall be prepared in accordance with generally accepted auditing standards and shall not be subject to any “going concern” or like qualification, exception or explanatory paragraph or any qualification or exception arising out of the scope of the audit;

 

(b)   as soon as available, but in any event within forty-five (45) days after the end of each of the first three (3) fiscal quarters of each fiscal year of the Borrower beginning with the fiscal quarter ending on September 30, 2011, an unaudited consolidated balance sheet of the Borrower and its consolidated Subsidiaries as at the end of such fiscal quarter and an unaudited consolidated balance sheet of the Borrower and its Restricted Subsidiaries as at the end of such fiscal quarter, and the related unaudited (i) consolidated statements of income or operations for such fiscal quarter and for the portion of the fiscal year then ended and (ii) consolidated statements of cash flows for such fiscal quarter and for the portion of the fiscal year then ended, setting forth in each case in comparative form the figures for the corresponding fiscal quarter of the previous fiscal year for the applicable entities and the corresponding portion of the previous fiscal year for the applicable entities, all certified by a Responsible Officer of the Borrower as fairly presenting in all material respects the consolidated financial condition, results of operations, stockholders’ equity and cash flows of the Borrower and its consolidated Subsidiaries and its Restricted Subsidiaries in accordance with GAAP, subject only to normal year-end audit adjustments and the absence of footnotes;

 

(c)   [Reserved]

 

(d)   as soon as available, and in any event no later than ninety (90) days after the end of each fiscal year of the Borrower beginning with the fiscal year ending on December 31, 2011, a reasonably detailed consolidated budget for the following fiscal year (including a projected consolidated balance sheet of the Borrower and its consolidated Subsidiaries as of the end of the following fiscal year and a projected consolidated balance sheet of the Borrower and its Restricted Subsidiaries as of the end of the following fiscal year, the related consolidated statements of projected cash flow and projected income and a summary of the material underlying assumptions applicable thereto) (collectively, the “Projections”), which Projections shall be certified by a Responsible Officer of the Borrower as being prepared based upon good faith estimates and assumptions that are believed by such Responsible Officer to be reasonable at the time made and that such Responsible Officer is not aware of (x) any information contained in such Projections which is false or misleading in any material respect or (y) any omission of information which causes such Projections to be false or misleading in any material respect (it being understood and agreed that the Projections are subject to significant uncertainties and contingencies, many of which are beyond the control of the Responsible Officer and that no assurance can be given that any of the Projections will be realized, and that the Projections are not a guarantee of financial performance and actual results may differ from the projected results and such differences may be material).

 

Notwithstanding the foregoing, the obligations in paragraphs (a) and (b) of this Section 6.01 may be satisfied with respect to financial information of the Borrower and its consolidated Subsidiaries or of the Borrower and its Restricted Subsidiaries by furnishing (A) the applicable financial

 

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

 

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

 

(a)   simultaneously with the delivery of the financial statements referred to in Section 6.01(a), a certificate of its independent certified public accounting firm certifying such financial statements and stating that in making the examination necessary therefor no knowledge was obtained of any Default or Event of Default under Section 7.14 or, if any such Default or Event of Default shall exist, stating the nature and status of such event (which certificate may be limited to the extent required by such firm’s general accounting and auditing rules, policies or guidelines);

 

(b)   simultaneously with the delivery of the financial statements referred to in Section 6.01(a) and (b), a duly completed Compliance Certificate signed by a Responsible Officer of the Borrower;

 

(c)   simultaneously with the delivery of the financial statements referred to in Sections 6.01(a) and (b), a narrative discussion and analysis of the financial condition and results of operations of the Borrower and its Subsidiaries (including, without limitation, with respect to Dispositions, cost savings, facility closures, litigation, contingent liabilities and other matters as the Administrative Agent or any Lender through the Administrative Agent may from time to time reasonably request) for the applicable period and for the period from the beginning of the then current fiscal year to the end of such period; provided, however, that so long as (i) the obligations in Sections 6.01(a) and (b) are satisfied by furnishing the Borrower’s or Holdings’ (or any direct or indirect parent thereof), as applicable, Form 10-K or 10-Q, as applicable, filed with the SEC and (ii) such Form 10-K or 10-Q, as applicable, contains such narrative discussion and analysis, the obligations of this Section 6.02(c) shall be deemed satisfied;

 

(d)   promptly upon the incurrence thereof of any obligation permitted under Sections 7.02(b)(i)(B), (C) or (D) or upon the entering into of any treasury, depository, cash management, or automated clearing house services permitted under Section 7.02(b)(i)(E) notice of such event, which notice shall set forth the nature of such obligation or service, including (i) in the case of clauses (B) and (C), principal amount, maturity and interest rate, (ii) in the case of clause (D), the principal terms of the applicable Secured Hedge Agreement, including notional amount, maturity and interest rate, if applicable (but not any ongoing requirement to provide mark-to-market valuations), and (iii) in the case of clause (E), the anticipated range of exposure and any material change thereto;

 

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

 

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delivered), exhibits to any registration statement and, if applicable, any registration statement on Form S-8) and in any case not otherwise required to be delivered to the Administrative Agent pursuant hereto;

 

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

 

(g)   no later than two (2) Business Days prior to the effectiveness thereof, copies of substantially final drafts of any proposed amendment, supplement, waiver or other modification, and any replacement, with respect to the Existing Credit Agreement, Senior Secured Notes Indenture, documentation governing Pari Passu Payment Lien Obligations or any Junior Financing Documentation;

 

(h)   together with the delivery of each Compliance Certificate pursuant to Section 6.02(b), to the extent not previously disclosed to the Administrative Agent, a description of any Person that has become a Group Member, in each case, since the date of the most recent list delivered pursuant to this Section 6.02(h) (or, in the case of the first such list so delivered, since the Closing Date) and a reconciliation of operating income of the Borrower and its Restricted Subsidiaries to EBITDA (which reconciliation may be provided as part of the calculations included in the applicable Compliance Certificate);

 

(i)    promptly, subject to applicable confidentiality requirements of Group Members, such additional financial or other information as the Administrative Agent or any Lender through the Administrative Agent may from time to time reasonably request;

 

(j)    simultaneously with the delivery of the financial statements referred to in Section 6.01(a) and (b), a calculation of (i) the outstanding aggregate amount of “Priority Payment Lien Obligations” under and as defined in the Senior Secured Note Indenture and (ii) the aggregate principal amount of Indebtedness outstanding under Section 7.02(b)(i), in each case, certified by a Responsible Officer of the Borrower; and

 

(k)   copies of any notices given to the administrative agent or any lender under and pursuant to the Existing Credit Agreement.

 

Documents required to be delivered pursuant to Section 6.01(a) or (b) or Section 6.02(d) or (f) may be delivered electronically and if so delivered, shall be deemed to have been delivered on the date (i) on which the Borrower posts such documents, or provides a link thereto on the Borrower’s website on the Internet at the website address listed in Section 11.02; (ii) on which such documents are posted on the Borrower’s behalf on IntraLinks/IntraAgency or another relevant website, if any, to which each Lender and the Administrative Agent have access (whether a commercial, third-party website or whether sponsored by the Administrative Agent); or (iii) such documents are publicly available on the SEC’s website pursuant to the SEC’s EDGAR system; provided that:  (i) upon written request by the Administrative Agent, the Borrower shall deliver paper copies of such documents to the Administrative Agent for further distribution to each Lender until a written request to cease delivering paper copies is given by the Administrative Agent and (ii) the Borrower shall notify (which may be by facsimile or electronic mail) the Administrative Agent of the posting of any such documents and provide to the Administrative Agent by electronic mail electronic versions (i.e., soft copies) of such documents.  Notwithstanding anything contained herein, in every instance the Borrower shall be required to provide paper copies of the Compliance Certificates required by Section 6.02(b) to the Administrative Agent.

 

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Each Lender shall be solely responsible for timely accessing posted documents or requesting delivery of paper copies of such documents from the Administrative Agent and maintaining its copies of such documents.

 

Section 6.03           Update Calls.  At least once per fiscal quarter, at such times as the Borrower and the Administrative Agent shall agree, the Borrower shall host a conference call (with a question and answer period) with the chief executive officer and chief financial officer of the Borrower and such other members of senior management of the Borrower as the Borrower deems appropriate and the Administrative Agent and the Lenders and their respective representatives and advisors to discuss the performance of the business, strategic alternatives and other issues as the Administrative Agent may reasonably request.

 

Section 6.04           Notices.  Promptly after any Responsible Officer of a Loan Party obtains knowledge thereof, notify the Administrative Agent (for prompt notification to each Lender):

 

(a)   of the occurrence of any Default or Event of Default; and

 

(b)   of any development or event that has had or could reasonably be expected to have a Material Adverse Effect.

 

Each notice pursuant to this Section shall be accompanied by a written statement of a Responsible Officer of the Borrower (x) that such notice is being delivered pursuant to Section 6.04(a) or (b) (as applicable) and (y) setting forth details of the occurrence referred to therein and stating what action the Borrower has taken and proposes to take with respect thereto.

 

Section 6.05           Payment of Obligations.  Pay, discharge or otherwise satisfy at or before maturity or before they become delinquent, as the case may be, all its material obligations of whatever nature (including, but not limited to, all material taxes, fees, assessments, and other governmental charges), except where the amount or validity thereof is currently being contested in good faith by appropriate proceedings and any required reserves in conformity with GAAP with respect thereto have been provided on the books of the relevant Group Member.

 

Section 6.06           Preservation of Existence, Etc.  (a)  Preserve, renew and maintain in full force and effect its legal existence under the Laws of the jurisdiction of its organization except (i) in the case of any Subsidiary of the Borrower, where the failure to perform such obligations, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect, or (ii) in a transaction permitted by Section 7.04 or Section 7.08 and (b) take all reasonable action to maintain all privileges (including its good standing), material rights, material permits, material licenses and material franchises necessary or desirable in the normal conduct of its business, except (i) to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect or (ii) pursuant to a transaction permitted by Section 7.04 or Section 7.08.

 

Section 6.07           Maintenance of Properties.  Except if the failure to do so could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, (a) maintain, preserve and protect all of its properties and equipment material to the operation of its business in good working order, repair and condition, ordinary wear and tear excepted and casualty or condemnation excepted, and (b) make all necessary renewals, replacements, modifications, improvements, upgrades, extensions and additions thereof or thereto in accordance with prudent industry practice.

 

Section 6.08           Maintenance of Insurance.  Maintain with financially sound and reputable insurance companies, insurance with respect to its properties and business against loss or

 

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

 

Section 6.09           Compliance with Laws.  Comply with the requirements of all Laws and all orders, writs, injunctions and decrees applicable to it or to its business or property, except if the failure to comply therewith could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

Section 6.10           Inspection Rights; Books and Records; Discussions.  (a)  Keep proper books of record and account in which full, true and correct entries in all material respects are made of all dealings and transactions in relation to its business and activities and (b) permit representatives of the Administrative Agent or any Lender to visit and inspect any of its properties and examine and make abstracts from any of its books of record at any reasonable time upon reasonable notice and to discuss the business, operations, properties and financial and other condition of the Loan Parties with officers and senior managerial employees of the Loan Parties and with their independent certified public accountants, in all cases subject to applicable Law and the terms of any applicable confidentiality agreements not entered into for purposes of obstructing the operation of this Section 6.10; provided, that an officer of the Borrower shall be provided reasonable opportunity to participate in any such discussion with the accountants; provided, further, that such inspections and discussions shall be coordinated through the Administrative Agent and that in the absence of a continuation of an Event of Default, the Administrative Agent and the Lenders shall not exercise such rights more often than once (1) during any calendar quarter.  The Administrative Agent and each Lender agrees to use reasonable efforts to coordinate and manage the exercise its rights under this Section 6.10 so as to minimize the disruption to the business of the Borrower and its Subsidiaries resulting therefrom.

 

Section 6.11           Covenant to Guarantee Obligations.  At the Borrower’s expense, take all action reasonably requested by the Administrative Agent to ensure that the Guarantee Requirement continues to be satisfied, including, within thirty (30) days after the formation or acquisition of any Wholly-Owned Domestic Subsidiary or such longer period as may be reasonably acceptable to the Administrative Agent if the Loan Parties are diligently pursuing compliance herewith, cause each such Wholly-Owned Domestic Subsidiary that is required to become a Guarantor under the Guarantee Requirement to become a Guarantor hereunder.

 

Section 6.12           Compliance with Environmental Laws.  Except, in each case, to the extent that the failure to do so could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect:  (a) comply, and take all reasonable actions to cause all lessees and other Persons operating or occupying its properties to comply, with all applicable Environmental Laws and Environmental Permits; (b) obtain and renew all Environmental Permits necessary for its operations and properties; and (c) in each case to the extent required by Environmental Laws, conduct any investigation, study, sampling and testing, and undertake any cleanup, removal, remedial or other action necessary to remove and clean up all Hazardous Materials from any of its properties, in accordance with the requirements of all Environmental Laws.

 

Section 6.13           [Reserved].

 

Section 6.14           Use of Proceeds.  Apply the proceeds of the Loans solely for working capital and other general corporate purposes of Holdings and its Subsidiaries and to pay fees and expenses

 

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in connection with the negotiation and consummation of this Agreement, the Secured Credit Facility and other related financing alternatives.

 

Section 6.15           Right of First Refusal to Provide Additional Financing.  In the event the Borrower or any Restricted Subsidiary desires to incur any additional unsecured Indebtedness under Section 7.02(b)(xx) hereof in excess of the Loan, the Borrower or such Restricted Subsidiary, as applicable, shall offer to the Administrative Agent and the Lenders the right to provide financing with respect to such unsecured Indebtedness prior to entering any agreement related thereto (including any commitment letter or similar agreement relating thereto) with any other party on the same or better terms.

 

ARTICLE VII

 

NEGATIVE COVENANTS

 

So long as any Obligation shall remain outstanding (other than contingent indemnification and contingent expense reimbursement obligations), each Loan Party covenants and agrees with the Lenders that:

 

Section 7.01           Limitation on Restricted Payments.  (a)    The Borrower will not, and will not permit any Restricted Subsidiary to, directly or indirectly:

 

(i)            declare or pay any dividend or make any distribution on account of the Borrower’s or any Restricted Subsidiary’s Equity Interests, including any dividend or distribution payable in connection with any merger or consolidation other than:

 

(A)  dividends or distributions by the Borrower payable in Equity Interests (other than Disqualified Stock) of the Borrower or in options, warrants or other rights to purchase such Equity Interests; or

 

(B)   dividends or distributions by a Restricted Subsidiary so long as, in the case of any dividend or distribution payable on or in respect of any class or series of securities issued by a Restricted Subsidiary other than a Wholly Owned Subsidiary, the Borrower or a Restricted Subsidiary receives at least its pro rata share of such dividend or distribution in accordance with its Equity Interests in such class or series of securities;

 

(ii)           purchase, redeem, defease or otherwise acquire or retire for value any Equity Interests of the Borrower or any direct or indirect parent of the Borrower, including in connection with any merger or consolidation, held by Persons other than the Borrower or any Subsidiary Guarantor;

 

(iii)          make any principal payment on, or redeem, repurchase, defease, otherwise acquire or retire for value or give any irrevocable notice of redemption with respect thereto in each case, prior to any scheduled repayment, sinking fund payment or maturity, any Indebtedness, other than (except to the extent otherwise prohibited by the provisions of Section 7.09):

 

(A)  Pari Passu Payment Lien Obligations;

 

(B)   Priority Payment Lien Obligations;

 

(C)   Indebtedness permitted under clauses (iv), (vii), (viii), (ix), and (x) of Section 7.02(b);

 

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(D)  Indebtedness incurred under the Loan Documents;

 

(E)   the purchase, repurchase or other acquisition of Indebtedness purchased in anticipation of satisfying a sinking fund obligation, principal installment or final maturity, in each case due within one year of the date of purchase, repurchase or acquisition;

 

(F)   Indebtedness incurred under revolving credit facilities (other than payments, redemptions, repurchases, defeasances or other acquisitions or retirements for value that are accompanied by termination or reduction of commitments under such revolving credit facilities); or

 

(G)   the giving of an irrevocable notice of redemption with respect to the transactions described in clauses (ii) and (iii) of Section 7.01(a); or

 

(iv)          make any Restricted Investment

 

(all such payments and other actions set forth in clauses (i) through (iv) above being collectively referred to as “Restricted Payments”), unless at the time of such Restricted Payment:

 

(v)           no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof;

 

(vi)          immediately after giving effect to such transaction on a pro forma basis, the Borrower could incur $1.00 of additional Indebtedness under Section 7.02(a); and

 

(vii)         such Restricted Payment, together with the aggregate amount of all other Restricted Payments made by the Borrower and the Restricted Subsidiaries after the Existing Agreement Closing Date (including Restricted Payments permitted by clauses (i), (viii), (xii) and (xiv) of paragraph (b) below, but excluding all other Restricted Payments permitted by paragraph (b)), is less than the sum of:

 

(A)  the EBITDA of the Borrower for the period (taken as one accounting period) from April 1, 2010, to the end of the Borrower’s most recently ended fiscal quarter for which internal financial statements are available at the time of such Restricted Payment, less the product of 1.4 times Consolidated Interest Expense of the Borrower for the same period; provided that if the amount under this clause (A) for any fiscal quarter is less than zero, then the amount “built” under this clause (A) for such fiscal quarter shall be deemed to be equal to zero, plus

 

(B)   100% of the aggregate net cash proceeds and the fair market value, as determined in good faith by the Board of Directors, of marketable securities or other property received by the Borrower since immediately after the Existing Agreement Closing Date from the issue or sale of:

 

(1)   Equity Interests of the Borrower, including Retired Capital Stock (as defined below), but excluding cash proceeds and the fair market value, as determined in good faith by the Board of Directors, of marketable securities or other property received from the sale of:

 

I                                            Equity Interests to members of management, directors or consultants of the Borrower, any direct or indirect parent of the Borrower and the Borrower’s Subsidiaries after the Existing Agreement Closing Date to the extent such amounts have been applied to Restricted Payments made 

 

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in accordance with clause (iv) of paragraph (b) below; and

 

II                                        Designated Preferred Stock; or

 

(2)   debt securities of the Borrower that have been converted into such Equity Interests of the Borrower or its direct or indirect parents;

 

provided, however, that this clause (B) shall not include the proceeds from (w) Refunding Capital Stock (as defined below), (x) Equity Interests or converted debt securities of the Borrower sold to a Restricted Subsidiary, or to an employee stock ownership plan or other trust established by the Borrower or a Restricted Subsidiary, (y) Disqualified Stock or debt securities that have been converted into Disqualified Stock or (z) Excluded Contributions or Designated Preferred Stock, plus

 

(C)   100% of the aggregate amount of cash and the fair market value, as determined in good faith by the Board of Directors, of marketable securities or other property contributed to the capital of the Borrower following the Existing Agreement Closing Date other than (i) net cash proceeds contributed to the Borrower from the sale of Disqualified Stock or Designated Preferred Stock, (ii) net cash proceeds received from Equity Offerings to the extent used to redeem Senior Secured Notes, (iii) by any Excluded Contributions and (iv) by contributions to the Borrower and the Restricted Subsidiaries in connection with the Reorganization Plan, plus

 

(D)  100% of the aggregate amount received in cash and the fair market value, as determined in good faith by the Board of Directors, of marketable securities or other property received by the Borrower or a Restricted Subsidiary by means of:

 

(1)   the sale or other disposition (other than to the Borrower or a Restricted Subsidiary or to an employee stock ownership plan or any trust established by the Borrower or any of its Subsidiaries) of Restricted Investments made after the Closing Date by the Borrower and its Restricted Subsidiaries and repurchases and redemptions of such Restricted Investments from the Borrower and its Restricted Subsidiaries and repayments of loans or advances which constitute Restricted Investments made after the Closing Date by the Borrower and the Restricted Subsidiaries and (without duplication of amounts included in EBITDA) any dividends or distributions received by the Borrower or a Restricted Subsidiary on account of Restricted Investments made after the Existing Agreement Closing Date (other than in each case to the extent the Investment in such Restricted Investment was made by the Borrower or a Restricted Subsidiary pursuant to clause (xiv) of paragraph (b) below); or

 

(2)   the sale (other than to the Borrower or a Restricted Subsidiary or to an employee stock ownership plan or any trust established by the Borrower or any of its Subsidiaries) of the stock of an Unrestricted Subsidiary (other than in each case to the extent the Investment in such Unrestricted Subsidiary was made by the Borrower or a Restricted Subsidiary pursuant to clause (x) of paragraph (b) below or to the extent such Investment constituted a Permitted Investment) or a dividend or distribution from an Unrestricted Subsidiary in each case after the Existing Agreement Closing Date; plus

 

(E)   in the case of the redesignation of an Unrestricted Subsidiary as a Restricted Subsidiary after the Existing Agreement Closing Date, the fair market value of the Investment in such Unrestricted Subsidiary, as determined by the Board of Directors in good faith or if, in the case of an Unrestricted Subsidiary, such fair market value may exceed $25.0 million, in writing

 

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by an Independent Financial Advisor, at the time of the redesignation of such Unrestricted Subsidiary as a Restricted Subsidiary, other than an Unrestricted Subsidiary to the extent the Investment in such Unrestricted Subsidiary was made by the Borrower or a Restricted Subsidiary pursuant to clause (xiv) of paragraph (b) below or to the extent such Investment constituted a Permitted Investment.

