CONFORMED COPY
SECOND AMENDMENT dated as of June 2,
1998 (this "Amendment"), among THE READER'S
DIGEST ASSOCIATION, INC., a Delaware
corporation (the "Company"), the BORROWING
SUBSIDIARIES party to the Credit Agreement
referred to below ("Borrowing Subsidiaries"),
the undersigned financial institutions party
to the Credit Agreement (the "Lenders"), THE
CHASE MANHATTAN BANK, as administrative agent
for the Lenders (in such capacity, the
"Administrative Agent") and X.X. Xxxxxx
Securities Inc., as syndication agent (in
such capacity, the "Syndication Agent").
A. Reference is made to the Credit Agreement
dated as of November 12, 1996, as amended on September 17,
1997 (the "Credit Agreement") among the Company, the
Borrowing Subsidiaries, the Lenders, the Administrative
Agent and the Syndication Agent. Capitalized terms used but
not otherwise defined herein have the meanings assigned to
them in the Credit Agreement.
B. The Company has requested that the Lenders
amend certain provisions of the Credit Agreement. The
Lenders are willing to do so, subject to the terms and
conditions of this Amendment.
Accordingly, in consideration of the mutual
agreements herein contained and other good and valuable
consideration, the sufficiency and receipt of which are
hereby acknowledged, the parties hereto hereby agree as
follows:
SECTION 1.01. Amendment to Preamble. The
Preamble to the Credit Agreement is hereby amended by (a)
deleting the reference to "$400,000,000" therein and
replacing it with "$300,000,000" and (b) deleting the
reference to "$40,000,000" therein and replacing it with
"$30,000,000".
SECTION 1.02. Amendment to Section 1.01.
Section 1.01 of the Credit Agreement is hereby amended by:
(a) amending the definition of "Eligible Currency"
by adding the following to the end thereof:
",including the Euro after its adoption by
members of the European Union"; and
(b) inserting in appropriate alphabetical order
the following definitions (which shall apply as of the
Effective Date (as defined in Section 3 herein)):
(i) "'Applicable Rate' means, for any day,
with respect to any Eurocurrency Standby Loan, or
with respect to the facility fees payable
hereunder, as the case may be, the applicable rate
per annum set forth below under the caption
"Eurodollar Spread" or "Facility Fee Rate", as the
case may be, based upon EBITDA, as set forth
below:
Category Four-quarter Facility Fee Eurodollar
EBITDA ($MM) Rate Spread
1 Greater than .200% .300%
300
2 Less than or .225% .400%
equal to 300
but greater
than 200
3 Less than or .250% .500%
equal to 200
but greater
than 100
4 Less than or .375% .875%
equal to 100
Except as set forth below, EBITDA used on any date
to determine the Applicable Rate shall be that for
the period of four fiscal quarters ending at the
fiscal quarter end next preceding the Financial
Statement Delivery Date occurring on or most
recently prior to such date; provided that if any
Financial Statement Delivery Date shall have
occurred and the financial statements required to
have been delivered under Section 5.01(a) or
Section 5.01(b) by such date have not yet been
delivered, the Applicable Rate shall, until such
financial statements shall have been delivered, be
determined by reference to Category 4."
(ii) "'Consolidated Net Income' shall mean
the net income of the Borrower and its
Subsidiaries determined on a consolidated basis in
accordance with GAAP."
(iii) "'EBITDA' means, for any period, the
consolidated net income of the Company and its
consolidated Subsidiaries for such period plus, to
the extent deducted in computing such consolidated
net income for such period, the sum (without
duplication) of (a) income tax expense, (b)
Interest Expense, (c) depreciation and
amortization, (d) non-recurring restructuring
charges, (e) extraordinary losses and (f) the
cumulative effect of changes in accounting
principles, minus, to the extent added in
computing such consolidated net income for such
period the sum (without duplication) of, (a)
consolidated interest income, (b) extraordinary
gains and (c) the cumulative effect of changes in
accounting principles."
(iv) "'Financial Statement Delivery Date'
means the 90th day following the end of each
fiscal year of the Company, and the 45th day
following the end of each of the first three
fiscal quarters in each fiscal year of the
Company."
(v) "'Interest Expense' means, for any
period, the interest expense of the Company and
its consolidated Subsidiaries for such period
determined on a consolidated basis in accordance
with GAAP, including (i) the amortization of debt
discounts to the extent included in interest
expense in accordance with GAAP, (ii) the
amortization of all fees (including fees with
respect to interest rate protection agreements or
other interest rate hedging agreements) payable in
connection with the incurrence of indebtedness to
the extent included in interest expense in
accordance with GAAP and (iii) the portion of any
rents payable under capital leases allocable to
interest expense in accordance with GAAP."
