EXHIBIT 4.2
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT dated March 3, 2004 (this
"Agreement") is entered into by and among The Reader's Digest Association, Inc.,
a Delaware corporation (the "Company"), and X.X. Xxxxxx Securities Inc., ABN
AMRO Incorporated, Commerzbank Aktiengesellschaft, The Royal Bank of Scotland,
plc, and Wachovia Securities Inc. (the "Initial Purchasers").
The Company and the Initial Purchasers are parties to the
Purchase Agreement dated February 27, 2004 (the "Purchase Agreement"), which
provides for the sale by the Company to the Initial Purchasers of $300,000,000
aggregate principal amount of the Company's 6 1/2% Senior Notes due 2011 (the
"Securities"). As an inducement to the Initial Purchasers to enter into the
Purchase Agreement, the Company has agreed to provide to the Initial Purchasers
and their direct and indirect transferees the registration rights set forth in
this Agreement. The execution and delivery of this Agreement is a condition to
the closing under the Purchase Agreement.
In consideration of the foregoing, the parties hereto agree as
follows:
1. Definitions. As used in this Agreement, the following
terms shall have the following meanings:
"Business Day" shall mean any day that is not a Saturday,
Sunday or other day on which commercial banks in New York City are authorized or
required by law to remain closed.
"Closing Date" shall mean the Closing Date as defined in the
Purchase Agreement.
"Company" shall have the meaning set forth in the preamble and
shall also include the Company's successors.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended from time to time.
"Exchange Dates" shall have the meaning set forth in Section
2(a)(ii) hereof.
"Exchange Offer" shall mean the exchange offer by the Company
of Exchange Securities for Registrable Securities pursuant to Section 2(a)
hereof.
"Exchange Offer Registration" shall mean a registration under
the Securities Act effected pursuant to Section 2(a) hereof.
"Exchange Offer Registration Statement" shall mean an exchange
offer registration statement on Form S-4 (or, if applicable, on another
appropriate form) and all amendments and supplements to such registration
statement, in each case including the Prospectus contained therein, all exhibits
thereto and any document incorporated by reference therein.
"Exchange Securities" shall mean senior notes issued by the
Company under the Indenture containing terms identical to the Securities (except
that the Exchange Securities will not be subject to restrictions on transfer or
to any increase in annual interest rate for failure to comply with this
Agreement and interest thereon shall accrue from the last date on which interest
has been paid on the Securities or, if no such interest has been paid, from the
date of issuance of the Securities) and to be offered to Holders of Securities
in exchange for Securities pursuant to the Exchange Offer.
"Holders" shall mean the Initial Purchasers, for so long as
they own any Registrable Securities, and each of their successors, assigns and
direct and indirect transferees who become owners of Registrable Securities
under the Indenture; provided, however, that for purposes of Sections 4 and 5 of
this Agreement, the term "Holders" shall include Participating Broker-Dealers.
"Indenture" shall mean the Indenture relating to the
Securities dated as of March 3, 2004 between the Company and JPMorgan Chase
Bank, as trustee, and as the same may be amended from time to time in accordance
with the terms thereof.
"Initial Purchasers" shall have the meaning set forth in the
preamble.
"Majority Holders" shall mean the Holders of a majority of the
aggregate principal amount of outstanding Registrable Securities; provided,
however, that whenever the consent or approval of Holders of a specified
percentage of Registrable Securities is required hereunder, Registrable
Securities owned directly or indirectly by the Company or any of its affiliates
shall not be counted in determining whether such consent or approval was given
by the Holders of such required percentage or amount.
"Participating Broker-Dealers" shall have the meaning set
forth in Section 4(a) hereof.
"Person" shall mean an individual, partnership, limited
liability company, corporation, trust or unincorporated organization, or a
government or agency or political subdivision thereof.
"Prospectus" shall mean the prospectus included in a
Registration Statement, including any preliminary prospectus, and any such
prospectus as amended or supplemented by any prospectus supplement, including a
prospectus supplement with respect to the terms of the offering of any portion
of the Registrable Securities covered by a Shelf Registration Statement, and by
all other amendments and supplements to such prospectus, and in each case
including any document incorporated by reference therein.
"Purchase Agreement" shall have the meaning set forth in the
preamble.