 

(b)   The foregoing provisions of Section 7.01(a) will not prohibit:

 

(i)            the payment of any dividend or distribution within 60 days after the date of declaration thereof, if at the date of declaration such payment would have complied with the provisions of this Agreement or the redemption, repurchase or retirement of Indebtedness if, at the date of any irrevocable redemption notice such payment would have complied with the provisions of this Agreement;

 

(ii)           the redemption, repurchase, retirement or other acquisition of any Equity Interests of the Borrower (“Retired Capital Stock”) or Indebtedness of the Borrower or a Subsidiary Guarantor, or any Equity Interests of any direct or indirect parent of the Borrower, in exchange for, or out of the proceeds of the substantially concurrent sale (other than to the Borrower or a Restricted Subsidiary or to an employee stock ownership plan or other trust established by the Borrower or a Restricted Subsidiary) of, Equity Interests of the Borrower or any direct or indirect parent of the Borrower to the extent contributed to the Borrower (in each case, other than any Disqualified Stock) (“Refunding Capital Stock”);

 

(iii)          the redemption, repurchase or other acquisition or retirement of Indebtedness of the Borrower or a Subsidiary Guarantor made by exchange for, or out of the proceeds of the substantially concurrent sale of, new Indebtedness of the Borrower or a Subsidiary Guarantor, as the case may be, which is incurred in compliance with Section 7.02 so long as:

 

(A)  such new Indebtedness has a final scheduled maturity date equal to or later than the final scheduled maturity date of the Indebtedness being so redeemed, repurchased, acquired or retired;

 

(B)   such new Indebtedness has a Weighted Average Life to Maturity equal to or greater than the remaining Weighted Average Life to Maturity of the Indebtedness being so redeemed, repurchased, acquired or retired;

 

(C)   in the case of unsecured Indebtedness, such new Indebtedness is unsecured, and in the case of secured Indebtedness, such new Indebtedness is either unsecured or is Junior Lien Indebtedness; and

 

(D)  the principal amount of such new Indebtedness does not exceed the principal amount of (or accreted value, if applicable), plus any accrued and unpaid interest on, the Indebtedness being so redeemed, repurchased, acquired or retired, plus the amount of any premium (including tender premiums) and any fees and expenses incurred in connection with such issuance of new Indebtedness;

 

(iv)          a Restricted Payment to pay for the repurchase, retirement or other acquisition or retirement for value of common Equity Interests of the Borrower or any of its direct or indirect parents held by any future, present or former employee, director or consultant of the Borrower, any of its Subsidiaries or any of its direct or indirect parents (or permitted transferees, assigns, estates, or heirs of such employee, director or consultant) pursuant to any management equity plan or stock option plan or any other management or employee benefit plan or agreement; provided, however, that the aggregate

 

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Restricted Payments made under this clause (iv) do not exceed $5.0 million in any calendar year (with unused amounts in any calendar year being carried over to the immediately succeeding calendar year; provided further that such amount in any calendar year may be increased by an amount not to exceed:

 

(A)  the cash proceeds from the sale of Equity Interests (other than Disqualified Stock) of the Borrower and, to the extent contributed to the Borrower, Equity Interests of any of the Borrower’s direct or indirect parents, in each case to members of management, directors or consultants of the Borrower, any of its Subsidiaries or any of its direct or indirect parents that occurred after the Existing Agreement Closing Date, to the extent the cash proceeds from the sale of such Equity Interests have not otherwise been applied to the payment of Restricted Payments by virtue of Section 7.01(a)(vii); plus

 

(B)   the cash proceeds of key man life insurance policies received by the Borrower and its Restricted Subsidiaries after the Existing Agreement Closing Date; less

 

(C)   the amount of any Restricted Payments previously made pursuant to clauses (A) and (B) of this clause (iv);

 

(v)           the declaration and payment of dividends to holders of any class or series of Disqualified Stock of the Borrower or any Restricted Subsidiary issued in accordance with Section 7.02;

 

(vi)          the declaration and payment of dividends to holders of any class or series of Designated Preferred Stock (other than Disqualified Stock) issued by the Borrower after the Existing Agreement Closing Date;

 

(A)  provided that the aggregate amount of dividends paid pursuant to this clause (A) shall not exceed the aggregate amount of cash actually received by the Borrower from the sale of such Designated Preferred Stock;

 

(B)   the declaration and payment of dividends to a direct or indirect parent of the Borrower, the proceeds of which will be used to fund the payment of dividends to holders of any class or series of Designated Preferred Stock (other than Disqualified Stock) of such parent issued after the Existing Agreement Closing Date; provided, that the amount of dividends paid pursuant to this clause (B) shall not exceed the aggregate amount of cash actually contributed to the Borrower from the sale of such Designated Preferred Stock;

 

(vii)         repurchases of Equity Interests (i) constituting fractional shares or (ii) deemed to occur upon exercise of stock options or warrants or other securities convertible or exchangeable into Equity Interests if such Equity Interests represent all or a portion of the exercise price of such options or warrants;

 

(viii)        the payment of dividends on the Borrower’s common equity or the dividend or distribution to any direct or indirect parent company to fund the payment by such parent company of dividends on its common stock, following the consummation of the first public offering of the Borrower’s common stock or the common stock of any of its direct or indirect parents after the Closing Date, of up to 6% per annum of the net cash proceeds received by or contributed to the Borrower in any public offering, other than public offerings with respect to the Borrower’s or such direct or indirect parent company’s common stock registered on Form S-8 and other than any public sale constituting an Excluded Contribution;

 

(ix)           Restricted Payments that are made with Excluded Contributions;

 

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(x)            other Restricted Payments in an aggregate amount taken together with all other Restricted Payments made pursuant to this clause (x) not to exceed $20.0 million;

 

(xi)           the declaration and payment of dividends by the Borrower to, or the making of loans to, any direct or indirect parent company of the Borrower in aggregate amounts not to exceed the aggregate amount required for any direct or indirect parent company to pay, in each case without duplication;

 

(A)  franchise taxes and other fees, taxes and expenses required to maintain their corporate existence;

 

(B)   foreign, federal, state and local income taxes, to the extent such income taxes are attributable to the income of the Borrower and the Restricted Subsidiaries and, to the extent of the amount actually received from its Unrestricted Subsidiaries, in amounts required to pay such taxes to the extent attributable to the income of such Unrestricted Subsidiaries; provided that in each case the amount of such payments in any fiscal year does not exceed the amount that the Borrower and its Restricted Subsidiaries would be required to pay in respect of foreign, federal, state and local taxes for such fiscal year were the Borrower, its Restricted Subsidiaries and its Unrestricted Subsidiaries (to the extent described above) to pay such taxes separately from any such parent entity;

 

(C)   customary salary, bonus, indemnification obligations and other benefits payable to officers, directors and employees or former officers, directors or employees of any direct or indirect parent of the Borrower to the extent such salaries, bonuses, indemnification obligations and other benefits are attributable to the ownership or operation of the Borrower and the Restricted Subsidiaries;

 

(D)  general corporate overhead expenses of any direct or indirect parent of the Borrower to the extent such expenses are attributable to the ownership or operation of the Borrower and the Restricted Subsidiaries;

 

(E)   fees and expenses incurred by any direct or indirect parent company of the Borrower in connection with any unsuccessful equity issuances or incurrence of Indebtedness to the extent the net proceeds thereof were intended to be contributed to the Borrower; and

 

(F)   taxes with respect to income of any direct or indirect parent company of the Borrower derived from funding made available to the Borrower and its Restricted Subsidiaries by such direct or indirect parent company;

 

(xii)          the repurchase, redemption or other acquisition or retirement for value of any Indebtedness or the making of a dividend or distribution to any direct or indirect parent of the Borrower to fund a similar purchase, redemption or other acquisition or retirement for value required pursuant to provisions similar to those described in Section 3.10 of the Senior Secured Note Indenture (in which case a repurchase, redemption or other acquisition or retirement price of not greater than 101% of the principal amount of such Indebtedness) and under Section 3.5 of the Senior Secured Note Indenture;

 

(xiii)         the distribution, as a dividend or otherwise, of (A) Equity Interests of, or Indebtedness owed to the Borrower or a Restricted Subsidiary by, Unrestricted Subsidiaries (other than Unrestricted Subsidiaries the primary assets of which are cash and/or Cash Equivalents) and (B) any proceeds received from an Unrestricted Subsidiary on account of such Equity Interests or Indebtedness,

 

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provided, that, in the case of clause (B), such proceeds will be excluded from EBITDA for purposes of Section 7.01(a)(vii)(A) and will be excluded from Section 7.01(a)(vii)(E);

 

(xiv)        Investments in joint ventures and Unrestricted Subsidiaries; provided that the aggregate Restricted Payments made pursuant to this clause (xiv) do not exceed $10.0 million; provided that such amount shall be increased by an amount not to exceed (A) the cash proceeds received as a dividend, distribution or otherwise from such joint ventures and Unrestricted Subsidiaries (it being understood that the forgiveness of any debt by such joint venture and Unrestricted Subsidiary will not be a Restricted Payment hereunder) less (B) the amount of any Restricted Payments previously made pursuant to subclause (A) of this clause (xiv); provided, further, that such increased amount shall be excluded from EBITDA for purposes of Section 7.01(a)(vii)(A) and shall also be excluded from clauses Section 7.01(a)(vii)(D) and Section 7.01(a)(vii)(E); and

 

(xv)         distributions or payments of Receivables Fees.

 

provided however, that at the time of, and after giving effect to, any Restricted Payment permitted under clauses (v), (vi), (x) and (xiii), no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof.

 

(c)   Notwithstanding anything to the contrary in the foregoing, (i) Restricted Investments of assets and property constituting Collateral (other than cash and Cash Equivalents) made pursuant to Section 7.01(a) may only be made in Subsidiary Guarantors and (ii) the Borrower will not, and will not permit any Restricted Subsidiary to, directly or indirectly, (I) declare or pay any dividend or make any distribution (whether cash or noncash) on account of the Borrower’s Equity Interests; (II) purchase or redeem, defease or otherwise acquire or retire for value any Equity Interests of the Borrower or any direct or indirect parent of the Borrower, in the case of each of clauses (I) and (II) to or for the benefit of any holder of common Equity Interests of the Borrower or any direct or indirect parent of the Borrower, or (III) make any principal payment on, or redeem, repurchase, defease, otherwise acquire or retire for value or give any irrevocable notice of redemption with respect thereto in each case, prior to any scheduled repayment, sinking fund payment or maturity, any Indebtedness by means of (A) Section 7.01(a)(vii), (B) Section 7.01(b)(v), Section 7.01(b)(vi), Section 7.01(b)(viii), Section 7.01(b)(ix), Section 7.01(b)(x), Section 7.01(b)(xii), Section 7.01(b)(xiii) or Section 7.01(b)(xiv) or (C) clause (o) of the definition of “Permitted Investments,” unless in each case such Restricted Payment is otherwise in compliance with this Agreement and at the time of such Restricted Payment (x) the Consolidated Secured Debt Ratio (calculated without giving effect to clause (1)(e) of the definition of Consolidated Secured Debt Ratio) of the Borrower would have been no greater than 3.25 to 1.00 on a pro forma basis (it being understood that the amount calculated pursuant to clause (1) of the definition of Consolidated Secured Debt Ratio will be reduced by the Liquidity of the Borrower and its Restricted Subsidiaries in excess of $150.0 million for purposes of such calculation), (y) the Borrower and its Restricted Subsidiaries would have Liquidity of no less than $100.0 million on a pro forma basis and (z) the Senior Secured Leverage Ratio (calculated on a pro forma basis in accordance with the last sentence of Section 7.14) would have been no greater than the ratio set forth in Section 7.14 opposite the last day of the then current fiscal quarter less 0.50.

 

(d)   The amount of all Restricted Payments (other than cash) will be the fair market value (as determined in good faith by the Borrower) on the date of such Restricted Payment of the assets or securities proposed to be paid, transferred or issued by the Borrower or such Restricted Subsidiary, as the case may be, pursuant to such Restricted Payment.

 

(e)   As of the Closing Date, all of the Borrower’s Subsidiaries will be Restricted Subsidiaries. The Borrower will not permit any Unrestricted Subsidiary to become a Restricted Subsidiary except pursuant to the last sentence of the definition of “Unrestricted Subsidiary.” For

 

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purposes of designating any Restricted Subsidiary as an Unrestricted Subsidiary, all outstanding Investments by the Borrower and the Restricted Subsidiaries (except to the extent repaid) in the Subsidiary so designated will be deemed to be Restricted Payments in an amount determined as set forth in the last sentence of the definition of “Investment.” Such designation will be permitted only if a Restricted Payment in such amount would be permitted at such time, whether pursuant to Section 7.01(a), Section 7.01(b)(ix) or Section 7.01(b)(x), or pursuant to the definition of “Permitted Investments,” and if such Subsidiary otherwise meets the definition of an Unrestricted Subsidiary.

 

Section 7.02           Limitation on incurrence of Indebtedness and issuance of Disqualified Stock and preferred stock.

 

(a)  The Borrower will not, and will not permit any Restricted Subsidiary to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable, contingently or otherwise, (collectively, “incur” and collectively, an “incurrence”) with respect to any Indebtedness (including Acquired Indebtedness) and the Borrower will not issue any shares of Disqualified Stock and will not permit any Restricted Subsidiary to issue any shares of Disqualified Stock or preferred stock; provided, however, that the Borrower may incur Indebtedness (including Acquired Indebtedness) or issue shares of Disqualified Stock, and any Subsidiary Guarantor may incur Indebtedness (including Acquired Indebtedness), issue shares of Disqualified Stock and issue shares of preferred stock, if the Consolidated Leverage Ratio of the Borrower and the Restricted Subsidiaries at the time such additional Indebtedness is incurred or such Disqualified Stock or preferred stock is issued would have been no greater than 5.00 to 1.00, determined on a pro forma basis (including a pro forma application of the net proceeds therefrom), as if the additional Indebtedness had been incurred, or the Disqualified Stock or preferred stock had been issued, as the case may be, and the application of proceeds therefrom had occurred at the beginning of the most recently ended four full fiscal quarters for which internal financial statements are available.

 

(b)   The foregoing limitations in paragraph (a) will not apply to:

 

(i)            the incurrence of (A) Indebtedness of any Loan Party pursuant to the Secured Credit Facility, (B) Indebtedness under other Credit Facilities by the Borrower or any of the Subsidiary Guarantors and the issuance and creation of letters of credit and bankers’ acceptances thereunder (with letters of credit and bankers’ acceptances being deemed to have a principal amount equal to the face amount thereof), (C) Indebtedness under Credit Facilities of Foreign Subsidiaries, (D) obligations under Secured Hedge Agreements or (E) Cash Management Obligations; provided that the aggregate principal amount of Indebtedness incurred under clauses (A), (B), (C), (D) and (E) outstanding at any one time shall not exceed $100.0 million less the aggregate amount of all Net Proceeds of Asset Sales applied by the Borrower or any Restricted Subsidiary since the Closing Date to permanently repay any Indebtedness under Credit Facilities (and, in the case of revolving credit Indebtedness, to effect a corresponding permanent reduction thereunder); provided that Cash Management Obligations incurred under this clause (i) shall not exceed $5.0 million in the aggregate at any time outstanding;

 

(ii)           the incurrence by the Borrower and any Subsidiary Guarantor of Indebtedness represented by (i) the Senior Secured Notes issued on the Issue Date (other than any Additional Notes), including any guarantee thereof, and (ii) any Exchange Notes (including any guarantee thereof);

 

(iii)          Existing Indebtedness (other than Indebtedness described in clauses (i), (ii) and (iv) of Section 7.02(b) (in respect of clause (iv) only, incurred on or after the Existing Agreement Closing Date));

 

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(iv)          Indebtedness (including Capitalized Lease Obligations), Disqualified Stock and preferred stock incurred by the Borrower or any of the Subsidiary Guarantors to finance the purchase, lease or improvement of property (real or personal) or equipment that is used or useful in a Similar Business, whether through the direct purchase of assets or the Capital Stock of any Person owning such assets, in an aggregate principal amount which, when aggregated with the principal amount of all other Indebtedness, Disqualified Stock and preferred stock then outstanding and incurred pursuant to this clause (iv) and including all Refinancing Indebtedness incurred to refund, refinance or replace any other Indebtedness, Disqualified Stock and preferred stock incurred pursuant to this clause (iv), does not exceed the greater of $20.0 million and 1.0% of Total Assets;

 

(v)           Indebtedness incurred by the Borrower or any Restricted Subsidiary constituting reimbursement obligations with respect to letters of credit issued in the ordinary course of business, including without limitation letters of credit in respect of workers’ compensation claims, or other Indebtedness with respect to reimbursement type obligations regarding workers’ compensation claims, health, disability or other employee benefits, or property, casualty or liability insurance or self insurance obligations in the ordinary course of business; provided, however, that upon the drawing of such letters of credit or the incurrence of such Indebtedness, such obligations are reimbursed within 30 days following such drawing or incurrence;

 

(vi)          Indebtedness arising from agreements of the Borrower or a Restricted Subsidiary providing for and to the extent of indemnification, adjustment of purchase price or similar obligations, in each case, incurred or assumed in connection with the disposition or acquisition of any business, assets or a Subsidiary, other than guarantees of Indebtedness incurred by any Person acquiring all or any portion of such business, assets or a Subsidiary for the purpose of financing such acquisition; provided that the maximum assumable liability in respect of all such Indebtedness shall at no time exceed the gross proceeds including noncash proceeds (the fair market value of such noncash proceeds being measured at the time received and without giving effect to any subsequent changes in value) actually received by the Borrower and the Restricted Subsidiaries in connection with such disposition;

 

(vii)         Indebtedness of the Borrower to a Subsidiary Guarantor; provided that any subsequent issuance or transfer of any Capital Stock or any other event which results in any such Subsidiary Guarantor ceasing to be a Subsidiary Guarantor or any other subsequent transfer of any such Indebtedness (except to the Borrower or another Guarantor) shall be deemed, in each case to be an incurrence of such Indebtedness not permitted by this clause (vii);

 

(viii)        Indebtedness of the Borrower or a Subsidiary Guarantor to a Restricted Subsidiary that is not a Subsidiary Guarantor; provided that any such Indebtedness is subordinated in right of payment to the Obligations, as applicable, provided further that any subsequent issuance or transfer of any Capital Stock or any other event which results in any such Restricted Subsidiary ceasing to be a Restricted Subsidiary or any other subsequent transfer of any such Indebtedness (except to the Borrower or another Restricted Subsidiary) shall be deemed, in each case, to be an incurrence of such Indebtedness not permitted by this clause (viii);

 

(ix)           Indebtedness of a Subsidiary Guarantor to the Borrower or another Subsidiary Guarantor;

 

(x)            Indebtedness of a Restricted Subsidiary that is not a Subsidiary Guarantor to the Borrower or a Restricted Subsidiary;

 

(xi)           shares of preferred stock of a Restricted Subsidiary issued to the Borrower or another Restricted Subsidiary; provided that any subsequent issuance or transfer of any Capital Stock or any other

 

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event which results in any such Restricted Subsidiary ceasing to be a Restricted Subsidiary or any other subsequent transfer of any such shares of preferred stock (except to the Borrower or another Restricted Subsidiary) shall be deemed in each case to be an issuance of such shares of preferred stock not permitted by this clause (xi);

 

(xii)          obligations under Swap Contracts (excluding obligations under Swap Contracts entered into for speculative purposes) for the purpose of limiting:

 

(A)  interest rate risk with respect to any Indebtedness permitted to be incurred or outstanding under the Senior Secured Note Indenture; or

 

(B)   exchange rate risk with respect to any currency exchange; or

 

(C)   commodity risk;

 

(xiii)         obligations in respect of performance, bid, appeal and surety bonds and other similar types of performance and completion guarantees provided by the Borrower or any Restricted Subsidiary in the ordinary course of business;

 

(xiv)        (A)  any guarantee by the Borrower or a Subsidiary Guarantor of Indebtedness or other obligations of any Restricted Subsidiary so long as the incurrence of such Indebtedness incurred by such Restricted Subsidiary is permitted under the terms of this Agreement; provided that if the Indebtedness being guaranteed is subordinated to or pari passu with a Subsidiary Guarantee, then the guarantee shall be subordinated or pari passu to the Obligations or Guarantor Obligations, as applicable, to the same extent as the Indebtedness guaranteed; or

 

(B)   any guarantee by a Restricted Subsidiary of Indebtedness of the Borrower or a Subsidiary Guarantor; provided that such guarantee is incurred in accordance with Section 7.13; or

 

(C)   any guarantee by a Restricted Subsidiary that is not a Subsidiary Guarantor of Indebtedness of another Restricted Subsidiary that is not a Subsidiary Guarantor;

 

(xv)         the incurrence by the Borrower or any Restricted Subsidiary of Indebtedness, Disqualified Stock or preferred stock which serves to refund or refinance any Indebtedness, Disqualified Stock or preferred stock of the Borrower or any Restricted Subsidiary incurred as permitted under Section 7.02(a) and Section 7.02(b)(ii) and (b)(iii) above, this clause (xv) and clause (xvi) below, including additional Indebtedness, Disqualified Stock or preferred stock incurred to pay premiums (including tender premiums), defeasance costs and fees in connection therewith (the “Refinancing Indebtedness”) prior to its respective maturity; provided, however, that such Refinancing Indebtedness:

 

(A)  (1) has a Weighted Average Life to Maturity at the time such Refinancing Indebtedness is incurred which is not less than the lesser of (x) the remaining Weighted Average Life to Maturity of the Indebtedness, Disqualified Stock or preferred stock being refunded or refinanced and (y) the remaining Weighted Average Life to Maturity of the Loans and (2) does not have a maturity date prior to the Maturity Date;

 

(B)   to the extent such Refinancing Indebtedness refinances (i) Indebtedness subordinated or pari passu in right of payment to the Obligations, such Refinancing Indebtedness is subordinated or pari passu in right of payment to the Obligations at least to the same extent as the

 

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Indebtedness being refinanced or refunded or (ii) Disqualified Stock or preferred stock, such Refinancing Indebtedness must be Disqualified Stock or preferred stock, respectively;

 

(C)   shall not be in an amount in excess the principal amount (or accreted value, if applicable) or liquidation preference of, plus any accrued and unpaid interest on, the Indebtedness being so refunded or refinanced, plus the amount of any premium (including tender premiums), defeasance costs and any related fees and expenses;

 

(D)  shall not have a final maturity date prior to the final maturity date of the Indebtedness, Disqualified Stock or preferred stock being refunded or refinanced; and

 

(E)   shall not include:

 

(1)   Indebtedness, Disqualified Stock or preferred stock of a Restricted Subsidiary that is not a Subsidiary Guarantor that refinances Indebtedness, Disqualified Stock or preferred stock of the Borrower or a Subsidiary Guarantor; or

 

(2)   Indebtedness, Disqualified Stock or preferred stock of the Borrower or a Restricted Subsidiary that refinances Indebtedness, Disqualified Stock or preferred stock of an Unrestricted Subsidiary;

 

(xvi)        (i)    Indebtedness, Disqualified Stock or preferred stock of Persons incurred and outstanding on or prior to the date such Person was acquired by the Borrower or any Restricted Subsidiary or merged into the Borrower or a Restricted Subsidiary in accordance with the terms of this Agreement and (ii) Indebtedness of the Borrower or any Restricted Subsidiary incurred in connection with or in contemplation of, or to provide all or any portion of the funds or credit support utilized to consummate, the acquisition by the Borrower or such Restricted Subsidiary of property used or useful in a Similar Business (whether through the direct purchase of assets or the purchase of Capital Stock of, or merger or consolidation with, any Person owning such assets); provided that in the case of both (i) and (ii), the Borrower would be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Consolidated Leverage Ratio test set forth in paragraph (a) of this Section;

 

(xvii)       Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument drawn against insufficient funds in the ordinary course of business; provided that such Indebtedness is extinguished within five business days of its incurrence;

 

(xviii)      Indebtedness consisting of promissory notes issued by the Borrower or any of its Restricted Subsidiaries to any current or former employee, director or officer of the Borrower, any of its Restricted Subsidiaries or any of its direct or indirect parents (or permitted transferees, assigns, estates, or heirs of such employee, director or officer), to finance the purchase or redemption of Equity Interests of the Borrower or any of its direct or indirect parent companies permitted by Section 7.01; provided further, that such indebtedness must be expressly subordinated in right of payment to the Obligations;

 

(xix)         Indebtedness of the Borrower or any Restricted Subsidiary consisting of (i) the financing of insurance premiums or (ii) take-or-pay obligations contained in supply arrangements, in each case, in the ordinary course of business;

 

(xx)          Indebtedness, Disqualified Stock and preferred stock of the Borrower and the Restricted Subsidiaries not otherwise permitted hereunder in an aggregate principal amount or liquidation preference, which when aggregated with the principal amount and liquidation preference of all other Indebtedness, Disqualified Stock and preferred stock then outstanding and incurred pursuant to this clause

 

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(xx) and all aggregate outstanding principal amounts incurred under this Agreement, does not at any one time outstanding exceed $35.0 million;

 

(xxi)                           Indebtedness of Foreign Subsidiaries in an aggregate amount not to exceed $5.0 million at any time outstanding; and

 

(xxii)                        Indebtedness incurred pursuant to the Loan Documents.