SECTION 1.03. Amendment to Section 2.05(a).
Section 2.05(a) is hereby amended by deleting the reference
to "$40,000,000" therein and replacing it with
"$30,000,000".
SECTION 1.04. Amendment to Section 2.07(a).
Section 2.07(a) of the Credit Agreement is hereby amended by
deleting the phrase "at a rate of %.055 per annum on the
amount of the Commitment of such Lender" in the first
sentence thereof and replacing it with "which shall accrue
at the Applicable Rate on the daily amount of the Commitment
of such Lender".
SECTION 1.05. Amendment to Section 2.09(a).
Section 2.09(a) of the Credit Agreement is hereby amended by
(a) deleting the phrase ".095% per annum" in each of the
first and third clauses thereof and replacing it with "the
Applicable Rate" and (b) deleting clause (iv) of such
Section and replacing it with "(iv) in the case of each
Swingline Loan, a per annum money market rate quoted by the
Swingline Lender plus the Eurodollar Spread plus the
Facility Fee Rate (as set forth in the definition of
"Applicable Rate") plus 0.50% per annum (computed on the
basis of the actual number of days elapsed over a year of
360 days)."
SECTION 1.06. Amendment to Section 4.04(b).
Section 4.04(b) of the Credit Agreement is hereby amended by
deleting the reference to "June 30, 1996" and replacing it
with "March 31, 1998".
SECTION 1.07. Amendment to Article IV.
Article IV of the Credit Agreement is hereby amended by
adding the following new Section 4.13:
"SECTION 4.13. Year 2000 Compliance. The cost to
the Company and its Subsidiaries of (a) any
reprogramming required to permit the proper
functioning, in and following the year 2000, of (x) the
Company's and its Subsidiaries' computer systems and
(y) equipment containing embedded microchips (including
systems and equipment supplied by others or with which
the Company's and its Subsidiaries' systems interface),
(b) the testing of all such systems and equipment, as
so reprogrammed, and (c) the probable consequences of
year 2000 systems remediation issues to the Company and
its Subsidiaries (including, without limitation,
reprogramming errors and the failure of others' systems
or equipment) are not reasonably expected to result in
a Default or a Material Adverse Effect. Except for
such of the reprogramming referred to in the preceding
sentence as may be necessary, the computer and
management information systems of the Company and its
Subsidiaries are and, with ordinary course upgrading
and maintenance, will continue for the term of this
Agreement to be, sufficient to permit each of the
Company and its Subsidiaries to conduct its business
without the occurrence of a Material Adverse Effect."
SECTION 1.08. Amendment to Section 6.02.
Section 6.02 of the Credit Agreement is hereby amended by
adding the following after the last sentence thereof:
"Notwithstanding any of the above, nothing in this
Section 6.02 shall be deemed to prohibit the Company or
its Subsidiaries from entering into a sale and
leaseback transaction with respect to its Canary Wharf
facilities at 00 Xxxxxxxxx Xxxxxx, Xxxxxx, Xxxxxxx.
The Company agrees that any proceeds from such a sale
and leaseback transaction will be promptly applied to
prepay any amounts outstanding under this Agreement."
SECTION 1.09. Amendment to Section 6.06(e).
Section 6.06(e) of the Credit Agreement is hereby amended to
read in its entirety as follows:
"(e) in an aggregate principal amount outstanding
at any time for all Subsidiaries that, when
aggregated with the amount of debt secured by
Liens permitted pursuant to Section 6.01(m) and
the aggregate book value or sale price of the
assets sold in sale and leaseback transactions
permitted pursuant to Section 6.02 (but not
including the sale and leaseback transaction
described in the last sentence of Section 6.02)
does not exceed $40,000,000."
SECTION 1.10. Amendment to Section 6.07.
Section 6.07 of the Credit Agreement is hereby amended by
deleting such Section in its entirety and by substituting,
as of the Effective Date, the following:
"Consolidated Tangible Net Worth. The Company
will not permit Consolidated Tangible Net Worth at any
time to be less than the amount set forth below for the
time period set forth below:
Until and on 06/30/98: $175,000,000
After 06/30/98 until $150,000,000
12/31/98:
On and after 12/31/98 until
3/31/99: $175,000,000
On and after 03/31/99 until
and on 6/30/99: $175,000,000 plus 25% of
cumulative Consolidated Net
Income from 01/01/99
After 06/30/99 until
12/31/99: $165,000,000
On and after 12/31/99: $175,000,000 plus 25% of
cumulative Consolidated Net
Income from 01/01/99.