"Registrable Securities" shall mean the Securities; provided,
however, that the Securities shall cease to be Registrable Securities (i) when a
Registration Statement with respect to such Securities has been declared
effective under the Securities Act and such Securities have been exchanged, sold
or otherwise disposed of pursuant to such
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Registration Statement, (ii) when such Securities are eligible to be sold
pursuant to Rule 144(k) (or any similar provision then in force, but not Rule
144A) under the Securities Act or (iii) when such Securities cease to be
outstanding.
"Registration Expenses" shall mean any and all expenses
incident to performance of or compliance by the Company with this Agreement,
including, without limitation, (i) all SEC, stock exchange or National
Association of Securities Dealers, Inc. registration and filing fees, (ii) all
fees and expenses incurred in connection with compliance with state securities
or blue sky laws (including reasonable fees and disbursements of counsel for any
Underwriters or Holders in connection with blue sky qualification of any
Exchange Securities or Registrable Securities), (iii) all expenses of any
Persons in preparing, or assisting in preparing, word processing, printing and
distributing any Registration Statement, any Prospectus and any amendments or
supplements thereto and any other documents relating to the performance of and
compliance with this Agreement, (iv) all rating agency fees, (v) all fees and
disbursements relating to the qualification of the Indenture under applicable
securities laws, (vi) the fees and disbursements of the Trustee and its counsel,
(vii) the fees and disbursements of counsel for the Company and, in the case of
a Shelf Registration Statement, the reasonable fees and disbursements of one
counsel for the Holders (which counsel shall be selected by the Majority Holders
and which counsel may also be counsel for the Initial Purchasers) and (viii) the
fees and disbursements of the independent public accountants of the Company,
including the expenses of any special audits or "comfort" letters required by or
incident to the performance of and compliance with this Agreement, but excluding
fees and expenses of counsel to the Underwriters (other than fees and expenses
set forth in clause (ii) above) or the Holders and underwriting discounts and
commissions and transfer taxes, if any, relating to the sale or disposition of
Registrable Securities by a Holder.
"Registration Statement" shall mean any registration statement
of the Company that covers any of the Exchange Securities or Registrable
Securities pursuant to the provisions of this Agreement and all amendments and
supplements to any such registration statement, including post-effective
amendments, in each case including the Prospectus contained therein, all
exhibits thereto and any document incorporated by reference therein.
"SEC" shall mean the Securities and Exchange Commission.
"Securities" shall have the meaning set forth in the preamble.
"Securities Act" shall mean the Securities Act of 1933, as
amended from time to time.
"Shelf Effectiveness Period" shall have the meaning set forth
in Section 2(b) hereof.
"Shelf Registration" shall mean a registration effected
pursuant to Section 2(b) hereof.
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"Shelf Registration Statement" shall mean a "shelf"
registration statement of the Company that covers all the Registrable Securities
(but no other securities unless approved by the Holders owning a majority of the
Registrable Securities to be covered by such Shelf Registration Statement) on an
appropriate form under Rule 415 under the Securities Act, or any similar rule
that may be adopted by the SEC, and all amendments and supplements to such
registration statement, including post-effective amendments, in each case
including the Prospectus contained therein, all exhibits thereto and any
document incorporated by reference therein.
"Trust Indenture Act" shall mean the Trust Indenture Act of
1939, as amended from time to time.
"Trustee" shall mean the trustee with respect to the
Securities under the Indenture.
"Underwriter" shall have the meaning set forth in Section 3
hereof.
"Underwritten Offering" shall mean an offering in which
Registrable Securities are sold to an Underwriter for reoffering to the public.
2. Registration Under the Securities Act. (a) To the
extent not prohibited by any applicable law or applicable interpretations of the
Staff of the SEC, the Company shall use its reasonable best efforts to (i) cause
to be filed an Exchange Offer Registration Statement covering an offer to the
Holders to exchange all the Registrable Securities for Exchange Securities and
(ii) have such Registration Statement remain effective until the earlier of (A)
180 days after the effectiveness of such Registration Statement and (B) the date
on which all Participating Broker-Dealers have sold their respective allotments
of Exchange Securities. The Company shall commence the Exchange Offer promptly
after the Exchange Offer Registration Statement is declared effective by the SEC
and use its reasonable best efforts to complete the Exchange Offer not later
than 60 days after such effective date. For purposes of this section, "complete"
shall mean compliance by the Company with the provisions set forth below in this
Section 2(a).