 

(c)          For purposes of determining compliance with this Section 7.03 in the event that an item of Indebtedness, Disqualified Stock or preferred stock (or any portion thereof) meets the criteria of more than one of the categories of permitted Indebtedness, Disqualified Stock or preferred stock described in clauses (b)(i) through (b)(xxii) above or is entitled to be incurred pursuant to paragraph (a) of this Section, the Borrower shall, in its sole discretion, classify or reclassify such item of Indebtedness, Disqualified Stock or preferred stock (or any portion thereof) in any manner that complies with this Section and such item of Indebtedness, Disqualified Stock or preferred stock will be treated as having been incurred pursuant to only one of such clauses or pursuant to paragraph (a) of this Section. Additionally, all or any portion of any item of Indebtedness may later be reclassified as having been incurred pursuant to any category of permitted Indebtedness described in clauses (b)(i) through (b)(xxii) above or pursuant to paragraph (a) of this Section so long as such Indebtedness is permitted to be incurred pursuant to such provision at the time of reclassifications, provided that all Indebtedness outstanding on the Closing Date under this Agreement shall be deemed to have been incurred on such date in reliance on the exception provided by Section 7.02(b)(i) and may not later be reclassified. Accrual of interest, the accretion of accreted value, the amortization of original issue discount and the payment of interest in the form of additional Indebtedness, Disqualified Stock or preferred stock will not be deemed to be an incurrence of Indebtedness, Disqualified Stock or preferred stock for purposes of this Section.

 

(d)         For purposes of determining compliance with any U.S. dollar-denominated restriction on the incurrence of Indebtedness, the U.S. dollar-equivalent principal amount of Indebtedness denominated in a foreign currency shall be calculated based on the relevant currency exchange rate in effect on the date such Indebtedness was incurred, in the case of term debt, or first committed, in the case of revolving credit debt; provided that if such Indebtedness is incurred to refinance other Indebtedness denominated in a foreign currency, and such refinancing would cause the applicable U.S. dollar-denominated restriction to be exceeded if calculated at the relevant currency exchange rate in effect on the date of such refinancing, such U.S. dollar-denominated restriction shall be deemed not to have been exceeded so long as the principal amount of such refinancing Indebtedness does not exceed the principal amount of such Indebtedness being refinanced.

 

(e)          The principal amount of any Indebtedness incurred to refinance other Indebtedness, if incurred in a different currency from the Indebtedness being refinanced, shall be calculated based on the currency exchange rate applicable to the currencies in which such respective Indebtedness is denominated that is in effect on the date of such refinancing.

 

(f)            The Borrower will not, and will not permit any Subsidiary Guarantor to directly or indirectly, incur any Indebtedness (including Acquired Indebtedness) that is subordinated or junior in right of payment to any Indebtedness of the Borrower or such Subsidiary Guarantor, as the case may be, unless such Indebtedness is expressly subordinated in right of payment to the Obligations or such Subsidiary Guarantor’s Guarantor Obligations to the extent and in the same manner in all material respects and taken as a whole as such Indebtedness is subordinated in right of payment to other Indebtedness of the Borrower or such Subsidiary Guarantor as the case may be.

 

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(g)         This agreement will not treat (1) unsecured Indebtedness as subordinated or junior to secured Indebtedness merely because it is unsecured or (2) senior Indebtedness as subordinated or junior to any other senior Indebtedness merely because it has a junior priority with respect to the same collateral or is secured by different collateral.

 

(h)         Notwithstanding anything to the contrary in the foregoing, the incurrence (as defined in Section 7.02(a)) of Senior Secured Indebtedness in a principal amount greater than $5,000,000 under any other provision of this Section 7.02 shall only be permitted under this Section 7.02 to the extent that, both immediately before and after giving pro forma effect to the incurrence of such Senior Secured Indebtedness (x) no Default or Event of Default shall have occurred and be continuing and (y) the Borrower shall be in compliance with Section 7.14.

 

Section 7.03                                                        Liens.  The Borrower will not, and will not permit any of the Restricted Subsidiaries to, create, incur, assume or otherwise cause or suffer to exist or become effective any Lien (other than Permitted Liens) upon any of their property or assets, now owned or hereafter acquired, or upon any income or profits therefrom.

 

Section 7.04                                                        Merger, Consolidation or Sale of All or Substantially All Assets.

 

(a)          The Borrower may not consolidate or merge with or into or wind up into (whether or not the Borrower is the surviving corporation), or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of the properties or assets of the Borrower and the Restricted Subsidiaries, taken as a whole, in one or more related transactions, to any Person unless:

 

(i)                                     the Borrower is the surviving corporation or the Person formed by or surviving any such consolidation or merger (if other than the Borrower) or to which such sale, assignment, transfer, lease, conveyance or other disposition will have been made is a corporation, limited liability company or limited partnership organized or existing under the laws of the United States, any state thereof, the District of Columbia, or any territory thereof; provided that if such Person is not a corporation, such Person shall be required to cause a subsidiary of such Person that is a corporation to be a co-obligor of the Obligations (such Person, as the case may be, being herein called the “Successor Borrower”);

 

(ii)                                  the Successor Borrower, if other than the Borrower, expressly assumes all the obligations of such Borrower under this Agreement pursuant to a supplement to this Agreement or other documents, agreements or instruments in form reasonably satisfactory to the Administrative Agent;

 

(iii)                               immediately after such transaction no Default or Event of Default exists;

 

(iv)                              immediately after giving pro forma effect to such transaction, as if such transaction had occurred at the beginning of the applicable four-quarter period, the Successor Borrower would be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Consolidated Leverage Ratio test set forth in Section 7.02(a);

 

(v)                                 each Guarantor, unless it is a Subsidiary Guarantor that is the other party to the transactions described above, in which Section 7.04(a)(ii) above shall apply, shall have by supplement to this Agreement confirmed that its Guarantee shall apply to such Person’s obligations under this Agreement shall continue to be in effect;

 

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(vi)                              the Borrower shall have delivered to the Administrative Agent an Officers’ Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer and such supplements, if any, comply with this Agreement;

 

(vii)                           [Reserved]; and

 

(viii)                        [Reserved]:

 

(b)         The Successor Borrower will succeed to, and be substituted for such Borrower under this Agreement and the Obligations and the Borrower (if not the Successor Borrower) will be fully released from its obligations under this Agreement but, in the case of a lease of all or substantially all its assets, the Borrower will not be released from the obligation to pay the principal of and interest on the Obligations.

 

(c)          In addition, the Borrower will not, directly or indirectly, lease all or substantially all of the properties and assets of it and its Restricted Subsidiaries taken as a whole, in one or more related transactions, to any other Person.

 

(d)         Notwithstanding the foregoing clauses (a)(iii) and (a)(iv),

 

(i)                                     any Restricted Subsidiary that is not a Subsidiary Guarantor may consolidate with, merge into or transfer all or part of its properties and assets to the Borrower or any Restricted Subsidiary;

 

(ii)                                  any Subsidiary Guarantor may consolidate with, merge into or transfer all or part of its properties and assets to the Borrower or a Subsidiary Guarantor; and

 

(iii)                               the Borrower may merge with an Affiliate incorporated solely for the purpose of reincorporating the Borrower in another State of the United States.

 

(e)          For purposes of this Section, the sale, lease, conveyance, assignment, transfer, or other disposition of all or substantially all of the properties and assets of one or more Subsidiaries of the Borrower, which properties and assets, if held by the Borrower instead of such Subsidiaries, would constitute all or substantially all of the properties and assets of the Borrower on a consolidated basis, shall be deemed to be the transfer of all or substantially all of the properties and assets of the Borrower.

 

(f)            Notwithstanding anything to the contrary herein, any Subsidiary with a value of less than $250,000 may liquidate or dissolve or change its legal form if the Borrower determines in good faith that such action is in the best interests of the Borrower and its Subsidiaries and is not materially disadvantageous to the interests of the Lenders.

 

Section 7.05                                                        Limitations on Guarantors.  (a)  Subject to certain limitations described in this Agreement governing release of a Guarantee upon the sale, disposition or transfer of a Subsidiary Guarantor, each Guarantor will not, and the Borrower will not permit any Subsidiary Guarantor to, consolidate or merge with or into or wind up into (whether or not such Guarantor is the surviving corporation), or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets in one or more related transactions to, any Person unless:

 

(i)                                     (A) such Guarantor is the surviving corporation or the Person formed by or surviving any such consolidation or merger (if other than such Guarantor) or to which such sale, assignment, transfer, lease, conveyance or other disposition will have been made is a corporation, partnership, trust or limited liability company organized or existing under the laws of the United States, any state thereof, the

 

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District of Columbia, or any territory thereof (such Guarantor or such Person, as the case may be, being herein called the “Successor Person”);

 

(B)        the Successor Person, if other than such Guarantor, expressly assumes all the obligations of such Guarantor under this Agreement, such Guarantor’s Guarantor Obligations pursuant to supplemental indentures or other documents or instruments in form reasonably satisfactory to the Administrative Agent;

 

(C)        immediately after such transaction (and treating any Indebtedness which becomes an obligation of the Successor Person or any Restricted Subsidiary as a result of such transaction as having been incurred by the Successor Person or such Restricted Subsidiary at the time of such transaction), no Default or Event of Default exists;

 

(D)       [Reserved];

 

(E)         [Reserved]; and

 

(F)         [Reserved];

 

(ii)                                  the transaction is made in compliance with Section 7.08.

 

(b)         Subject to certain limitations described in this Agreement, the Successor Person will succeed to, and be substituted for, such Guarantor under this Agreement and such Guarantor’s Guarantor Obligations but, in the case of a lease of all or substantially all its assets, the Guarantor will not be released from its obligations under its Guarantee. Notwithstanding the foregoing any Subsidiary Guarantor may merge into or transfer all or part of its properties and assets to another Subsidiary Guarantor or the Borrower.

 

Section 7.06                                                        Transactions with Affiliates.  (a)  The Borrower will not, and will not permit any Restricted Subsidiary to, make any payment to, or sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into or make or amend any transaction, contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate of the Borrower (each of the foregoing, an “Affiliate Transaction”), unless:

 

(i)                                     such Affiliate Transaction is on terms that are not materially less favorable to the Borrower or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction by the Borrower or such Restricted Subsidiary with an unrelated Person on an arm’s-length basis; and

 

(ii)                                  the Borrower delivers to the Administrative Agent (A) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate payments or consideration in excess of $15.0 million, a resolution adopted by the majority of the Board of Directors of the Borrower approving such Affiliate Transaction and set forth in an Officers’ Certificate that (x) such Affiliate Transaction has been approved by a majority of the disinterested members of the Board of Directors, if any, and (y) that such Affiliate Transaction complies with clause (i) above; and (B) with respect to any Affiliate Transactions or series of related Affiliate Transactions involving aggregate payments or consideration in excess of $25.0 million, a letter from an Independent Financial Advisor stating that such transaction is fair to the Borrower or such Restricted Subsidiary from a financial point of view.

 

(b)         The foregoing provisions will not apply to the following:

 

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(i)                                     transactions between or among the Borrower and/or any of the Restricted Subsidiaries;

 

(ii)                                  Restricted Payments permitted by Section 7.01 and the definition of “Permitted Investments” (other than pursuant to clauses (c), (d) and (o) thereof);

 

(iii)                               the payment of reasonable fees and compensation paid to, and indemnities provided on behalf of, (and entering into related agreements with) officers, directors, employees or consultants of the Borrower, any of its direct or indirect parents or any Restricted Subsidiary;

 

(iv)                              transactions in which the Borrower or any Restricted Subsidiary, as the case may be, delivers to the Administrative Agent a letter from an Independent Financial Advisor stating that such transaction is fair to the Borrower or such Restricted Subsidiary from a financial point of view;

 

(v)                                 payments or loans (or cancellation of loans) to employees or consultants of the Borrower, any of its direct or indirect parents or any Restricted Subsidiary which are approved by a majority of the Board of Directors of the Borrower in good faith and in accordance with applicable law;

 

(vi)                              this Agreement, the Secured Credit Facility and any agreement as in effect as of the Existing Agreement Closing Date, or any amendment thereto (so long as any such amendment is not disadvantageous to the Lenders in any material respect) or payments made thereunder or the performance thereof or any transaction contemplated thereby;

 

(vii)                           the existence of, or the performance by the Borrower or any Restricted Subsidiaries of its obligations under the terms of, any equityholders agreement (including any registration right agreement or purchase agreements related thereto) to which it is party as of the Existing Agreement Closing Date and any similar agreement that it may enter into thereafter; provided, however, that the existence of, or the performance by the Borrower or any Restricted Subsidiary of its obligations under any future amendment to the equityholders’ agreement or under any similar agreement entered into after the Existing Agreement Closing Date will only be permitted under this clause (vii) to the extent that the terms of any such amendment or new agreement are not otherwise disadvantageous to the Lenders in any material respects;

 

(viii)                        transactions with customers, clients, suppliers, or purchasers or sellers of goods or services, in each case in the ordinary course of business and otherwise in compliance with the terms of this Agreement which are fair to the Borrower and the Restricted Subsidiaries, in the reasonable determination of the Board of Directors of the Borrower or the senior management thereof, or are on terms at least as favorable as might reasonably have been obtained at such time in arm’s length negotiations with an unaffiliated third party;

 

(ix)                                transactions with a Person (other than an Unrestricted Subsidiary of the Borrower) that is an Affiliate of the Borrower solely because the Borrower or a Restricted Subsidiary of the Borrower owns an equity interest in or otherwise controls such Person;

 

(x)                                   any purchases by the Borrower’s Affiliates of Indebtedness of the Borrower or any of its Restricted Subsidiaries the majority of which Indebtedness is offered to Persons who are not Affiliates and the Affiliate of the Borrower purchases such Indebtedness on similar terms;

 

(xi)                                any issuance or sale of Equity Interests (other than Disqualified Stock) to Affiliates of the Borrower and the granting of registration and other customary rights in connection therewith or any contribution to capital of direct or indirect parent companies, the Borrower or any Restricted Subsidiary;

 

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(xii)                             any issuance of securities, or other payments, awards or grants in cash, securities or otherwise pursuant to, or the funding of, employment arrangements, stock options and stock ownership plans approved by the Board of Directors of the Borrower in good faith;

 

(xiii)                          sales of accounts receivable, or participations therein, in connection with any Receivables Facility; and

 

(xiv)                         transactions contemplated by the Reorganization Plan and the related confirmation order.

 

Section 7.07                                                        Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries.

 

(a)          The Borrower will not, and will not permit any Restricted Subsidiary to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any consensual encumbrance or consensual restriction on the ability of any such Restricted Subsidiary to:

 

(i)                                     pay dividends or make any other distributions to the Borrower or any Restricted Subsidiary on its Capital Stock or with respect to any other interest or participation in, or measured by, its profits, or pay any Indebtedness owed to the Borrower or any Restricted Subsidiary;

 

(ii)                                  make loans or advances to the Borrower or any Restricted Subsidiary; or

 

(iii)                               sell, lease or transfer any of its properties or assets to the Borrower or any Restricted Subsidiary.

 

(b)         The foregoing limitations in paragraph (a) will not apply (in each case) to encumbrances or restrictions existing under or by reason of:

 

(i)                                     contractual encumbrances or restrictions in effect on the Closing Date, including pursuant to this Agreement and the related documentation as in effect on the Closing Date and any amendments, restatements, modifications, renewals, supplements, refundings, replacements or refinancings of those agreements; provided that the amendments, restatements, modifications, renewals, supplements, refundings, replacements or refinancings are not materially more restrictive, taken as a whole, with respect to such dividend and other payment restrictions than those contained in those agreements on the Closing Date;

 

(ii)                                  this Agreement, the Senior Secured Notes Indenture, the Existing Credit Agreement and the Secured Credit Agreement, any other Priority Payment Lien Obligations and other Pari Passu Payment Lien Obligations permitted hereby;

 

(iii)                               purchase money obligations for property acquired in the ordinary course of business that impose restrictions of the nature discussed in Section 7.07(a)(iii) on the property so acquired;

 

(iv)                              applicable law or any applicable rule, regulation or order;

 

(v)                                 any agreement or other instrument of a Person acquired by the Borrower or any Restricted Subsidiary in existence at the time of such acquisition (but not created in contemplation thereof), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired provided that, in the case of Indebtedness, such Indebtedness was permitted by the terms of this Agreement to be incurred;

 

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(vi)                              contracts for the sale of assets, including, without limitation, customary restrictions with respect to a Subsidiary pursuant to an agreement that has been entered into for the sale or disposition of all or substantially all of the Capital Stock or assets of such Subsidiary that impose restrictions on the assets to be sold;

 

(vii)                           secured Indebtedness otherwise permitted to be incurred pursuant to Section 7.02 and Section 7.03 that limit the right of the debtor to dispose of the assets securing such Indebtedness;

 

(viii)                        restrictions on cash or other deposits or net worth imposed by customers under contracts entered into in the ordinary course of business;

 

(ix)                                other Indebtedness, Disqualified Stock or preferred stock of Foreign Subsidiaries permitted to be incurred subsequent to the Closing Date pursuant to Section 7.02 that impose restrictions solely on the Foreign Subsidiaries party thereto or their Subsidiaries;

 

(x)                                   customary provisions in joint venture agreements and other similar agreements relating solely to such joint venture provided that with respect to any joint venture agreement relating to a Restricted Subsidiary, such provisions will not materially affect the Borrower’s ability to make anticipated payments on the Obligations (as determined in good faith by the Board of Directors of the Borrower);

 

(xi)                                customary provisions contained in leases, licenses and other agreements entered into in the ordinary course of business;

 

(xii)                             any agreement or instrument (A) relating to any Indebtedness or preferred stock of a Restricted Subsidiary permitted to be incurred subsequent to the Closing Date pursuant to Section 7.02 if the encumbrances and restrictions are not materially more disadvantageous to the Lenders than is customary in comparable financings (as determined in good faith by the Borrower) and (B) either (x) the Borrower determines that such encumbrance or restriction will not adversely affect the Borrower’s ability to make payments on the Obligations as and when they come due or (y) such encumbrances and restrictions apply only during the continuance of a default in respect of a payment or financial maintenance covenant relating to such Indebtedness;

 

(xiii)                          restrictions created in connection with any Receivables Facility that, in the good faith determination of the Board of Directors of the Borrower, are necessary or advisable to effect such Receivables Facility; and

 

(xiv)                         any encumbrances or restrictions of the type referred to in clauses (a)(i), a(ii) and (a)(iii) above imposed by any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings of the contracts, instruments or obligations referred to in clauses (i) through (xiii) above; provided that such amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings are, in the good faith judgment of the Borrower’s Board of Directors, not materially more restrictive taken as a whole with respect to such encumbrance and other restrictions than those prior to such amendment, modification, restatement, renewal, increase, supplement, refunding, replacement or refinancing.

 

Section 7.08                                                        Asset Sales.  (a)  (i)  The Borrower will not, and will not permit any Restricted Subsidiary to, cause or make an Asset Sale, unless:

 

(A)      the Borrower or such Restricted Subsidiary, as the case may be, receives consideration at the time of such Asset Sale at least equal to the fair market value (as determined

 

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in good faith by the Borrower on the date of contractually agreeing to such Asset Sale) of the assets sold or otherwise disposed of; and

 

(B)        85% of the consideration therefor received by the Borrower or such Restricted Subsidiary, as the case may be, is in the form of cash, Cash Equivalents or Replacement Assets or a combination of the foregoing.

 

(ii)                                  [Reserved]

 

(iii)                               [Reserved]

 

(iv)                              All Net Proceeds received from any Recovery Event or Asset Sale shall be applied to repay, first, the obligations under the Secured Credit Facility in accordance with the terms thereof, and, second, to the extent that any Net Proceeds remain after such repayment and to the extent permitted by the terms of the respective Secured Obligations, to the payment of Priority Payment Lien Obligations, the holders of Specified Notes and holders of Pari Passu Payment Lien Obligations in accordance with the terms of the Existing Credit Agreement and the Senior Secured Notes Indenture or the other agreements governing such other Priority Payment Lien Obligations or Pasi Passu Payment Lien Obligations and, third, to the extent any Net Proceeds remain and to the extent permitted by the terms of the respective agreements governing Secured Obligations to the payment of the Obligations in accordance with Section 2.04.

 

(v)                                 [Reserved]

 

(b)         [Reserved]

 

For purposes of paragraphs (a) and (b) of this Section, (i) any liabilities (other than Pari Passu Payment Lien Obligations, Disqualified Stock and Indebtedness the repayment of which would constitute a Restricted Payment) (as shown on the Borrower’s, or such Restricted Subsidiary’s, most recent balance sheet or in the notes thereto) of the Borrower or any Restricted Subsidiary that are assumed by the transferee of any such assets and for which the Borrower and all Restricted Subsidiaries have been validly released by all creditors in writing; and (ii) any securities or other obligations received by the Borrower or such Restricted Subsidiary from such transferee that are converted by the Borrower or such Restricted Subsidiary into cash or Cash Equivalents (to the extent of the cash or Cash Equivalents received) within 180 days following the closing of such Asset Sale shall be deemed to be cash or Cash Equivalents.