SECTION 1.11. Amendment to Schedule 2.01.
Schedule 2.01 to the Credit Agreement is hereby amended by
deleting it in its entirety and replacing it with the new
Schedule 2.01 attached hereto.
SECTION 2. Representations, Warranties and
Agreements. The Company, as to itself and each of its
Subsidiaries, and each Borrowing Subsidiary, as to itself,
hereby represents and warrants to and agrees with each
Lender, the Administrative Agent and the Syndication Agent
that:
(a) The representations and warranties set forth
in Article IV of the Credit Agreement, as amended
hereby, are true and correct in all material respects
on and as of the date hereof with the same effect as if
made on and as of such date, except to the extent such
representations and warranties expressly relate to an
earlier date.
(b) The execution and delivery of this Amendment
and the performance by the Company and each Borrowing
Subsidiary of the Credit Agreement, as amended by this
Amendment, (i) have been duly authorized by all
requisite action and (ii) will not (I) violate (x) any
provision of law, statute, rule or regulation, or of
the certificate of incorporation, by-laws or other
constitutive documents of the Company or any of its
Subsidiaries, (y) any order of any Governmental
Authority or (z) any provision of any indenture, any
agreement for borrowed money, or any other material
agreement or instrument to which the Company or any of
its Subsidiaries is a party or by which any of them or
any of their property is or may be bound, (II) be in
conflict with, result in a breach of or constitute
(alone or with notice or lapse of time or both) a
default under any such indenture, agreement for
borrowed money or other material agreement or
instrument or (III) result in the creation or
imposition of any Lien upon or with respect to any
property or assets now owned or hereafter acquired by
the Company or any of its Subsidiaries.
(c) This Amendment has been duly executed and
delivered by the Company. Each of this Amendment and
the Credit Agreement as amended hereby constitutes a
legal, valid and binding obligation of the Company and
each Borrowing Subsidiary, enforceable against the
Company and each Borrowing Subsidiary in accordance
with its terms, except as enforceability may be limited
by (i) any applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting
the enforcement of creditors' rights generally and (ii)
general principles of equity.
(d) As of the Effective Date, after giving effect
to this Amendment, no Event of Default or Default has
occurred and is continuing.
SECTION 3. Conditions to Effectiveness. This
Amendment shall become effective as of the date first above
written (the "Effective Date") upon satisfaction of the
following conditions:
(a) The Administrative Agent shall have received
duly executed counterparts hereof which, when taken
together, bear the authorized signatures of the Company
and the Required Lenders.
(b) The Administrative Agent shall have received
such other documents, instruments, certificates and
opinions as it or its counsel shall have reasonably
requested.
(c) The Administrative Agent shall have received
payment for all fees and expenses in connection with
this Amendment, including the reasonable fees, charges
and disbursements of Cravath, Swaine & Xxxxx, counsel
for the Administrative Agent.
SECTION 4. Credit Agreement. Except as
specifically stated herein, the Credit Agreement shall
continue in full force and effect in accordance with the
provisions thereof. As used therein, the terms "Agreement",
"herein", "hereunder", "hereto", "hereof" and words similar
import shall, unless the context otherwise requires, refer
to the Credit Agreement as modified hereby.
SECTION 5. Applicable Law. THIS AMENDMENT SHALL
BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF
THE STATE OF NEW YORK.
SECTION 6. Counterparts. This Amendment may be
executed in counterparts (and by different parties hereto on
different counterparts), each of which shall constitute an
original but all of which, when taken together, shall
constitute a single instrument.
SECTION 7. Expenses. The Company agrees to
reimburse the Administrative Agent for its out-of-pocket
expenses in connection with this Amendment, including the
reasonable fees, charges and disbursements of Cravath,
Swaine & Xxxxx, counsel for the Administrative Agent.
IN WITNESS WHEREOF, the parties hereto have caused
this Amendment to be duly executed by their respective
authorized officers as of the date first above written.