The Company shall commence the Exchange Offer by mailing the
related Prospectus, appropriate letters of transmittal and other accompanying
documents to each Holder stating, in addition to such other disclosures as are
required by applicable law,
(i) that the Exchange Offer is being made pursuant to this
Agreement and that all Registrable Securities validly tendered
and not properly withdrawn will be accepted for exchange;
(ii) the dates of acceptance for exchange (which shall be a period
of at least 20 Business Days from the date such notice is
mailed) (the "Exchange Dates");
(iii) that any Registrable Security not tendered will remain
outstanding and continue to accrue interest but will not
retain any rights under this Agreement;
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(iv) that any Holder electing to have a Registrable Security
exchanged pursuant to the Exchange Offer will be required to
surrender such Registrable Security, together with the
appropriate letters of transmittal, to the institution and at
the address (located in the Borough of Manhattan, The City of
New York) and in the manner specified in the notice, prior to
the close of business on the last Exchange Date; and
(v) that any Holder will be entitled to withdraw its election, not
later than the close of business on the last Exchange Date, by
sending to the institution and at the address (located in the
Borough of Manhattan, The City of New York) specified in the
notice, a telegram, telex, facsimile transmission or letter
setting forth the name of such Holder, the principal amount of
Registrable Securities delivered for exchange and a statement
that such Holder is withdrawing its election to have such
Securities exchanged.
As a condition to participating in the Exchange Offer, a
Holder will be required to represent to the Company that (i) any Exchange
Securities to be received by it will be acquired in the ordinary course of its
business, (ii) at the time of the commencement of the Exchange Offer it has no
arrangement or understanding with any Person to participate in the distribution
(within the meaning of the Securities Act) of the Exchange Securities in
violation of the provisions of the Securities Act, (iii) it is not an
"affiliate" (within the meaning of Rule 405 under Securities Act) of the Company
and (iv) if such Holder is a broker-dealer that will receive Exchange Securities
for its own account in exchange for Registrable Securities that were acquired as
a result of market-making or other trading activities, then such Holder will
deliver a Prospectus in connection with any resale of such Exchange Securities.
As soon as practicable after the last Exchange Date, the
Company shall:
(i) accept for exchange Registrable Securities or portions thereof
validly tendered and not properly withdrawn pursuant to the
Exchange Offer; and
(ii) deliver, or cause to be delivered, to the Trustee for
cancellation all Registrable Securities or portions thereof so
accepted for exchange by the Company and issue, and cause the
Trustee to promptly authenticate and deliver to each Holder,
Exchange Securities equal in principal amount to the principal
amount of the Registrable Securities surrendered by such
Holder.
The Company shall use its reasonable best efforts to complete
the Exchange Offer as provided above and shall comply with the applicable
requirements of the Securities Act, the Exchange Act and other applicable laws
and regulations in connection with the each exchange pursuant to the Exchange
Offer. The Exchange Offer shall not be subject to any conditions, other than
that the Exchange Offer does not violate any applicable law or applicable
interpretations of the Staff of the SEC and the due tendering of Registerable
Securities in accordance with the Exchange Offer.
(b) In the event that (i) the Company determines that the
Exchange Offer Registration Statement provided for in Section 2(a) above is not
available or may not be
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completed as soon as practicable after the last Exchange Date because it would
violate any applicable law or applicable interpretations of the Staff of the
SEC, (ii) the Exchange Offer is not for any other reason completed by July 1,
2004 (the "Target Exchange Date") or (iii) upon completion of the Exchange Offer
any Initial Purchaser holding an unsold allotment of Registrable Securities
shall so request in connection with any offering or sale of Registrable
Securities, the Company shall use its reasonable best efforts to cause to be
filed as soon as practicable after such determination, date or request, as the
case may be, a Shelf Registration Statement providing for the sale of all the
Registrable Securities by the Holders thereof and to have such Shelf
Registration Statement declared effective by the SEC. To the extent that a Shelf
Registration Statement is required to be filed solely pursuant to clause (ii)
above, but the Exchange Offer is completed on a date later than the Target
Exchange Date, upon consummation of such Exchange Offer, the Company will no
longer be required to file, make effective or continue the effectiveness of such
Shelf Registration Statement.