 

Section 7.09                                                        Prepayments, Etc. of Indebtedness.  The Borrower will not, and will not permit any Restricted Subsidiary to, directly or indirectly:

 

(a)          prepay, redeem, purchase, defease or otherwise satisfy prior to the scheduled maturity thereof in any manner (it being understood that payments of regularly scheduled interest shall be permitted) any unsecured Indebtedness (other than the Obligations), any Junior Lien Indebtedness or any Indebtedness that is required to be subordinated to the Obligations pursuant to the terms of the Loan Documents (collectively, “Junior Financing”) or make any payment in violation of any subordination terms of any Junior Financing Documentation, except the refinancing thereof with Refinancing Indebtedness otherwise permitted under Section 7.02(b)(xv);

 

(b)         amend, modify or change in any manner materially adverse to the interests of the Lenders (including, without limitation, in each case any covenant thereunder more restrictive in any material respect to the Borrower or any Restricted Subsidiary) (i) any term or condition of the Senior

 

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Secured Notes, the Senior Secured Note Indenture, the Existing Credit Agreement, documentation governing Pari Passu Payment Lien Obligations or any Junior Financing Documentation or (ii) any Organization Document of any Group Member, in any case without the consent of the Administrative Agent; provided, that notwithstanding the foregoing, it is agreed and acknowledged that (x) any extension of the maturity, including the payment of customary fees at a market rate in connection therewith, of the Existing Credit Agreement or any other Credit Facility and (y) any payment of customary fees at a market rate in connection with any amendment, modification or change in respect of the foregoing, in each case, are hereby deemed to be not materially adverse to the interests of the Lenders;

 

(c)          amend, modify or otherwise change (i) Sections 3.2(b)(1) or 3.5 of the Senior Secured Note Indenture or clause (26) of the definition of “Permitted Liens” in the Senior Secured Note Indenture or (ii) Section 7.02(b)(i) of the Existing Credit Agreement or clause (26) of the definition of “Permitted Liens” in the Existing Credit Agreement; or

 

(d)         make any payment on account of Priority Payment Lien Obligations (including, without limitation, the Existing Credit Agreement and any refinancing or replacement thereof, but excluding the Secured Credit Facility), the Specified Notes or other Pari Passu Payment Lien Obligations from Net Proceeds of Asset Sales to the extent the Borrower is not required to make any payment thereof pursuant to the terms of the applicable Credit Facility, Senior Notes Indenture or other documents governing such Priority Payment Lien Obligations or Pari Passu Payment Lien Obligations;

 

(e)          make any voluntary payment in respect of the Existing Credit Facility; provided that such payment shall be permitted to the extent (i) made with cash (other than Net Proceeds from Asset Sales or Recovery Events) and (ii) at the time of such payment (x) no “Default” or “Event of Default” (as such terms are defined in the Existing Credit Agreement) shall then exist or shall exist immediately after giving effect to such prepayment, (y) no Default or Event of Default shall exist or shall exist immediately after giving effect to such prepayment, and (z) the commitments under the Existing Credit Facility are not reduced; or

 

(f)            make any optional or voluntary redemption of any of the Specified Notes prior to the scheduled maturity thereof.

 

Section 7.10                                                        Holding Company.  Holdings shall not conduct, transact or otherwise engage in any business or operations other than (i) its ownership of all of the Equity Interests in, and its management of, the Borrower, (ii) action required by law to maintain its existence, (ii) performance of its obligations under this Agreement, the Existing Credit Agreement, the Secured Credit Facility, the Senior Secured Note Indenture, and the other agreements contemplated thereby, (v) any public offering of its common stock, (vi) activities incidental to its maintenance and continuance and to any of the foregoing activities and (vii) other activities to the extent permitted by, and in compliance with, this Agreement.

 

Section 7.11                                                        Payments for Consent.  The Borrower will not, and will not permit any of its Subsidiaries to, directly or indirectly, pay or cause to be paid any consideration to or for the benefit of any Lender for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of this Agreement unless such consideration is offered to be paid and is paid to all Lenders that consent, waive or agree to amend in the time frame set forth in the solicitation documents relating to such consent, waiver or amendment.

 

Section 7.12                                                        Limitation on Lines of Business.  The Borrower will not, and will not permit any Restricted Subsidiary to, engage in any business other than a Similar Business.

 

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Section 7.13                                                        Limitation on Guarantees of Indebtedness by Restricted Subsidiaries.

 

(a)          The Borrower will not permit any Restricted Subsidiary that is not a Subsidiary Guarantor or a special-purpose Restricted Subsidiary formed in connection with Receivables Facilities, to guarantee the payment of any Indebtedness of the Borrower or any other Guarantor unless:

 

(i)                                     such Restricted Subsidiary executes and delivers within 10 Business Days joinders or supplements to this Agreement providing for a guarantee of payment of the Obligations by such Restricted Subsidiary, except if such Indebtedness is by its express terms subordinated in right of payment to the Obligations or such Subsidiary Guarantor’s Guarantor Obligations, any such guarantee of such Restricted Subsidiary with respect to such Indebtedness shall be subordinated in right of payment to such Restricted Subsidiary’s Guarantor Obligations substantially to the same extent as such Indebtedness is subordinated in right of payment to the Obligations or such Subsidiary Guarantor’s Guarantor Obligations;

 

(ii)                                  such Restricted Subsidiary waives and will not in any manner whatsoever claim or take the benefit or advantage of, any rights of subrogation in relation to the Lenders in respect of any payment by such Restricted Subsidiary under its guarantee until payment in full of the Obligations (other than contingent indemnification and contingent expense reimbursement obligations);

 

(iii)                               [Reserved]; and

 

(iv)                              such Restricted Subsidiary shall deliver to the Administrative Agent an Opinion of Counsel to the effect that:

 

(A)      such Guarantee of the Obligations has been duly executed and authorized; and

 

(B)        such Guarantee of the Obligations constitutes a valid, binding and enforceable obligation of such Restricted Subsidiary, except insofar as enforcement thereof may be limited by bankruptcy, insolvency or similar laws (including, without limitation, all laws relating to fraudulent transfers) and except insofar as enforcement thereof is subject to general principles of equity;

 

provided that this paragraph (a) shall not be applicable to any guarantee of any Restricted Subsidiary that existed at the time such Person became a Restricted Subsidiary and was not incurred in connection with, or in contemplation of, such Person becoming a Restricted Subsidiary to the extent it is not incurred pursuant to a syndicated loan, registered offering of securities under the Securities Act or a private placement of securities (including under Rule 144A) pursuant to an exemption from the registration requirements of the Securities Act.

 

(b)         Notwithstanding the foregoing and the other provisions of this Agreement, any Guarantee by a Restricted Subsidiary of the Obligations shall provide by its terms that it shall be automatically and unconditionally released and discharged upon:

 

(i)                                     any sale, exchange or transfer (by merger or otherwise) of Capital Stock of such Subsidiary Guarantor following which the applicable Subsidiary Guarantor is no longer a Restricted Subsidiary or all or substantially all the assets of such Subsidiary Guarantor (other than by lease), which sale, exchange or transfer is made in compliance with the applicable provisions of this Agreement and all the obligations of such Subsidiary Guarantor in respect of all Indebtedness of the Borrower or the Subsidiary Guarantors terminate upon consummation of such transaction;

 

(ii)                                  the release or discharge of the guarantee by such Restricted Subsidiary which resulted in the creation of such Guarantee if such Subsidiary Guarantor would not then otherwise be

 

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required to guarantee the Obligations pursuant to this Agreement provided, that if such Restricted Subsidiary has incurred any Indebtedness or issued any preferred stock or Disqualified Stock in reliance on its status as a Guarantor under Section 7.02, such Restricted Subsidiary’s obligations under such Indebtedness, Disqualified Stock or preferred stock, as the case may be, so incurred are satisfied in full and discharged or are otherwise permitted to be incurred by a Restricted Subsidiary (other than a Subsidiary Guarantor) under Section 7.02; except a discharge or release by or as a result of payment under such guarantee;

 

(iii)                              if such Subsidiary Guarantor is designated as an Unrestricted Subsidiary or otherwise ceases to be a Restricted Subsidiary, in each case in accordance with the provisions of this Agreement, upon effectiveness of such designation or when it first ceases to be a Restricted Subsidiary, respectively; or

 

(iv)                              if the Obligations under this Agreement are discharged in accordance with the terms of this Agreement (other than contingent indemnification and contingent expense reimbursement obligations).

 

Section 7.14                                Financial Condition Covenant. The Borrower will not permit the Senior Secured Leverage Ratio as of any date set forth below to be greater than the ratio set forth below opposite such date:

 

	
Date
    	
 
    	
Senior Secured
   Leverage Ratio
    
	
 
    	
 
    	
 
    
	
September 30, 2011
    	
 
    	
4.25 : 1.00
    
	
December 31, 2011
    	
 
    	
4.00 : 1.00
    
	
March 31, 2012
    	
 
    	
3.75 : 1.00
    
	
June 30, 2012
    	
 
    	
3.75 : 1.00
    
	
September 30, 2012
    	
 
    	
3.75 : 1.00
    
	
December 31, 2012 and   thereafter
    	
 
    	
3.75 : 1.00
    

 

For all purposes of determining pro forma compliance with this Section 7.14 on any day, the applicable ratio shall be the one in effect on the last day of the fiscal quarter in which such day falls (it being understood that the EBITDA used in determining such pro forma compliance will be the EBITDA for the most recently ended period for which financial statements have been or are required to have been delivered pursuant to Section 6.01(a) or (b)).

 

Section 7.15                                Receivables.  The Borrower will not, and will not permit any Restricted Subsidiary that is a Domestic Subsidiary, to sell its accounts receivable to a Person that is not a Restricted Subsidiary in connection with any receivables financing facility.

 

Section 7.16                                Accounting Changes.  The Borrower will not make any change in its fiscal year, (i) except as required by GAAP and (ii) except the change to December 31 and any related changes.

 

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ARTICLE VIII

 

EVENTS OF DEFAULT AND REMEDIES

 

Section 8.01                                Events of Default.  Any of the following shall constitute an Event of Default:

 

(a)          Non-Payment.  The Borrower or any other Loan Party fails to pay (i) when and as required to be paid herein, any amount of principal of any Loan, or (ii) within three (3) Business Days after the same becomes due, any interest or any other amount payable hereunder or with respect to any other Loan Document; or

 

(b)         Specific Covenants.  Any Group Member fails to perform or observe (or to cause the performance or observance of) any term, covenant or agreement contained in any of Sections 6.04(a), 6.06 (solely with respect to Holdings and the Borrower) or Section 6.15 or Article VII; or

 

(c)          Other Defaults.  Any Group Member fails to perform or observe (or to cause the performance or observance of) any other covenant or agreement (not specified in Section 8.01(a) or (b) above) contained in any Loan Document on its part to be performed or observed and such failure continues for thirty (30) days after written notice thereof by the Administrative Agent or the Required Lenders to the Borrower; or

 

(d)         Representations and Warranties.  Any representation, warranty, certification or statement of fact made or deemed made by or on behalf of the Borrower or any other Loan Party herein, in any other Loan Document, or in any document required to be delivered in connection herewith or therewith shall be incorrect or misleading in any material respect when made or deemed made; or

 

(e)          Cross-Default.  (i) Any Group Member (A) fails to make any payment beyond the applicable grace period with respect thereto, if any (whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise) in respect of any Indebtedness (other than Indebtedness hereunder) having an aggregate principal amount of not less than the Threshold Amount, or (B) fails to observe or perform any other agreement or condition contained in any instrument or agreement evidencing, governing, securing or otherwise relating to any such Indebtedness, or any other “default” (or like term) occurs, the effect of which failure or other “default” is to cause, or to permit the holder or holders of such Indebtedness (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause, with the giving of notice if required, such Indebtedness to become due (automatically or otherwise) prior to its stated maturity (or, in the case of any such Indebtedness constituting a guarantee, to become payable); provided, that this clause (e)(B) shall not apply to secured Indebtedness that becomes due as a result of the voluntary sale or transfer of the property or assets securing such Indebtedness, if such sale or transfer is permitted hereunder and under the documents providing for such Indebtedness; provided, further, that this clause (e) shall not apply in respect of (x) any Indebtedness of any Designated Non-Debtor that becomes due or payable, or is capable of becoming due or payable, prior to its stated maturity, or (y) any non-payment in respect of any Indebtedness by any Designated Non-Debtor, in each case to the extent caused by or directly resulting from the institution of any proceeding under any Debtor Relief Law in respect of such Designated Non-Debtor; or (ii) any “Event of Default” shall have occurred and be continuing under, and as defined in, the Existing Credit Agreement, the Secured Credit Facility or the Senior Notes Indenture; or

 

(f)            Insolvency Proceedings, Etc.  Any Group Member other than a Designated Non-Debtor institutes or consents to the institution of any proceeding under any Debtor Relief Law, or makes an assignment for the benefit of creditors; or applies for or consents to the appointment of any receiver,

 

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trustee, custodian, conservator, liquidator, rehabilitator, administrator, administrative receiver or similar officer for it or for all or any material part of its property; or any receiver, trustee, custodian, conservator, liquidator, rehabilitator, administrator, administrative receiver or similar officer is appointed without the application or consent of such Person and the appointment continues undischarged or unstayed for sixty (60) calendar days; or any proceeding under any Debtor Relief Law relating to any such Person or to all or any material part of its property is instituted without the consent of such Person and continues undismissed or unstayed for sixty (60) calendar days, or an order for relief approving or ordering any of the foregoing is entered in any such proceeding (to avoid any doubt, it being understood and agreed that none of the foregoing shall be applicable to commencement of a process relating to Mandataire ad Hoc or an appointment of a Mandataire pursuant to French laws); or

 

(g)         Inability to Pay Debts; Attachment.  (i)  Any Group Member other than a Designated Non-Debtor becomes generally unable or admits in writing its inability generally or fails generally to pay its debts in excess of the Threshold Amount as they become due, or (ii) any writ or warrant of attachment or execution or similar process is issued or levied against all or any material part of the property of any Group Member, and is not released, vacated or fully bonded within sixty (60) days after its issue or levy; or

 

(h)         Judgments.  (i) One or more judgments or decrees shall be entered against any Group Member involving in the aggregate a liability (not paid or fully covered by insurance as to which the relevant insurance company has not disputed coverage) of an amount exceeding the Threshold Amount, and all such judgments or decrees shall not have been vacated, discharged, stayed or bonded pending appeal within thirty (30) days from the entry thereof; or (ii) there shall be rendered against any Group Member a nonmonetary judgment with respect to any event which causes or could reasonably be expected to have a Material Adverse Effect; or

 

(i)             ERISA.  (i)  An ERISA Event occurs with respect to a Pension Plan or Multiemployer Plan which has resulted or could reasonably be expected to result in liability of any Loan Party under Title IV of ERISA in an aggregate amount which could reasonably be expected to result in a Material Adverse Effect, (ii) any Loan Party or any ERISA Affiliate fails to pay when due, after the expiration of any applicable grace period, any installment payment with respect to its withdrawal liability under Section 4201 of ERISA under a Multiemployer Plan in an aggregate amount which could reasonably be expected to result in a Material Adverse Effect, (iii) any Loan Party or any ERISA Affiliate engages in any “prohibited transaction” (as defined in Section 406 of ERISA or Section 4975 of the Code) involving any Pension Plan which could reasonably be expected to result in a Material Adverse Effect, or (iv) other than the matters disclosed in Schedule 5.11(c), any other event or condition shall occur or exist with respect to a Pension Plan, a Foreign Benefit Arrangement or Foreign Plan which has resulted or could reasonably be expected to result in a Material Adverse Effect; or

 

(j)             Change of Control.  There occurs any Change of Control; or

 

(k)          [Reserved]; or

 

(l)             Invalidity of Guarantees.  The Guarantees contained in this Agreement shall cease, for any reason, to be in full force and effect or any Loan Party or Affiliate of any Loan Party shall so assert in writing (it being understood and agreed that the discharge of a Guarantor from this Agreement in accordance with the terms hereof shall not be construed as the Guarantee(s) in this Agreement ceasing to be in full force and effect); or

 

(m)       [Reserved].

 

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Section 8.02                                Remedies Upon Event of Default.  If any Event of Default occurs and is continuing, the Administrative Agent may and, at the request of the Required Lenders, shall take any or all of the following actions:

 

(a)          [reserved];

 

(b)         declare the unpaid principal amount of all outstanding Loans, all interest accrued and unpaid thereon, and all other amounts owing or payable hereunder (including without limitation the Yield Maintenance Amount) or under any other Loan Document to be immediately due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by the Borrower; and

 

(c)          [reserved]; and

 

(d)         exercise on behalf of itself and the Lenders all rights and remedies available to it and the Lenders under the Loan Documents or applicable Law;

 

provided that upon the occurrence of an Event of Default specified in Section 8.01(f) with respect to the Borrower, the unpaid principal amount of all outstanding Loans and all interest and other amounts as aforesaid (including without limitation the Yield Maintenance Amount) shall automatically become due and payable without further act of the Administrative Agent or any Lender.

 

Section 8.03                                Application of Funds.  After the exercise of remedies provided for in Section 8.02 (or after the Loans have automatically become immediately due and payable as set forth in the proviso to Section 8.02), any amounts received on account of the Obligations shall be applied by the Administrative Agent in the following order:

 

First, to payment of that portion of the Obligations constituting fees, indemnities, expenses and other amounts (other than principal and interest, but including Attorney Costs payable under Section 11.04 and amounts payable under Article III) payable to the Administrative Agent in its capacity as such;

 

Second, to payment of that portion of the Obligations constituting fees, indemnities and other amounts (other than principal and interest) payable to the Lenders (including Attorney Costs payable under Section 11.04 and amounts payable under Article III), ratably among them in proportion to the amounts described in this clause Second payable to them;

 

Third, to payment of that portion of the Obligations constituting accrued and unpaid interest on the Loans, ratably among the holders of such Obligations in proportion to the respective amounts described in this clause Third payable to them;

 

Fourth, to payment of that portion of the Obligations constituting unpaid principal of the Loans, ratably among the holders of such Obligations in proportion to the respective amounts described in this clause Fourth held by them;

 

Fifth, to the payment of all other Obligations of the Loan Parties that are due and payable to the Administrative Agent and the Lenders on such date, ratably based upon the respective aggregate amounts of all such Obligations owing to the Administrative Agent and the Lenders on such date; and

 

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Last, the balance, if any, after all of the Obligations have been paid in full, to the Borrower or as otherwise required by Law.

 

Notwithstanding anything to the contrary in this Agreement, amounts received from any Foreign Subsidiary on account of the Obligations of any Foreign Subsidiary shall be applied solely to the payment of Obligations of Foreign Subsidiaries.

 

ARTICLE IX

 

ADMINISTRATIVE AGENT

 

Section 9.01                                Appointment and Authorization of Administrative Agent.  (a)  Each Lender hereby irrevocably appoints, designates and authorizes the Administrative Agent to take such action on its behalf under the provisions of this Agreement and each other Loan Document and to exercise such powers and perform such duties as are expressly delegated to it by the terms of this Agreement or any other Loan Document, together with such powers as are reasonably incidental thereto.  Notwithstanding any provision to the contrary contained elsewhere herein or in any other Loan Document, the Administrative Agent shall have no duties or responsibilities, except those expressly set forth herein, nor shall the Administrative Agent have or be deemed to have any fiduciary relationship with any Lender or participant, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against the Administrative Agent.  Without limiting the generality of the foregoing sentence, the use of the term “agent” herein and in the other Loan Documents with reference to the Administrative Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable Law.  Instead, such term is used merely as a matter of market custom, and is intended to create or reflect only an administrative relationship between independent contracting parties.

 

(b)         [reserved]

 

(c)          [reserved].

 

Section 9.02                                Delegation of Duties.  The Administrative Agent may execute any of its duties under this Agreement or any other Loan Document by or through agents, employees or attorneys-in-fact and such sub-agents as shall be deemed necessary by the Administrative Agent and shall be entitled to advice of counsel and other consultants or experts concerning all matters pertaining to such duties.  The Administrative Agent shall not be responsible for the negligence or misconduct of any agent or sub-agent or attorney-in-fact that it selects in the absence of gross negligence or willful misconduct (as determined in the final non-appealable judgment of a court of competent jurisdiction).

 

Section 9.03                                Liability of Administrative Agent.  No Agent-Related Person shall (a) be liable for any action taken or omitted to be taken by any of them under or in connection with this Agreement or any other Loan Document or the transactions contemplated hereby (except for its own gross negligence or willful misconduct, as determined by the final judgment of a court of competent jurisdiction, in connection with its duties expressly set forth herein), or (b) be responsible in any manner to any Lender or participant for any recital, statement, representation or warranty made by any Loan Party or any officer thereof, contained herein or in any other Loan Document, or in any certificate, report, statement or other document referred to or provided for in, or received by the Administrative Agent under or in connection with, this Agreement or any other Loan Document, or the validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document, or for any failure of any Loan Party or any other party to any Loan Document to perform its obligations hereunder or thereunder.  No Agent-Related Person shall be under any obligation to any Lender or participant to

 

84

 

ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the properties, books or records of any Loan Party or any Affiliate thereof.

 

Section 9.04                                Reliance by Administrative Agent.  (a)  The Administrative Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, communication, signature, resolution, representation, notice, consent, certificate, affidavit, letter, telegram, facsimile, telex or telephone message, electronic mail message, statement or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons, and upon advice and statements of legal counsel (including counsel to any Loan Party), independent accountants and other experts selected by the Administrative Agent.  The Administrative Agent shall be fully justified in failing or refusing to take any action under any Loan Document unless it shall first receive such advice or concurrence of the Required Lenders as it deems appropriate and, if it so requests, it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action.  The Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement or any other Loan Document in accordance with a request or consent of the Required Lenders (or such greater number of Lenders as may be expressly required hereby in any instance) and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders.

 

(b)         For purposes of determining compliance with the conditions specified in Article IV, each Lender that has signed this Agreement shall be deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to a Lender unless the Administrative Agent shall have received notice from such Lender prior to the proposed Closing Date specifying its objection thereto.

 

Section 9.05                                Notice of Default.  The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of any Default, except with respect to defaults in the payment of principal, interest and fees required to be paid to the Administrative Agent for the account of the Lenders, unless the Administrative Agent shall have received written notice from a Lender or the Borrower referring to this Agreement, describing such Default and stating that such notice is a “notice of default.”  The Administrative Agent will notify the Lenders of its receipt of any such notice.  The Administrative Agent shall take such action with respect to any Event of Default as may be directed by the Required Lenders in accordance with Article VIII; provided that unless and until the Administrative Agent has received any such direction, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Event of Default as it shall deem advisable or in the best interest of the Lenders.