THE READER'S DIGEST
ASSOCIATION, INC.
by
/s/ Xxxxx X. Xxxxxxxx
Name: Xxxxx X. Xxxxxxxx
Title: Vice President &
Treasurer
THE CHASE MANHATTAN BANK,
individually and as
Administrative Agent
by
/s/ Xxxxx X. Xxxxx
Name: Xxxxx X. Xxxxx
Title: Vice President
XXXXXX GUARANTY TRUST COMPANY
OF NEW YORK
by
/s/ Xxxxx X. Xxxxx
Name: Xxxxx X. Xxxxx
Title: Vice President
BARCLAYS BANK PLC
by
/s/ Xxxxxxx Xxxxxxx
Name: Xxxxxxx Xxxxxxx
Title: Vice President
CITIBANK, N.A.
by
/s/ Xxxxxxxx X. Xxxx
Name: Xxxxxxxx X. Xxxx
Title: Attorney-In-Fact
COMMERZBANK AG, New York
and/or Grand Cayman Branches
by
/s/ A. Xxxxxx Xxxxxx-Xxxxxxx
Name:A. Xxxxxx Xxxxxx-Xxxxxxx
Title: Assistant Treasurer
by
/s/ Xxxxxx X. Xxxxxxxxxxx
Name: Xxxxxx X. Xxxxxxxxxxx
Title: Vice President
MELLON BANK, N.A.
by
/s/ Xxxxx XxXxxxx
Name: Xxxxx XxXxxxx
Title: Vice President
ISTITUTO BANCARIO SAN PAOLO DI
TORINO
by
/s/ Xxxxxx X. XxXxxxx
Name: Xxxxxx X. XxXxxxx
Title: Vice President
by
/s/ X. Xxxxx
Name: X. Xxxxx
Title: Vice President
NATIONAL WESTMINSTER BANK PLC, NEW YORK BRANCH
by
/s/ Xxxx Xxxxx Xxxxx
Name: Xxxx Xxxxx Xxxxx
Title: Vice President
NATIONAL WESTMINSTER BANK PLC, NASSAU BRANCH
by
/s/ Xxxx Xxxxx Xxxxx
Name: Xxxx Xxxxx Xxxxx
Title: Vice President
THE SUMITOMO BANK, LIMITED, NEW YORK BRANCH
by
/s/ Xxxx X. Xxxxxxxxx
Name: Xxxx X. Xxxxxxxxx
Title: Joint General Manager
SVENSKA HANDELSBANKEN
by
/s/ Xxxxxxxx Xxxxxx
Name: Xxxxxxxx Xxxxxx
Title: Senior Vice President
by
/s/ Xxxx Xxxxxxx
Name: Xxxx Xxxxxxx
Title: Vice President
BANQUE NATIONALE DE PARIS
by
/s/ Xxxxx Xxxxxx
Name: Xxxxx Xxxxxx
Title: Vice President
BANQUE NATIONALE DE PARIS
by
/s/ Xxxxx X. Xxxxxx
Name: Xxxxx X. Xxxxxx Title: Vice President
UNION BANK OF SWITZERLAND, NEW YORK BRANCH
by
/s/ Xxxxxxxx Xxxx
Name: Xxxxxxxx Xxxx
Title: Assistant Treasurer
by
/s/ Xxxxxxx Xxxxxxx
Name: Xxxxxxx Xxxxxxx
Title: Director
ABN AMRO BANK N.V.
by
/s/ Xxxxxxx O'X. Xxxxx
Name: Xxxxxxx O'X. Xxxxx
Title: Group Vice President
by
/s/ Xxxxx Xxxxxxxxxx
Name: Xxxxx Xxxxxxxxxx
Title: Vice President
THE FUJI BANK, LIMITED, NEW YORK BRANCH
by
/s/ Xxxxxxx Xxxxxxx
Name: Xxxxxxx Xxxxxxx
Title: Vice President & Manager
ING BANK N.V.
by
/s/ X.X. xxx Xxxxxxxxxx
Name: X.X. xxx Xxxxxxxxxx
Title: Company Lawyer
by
/s/ J.R. Xxxxxxx
Name: J.R. Xxxxxxx
Title: Company Lawyer
CIBC INC.
by
/s/ Xxxxxxx XxXxxxxx
Name: Xxxxxxx XxXxxxxx
Title: Executive Director
CIBC Xxxxxxxxxxx Corp.,
as Agent
Guarantor
THE READER'S DIGEST ASSOCIATION, INC.
by
/s/ Xxxxx X. Xxxxxxxx
Name: Xxxxx X. Xxxxxxxx
Title: Vice President &
Treasurer
X. X. XXXXXX SECURITIES INC., as Syndication Agent
by
/s/ Xxxxxxx Xxxxx
Name: Xxxxxxx Xxxxx
Title: Vice President