 

Section 9.06                                Credit Decision; Disclosure of Information by Administrative Agent.  Each Lender expressly acknowledges that no Agent-Related Person has made any representation or warranty to it, and that no act by the Administrative Agent hereafter taken, including any consent to and acceptance of any assignment or review of the affairs of any Loan Party or any Affiliate thereof, shall be deemed to constitute any representation or warranty by any Agent-Related Person to any Lender as to any matter, including whether Agent-Related Persons have disclosed material information in their possession.  Each Lender represents to the Administrative Agent that it has, independently and without reliance upon any Agent-Related Person and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, prospects, operations, property, financial and other condition and creditworthiness of the Loan Parties and their respective Subsidiaries, and all applicable bank or other regulatory Laws relating to the transactions contemplated hereby, and made its own decision to enter into this Agreement and to extend credit to the Borrower and the other Loan Parties hereunder.  Each Lender also represents that it will, independently and without reliance upon any Agent-

 

85

 

Related Person and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigations as it deems necessary to inform itself as to the business, prospects, operations, property, financial and other condition and creditworthiness of the Borrower and the other Loan Parties.  Except for notices, reports and other documents expressly required to be furnished to the Lenders by the Administrative Agent herein, the Administrative Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, prospects, operations, property, financial and other condition or creditworthiness of any of the Loan Parties or any of their respective Affiliates which may come into the possession of any Agent-Related Person.

 

Section 9.07                                Indemnification of Administrative Agent.  Whether or not the transactions contemplated hereby are consummated, the Lenders shall indemnify upon demand each Agent-Related Person (to the extent not reimbursed by or on behalf of any Loan Party and without limiting the obligation of any Loan Party to do so), pro rata, and hold harmless each Agent-Related Person from and against any and all Indemnified Liabilities incurred by it; provided that no Lender shall be liable for the payment to any Agent-Related Person of any portion of such Indemnified Liabilities resulting from such Agent-Related Person’s own gross negligence or willful misconduct, as determined by the final non-appealable judgment of a court of competent jurisdiction; provided that no action taken in accordance with the directions of the Required Lenders (or such other number or percentage of the Lenders as shall be required by the Loan Documents) shall be deemed to constitute gross negligence or willful misconduct for purposes of this Section 9.07.  In the case of any investigation, litigation or proceeding giving rise to any Indemnified Liabilities, this Section 9.07 applies whether any such investigation, litigation or proceeding is brought by any Lender or any other Person.  Without limitation of the foregoing, each Lender shall reimburse the Administrative Agent upon demand for its ratable share of any costs or out-of-pocket expenses (including Attorney Costs) incurred by the Administrative Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, any other Loan Document, or any document contemplated by or referred to herein, to the extent that the Administrative Agent is not reimbursed for such expenses by or on behalf of the Borrower.  The undertaking in this Section 9.07 shall survive the termination of the Aggregate Commitments, the payment of all Obligations and the resignation of the Administrative Agent.

 

Section 9.08                                Administrative Agent in its Individual Capacity.  Luxor Capital Group and its Affiliates may make loans to, issue letters of credit for the account of, accept deposits from, acquire Equity Interests in and generally engage in any kind of banking, trust, financial advisory, underwriting or other business with each of the Loan Parties and their respective Affiliates as though Luxor Capital Group were not the Administrative Agent hereunder and without notice to or consent of the Lenders.  The Lenders acknowledge that, pursuant to such activities, Luxor Capital Group or its Affiliates may receive information regarding any Loan Party or its Affiliates (including information that may be subject to confidentiality obligations in favor of such Loan Party or such Affiliate) and acknowledge that the Administrative Agent shall be under no obligation to provide such information to them.  With respect to its Loans, Luxor Capital Group shall have the same rights and powers under this Agreement as any other Lender and may exercise such rights and powers as though it were not the Administrative Agent, and the terms “Lender” and “Lenders” include Luxor Capital Group in its individual capacity.

 

Section 9.09                                Successor Agents.  The Administrative Agent may resign as the Administrative Agent upon thirty (30) days’ notice to the Lenders and the Borrower.  If the Administrative Agent resigns under this Agreement, the Required Lenders shall appoint from among the

 

86

 

Lenders a successor agent for the Lenders.  If no successor agent is appointed prior to the effective date of the resignation of the Administrative Agent, the Administrative Agent may appoint, after consulting with the Lenders, a successor agent, which shall be a Lender or a bank with an office in New York, New York or an Affiliate of such Lender or bank.  Upon the acceptance of its appointment as successor agent hereunder, the Person acting as such successor agent shall succeed to all the rights, powers and duties of the retiring Administrative Agent and the term “Administrative Agent,” shall mean such successor administrative agent and/or supplemental administrative agent, as the case may be, and the retiring Administrative Agent’s appointment, powers and duties as the Administrative Agent shall be terminated.  After the retiring Administrative Agent’s resignation hereunder as the Administrative Agent, the provisions of this Article IX and Sections 11.04 and 11.05 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was the Administrative Agent under this Agreement.  If no successor agent has accepted appointment as the Administrative Agent by the date which is thirty (30) days following the retiring Administrative Agent’s notice of resignation, the retiring Administrative Agent’s resignation shall nevertheless thereupon become effective and the Lenders shall perform all of the duties of the Administrative Agent hereunder until such time, if any, as the Required Lenders appoint a successor agent as provided for above.  Upon the acceptance of any appointment as the Administrative Agent hereunder by a successor, the Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, discretion, privileges, and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations under the Loan Documents.  After the retiring Administrative Agent’s resignation hereunder as the Administrative Agent, the provisions of this Article IX shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as the Administrative Agent.

 

Section 9.10                                Administrative Agent May File Proofs of Claim.  In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to any Loan Party, the Administrative Agent (irrespective of whether the principal of any Loan shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether the Administrative Agent shall have made any demand on the Borrower) shall be entitled and empowered, by intervention in such proceeding or otherwise:

 

(a)          to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Loans and all other Obligations that are owing and unpaid and to file such other documents as may be necessary or advisable in order to have the claims of the Lenders and the Administrative Agent (including any claim for the reasonable compensation, expenses, disbursements and advances of the Lenders and the Administrative Agent and their respective agents and counsel and all other amounts due the Lenders and the Administrative Agent under Sections 2.08 and 11.04) allowed in such judicial proceeding; and

 

(b)         to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same;

 

and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender to make such payments to the Administrative Agent and, in the event that the Administrative Agent shall consent to the making of such payments directly to the Lenders, to pay to the Administrative Agent any amount due for the reasonable compensation, expenses, disbursements and advances of the Administrative Agent and its agents and counsel, and any other amounts due the Administrative Agent under Sections 2.08 and 11.04.

 

Nothing contained herein shall be deemed to authorize the Administrative Agent to authorize or consent to or accept or adopt on behalf of any Lender any plan of reorganization, arrangement, adjustment

 

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or composition affecting the Obligations or the rights of any Lender or to authorize the Administrative Agent to vote in respect of the claim of any Lender in any such proceeding.

 

Section 9.11                                Guarantee Matters.  The Lenders irrevocably agree that any Guarantor shall be automatically released from its obligations hereunder in accordance with Section 7.13(b).

 

Section 9.12                                [Reserved].

 

Section 9.13                                Appointment of Supplemental Administrative Agents.  (a)  It is the purpose of this Agreement and the other Loan Documents that there shall be no violation of any Law of any jurisdiction denying or restricting the right of banking corporations or associations to transact business as agent or trustee in such jurisdiction.  It is recognized that in case of litigation under this Agreement or any of the other Loan Documents, and in particular in case of the enforcement of any of the Loan Documents, or in case the Administrative Agent deems that by reason of any present or future Law of any jurisdiction it may not exercise any of the rights, powers or remedies granted herein or in any of the other Loan Documents or take any other action which may be desirable or necessary in connection therewith, the Administrative Agent is hereby authorized to appoint an additional individual or institution selected by the Administrative Agent in its sole discretion as a separate trustee, co-trustee, administrative agent, collateral agent, administrative sub-agent or administrative co-agent (any such additional individual or institution being referred to herein individually as a “Supplemental Administrative Agent” and collectively as “Supplemental Administrative Agents”).

 

(b)         [Reserved].

 

(c)          Should any instrument in writing from the Borrower, Holdings or any other Loan Party be required by any Supplemental Administrative Agent so appointed by the Administrative Agent for more fully and certainly vesting in and confirming to him or it such rights, powers, privileges and duties, the Borrower or Holdings, as applicable, shall, or shall cause such Loan Party to, execute, acknowledge and deliver any and all such instruments promptly upon request by the Administrative Agent.  In case any Supplemental Administrative Agent, or a successor thereto, shall die, become incapable of acting, resign or be removed, all the rights, powers, privileges and duties of such Supplemental Administrative Agent, to the extent permitted by Law, shall vest in and be exercised by the Administrative Agent until the appointment of a new Supplemental Administrative Agent.

 

ARTICLE X

 

GUARANTEE

 

Section 10.01                          Guarantee.  (a)   Each of the Guarantors hereby, jointly and severally, unconditionally and irrevocably, guarantees to the Administrative Agent, for the ratable benefit of the Lenders and their respective successors and permitted indorsees, transferees and assigns, the prompt and complete payment and performance by the Borrower when due (whether at the stated maturity, by acceleration or otherwise) of the Obligations.

 

(b)         Anything herein or in any other Loan Document to the contrary notwithstanding, the maximum liability of each Guarantor hereunder and under the other Loan Documents shall in no event exceed the amount which can be guaranteed by such Guarantor under applicable federal and state laws relating to the insolvency of debtors (after giving effect to the right of contribution established in Section 10.02.

 

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(c)          Each Guarantor agrees that the Obligations may at any time and from time to time exceed the amount of the liability of such Guarantor hereunder without impairing the guarantee contained in this Article X or affecting the rights and remedies of the Administrative Agent or any Lender hereunder.

 

(d)         The guarantee contained in this Article X shall remain in full force and effect until all the Obligations and the obligations of each Guarantor under the guarantee contained in this Article X (other than contingent indemnification and contingent expense reimbursement obligations) shall have been satisfied by payment in full, notwithstanding that from time to time during the term of this Agreement the Borrower may be free from any Obligations.

 

(e)          No payment made by the Borrower, any of the Guarantors, any other guarantor or any other Person or received or collected by the Administrative Agent or any Lender from the Borrower, any of the Guarantors, any other guarantor or any other Person by virtue of any action or proceeding or any set-off or appropriation or application at any time or from time to time in reduction of or in payment of the Obligations shall be deemed to modify, reduce, release or otherwise affect the liability of any Guarantor hereunder which shall, notwithstanding any such payment (other than any payment made by such Guarantor in respect of the Obligations or any payment received or collected from such Guarantor in respect of the Obligations), remain liable for the Obligations up to the maximum liability of such Guarantor hereunder until the Obligations are paid in full (other than contingent indemnification and contingent expense reimbursement obligations).

 

Section 10.02                          Right of Contribution.  Each Subsidiary Guarantor hereby agrees that to the extent that a Subsidiary Guarantor shall have paid more than its proportionate share of any payment made hereunder, such Subsidiary Guarantor shall be entitled to seek and receive contribution from and against any other Subsidiary Guarantor hereunder which has not paid its proportionate share of such payment.  Each Subsidiary Guarantor’s right of contribution shall be subject to the terms and conditions of Section 10.03.  The provisions of this Section 10.02 shall in no respect limit the obligations and liabilities of any Subsidiary Guarantor to the Administrative Agent and the Lenders, and each Subsidiary Guarantor shall remain liable to the Administrative Agent and the Lenders for the full amount guaranteed by such Subsidiary Guarantor hereunder.

 

Section 10.03                          No Subrogation.  Notwithstanding any payment made by any Guarantor hereunder or any set-off or application of funds of any Guarantor by the Administrative Agent or any Lender, no Guarantor shall be entitled to be subrogated to any of the rights of the Administrative Agent or any Lender against the Borrower or any other Guarantor or any collateral security or guarantee or right of offset held by the Administrative Agent or any Lender for the payment of the Obligations, nor shall any Guarantor seek or be entitled to seek any contribution or reimbursement from the Borrower or any other Guarantor in respect of payments made by such Guarantor hereunder, until all amounts owing to the Administrative Agent and the Lenders by the Borrower on account of the Obligations are paid in full.  If any amount shall be paid to any Guarantor on account of such subrogation rights at any time when all of the Obligations shall not have been paid in full, such amount shall be held by such Guarantor in trust for the Administrative Agent and the Lenders, segregated from other funds of such Guarantor, and shall, forthwith upon receipt by such Guarantor, be turned over to the Administrative Agent in the exact form received by such Guarantor (duly indorsed by such Guarantor to the Administrative Agent, if required), to be applied against the Obligations, whether matured or unmatured, in such order as the Administrative Agent may determine.  For the avoidance of doubt, nothing in the foregoing shall operate as a waiver of any subrogation rights.

 

Section 10.04                          Amendments, etc. with Respect to the Obligations.  To the fullest extent permitted by applicable law, each Guarantor shall remain obligated hereunder notwithstanding that,

 

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without any reservation of rights against any Guarantor and without notice to or further assent by any Guarantor, any demand for payment of any of the Obligations made by the Administrative Agent or any Lender may be rescinded by the Administrative Agent or such Lender and any of the Obligations continued, and the Obligations, or the liability of any other Person upon them or for any part thereof, or any collateral security or guarantee therefor or right of offset with respect thereto, may, from time to time, in whole or in part, be renewed, extended, amended, modified, accelerated, compromised, waived, surrendered or released by the Administrative Agent or any Lender, and this Agreement and the other Loan Documents and any other documents executed and delivered in connection herewith or therewith may be amended, modified, supplemented or terminated, in whole or in part, as the Administrative Agent (or the Required Lenders or all Lenders, as the case may be) may reasonably deem advisable from time to time, and any collateral security, guarantee or right of offset at any time held by the Administrative Agent or any Lender for the payment of the Obligations may be sold, exchanged, waived, surrendered or released.

 

Section 10.05                                    Guarantee Absolute and Unconditional.  To the fullest extent permitted by applicable law, each Guarantor waives any and all notice of the creation, renewal, extension or accrual of any of the Obligations and notice of or proof of reliance by the Administrative Agent or any Lender upon the guarantee contained in this Article X or acceptance of the guarantee contained in this Article X; the Obligations, and any of them, shall conclusively be deemed to have been created, contracted or incurred, or renewed, extended, amended or waived, in reliance upon the guarantee contained in this Article X; and all dealings between the Borrower and any of the Guarantors, on the one hand, and the Administrative Agent and the Lenders, on the other hand, likewise shall be conclusively presumed to have been had or consummated in reliance upon the guarantee contained in this Article X.  To the fullest extent permitted by applicable law, each Guarantor waives diligence, presentment, protest, demand for payment and notice of default or nonpayment to or upon the Borrower or any of the Guarantors with respect to the Obligations.  Each Guarantor understands and agrees that the guarantee contained in this Article X, to the fullest extent permitted by applicable law, shall be construed as a continuing, absolute and unconditional guarantee of payment without regard to (a) the validity or enforceability of this Agreement or any other Loan Document, any of the Obligations or any other collateral security therefor or guarantee or right of offset with respect thereto at any time or from time to time held by the Administrative Agent or any Lender, (b) any defense, set-off or counterclaim (other than a defense of payment or performance) which may at any time be available to or be asserted by the Borrower or any other Person against the Administrative Agent or any Lender, or (c) any other circumstance whatsoever (with or without notice to or knowledge of the Borrower or such Guarantor) which constitutes, or might be construed to constitute, an equitable or legal discharge of the Borrower for the Obligations, or of such Guarantor under the guarantee contained in this Article X, in bankruptcy or in any other instance.  When making any demand hereunder or otherwise pursuing its rights and remedies hereunder against any Guarantor, the Administrative Agent or any Lender may, but shall be under no obligation to, make a similar demand on or otherwise pursue such rights and remedies as it may have against the Borrower, any other Guarantor, or any other Person or against any collateral security or guarantee for the Obligations or any right of offset with respect thereto, and any failure by the Administrative Agent or any Lender to make any such demand, to pursue such other rights or remedies or to collect any payments from the Borrower, any other Guarantor, or any other Person or to realize upon any such collateral security or guarantee or to exercise any such right of offset, or any release of the Borrower, any other Guarantor, or any other Person or any such collateral security, guarantee or right of offset, shall not relieve any Guarantor of any obligation or liability hereunder, and shall not impair or affect the rights and remedies, whether express, implied or available as a matter of law, of the Administrative Agent or any Lender against any Guarantor.  For the purposes hereof “demand” shall include the commencement and continuance of legal proceedings.

 

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Section 10.06                                    Reinstatement.  The guarantee contained in this Article X shall continue to be effective, or be reinstated, as the case may be, if at any time payment, or any part thereof, of any of the Obligations is rescinded or must otherwise be restored or returned by the Administrative Agent or any Lender upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of any Loan Party, or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, any Loan Party or any substantial part of its property, or otherwise, all as though such payments had not been made.

 

Section 10.07                                    Payments.  Each Guarantor hereby guarantees that payments hereunder will be paid to the Administrative Agent without set-off or counterclaim in Dollars at the Administrative Agent’s Office.

 

ARTICLE XI

 

MISCELLANEOUS

 

Section 11.01                                    Amendments, Etc.  Except as otherwise set forth in this Agreement, no amendment or waiver of any provision of this Agreement or any other Loan Document, and no consent to any departure by the Borrower or any other Loan Party therefrom, shall be effective unless in writing signed by the Required Lenders and the Borrower or the applicable Loan Party, as the case may be, and each such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided that, no such amendment, waiver or consent shall:

 

(a)          postpone any date scheduled for, or reduce or forgive the amount of, any payment of principal or interest under Section 2.07 or Section 2.08 without the written consent of each Lender directly affected thereby, it being understood that the waiver of (or amendment to the terms of) any mandatory prepayment of the Loans shall not constitute a postponement of any date scheduled for the payment of principal or interest;

 

(b)         reduce or forgive the principal of, or the rate of interest specified herein on, any Loan or (subject to clause (i) of the second proviso to this Section 11.01) any fees (including fees set forth in Section 2.08 or other amounts payable hereunder or under any other Loan Document), or extend, postpone or waive the date upon which any fees are to be paid, without the written consent of each Lender directly affected thereby; provided that, only the consent of the Required Lenders shall be necessary to amend the definition of “Default Rate” or to waive any obligation of the Borrower to pay interest at the Default Rate;

 

(c)          change any provision of this Section 11.01, the definition of “Required Lenders” or “Pro Rata Share”, the third sentence of Section 2.11(a), Section 2.12, Section 8.03 or Section 11.07(a)(x) without the written consent of each Lender adversely affected thereby;

 

(d)         [Reserved]; or

 

(e)          release all or substantially all of the aggregate value of the Guaranty, without the written consent of each Lender;

 

and provided further that (i) no amendment, waiver or consent shall, unless in writing and signed by the Administrative Agent in addition to the Lenders required above, affect the rights or duties of, or any fees or other amounts payable to, the Administrative Agent under this Agreement or any other Loan Document and (ii) Section 11.07(h) may not be amended, waived or otherwise modified without the consent of each Granting Lender all or any part of whose Loans are being funded by an SPC at the time of such

 

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amendment, waiver or other modification.  Notwithstanding anything to the contrary herein, no Defaulting Lender shall have any right to approve or disapprove any amendment, waiver or consent hereunder, except that the principal of the Loans of such Lender may not be reduced or forgiven, and the Maturity Date of the Loans of such Lender may not be extended, in each case without the consent of such Lender (it being understood that any Loans held or deemed held by any Defaulting Lender shall be excluded for a vote of the Lenders hereunder requiring any consent of the Lenders).

 

Notwithstanding anything to the contrary contained in Section 11.01, guarantees, collateral security documents and related documents executed by Foreign Subsidiaries in connection with this Agreement may be in a form reasonably determined by the Administrative Agent and may be, together with this Agreement, amended and waived with the consent of the Administrative Agent at the request of the Borrower without the need to obtain the consent of any other Lender if such amendment or waiver is delivered in order (i) to comply with local Law or advice of local counsel, (ii) to cure ambiguities or defects or (iii) to cause such guarantee, collateral security document or other document to be consistent with this Agreement and the other Loan Documents.

 

Section 11.02                                    Notices and Other Communications; Facsimile Copies.  (a)  General.  Unless otherwise expressly provided herein, all notices and other communications provided for hereunder or under any other Loan Document shall be in writing (including by facsimile transmission).  All such written notices shall be mailed, faxed or delivered to the applicable address, facsimile number or electronic mail address, and all notices and other communications expressly permitted hereunder to be given by telephone shall be made to the applicable telephone number, as follows:

 

(i)                                     if to the Borrower, any Guarantor or the Administrative Agent to the address, facsimile number, electronic mail address or telephone number specified for such Person below or to such other address, facsimile number, electronic mail address or telephone number as shall be designated by such party in a notice to the other parties:

 

	
The Borrower and any Guarantor:
    	
The Reader’s Digest   Association, Inc.
    
	
 
    	
750 Third Avenue
    
	
 
    	
New York, NY 10017
    
	
 
    	
Attention: Treasurer
    
	
 
    	
Telephone number:  646-293-6149
    
	
 
    	
Facsimile number:  914-244-7949
    
	
 
    	
Electronic mail   address:  william.magill@rd.com
    
	
 
    	
Website address:  www.rd.com
    
	
 
    	
 
    
	
 
    	
With copies to (which shall not   constitute a notice hereunder):
    
	
 
    	
 
    
	
 
    	
RDA Holding Co./The Reader’s Digest   Association
    
	
 
    	
44 South Broadway
    
	
 
    	
White Plains, NY 10601
    
	
 
    	
Attention: General Counsel
    
	
 
    	
Telephone number:  914-244-5262
    
	
 
    	
Facsimile number:  914-244-7810
    

 

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Electronic mail   address:  anewborn@RD.com
    
	
 
    	
 
    
	
 
    	
Weil, Gotshal & Manges LLP
    
	
 
    	
767 Fifth Avenue
    
	
 
    	
New York, NY 10153
    
	
 
    	
Attention:  Daniel S. Dokos
    
	
 
    	
Telephone number:  212-310-8576
    
	
 
    	
Facsimile number:  212-310-8007
    
	
 
    	
Electronic mail address:   Daniel.dokos@weil.com
    
	
 
    	
 
    
	
The Administrative Agent:
    	
Luxor Capital Group
    
	
 
    	
1114 Avenue of the Americas, 29th Floor
    
	
 
    	
New York, NY 10036
    
	
 
    	
Attention: Operations Department
    
	
 
    	
Telephone number: (212) 763-8000
    
	
 
    	
Facsimile number: (212) 763-8001
    
	
 
    	
Electronic mail address::   Ops@luxorcap.com
    

 

(ii)                                  if to any other Lender, to the address, facsimile number, electronic mail address or telephone number specified in its Administrative Questionnaire or to such other address, facsimile number, electronic mail address or telephone number as shall be designated by such party in a notice to the Borrower and the Administrative Agent.

 

All such notices and other communications shall be deemed to be given or made, if given or made during the recipient’s normal business hours (and if not, shall be deemed to be given or made on the next succeeding Business Day), upon the earlier to occur of (i) actual receipt by the relevant party hereto and (ii) (A) if delivered by hand or by courier, when signed for by or on behalf of the relevant party hereto; (B) if delivered by mail, four (4) Business Days after deposit in the mails, postage prepaid; (C) if delivered by facsimile, when sent and receipt has been confirmed by telephone; and (D) if delivered by electronic mail (which form of delivery is subject to the provisions of Section 11.02(d)), when delivered; provided that notices and other communications to the Administrative Agent pursuant to Article II shall not be effective until actually received by the Administrative Agent.  In no event shall a voice mail message be effective as a notice, communication or confirmation hereunder.

 

(b)         Effectiveness of Facsimile Documents and Signatures.  Loan Documents may be transmitted and/or signed by facsimile or “PDF” (subject to Section 11.02(d)).  The effectiveness of any such documents and signatures shall, subject to applicable Law, have the same force and effect as manually signed originals and shall be binding on all Loan Parties, the Administrative Agent and the Lenders.

 

(c)          Reliance by Administrative Agent and Lenders.  The Administrative Agent and the Lenders shall be entitled to rely and act upon any notices purportedly given by or on behalf of the Borrower even if (i) such notices were not made in a manner specified herein, were incomplete or were not preceded or followed by any other form of notice specified herein, or (ii) the terms thereof, as understood by the recipient, varied from any confirmation thereof.  The Borrower shall indemnify each Agent-Related Person and each Lender from all losses, liabilities and related reasonable out-of-pocket costs and expenses resulting from the reliance by such Person on each notice purportedly given by or on behalf of the Borrower in the absence of gross negligence or willful misconduct.  All telephonic notices to the Administrative Agent may be recorded by the Administrative Agent, and each of the parties hereto hereby consents to such recording.

 

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(d)         Electronic Communications.  Notices and other communications to the Lenders hereunder may be delivered or furnished by electronic communication (including e-mail and Internet or intranet websites) pursuant to procedures approved by the Administrative Agent, provided that the foregoing shall not apply to notices to any Lender pursuant to Articles II and III, if such Lender has notified the Administrative Agent that it is incapable of receiving notices thereunder by electronic communication.  The Administrative Agent or the Borrower may, in their discretion, agree to accept notices and other communications to them hereunder by electronic communications pursuant to procedures approved by it, provided that approval of such procedures may be limited to particular notices or communications.  Unless the Administrative Agent otherwise prescribes, (i) notices and other communications sent to an e-mail address shall be deemed received upon the sender’s receipt of an acknowledgment from the intended recipient (such as by the “return receipt requested” function, as available, return e-mail or other written acknowledgment), provided that if such notice or other communication is not sent during the normal business hours of the recipient, such notice or communication shall be deemed to have been sent at the opening of business on the next Business Day for the recipient, and (ii) notices or communications posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient at its e-mail address as described in the foregoing clause (i) of notification that such notice or communication is available and identifying the website address therefor.

 

Section 11.03                                    No Waiver; Cumulative Remedies.  No failure by any Lender or the Administrative Agent to exercise, and no delay by any such Person in exercising, any right, remedy, power or privilege hereunder or under any other Loan Document shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.  The rights, remedies, powers and privileges herein provided, and provided under each other Loan Document, are cumulative and not exclusive of any rights, remedies, powers and privileges provided by Law.

 

Section 11.04                                    Attorney Costs, Expenses and Taxes.  The Borrower agrees (a) to pay or reimburse the Administrative Agent for all reasonable documented out-of-pocket costs and expenses incurred in connection with the preparation, negotiation, syndication and execution of this Agreement and the other Loan Documents, and any amendment, waiver, consent or other modification of the provisions hereof and thereof (whether or not the transactions contemplated thereby are consummated), and the consummation and administration of the transactions contemplated hereby and thereby, including all (i) Attorney Costs of one lead counsel and, if necessary, one conflicts counsel in each relevant jurisdiction and (ii) costs of other advisors to the Administrative Agent (in the case of this clause (ii) accrued through the completion of the transactions contemplated hereby) and (b) to pay or reimburse the Administrative Agent and each Lender for all reasonable documented out-of-pocket costs and expenses incurred in connection with the enforcement of any rights or remedies under this Agreement or the other Loan Documents (including all such costs and expenses incurred during any negotiations, workouts, restructurings or legal proceedings, including any proceeding under any Debtor Relief Law, and including all Attorney Costs of one lead counsel and, if necessary, one conflicts counsel in each relevant jurisdiction and the fees and disbursements of any financial advisor or third party consultants or appraisers to and of the Administrative Agent).  The foregoing costs and expenses shall include reasonable and out-of-pocket expenses incurred by the Administrative Agent.  The agreements in this Section 11.04 shall survive the termination of the Aggregate Commitments and the repayment of all Obligations.  All amounts due under this Section 11.04 shall be paid within ten (10) Business Days of receipt by the Borrower of an invoice relating thereto setting forth such expenses in reasonable detail.  If any Loan Party fails to pay when due any costs, expenses or other amounts payable by it hereunder or under any Loan Document, such amount may be paid on behalf of such Loan Party by the Administrative Agent in its sole discretion.

 

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Section 11.05                                    Indemnification by the Borrower.  Whether or not the transactions contemplated hereby are consummated, the Borrower shall indemnify and hold harmless the Agent-Related Person, each Lender and their respective Affiliates, and directors, officers, employees, counsel, agents, trustees, investment advisors and attorneys-in-fact of each of the foregoing (collectively, the “Indemnitees”) from and against any and all liabilities, obligations, losses, damages, penalties, claims, demands, actions, judgments and suits and related reasonable out-of-pocket expenses (including Attorney Costs) of any kind or nature whatsoever which may at any time be imposed on, incurred by or asserted against any such Indemnitee in any way relating to or arising out of or in connection with (a) the execution, delivery, enforcement, performance, administration, amendment, modification or waiver of any Loan Document or any other agreement, letter or instrument delivered in connection with the transactions contemplated thereby or the consummation of the transactions contemplated thereby, (b) any Loan or the use or proposed use of the proceeds therefrom, or (c) to the extent relating to or arising from any of the foregoing, any actual or alleged presence or release of Hazardous Materials on or from any property currently or formerly owned, leased or operated by any Group Member, or any Environmental Liability related in any way to any Group Member, or (d) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory (including any investigation of, preparation for, or defense of any pending or threatened claim, investigation, litigation or proceeding) and regardless of whether any Indemnitee is a party thereto (all the foregoing, collectively, the “Indemnified Liabilities”), in all cases, whether or not caused by or arising, in whole or in part, out of the negligence of the Indemnitee; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such liabilities, obligations, losses, damages, penalties, claims, demands, actions, judgments, suits or expenses are found in a final non-appealable judgment of a court of competent jurisdiction to have resulted from the gross negligence, bad faith or willful misconduct of such Indemnitee, any Affiliate of such Indemnitee or any officer, director, employee, advisor, representative or agent of such Indemnitee or any such Affiliate.  No Indemnitee shall be liable to any Group Member for any damages arising from the use by others of any information or other materials obtained through IntraLinks or other similar information transmission systems in connection with this Agreement.  No Indemnitee shall be liable (whether direct or indirect, in contract, tort or otherwise) to any Group Member except to the extent such liability is found in a non-appealable judgment of a court of competent jurisdiction to have resulted from the gross negligence, bad faith or willful misconduct of such Indemnitee, any Affiliate of such Indemnitee or any officer, director, employee, advisor, representative or agent of such Indemnitee or any such Affiliate.  No Indemnitee shall have any liability to any Group Member, nor any Group Member to any Indemnitee, for any special, punitive, indirect or consequential damages (including, without limitation, loss of profits, business or anticipated savings) relating to this Agreement or any other Loan Document or arising out of its activities in connection herewith or therewith (whether before or after the Closing Date).  All amounts due under this Section 11.05 shall be paid within ten (10) Business Days after demand therefor; provided, however, that such Indemnitee shall promptly refund any amount received under this Section 11.05 to the extent that there is a final judicial or arbitral determination that such Indemnitee was not entitled to indemnification or contribution rights with respect to such payment pursuant to the express terms of this Section 11.05.  The agreements in this Section 11.05 shall survive the resignation of the Administrative Agent, the replacement of any Lender, the termination of the Aggregate Commitments and the repayment, satisfaction or discharge of all the Obligations.

 

Section 11.06                                    Payments Set Aside.  To the extent that any payment by or on behalf of the Borrower is made to the Administrative Agent or any Lender, or the Administrative Agent or any Lender exercises its right of setoff, and such payment or the proceeds of such setoff or any part thereof is subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by the Administrative Agent or such Lender in its discretion) to be repaid to a trustee, receiver or any other party, in connection with any proceeding under any Debtor Relief Law or otherwise, then (a) to the extent of such recovery, the obligation or part thereof originally intended

 

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to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such setoff had not occurred, and (b) each Lender severally agrees to pay to the Administrative Agent upon demand its applicable share of any amount so recovered from or repaid by the Administrative Agent, plus interest thereon from the date of such demand to the date such payment is made at a rate per annum equal to the Federal Funds Rate from time to time in effect.

 

Section 11.07                                    Successors and Assigns.  (a)  The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that (x) neither Holdings nor the Borrower may assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender and (y) no Lender may assign or otherwise transfer any of its rights or obligations hereunder except (i) to an Eligible Assignee, (ii) by way of participation in accordance with the provisions of Section 11.07(e), (iii) by way of pledge or assignment of a security interest subject to the restrictions of Section 11.07(g) or Section 11.07(i) or (iv) to an SPC in accordance with the provisions of Section 11.07(h) (and any other attempted assignment or transfer by any party hereto shall be null and void).  Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby, Participants to the extent provided in Section 11.07(e) and, to the extent expressly contemplated hereby, the Indemnitees) any legal or equitable right, remedy or claim under or by reason of this Agreement.

 

(b)         (i)  Subject to the conditions set forth in clause (b)(ii) below, any Lender may assign to one or more assignees (other than (A) a natural person or (B) Holdings or any of its Subsidiaries or any of their respective Affiliates) (“Assignees”) all or a portion of its rights and obligations under this Agreement (including all or a portion of its Loans at the time owing to it) with the prior written consent (such consent not to be unreasonably withheld or delayed) of (x) the Borrower, unless (i) the assignee is a Lender, an Affiliate of a Lender or an Approved Fund or (ii) an Event of Default has occurred and is continuing and (y) the Administrative Agent.

 

(ii)                                  Assignments shall be subject to the following additional conditions:

 

(1)                                  except in the case of an assignment to a Lender, an Affiliate of a Lender or an Approved Fund or an assignment of the entire remaining amount of the assigning Lender’s Loans, the amount of the Loans of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the Administrative Agent) shall not be less than $5,000,000 and in increments of $1,000,000 in excess thereof unless the Administrative Agent otherwise consents, provided that such amounts shall be aggregated in respect of each Lender and its Affiliates or Approved Funds, if any;

 

(2)                                  the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Assumption, together with a processing and recordation fee of $3,500; provided that only one such fee shall be payable in the event of simultaneous assignments to or from two or more Approved Funds;

 

(3)                                  the Assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire in which the assignee designates one or more Credit Contacts (as defined in the Administrative Questionnaire) to whom all syndicate-level information (which may contain material non-public information about Holdings, the Borrower, the other Loan Parties and their Affiliates and related parties or their respective securities) will be made available and who may receive such information

 

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in accordance with the Assignee’s compliance procedures and applicable laws, including Federal and state securities laws; and

 

(4)                                  no assignment shall be effective unless and until such assignment is recorded in the Register.

 

(c)          Subject to acceptance and recording thereof by the Administrative Agent pursuant to Section 11.07(d), from and after the effective date specified in each Assignment and Assumption, the Eligible Assignee thereunder shall be a party to this Agreement and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 3.01, 3.04, 11.04 and 11.05 with respect to facts and circumstances occurring prior to the effective date of such assignment).  Upon request, and the surrender by the assigning Lender of its Note, the Borrower (at its expense) shall execute and deliver a Note to the assignee Lender.  Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this clause (c) shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with Section 11.07(e).

 

(d)         The Administrative Agent, acting solely for this purpose as an agent of the Borrower, shall maintain at the Administrative Agent’s Office a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders and principal amounts (and related interest amounts) of the Loans, owing to, each Lender pursuant to the terms hereof from time to time (the “Register”).  The entries in the Register shall be conclusive, absent manifest error, and the Borrower, the Administrative Agent and the Lenders shall treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary.  The Register shall be available for inspection by the Borrower, the Administrative Agent and, with respect to its own Loans, any Lender, at any reasonable time and from time to time upon reasonable prior notice.

 

(e)          Any Lender may at any time, without the consent of, or notice to, the Borrower or the Administrative Agent, sell participations to any Person (other than (A) a natural person or (B) Holdings or any of its Subsidiaries or any of their respective Affiliates) (each, a “Participant”) in all or a portion of such Lender’s rights and/or obligations under this Agreement (including all or a portion of its Loans owing to it); provided that (i) such Lender’s obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Borrower, the Administrative Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement.  Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and the other Loan Documents and to approve any amendment, modification or waiver of any provision of this Agreement or the other Loan Documents; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, waiver or other modification described in the first proviso to Section 11.01 that directly affects such Participant.  Subject to Section 11.07(f), the Borrower agrees that each Participant shall be entitled to the benefits of Sections 3.01 and 3.04 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to Section 11.07(c) but shall not be entitled to recover greater amounts under such Sections than the selling Lender would be entitled to recover.  To the extent permitted by applicable Law, each Participant also shall be entitled to the benefits of Section 11.09 as though it were a Lender; provided that such Participant

 

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agrees to be subject to Section 2.12 as though it were a Lender.  Each Lender that sells a participation with respect to a Loan shall, acting solely for this purpose as a non-fiduciary agent of the Borrower, maintain a register on which it enters the name and address of each Participant and the principal amounts (and related interest amounts) of each Participant’s interest in the Loan (the “Participant Register”).  The entries in the Participant Register shall be conclusive, absent manifest error, and such Lender shall treat each Person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary.

 

(f)            A Participant shall not be entitled to receive any greater payment under Section 3.01 and 3.04 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Borrower’s prior written consent.  A Participant shall not be entitled to the benefits of Section 3.01 unless the Borrower is notified of the participation sold to such Participant and such Participant agrees, for the benefit of the Borrower, to comply with Section 11.15 as though it were a Lender.

 

(g)         Any Lender may at any time, without the consent of the Borrower or the Administrative Agent, pledge or assign a security interest in all or any portion of its rights under this Agreement (including under its Note, if any) to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank; provided that no such pledge or assignment shall release such Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.

 

(h)         Notwithstanding anything to the contrary contained herein, any Lender (a “Granting Lender”) may grant to a special purpose funding vehicle identified as such in writing from time to time by the Granting Lender to the Administrative Agent and the Borrower (an “SPC”) the option to provide all or any part of any Loan that such Granting Lender would otherwise be obligated to make pursuant to this Agreement; provided that (i) nothing herein shall constitute a commitment by any SPC to fund any Loan, and (ii) if an SPC elects not to exercise such option or otherwise fails to make all or any part of such Loan, the Granting Lender shall be obligated to make such Loan pursuant to the terms hereof.  Each party hereto hereby agrees that (i) neither the grant to any SPC nor the exercise by any SPC of such option shall increase the costs or expenses or otherwise increase or change the obligations of the Borrower under this Agreement (including its obligations under Section 3.01 or 3.04), (ii) no SPC shall be liable for any indemnity or similar payment obligation under this Agreement for which a Lender would be liable, and (iii) the Granting Lender shall for all purposes, including the approval of any amendment, waiver or other modification of any provision of any Loan Document, remain the lender of record hereunder.  Notwithstanding anything to the contrary contained herein, any SPC may (i) with notice to, but without prior consent of the Borrower and the Administrative Agent and with the payment of a processing fee of $3,500, assign all or any portion of its right to receive payment with respect to any Loan to the Granting Lender and (ii) disclose on a confidential basis any non-public information relating to its funding of Loans to any rating agency, commercial paper dealer or provider of any surety or guarantee or credit or liquidity enhancement to such SPC.

 

(i)             Notwithstanding anything to the contrary contained herein, (1) any Lender may in accordance with applicable Law create a security interest in all or any portion of the Loans owing to it and the Note, if any, held by it and (2) any Lender that is a Fund may, without the consent of the Borrower or the Administrative Agent, create a security interest in all or any portion of the Loans owing to it and the Note, if any, held by it to the trustee for holders of obligations owed, or securities issued, by such Fund as security for such obligations or securities; provided that unless and until such trustee actually becomes a Lender in compliance with the other provisions of this Section 11.07, (i) no such pledge shall release the pledging Lender from any of its obligations under the Loan Documents and (ii) such trustee shall not be entitled to exercise any of the rights of a Lender under the Loan Documents.

 

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(j)             [reserved]

 

Section 11.08                                    Confidentiality.  Each of the Administrative Agent and the Lenders agrees to maintain the confidentiality of the Information, except that Information may be disclosed (a) on a need to know basis to its Affiliates and its and its Affiliates’ directors, officers, employees, trustees, investment advisors and agents, including accountants, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential pursuant to the terms hereof); (b) to the extent requested by any Governmental Authority; (c) to the extent required by applicable Laws or regulations or by any subpoena or similar legal process; (d) to any other party to this Agreement; (e) subject to an agreement for the benefit of the Borrower containing provisions substantially the same as those of this Section 11.08 (or as may otherwise be reasonably acceptable to the Borrower), to any pledgee referred to in Section 11.07(g), counterparty to a Swap Contract, Eligible Assignee of or Participant in, or any prospective Eligible Assignee of or Participant in, any of its rights or obligations under this Agreement; (f) with the written consent of the Borrower; (g) to the extent such Information becomes publicly available other than as a result of a breach of this Section 11.08; (h) to any Governmental Authority or examiner (including the National Association of Insurance Commissioners or any other similar organization) regulating any Lender; (i) to any rating agency when required by it (it being understood that, prior to any such disclosure, such rating agency shall undertake to preserve the confidentiality of any Information relating to the Loan Parties received by it from such Lender); or (j) in connection with the exercise of any remedies hereunder, under any other Loan Document or any legal action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder.  In addition, the Administrative Agent and the Lenders may disclose the existence of this Agreement and information about this Agreement to market data collectors, similar service providers to the lending industry, and service providers to the Administrative Agent and the Lenders in connection with the administration and management of this Agreement, the other Loan Documents and the Loans.  For the purposes of this Section 11.08, “Information” means all information received from any Loan Party relating to any Loan Party or its business, other than any such information that is publicly available to the Administrative Agent or any Lender prior to disclosure by any Loan Party other than as a result of a breach of this Section 11.08; provided that, in the case of information received from a Loan Party after the date hereof, such information (i) is clearly identified at the time of delivery as confidential or (ii) is delivered pursuant to Section 6.01, 6.02 or 6.04 hereof.

 

EACH LENDER ACKNOWLEDGES THAT INFORMATION FURNISHED TO IT PURSUANT TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS MAY INCLUDE MATERIAL NON-PUBLIC INFORMATION CONCERNING HOLDINGS, THE BORROWER, THE OTHER LOAN PARTIES AND THEIR AFFILIATES AND RELATED PARTIES OR THEIR RESPECTIVE SECURITIES, AND CONFIRMS THAT IT HAS DEVELOPED COMPLIANCE PROCEDURES REGARDING THE USE OF MATERIAL NON-PUBLIC INFORMATION AND THAT IT WILL HANDLE SUCH MATERIAL NON-PUBLIC INFORMATION IN ACCORDANCE WITH THOSE PROCEDURES AND APPLICABLE LAW, INCLUDING FEDERAL AND STATE SECURITIES LAWS.

 

ALL INFORMATION, INCLUDING WAIVERS AND AMENDMENTS, FURNISHED BY HOLDINGS, THE BORROWER OR THE ADMINISTRATIVE AGENT PURSUANT TO, OR IN THE COURSE OF ADMINISTERING, THIS AGREEMENT WILL BE SYNDICATE-LEVEL INFORMATION, WHICH MAY CONTAIN MATERIAL NON-PUBLIC INFORMATION ABOUT HOLDINGS, THE BORROWER, THE OTHER LOAN PARTIES AND THEIR AFFILIATES AND RELATED PARTIES OR THEIR RESPECTIVE SECURITIES.  ACCORDINGLY, EACH LENDER REPRESENTS TO HOLDINGS, THE BORROWER AND THE ADMINISTRATIVE AGENT THAT IT HAS IDENTIFIED IN ITS ADMINISTRATIVE

 

99

 

QUESTIONNAIRE A CREDIT CONTACT WHO MAY RECEIVE INFORMATION THAT MAY CONTAIN MATERIAL NON-PUBLIC INFORMATION IN ACCORDANCE WITH ITS COMPLIANCE PROCEDURES AND APPLICABLE LAW, INCLUDING FEDERAL AND STATE SECURITIES LAWS.

 

Section 11.09                                    Setoff.  In addition to any rights and remedies of the Lenders provided by Law, upon the occurrence and during the continuance of any Event of Default, each Lender and its Affiliates is authorized at any time and from time to time, without prior notice to the Borrower or any other Loan Party, any such notice being waived by the Borrower (on its own behalf and on behalf of each Loan Party and its Subsidiaries) to the fullest extent permitted by applicable Law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held by, and other Indebtedness at any time owing by, such Lender and its Affiliates to or for the credit or the account of the respective Loan Parties and their Subsidiaries against any and all Obligations owing to such Lender and its Affiliates hereunder or under any other Loan Document, now or hereafter existing, irrespective of whether or not the Administrative Agent or such Lender or Affiliate shall have made demand under this Agreement or any other Loan Document and although such Obligations may be contingent or unmatured or denominated in a currency different from that of the applicable deposit or Indebtedness.  Each Lender agrees promptly to notify the Borrower and the Administrative Agent after any such set off and application made by such Lender; provided, that the failure to give such notice shall not affect the validity of such setoff and application.  The rights of the Administrative Agent and each Lender under this Section 11.09 are in addition to other rights and remedies (including other rights of setoff) that the Administrative Agent and such Lender may have.  Notwithstanding anything herein or in any other Loan Document to the contrary, in no event shall the assets of any Foreign Subsidiary that is not a Loan Party constitute collateral security for payment of the Obligations of the Borrower or any Domestic Subsidiary, it being understood that (a) the Equity Interests of any Foreign Subsidiary that is not a Loan Party do not constitute such an asset and (b) the provisions hereof shall not limit, reduce or otherwise diminish in any respect the Borrower’s obligations to make any mandatory prepayment pursuant to Section 2.04(b).

 

Section 11.10                                    Interest Rate Limitation.  Notwithstanding anything to the contrary contained in any Loan Document, if at any time the interest rate applicable to any Loan, together with all fees, charges and other amounts which are treated as interest on such Loan under applicable Law (collectively the “Charges”), shall exceed the maximum lawful rate (the “Maximum Rate”) which may be contracted for, charged, taken, received or reserved by the Lender holding such Loan in accordance with applicable Law, the rate of interest payable in respect of such Loan hereunder, together with all Charges payable in respect thereof, shall be limited to the Maximum Rate and, to the extent lawful, the interest and Charges that would have been payable in respect of such Loan but were not payable as a result of the operation of this Section shall be cumulated and the interest and Charges payable to such Lender in respect of other Loans or periods shall be increased (but not above the Maximum Rate therefor) until such cumulated amount, together with interest thereon at the Federal Funds Rate to the date of repayment, shall have been received by such Lender.

 

Section 11.11                                    Counterparts.  This Agreement and each other Loan Document may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.  Delivery by telecopier of an executed counterpart of a signature page to this Agreement and each other Loan Document shall be effective as delivery of an original executed counterpart of this Agreement and such other Loan Document.  The Administrative Agent may also require that any such documents and signatures delivered by telecopier be confirmed by a manually signed original thereof; provided that the failure to request or deliver the same shall not limit the effectiveness of any document or signature delivered by telecopier.

 

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Section 11.12                                    Integration.  This Agreement and the other Loan Documents comprise the complete and integrated agreement of the parties on the subject matter hereof and thereof and supersedes all prior agreements, written or oral, on such subject matter.  In the event of any conflict between the provisions of this Agreement and those of any other Loan Document, the provisions of this Agreement shall control; provided that the inclusion of supplemental rights or remedies in favor of the Administrative Agent or the Lenders in any other Loan Document shall not be deemed a conflict with this Agreement.  Each Loan Document was drafted with the joint participation of the respective parties thereto and shall be construed neither against nor in favor of any party, but rather in accordance with the fair meaning thereof.

 

Section 11.13                                    Survival of Representations and Warranties.  All representations and warranties made hereunder and in any other Loan Document or other document delivered pursuant hereto or thereto or in connection herewith or therewith shall survive the execution and delivery hereof and thereof.  Such representations and warranties have been or will be relied upon by the Administrative Agent and each Lender, regardless of any investigation made by the Administrative Agent or any Lender or on their behalf and notwithstanding that the Administrative Agent or any Lender may have had notice or knowledge of any Default on the Closing Date, and shall continue in full force and effect as long as any Loan or any other Obligation hereunder shall remain unpaid or unsatisfied.

 

Section 11.14                                    Severability.  If any provision of this Agreement or the other Loan Documents is held to be illegal, invalid or unenforceable, the legality, validity and enforceability of the remaining provisions of this Agreement and the other Loan Documents shall not be affected or impaired thereby.  The invalidity of a provision in a particular jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

 

Section 11.15                                    Tax Forms.  (a)  Each Lender and Administrative Agent that is not a “United States person” within the meaning of Section 7701(a)(30) of the Code (each, a “Foreign Lender”) shall, to the extent it is legally entitled to do so, deliver to the Borrower and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender or the Administrative Agent under this Agreement or changes its Lending Office or place of organization (and from time to time thereafter upon the request of the Borrower or the Administrative Agent), whichever of the following is applicable:

 

(i)                                     duly completed copies of Internal Revenue Service Form W-8BEN claiming eligibility for benefits of an income tax treaty to which the United States of America is a party,

 

(ii)                                  duly completed copies of Internal Revenue Service Form W-8ECI,

 

(iii)                               in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under Section 881(c) of the Code, (x) a certificate substantially in the form of Exhibit H to the effect that (A) such Foreign Lender is not (i) a “bank” described in Section 881(c)(3)(A) of the Code, (ii) a “10 percent shareholder” of the applicable Borrower within the meaning of Section 881(c)(3)(B) of the Code or (iii) a “controlled foreign corporation” described in Section 881(c)(3)(C) of the Code and (B) the interest payments in question are not effectively connected with the United States trade or business conducted by such Lender (a “U.S. Tax Compliance Certificate”) and (y) duly completed copies of Internal Revenue Service Form W-8BEN,

 

(iv)                              to the extent a Foreign Lender is not the beneficial owner (for example, where the Foreign Lender is a partnership or participating Lender granting a typical participation), an Internal Revenue Service Form W-8IMY, accompanied by a Form W-8ECI, W-8BEN, U.S. Tax Compliance Certificate, Form W-9, and/or other certification documents from each beneficial owner, as applicable;

 

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provided that, if the Foreign Lender is a partnership (and not a participating Lender) and one or more beneficial owners of such Foreign Lender are claiming the portfolio interest exemption, such Foreign Lender may provide a U.S. Tax Compliance Certificate on behalf of each such beneficial owner, or

 

(v)                                 any other form prescribed by applicable law as a basis for claiming exemption from or a reduction in United States federal withholding tax duly completed together with such supplementary documentation as may be prescribed by applicable law to permit the Borrower to determine the withholding or deduction required to be made.

 

(b)         Each Lender and Administrative Agent that is a “United States person” within the meaning of Section 7701(a)(30) of the Code (each, a “United States Lender”) shall deliver to the Borrower and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Lender or the Administrative Agent becomes a Lender or the Administrative Agent under this Agreement or changes its Lending Office or place of organization (and from time to time thereafter upon the request of the Borrower or the Administrative Agent) properly completed copies of Internal Revenue Service Form W-9, certifying that such Lender or the Administrative Agent, as applicable, is entitled to an exemption from United States backup withholding tax, or any successor form.

 

(c)          [ Reserved]

 

(d)         The Borrower shall not be required to pay any additional amounts under Section 3.01(a) or indemnity with respect to such Taxes under Section 3.01(c) to (A) any Foreign Lender if such Foreign Lender shall have failed to satisfy the provisions of Section 11.15(a) or (B) any United States Lender if such United States Lender shall have failed to satisfy the provisions of Section 11.15(b); provided, that (i) if such Lender shall have satisfied the requirement of this Section 11.15, as applicable, on the date such Lender became a Lender, or ceased to act for its own account with respect to any payment under any of the Loan Documents, nothing in this Section 11.15 shall relieve the Borrower of its obligation to pay any amounts pursuant to Section 3.01 in the event that, as a result of any change in any applicable Law, treaty or governmental rule, regulation or order, or any change in the interpretation, administration or application thereof, such Lender is no longer properly entitled to deliver forms, certificates or other evidence at a subsequent date establishing the fact that such Lender or other Person for the account of which such Lender receives any sums payable under any of the Loan Documents is not subject to withholding or is subject to withholding at a reduced rate and (ii) nothing in this Section 11.15(d) shall relieve the Borrower of its obligation to pay any amounts pursuant to Section 3.01 in the event that the requirements of Section 11.15 have not been satisfied if the Borrower is entitled, under applicable Law, to rely on any applicable forms and statements required to be provided under this Section 11.15 by the Lender that does not act or has ceased to act for its own account under any of the Loan Documents, including in the case of a typical participation, and such Lender has provided such required forms and statements.

 

(e)          Each Lender agrees that if any form or certification previously delivered by it expires or becomes obsolete or inaccurate in any respect, it shall update such form or certification or promptly notify the Borrower and the Administrative Agent in writing of its legal inability to do so.  Notwithstanding anything to the contrary herein, no Lender or the Administrative Agent shall be required to deliver any form, certificate or other document pursuant to this Section 11.15 that such Lender or the Administrative Agent is not legally able to deliver.

 

(f)            The Administrative Agent may deduct and withhold any taxes required by any Laws to be deducted and withheld from any payment under any of the Loan Documents.

 

102

 

SECTION 11.16                      GOVERNING LAW.  THIS AGREEMENT AND EACH OTHER LOAN DOCUMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

 

Section 11.17                                    Submission To Jurisdiction; Waivers.  (a)  Each Loan Party hereby irrevocably and unconditionally:

 

(i)                                     submits for itself and its property in any legal action or proceeding relating to this Agreement and the other Loan Documents to which it is a party, or for recognition and enforcement of any judgment in respect thereof, to the non-exclusive general jurisdiction of (i) any State or Federal court of competent jurisdiction sitting in New York County, New York and (ii) appellate courts from any thereof;

 

(ii)                                  consents that any such action or proceeding may be brought in such courts and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same;

 

(iii)                               agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid at its address set forth in Section 11.02 or at such other address of which the Administrative Agent shall have been notified pursuant thereto;

 

(iv)                              agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right of the Administrative Agent or the Lenders to sue in any other jurisdiction; and

 

(v)                                 waives, to the maximum extent not prohibited by law, any right it may have to claim or recover in any legal action or proceeding referred to in this Section any special, exemplary, punitive or consequential damages.

 

SECTION 11.18                      WAIVER OF RIGHT TO TRIAL BY JURY.  EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER ANY LOAN DOCUMENT OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO ANY LOAN DOCUMENT, OR THE TRANSACTIONS RELATED THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER FOUNDED IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION 11.18 WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

 

Section 11.19                                    Binding Effect.  This Agreement shall become effective upon the satisfaction or waiver of the conditions precedent set forth in Article IV and thereafter shall be binding upon and inure to the benefit of the Borrower, the Administrative Agent and each Lender and their respective permitted successors and assigns, except that the Borrower shall not have the right to assign its rights hereunder or any interest herein without the prior written consent of the Lenders.

 

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Section 11.20                                    Lender Action.  Each Lender agrees that it shall not take or institute any actions or proceedings, judicial or otherwise, for any right or remedy against any Loan Party or any other obligor under any of the Loan Documents (including the exercise of any right of setoff, rights on account of any banker’s lien or similar claim or other rights of self-help), or institute any actions or proceedings, or otherwise commence any remedial procedures, with respect to any any property of any Loan Party, without the prior written consent of the Administrative Agent.  The provision of this Section 11.20 are for the sole benefit of the Lenders and shall not afford any right to, or constitute a defense available to, any Loan Party.

 

Section 11.21                                    USA PATRIOT Act.  Each Lender hereby notifies the Loan Parties that pursuant to the requirements of the Patriot Act, it is required to obtain, verify and record information that identifies the Loan Parties, which information includes the name, address and tax identification numbers of the Loan Parties and other information that will allow such Lender to identify the Loan Parties in accordance with the Act.

 

Section 11.22                                    Acknowledgements.  Each Loan Party hereby acknowledges that:

 

(a)          it has been advised by counsel in the negotiation, execution and delivery of this Agreement and the other Loan Documents;

 

(b)         neither the Administrative Agent nor any Lender has any fiduciary relationship with or duty to any Loan Party arising out of or in connection with this Agreement or any of the other Loan Documents, and the relationship between Administrative Agent and Lenders, on one hand, and the Loan Parties, on the other hand, in connection herewith or therewith is solely that of debtor and creditor; and

 

(c)          no joint venture is created hereby or by the other Loan Documents or otherwise exists by virtue of the transactions contemplated hereby among the Lenders or among the Loan Parties and the Lenders.

 

Section 11.23                                    Releases of Guarantee.  Notwithstanding anything to the contrary contained herein or in any other Loan Document, the Administrative Agent is hereby irrevocably authorized by each Lender (without requirement of notice to or consent of any Lender except as expressly required by Section 11.01) to take any action reasonably requested by the Borrower having the effect of releasing any Guarantee Obligations (i) to the extent necessary to permit any Disposition of the applicable Guarantor, as permitted by the Loan Documents or that has been consented to in accordance with Section 11.01 or (ii) in accordance with Section 7.13(b).

 

[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written.

 

 

	
 
    	
 
    	
RDA HOLDING CO.
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
by
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
/s/   Paul R. Tomkins
    
	
 
    	
 
    	
 
    	
 
    	
Name:
    	
Paul   R. Tomkins
    
	
 
    	
 
    	
 
    	
 
    	
Title:
    	
Executive Vice President and Chief Financial   Officer
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
THE READER’S DIGEST   ASSOCIATION, INC.
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
by
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
/s/   Paul R. Tomkins
    
	
 
    	
 
    	
 
    	
 
    	
Name:
    	
Paul   R. Tomkins
    
	
 
    	
 
    	
 
    	
 
    	
Title:
    	
Executive Vice President and Chief Financial   Officer
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
EACH OF THE GUARANTORS   LISTED
    
	
 
    	
 
    	
ON ANNEX I HERETO
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
by
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
/s/   William H. Magill
    
	
 
    	
 
    	
 
    	
 
    	
Name:
    	
William   H. Magill
    
	
 
    	
 
    	
 
    	
 
    	
Title:
    	
Authorized   Signatory
    

 

Unsecured Credit Agreement Signature Page

 

 

	
 
    	
 
    	
LUXOR CAPITAL GROUP, LP, as
   Administrative Agent
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
by
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
/s/ Norris Nissim
    
	
 
    	
 
    	
 
    	
 
    	
Name:
    	
Norris Nissim
    
	
 
    	
 
    	
 
    	
 
    	
Title:
    	
General Counsel
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
LUXOR CAPITAL PARTNERS,   LP, as
   Lender
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
by
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
/s/ Norris Nissim
    
	
 
    	
 
    	
 
    	
 
    	
Name:
    	
Norris Nissim
    
	
 
    	
 
    	
 
    	
 
    	
Title:
    	
General Counsel
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
Luxor Capital Group, LP
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
Investment Manager
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
LUXOR CAPITAL PARTNERS
   OFFSHORE MASTER FUND, LP, as Lender
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
by
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
/s/ Norris Nissim
    
	
 
    	
 
    	
 
    	
 
    	
Name:
    	
Norris Nissim
    
	
 
    	
 
    	
 
    	
 
    	
Title:
    	
General Counsel
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
Luxor Capital Group, LP
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
Investment Manager
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
LUXOR WAVEFRONT, LP, as Lender
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
by
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
/s/ Norris Nissim
    
	
 
    	
 
    	
 
    	
 
    	
Name:
    	
Norris Nissim
    
	
 
    	
 
    	
 
    	
 
    	
Title:
    	
General Counsel
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
Luxor Capital Group, LP
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
Investment Manager
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
LUXOR SPECTRUM OFFSHORE   MASTER FUND, LP, as Lender
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
by
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
/s/ Norris Nissim
    
	
 
    	
 
    	
 
    	
 
    	
Name:
    	
Norris Nissim
    
	
 
    	
 
    	
 
    	
 
    	
Title:
    	
General Counsel
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
Luxor Capital Group, LP
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
Investment Manager
    

 

Signature Pages for Unsecured Credit Agreement (Luxor)

 

 

	
 
    	
 
    	
GAM EQUITY SIX INC., as Lender
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
by
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
/s/ Norris Nissim
    
	
 
    	
 
    	
 
    	
 
    	
Name:
    	
Norris Nissim
    
	
 
    	
 
    	
 
    	
 
    	
Title:
    	
General Counsel
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
Luxor Capital Group, LP
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
Investment Manager
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
OC 19 MASTER FUND, L.P., as Lender
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
by
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
/s/ Norris Nissim
    
	
 
    	
 
    	
 
    	
 
    	
Name:
    	
Norris Nissim
    
	
 
    	
 
    	
 
    	
 
    	
Title:
    	
General Counsel
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
Luxor Capital Group, LP
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
Investment Manager
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
LUXOR SPECTRUM, LLC, as Lender
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
by
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
/s/ Norris Nissim
    
	
 
    	
 
    	
 
    	
 
    	
Name:
    	
Norris Nissim
    
	
 
    	
 
    	
 
    	
 
    	
Title:
    	
General Counsel
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
Luxor Capital Group, LP
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
Investment Manager
    

 

Signature Pages for Unsecured Credit Agreement (Luxor)

 

 

	
 
    	
 
    	
BLACKWELL PARTNERS LLC, as Lender
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
by
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
/s/ David R. Shumate
    
	
 
    	
 
    	
 
    	
 
    	
Name:
    	
David R. Shumate
    
	
 
    	
 
    	
 
    	
 
    	
Title:
    	
Executive Vice President
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
DUMAC, LLC
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
Authorized Agent
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
POINT LOBOS MASTER   FUND, L.P., as
   Lender
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
By: Point Lobos Capital, LLC, its   general
   partner
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
by
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
/s/ Ryan Schaper
    
	
 
    	
 
    	
 
    	
 
    	
Name:
    	
Ryan Schaper
    
	
 
    	
 
    	
 
    	
 
    	
Title:
    	
Manager
    

 

Signature Pages for Unsecured Credit Agreement (Point Lobos)

 

 

ANNEX I

 

	
Alex Inc.
    
	
Allrecipes.com, Inc.
    
	
Ardee Music Publishing, Inc.
    
	
Christmas Angel Productions, Inc.
    
	
Direct Holdings U.S. Corp.
    
	
Direct Holdings Americas Inc.
    
	
Direct Holdings Custom Publishing Inc.
    
	
Direct Holdings Customer   Service, Inc.
    
	
Direct Holdings Education Inc.
    
	
Direct Holdings Libraries Inc.
    
	
Direct Entertainment Media Group, Inc.
    
	
Funk & Wagnalls Yearbook Corp.
    
	
Gareth Stevens, Inc.
    
	
Haven Home Media, LLC
    
	
Home Service Publications, Inc.
    
	
Pegasus Asia Investments, Inc.
    
	
Pegasus Investment, LLC
    
	
Pegasus Sales, Inc.
    
	
Pleasantville Music   Publishing, Inc.
    
	
R.D. Manufacturing Corporation
    
	
RD Publications, Inc.
    
	
RD Large Edition, Inc.
    
	
RD Walking, Inc.
    
	
RDA Sub Co.
    
	
RDCL, Inc.
    
	
Reader’s Digest Children’s   Publishing, Inc.
    
	
Reader’s Digest Consumer   Services, Inc.
    
	
Reader’s Digest Entertainment, Inc.
    
	
Reader’s Digest Financial   Services, Inc.
    
	
Reader’s Digest Latinoamerica S.A.
    
	
Reader’s Digest Sales and   Services, Inc.
    
	
Reader’s Digest Young   Families, Inc.
    
	
Reiman Media Group, LLC
    
	
Reiman Manufacturing, LLC
    
	
Retirement Living Publishing   Company, Inc.
    
	
Saguaro Road Records, Inc.
    
	
Taste of Home Media Group, LLC
    
	
Taste of Home Productions, Inc.
    
	
Travel Publications, Inc.
    
	
W.A. Publications, LLC
    
	
WAPLA, LLC
    
	
Weekly Reader Corporation
    
	
Weekly Reader Custom   Publishing, Inc.
    
	
World Almanac Education Group, Inc.
    
	
World Wide Country Tours, Inc.
    
	
WRC Media Inc.
    

 

[Credit Agreement]Exhibit 10.3

 

THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED, OR OTHERWISE TRANSFERRED EXCEPT (1) EITHER (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED AND (2) IN COMPLIANCE WITH ALL APPLICABLE STATE SECURITIES LAWS.

 

	
Warrant   No.            
    	
August 12, 2011
    

 

RDA HOLDING CO.

 

FORM OF CLASS A WARRANT TO PURCHASE SHARES OF COMMON STOCK

 

This Warrant is issued to [·](1) (the “Holder”) by RDA Holding Co., a Delaware corporation (the “Company”), pursuant to the terms of that certain Unsecured Term Loan Credit and Guarantee Agreement dated of even date herewith (the “Credit Agreement”).

 

1.                                       Purchase of Shares. Subject to the terms and conditions set forth in this agreement (this “Agreement” or the “Warrant”) and in the Credit Agreement, the Holder is entitled, upon surrender of this Warrant at the principal office of the Company (or at such other place as the Company shall notify the Holder hereof in writing), to purchase from the Company, at the Exercise Price set forth below, up to an aggregate of [·](2) fully paid and nonassessable shares of Class A Common Stock, par value $0.001 per share, of the Company (the “Common Stock”).  The shares of Common Stock issuable pursuant to the Warrant, as adjusted from time to time pursuant to this Agreement, are referred to herein as the “Shares.”

 

2.                                       Definitions.  Capitalized terms used in this Warrant without definition or reference to another agreement shall have the meanings assigned to such terms in the Credit Agreement.  As used in this Warrant, the following terms shall have the meanings indicated herein and defined below:

 

“Additional Shares of Common Stock” means all shares of Common Stock issued by the Company at any time or from time to time during the Term, except: (i) the Shares; (ii) shares issued upon stock splits or as dividends in respect of capital stock; (iii) securities issued to employees, consultants or directors pursuant to any stock option plans and/or stock issuance plan approved by a majority of the members of the Board of Directors; (iv) securities issued in a Qualified IPO; (v) Common Stock issued upon exercise of options, warrants or other Convertible Securities existing on the date of the Credit Agreement; (vi) securities issued in connection with a bona fide business acquisition by the Company on terms approved by the Board of Directors; and (vii) securities issued to persons with which the Company has business relationships such as lenders and vendors on terms approved by the Board of Directors and (viii) such number of additional shares of Common Stock as may be issued or become issuable by reason of adjustments required or provided for pursuant to the terms of agreements relating to subclauses (i), (iii), and (v).

 

“Board of Directors” shall mean the board of directors of the Company.

 

“Common Stock Equivalent” means any Convertible Security or warrant, option or other right to subscribe for or purchase any Additional Shares of Common Stock or any Convertible Security.

 

(1)  Note:  Class A Warrants were issued to Luxor Capital Partners, LP, Luxor Capital Partners Offshore Master Fund, LP, Luxor Wavefront, LP, GAM Equity Six Inc., OC 19 Master Fund, L.P., Luxor Spectrum, LLC, Luxor Spectrum Offshore Master Fund, LP, Blackwell Partners LLC and Point Lobos Master Fund, L.P.

(2)  Note:  In the aggregate, the Class A Warrants are issuable for 1,250,000 shares of Class A Common Stock.

 

 

“Company Competitor” means any Person that is engaged directly or indirectly in the publishing or the direct marketing industry or any other business that competes with a material line of business of the Company or its subsidiaries.  Whether a Person is a Company Competitor shall be determined by the Board of Directors, acting in good faith.

 

“Convertible Securities” means evidences of indebtedness, shares of capital stock or other securities which are or may be at any time convertible into or exchangeable for Additional Shares of Common Stock.  The term “Convertible Security” means one of the Convertible Securities.

 

“Exchange Act” Securities Exchange Act of 1934, as amended.

 

“Exercise Price” means $15.00 per share of Common Stock, subject to adjustment pursuant to Section 7.

 

“Expiration Date” means August 12, 2013.

 

“Fair Market Value” means the average of the closing bid and asked prices of shares of Common Stock quoted in the over-the-counter market in which the shares of Common Stock are traded or the closing price quoted on any exchange on which the shares of Common Stock are listed, whichever is applicable, as published in the Western Edition of The Wall Street Journal for the ten (10) trading days prior to the date of determination of fair market value (or such shorter period of time during which such stock was traded over-the-counter or on such exchange).  If the shares of Common Stock are not traded on the over-the-counter market or on an exchange, the fair market value shall be the price per Share that the Company could obtain from a willing buyer for shares of Common Stock sold by the Company from authorized but unissued shares of Common Stock, as such prices shall be determined in good faith by the Board of Directors; provided, however, that if the Holder shall disagree with such determination and, by notice to the Company given within five (5) days after the Company’s determination, elect to dispute such determination, then the Appraised Value (as defined below) shall constitute the Fair Market Value. “Appraised Value” means the value of a share of Common Stock as determined by a nationally recognized valuation or appraisal firm (an “Appraiser”) selected jointly by the Board of Directors and the holders of Warrants exercisable for a majority of shares of Common Stock then issuable upon exercise of all of the outstanding Class A Warrants.  Each of the Company, on the one hand, and the holders of Warrants requesting appraisal, on the other hand, shall pay half of the costs and fees of such Appraiser, and the decision of the Appraiser making such determination of Appraised Value shall be final and binding on the Company and all affected holders of Warrants.

 

“Qualified IPO” means the sale of the Company’s Common Stock in a firm commitment, underwritten public offering registered under the Securities Act, other than a registration relating solely to a transaction under Rule 145 under the Securities Act Act (or any successor thereto) or to an employee benefit plan of the Company with aggregate proceeds to the Company and/or any selling stockholders (after deduction for underwriters’ discounts and commissions relating to the issuance), of at least Fifty Million Dollars ($50,000,000).

 

“Registration Rights Agreement” means that certain Registration Rights Agreement, dated as of February 19, 2010, by and among the Company and the parties thereto or bound thereby (as the same may be amended from time to time).

 

“Securities Act” means Securities Act of 1933, as amended.

 

“Stockholders Agreement” means that certain Stockholders Agreement, dated as of February 19, 2010, by and among the Company and the parties thereto or bound thereby (as the same may be amended from time to time).

 

2

 

“Term” means the period beginning on August 12, 2011 and ending on the Expiration Date at 5:00 p.m., New York time, on such date.

 

“Transfer” means any transfer, sale, offer, assignment, exchange, distribution, mortgage, pledge, hypothecation or other disposition.

 

3.                                       Method of Exercise.  The Holder may exercise, in whole or in part, the purchase rights evidenced hereby during the Term.  Such exercise shall be effected by:

 

(a)                                  the surrender of the Warrant, together with a properly executed notice of exercise to the Secretary of the Company at its principal offices, the form of which is attached hereto as Exhibit A; and

 

(b)                                 the payment to the Company of an amount equal to the aggregate Exercise Price for the number of shares of Common Stock being purchased.

 

4.                                       Cashless Exercise.  In lieu of delivery of cash upon exercise of this Warrant, and only at such times as the Fair Market Value of one share of Common Stock is greater than the Exercise Price, the Holder may elect to receive shares of Common Stock equal to the value of this Warrant (or the portion thereof being canceled) by surrender of this Warrant at the principal office of the Company together with a properly executed notice of such election, in which event the Company shall issue to the Holder hereof a number of shares of Common Stock computed using the following formula:

 

	
X =
    	
Y   - 
    	
(A)(Y)
    	
 
    
	
 
    	
 
    	
B
    	
 
    
	
 
    	
 
    
	
X =
    	
The   number of shares of Common Stock to be issued to the Holder of this Warrant.
    
	
 
    	
 
    
	
Y =
    	
The   number of shares of Common Stock purchasable under this Warrant upon   exercise.
    
	
 
    	
 
    
	
A =
    	
The   Exercise Price (as adjusted to the date of such calculations).
    
	
 
    	
 
    
	
B =
    	
The   Fair Market Value of a share of Common Stock.
    

 

5.                                       Certificates for Share.  Upon the exercise of the purchase rights evidenced by this Warrant, one or more certificates for the number of shares of Common Stock so purchased shall be issued as soon as practicable thereafter, and in any event within thirty (30) days of the delivery of a properly executed notice of exercise, surrender of this Warrant, and payment of the aggregate Exercise Price thereof in accordance with Section 3(b), unless exercised pursuant to a cashless exercise pursuant to Section 4.

 

6.                                       Issuance of Shares.  In the event that the Holder exercises this Warrant, this Warrant shall be deemed to have been exercised immediately prior to the close of business on the date of its surrender for exercise as provided herein, and the Holder shall be treated for all purposes as the holder of record of the shares of Common Stock issued upon exercise of this Warrant as of the close of business on such date.  The Company covenants that the shares of Common Stock, when issued in accordance with the valid exercise of this Warrant, will be duly and validly issued, fully paid and nonassessable and free from all preemptive rights with respect to the issuance thereof.  The Company further covenants and agrees that, during the Term, the Company will at all times have authorized and reserved for issuance a sufficient number of shares of Common Stock to provide for the exercise of this Warrant in full.

 

3

 

7.                                       Adjustment of Exercise Price and Number of Shares.  The number of shares of Common Stock purchasable upon exercise of this Warrant and the Exercise Price shall be subject to adjustment from time to time as follows:

 

(a)                                  Issuance of Additional Shares of Common Stock.  In the event the Company shall at any time or from time to time during the Term issue any Additional Shares of Common Stock at a price per share less than the Exercise Price then in effect or without consideration, then, at the time of each such issuance, the number of shares of Common Stock purchasable upon the exercise of the Warrant shall be increased, concurrently with such issue or sale, to an amount determined by multiplying such shares of Common Stock by a fraction,

 

(A)                              the numerator of which shall be the number of shares of Common Stock outstanding immediately after such issue or sale, including any Additional Shares of Common Stock issued pursuant to this Section 7(a) and excluding treasury shares, and

 

(B)                                the denominator of which shall be the sum of (x) the number of shares of Common Stock outstanding immediately prior to the issuance of such Additional Shares of Common Stock and (y) the number of shares of Common Stock for which the aggregate consideration received by the Company on account of the total number of such Additional Shares of Common Stock so issued or sold would have been able to purchase at the Exercise Price.

 

Whenever the number of shares of Common Stock purchasable upon the exercise of the Warrant is adjusted as herein provided, the Exercise Price payable upon exercise of such Warrant shall be adjusted by multiplying such Exercise Price immediately prior to such adjustment by a fraction, (x) the numerator of which shall be the number of shares of Common Stock purchasable upon the exercise of such Warrant immediately prior to such adjustment, and (y) the denominator of which shall be the number of shares of Common Stock so purchasable immediately thereafter.

 

(b)                                 Issuance of Common Stock Equivalents.  If at any time the Company shall fix a record date for the determination of the holders of its Common Stock for the purpose of entitling them to receive a distribution of, or shall in any manner (whether directly or by assumption in a merger in which the Company is the surviving corporation) issue or sell, any Common Stock Equivalents, whether or not the rights to exchange or convert thereunder are immediately exercisable, and the price per share for which Common Stock is issuable upon such conversion or exchange shall be less than the Exercise Price in effect immediately prior to the time of such issue or sale, or if, after any such issuance of Common Stock Equivalents, the price per share for which Additional Shares of Common Stock may be issuable thereafter is amended or adjusted, and such price as so amended shall be less than the Exercise Price in effect at the time of such amendment or adjustment, then the Exercise Price then in effect shall be adjusted as provided in Section 7(a) above.  No further adjustments to the Exercise Price then in effect shall be made upon the actual issuance of such Common Stock upon conversion or exchange of such Common Stock Equivalents.  For purposes of the adjustment in Section 7(a), the aggregate consideration received by the Company on account of Additional Shares of Common Stock deemed to have been issued in respect of Common Stock Equivalents shall be the total amount, if any, received and receivable by the Company as consideration for the issue, sale or grant of the Common Stock Equivalents in question, plus the minimum aggregate amount of additional consideration (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such consideration to protect against dilution) payable to the Company upon the exercise in full of such Common Stock Equivalents.

 

(c)                                  Subdivisions, Combinations and Other Issuances.  If the Company shall at any time or from time to time during the Term subdivide the shares of Common Stock, by split-up or otherwise, or

 

4

 

combine the shares of Common Stock, or issue additional shares of the Common Stock as a dividend, the number and kind of shares of Common Stock issuable on the exercise of this Warrant shall forthwith be proportionately increased or adjusted in the case of a subdivision or stock dividend, or proportionately decreased in the case of a combination.  Appropriate adjustments shall also be made to the Exercise Price payable per share, but the aggregate purchase price payable for the total number of shares of Common Stock purchasable under this Warrant (as adjusted) shall remain the same.  Any adjustment under this Section 7(c) shall become effective at the close of business on the date the subdivision or combination becomes effective, or as of the record date of such dividend, or in the event that no record date is fixed, upon the making of such dividend.

 

(d)                                 Reclassification, Reorganization, Consolidation, Merger or Sale.  In case of any (i) reclassification of the stock of the Company, (ii) capital reorganization of the Company or change in the capital stock of the Company, (iii) consolidation or merger of the Company with or into another Person, (iv) sale of all or substantially all of the Company’s assets to another Person, or (v) other similar transaction (other than an issuance, distribution, subdivision, combination, stock dividend or other transaction covered by Sections 7(a)-(c) or 7(e)), in each case (other than (iv)) in which the stockholders of the Company prior to such consolidation, merger, reorganization or other transaction, own capital representing directly, or indirectly through one or more entities, less than 50% of the economic interests in or voting power of the Company or other surviving entity immediately after such consolidation, merger, reorganization or other transaction, which entitles the holders of Common Stock to receive (either directly or upon subsequent liquidation) stock, securities or assets with respect to or in exchange for Common Stock (each, a “Triggering Event”), then the Company shall make appropriate provision so that the Holder shall have the right at any time or from time to time during the Term to purchase, at a total purchase price equal to that payable upon the exercise of this Warrant, the kind and amount of shares of stock and other securities and property receivable in connection with such Triggering Event by a holder of the same number of shares of Common Stock as were purchasable by the Holder immediately prior to such Triggering Event (as if the Holder had exercised the rights represented by this Warrant immediately prior thereto).  In any such case, appropriate provisions shall be made with respect to the rights and interest of the Holder (including to give effect to the right of a holder to elect the type of consideration it will receive upon a Triggering Event) so that the provisions hereof shall thereafter be applicable with respect to any shares of stock or other securities and property deliverable upon exercise hereof, and appropriate adjustments shall be made to the purchase price per share payable hereunder, provided the aggregate purchase price shall remain the same.

 

(e)                                  If the Company shall, at any time or from time to time during the Term, fix a record date for the determination of the holders of its Common Stock in respect of a distribution to all holders of Common Stock or Common Stock Equivalents, as the case may be, for no consideration, of: (a) evidences of its indebtedness or (b) any other asset or security (other than Additional Shares of Common Stock, Common Stock Equivalents or a distribution for Common Stock covered by Section 7(c)), including cash (in each case, “Distributed Property”), then, the Holder shall elect, at least three (3) business days prior to the payment date in respect of such distribution, to (i) not exercise the Warrant, which shall immediately thereafter be adjusted to give effect to the change in the fair market value per share of the Common Stock, which value shall be determined based on the fair market value of the Distributed Property or (ii) exercise the Warrant, in which case such Holder shall be entitled to receive, in addition to shares of Common Stock otherwise issuable upon such exercise, the Distributed Property that the Holder would have been entitled to receive in respect of such number of shares of Common Stock had the Holder been the record holder of such shares of Common Stock immediately prior to such date.

 

(f)                                    Notice of Adjustment.  When any adjustment is required to be made in the number or kind of shares purchasable upon exercise of the Warrant, or in the Exercise Price, the Company shall, no later than ten (10) days following such event, notify the Holder of such event and of the number of shares of Common Stock or other securities or property thereafter purchasable upon exercise of this Warrant.

 

5

 

8.                                       No Impairment.  The Company shall not, by amendment of its Certificate of Incorporation, Bylaws, or through any reorganization, recapitalization, transfer of assets, consolidation, merger, dissolution, issuance or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant to be observed or performed hereunder by the Company.  Without limiting the generality of the foregoing, the Company will use its best efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof as may be reasonably necessary to enable the Company to perform its obligations under this Warrant.

 

9.                                       No Fractional Shares or Scrip.  No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant, but in lieu of such fractional shares the Company shall make a cash payment therefor on the basis of the Exercise Price then in effect.

 

10.                                 Restrictive Legend.  The shares of Common Stock (unless registered under the Securities Act of 1933, as amended) shall be stamped or imprinted with a legend in substantially the following form:

 

THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF, AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”).  SUCH SHARES OF COMMON STOCK MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.

 

11.                                 Replacement of Warrant.  On receipt of a lost warrant affidavit in form and substance reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of loss, theft or destruction, on delivery of an indemnity agreement reasonably satisfactory in form and substance to the Company or, in the case of mutilation, on surrender and cancellation of this Warrant, the Company at its expense shall execute and deliver, in lieu of this Warrant, a new warrant of like tenor and amount.

 

12.                                 Notices.  All notices and other communications required or permitted hereunder shall be in writing, shall be deemed given, (a) upon delivery, if delivered personally by hand, (b) one (1) business day after the business day of deposit with Federal Express or similar overnight courier, freight prepaid (with written confirmation of receipt) or (c) when delivered by facsimile transmission (with written confirmation of transmission), and shall be addressed (i) if to the Holder, at the Holder’s address as set forth on the signature pages hereto, and (ii) if to the Company, at The Reader’ s Digest Association, Inc., One Reader’s Digest Road, Pleasantville, NY 10570 (attention: General Counsel), Fax:  (914) 244-5644, with a copy to Weil, Gotshal & Manges LLP, 767 Fifth Avenue, New York, NY 10153 (attention:  Michael J. Aiello), Fax: (212) 310-8007, or at such other address as a party may designate by ten (10) days advance written notice to the other party pursuant to the provisions above.

 

13.                                 Registration Rights.  The registration rights and obligations of the Holder (including its successors) with respect to the Common Stock issuable upon exercise of this Warrant shall be the same as those applicable to any Person that is a Holder (as defined in the Registration Rights Agreement) pursuant to the Registration Rights Agreement.

 

14.                                 Representations and Warranties.  The Holder hereby represents and warrants that it is (a) an “accredited investor” as the term is defined in Rule 501(a) under the Securities Act and (b) the Holder is purchasing this Warrant for its own account (or for beneficiaries’ accounts over which the Holder has investment discretion) and not with a view to distribute.

 

6

 

15.                                 Governing Law.  This Warrant and all actions arising out of or in connection with this Warrant shall be governed by and construed in accordance with the laws of the State of New York, without regard to the conflicts of law provisions of the State of New York or of any other state.

 

16.                                 Rights and Obligations Survive Exercise of Warrant.  Unless otherwise provided herein, the rights and obligations of the Company, of the Holder of this Warrant and of the holder of the shares of Common Stock issued upon exercise of this Warrant, shall survive the exercise of this Warrant.

 

17.                                 Entire Agreement.  This Warrant, together with the Credit Agreement, the Stockholder Agreement, the Registration Rights Agreement and the other Loan Documents, embodies the complete agreement and understanding among the parties hereto with respect to the subject matter hereof and supersedes and preempts any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof in any way.

 

18.                                 Severability.  Whenever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect the validity, legality or enforceability of any other provision of this Agreement in such jurisdiction, but this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.

 

19.                                 Successors and Assigns.  Subject to the transfer restrictions contained in this Agreement, to the extent applicable, the rights granted hereunder shall inure to the benefit of and be binding upon the successors of the Company and the permitted successors and assigns of the Holder.  Subject to the transfer restrictions contained in this Agreement, this Warrant and all rights hereunder are transferable by the Holder hereof on the register of the Company upon surrender of this Warrant for registration of transfer at the office of the Secretary of the Company accompanied by a written instrument of transfer, duly executed by the Holder hereof and in the form of the Form of Assignment attached hereto as Exhibit B.

 

20.                                 Further Transfer Restrictions.

 

(a)                                  No Warrant or Share may be sold, exchanged, assigned, encumbered or otherwise Transferred in violation of the Securities Act of 1933, as amended, or state securities laws.  Further, prior to a Qualified IPO, no Transfer of Warrants or Shares shall be permitted if, after giving effect to such Transfer, such Transfer would result in the Company becoming subject to the reporting requirements under the Exchange Act.  The Company may require that, as a condition to any Transfer of Warrants or Shares, that the Holder deliver to the Company an opinion of counsel, which opinion of counsel shall be reasonably satisfactory to the Company, to the effect that such Transfer is made in compliance with the Securities Act and all applicable state securities laws or pursuant to an exempt transaction under the Securities Act and state securities laws.  The provisions of this Section 20(a) shall not apply to the exercise of any Warrant to the extent that the Shares issued upon such exercise (and any unexercised portion of the Warrant so exercised) shall be issued to the same registered holder that exercised such Warrant.

 

(b)                                 No Transfer of Warrants to any Company Competitor or an Affiliate of any Company Competitor shall be permitted without the prior written consent of the Board.

 

(c)                                  No Transfer of Warrants shall be permitted unless and until the proposed transferee agrees in writing to become a party to, and be bound to the same extent as the transferor by the terms of, the Stockholders Agreement and the Registration Rights Agreement.  Such transferee must execute a joinder agreement, in form and substance reasonably satisfactory to the Company, evidencing such transferee’s agreement to become a party to the Stockholders Agreement and the Registration Rights Agreement and be bound to the same extent as the transferor.

 

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(d)                                 In the event of any purported Transfer in violation of the provisions of this Agreement, such purported Transfer shall be void and of no effect and the Company shall not give effect to such Transfer.

 

21.                                 Party to the Stockholders Agreement.  Notwithstanding anything herein to the contrary, each Holder agrees to be deemed a party to Sections  4.5, 4.6, 5.1, 5.2, 5.4, 5.5, 5.6 and 5.11 of the Stockholders Agreement and be bound thereby.

 

22.                                 Supplements and Amendments.  The Company may from time to time supplement or amend this Agreement, (a) without the approval of any Holder, in order to cure any ambiguity, manifest error or other mistake in this Agreement, or (b) with the prior written consent of holders of Warrants exercisable for a majority of the shares of Common Stock then issuable upon exercise of all of the outstanding Class A Warrants.

 

23.                                 No Valuation of the Company.  The Company and the Holder acknowledge and agree that:  (a) this Warrant does not represent a valuation of the Company; and (b) the Exercise Price was the product of an arm’s-length negotiation between the Company and the initial Holder.

 

[Remainder of page intentionally left blank]

 

8

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above.

 

	
 
    	
RDA   HOLDING CO.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    

 

Signature Page to

Class A Warrant to Purchase Shares of Common Stock

 

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above.

 

 

	
 
    	
[NAME   OF HOLDER]
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    	
Address:
    
	
 
    	
 
    	
Facsimile:
    

 

Signature Page to

Class A Warrant to Purchase Shares of Common Stock

 

 

EXHIBIT A

 

NOTICE OF EXERCISE

 

TO:                            RDA Holding Co.

c/o The Reader’s Digest Association, Inc.

Reader’s Digest Road

Pleasantville, NY 10570

Attention: Treasurer

Facsimile number:  914-244-5904

 

1.                                       The undersigned hereby elects to purchase                      shares of Common Stock pursuant to the terms of the attached Warrant.

 

2.                                       Method of Exercise (Please initial the applicable blank):

 

o                                    The undersigned elects to exercise the attached Warrant by means of a cash payment, and tenders herewith payment in full for the purchase price of the shares being purchased, together with all applicable transfer taxes, if any.

 

o                                    The undersigned elects to exercise the attached Warrant by means of the cashless exercise provisions of Section 4 of the Warrant.

 

3.                                       Please issue a certificate or certificates representing said shares of Common Stock in the name of the undersigned or in such other name as is specified below:

 

	
 
    	
 
    	
 
    
	
 
    	
(Name)
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
(Address)
    	
 
    

 

4.                                       The undersigned hereby represents and warrants that the aforesaid shares of Common Stock are being acquired for the account of the undersigned for investment and not with a view to, or for resale, in connection with the distribution thereof, and that the undersigned has no present intention of distributing or reselling such shares.

 

 

	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
Date:
    	
 
    

 

 

EXHIBIT B

 

FORM OF ASSIGNMENT

 

FOR VALUE RECEIVED the undersigned Holder hereby sells, assigns, and transfers unto the Assignee(s) named below all of the right of the undersigned under the Warrant, with respect to the number of Warrants set forth below:

 

	
Names of Assignees
    	
 
    	
Address/Fascimile
    	
 
    	
Social Security or
   other Identifying
   Number of
   Assignee(s)
    	
 
    	
Series and
   Number of
   Warrants
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    

 

and does hereby irrevocably constitute and appoint the Secretary of the Company to make such transfer on the books of the Company maintained for that purpose.

 

	
Date:
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
*
    
	
 
    	
 
    	
 
    	
(Signature   of Holder)
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
(Street   Address)
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
(City)
    	
(State) (Zip Code)
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Signature   Guaranteed by:
    

 

*                                         The signature must correspond with the name as written upon the face of the within Warrant in every particular, without alteration or enlargement or any change whatever, and must be guaranteed by a participant in a Medallion Signature Guarantee Program at a guarantee level acceptable to the Company’s transfer agent.

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