In the event that the Company is required to file a Shelf
Registration Statement pursuant to clause (iii) of the preceding paragraph, the
Company shall use its reasonable best efforts to file and have declared
effective by the SEC both an Exchange Offer Registration Statement pursuant to
Section 2(a) with respect to all Registrable Securities and a Shelf Registration
Statement (which may be a combined Registration Statement with the Exchange
Offer Registration Statement) with respect to offers and sales of Registrable
Securities held by the Initial Purchasers after completion of the Exchange
Offer.
The Company agrees to use its reasonable best efforts to keep
the Shelf Registration Statement continuously effective until the expiration of
the period referred to in Rule 144(k) under the Securities Act with respect to
the Registrable Securities or such shorter period that will terminate when all
the Registrable Securities covered by the Shelf Registration Statement have been
sold pursuant to the Shelf Registration Statement (the "Shelf Effectiveness
Period"). The Company further agrees to supplement or amend the Shelf
Registration Statement and the related Prospectus if required by the rules,
regulations or instructions applicable to the registration form used by the
Company for such Shelf Registration Statement or by the Securities Act or by any
other rules and regulations thereunder for shelf registration or if reasonably
requested by a Holder of Registrable Securities with respect to information
relating to such Holder, and to use its reasonable best efforts to cause any
such amendment to become effective and such Shelf Registration Statement and
Prospectus to become usable as soon as thereafter practicable. The Company
agrees to furnish to the Holders of Registrable Securities copies of any such
supplement or amendment promptly after its being used or filed with the SEC.
(c) The Company shall pay all Registration Expenses in
connection with the registration pursuant to Section 2(a) and Section 2(b)
hereof. Each Holder shall pay all underwriting discounts and commissions and
transfer taxes, if any, relating to the sale or disposition of such Holder's
Registrable Securities pursuant to the Shelf Registration Statement.
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(d) An Exchange Offer Registration Statement pursuant to
Section 2(a) hereof or a Shelf Registration Statement pursuant to Section 2(b)
hereof will not be deemed to have become effective unless it has been declared
effective by the SEC.
In the event that either the Exchange Offer is not completed
or the Shelf Registration Statement, if required hereby, is not declared
effective on or prior to July 1, 2004, the interest rate on the Registrable
Securities will be increased by 1.00% per annum until the Exchange Offer is
completed or the Shelf Registration Statement, if required hereby, is declared
effective by the SEC or the Securities become freely tradable under the
Securities Act.
If the Shelf Registration Statement has been declared
effective and thereafter either ceases to be effective or the Prospectus
contained therein ceases to be usable at any time during the Shelf Effectiveness
Period, and such failure to remain effective or usable exists for more than 30
days (whether or not consecutive) in any 12-month period, then the interest rate
on the Registrable Securities will be increased by 1.00% per annum commencing on
the 31st day in such 12-month period and ending on such date that the Shelf
Registration Statement has again been declared effective or the Prospectus again
becomes usable.
(e) Without limiting the remedies available to the
Initial Purchasers and the Holders, the Company acknowledges that any failure by
the Company to comply with its obligations under Section 2(a) and Section 2(b)
hereof may result in material irreparable injury to the Initial Purchasers or
the Holders for which there is no adequate remedy at law, that it will not be
possible to measure damages for such injuries precisely and that, in the event
of any such failure, the Initial Purchasers or any Holder may obtain such relief
as may be required to specifically enforce the Company's obligations under
Section 2(a) and Section 2(b) hereof.
3. Registration Procedures. In connection with its
obligations pursuant to Section 2(a) and Section 2(b) hereof, the Company shall
as expeditiously as possible:
(a) prepare and file with the SEC a Registration
Statement on the appropriate form under the Securities Act, which form
(x) shall be selected by the Company, (y) shall, in the case of a Shelf
Registration, be available for the sale of the Registrable Securities
by the selling Holders thereof and (z) shall comply as to form in all
material respects with the requirements of the applicable form and
include all financial statements required by the SEC to be filed
therewith; and use its reasonable best efforts to cause such
Registration Statement to become effective and remain effective for the
applicable period in accordance with Section 2 hereof;
(b) prepare and file with the SEC such amendments and
post-effective amendments to each Registration Statement as may be
necessary to keep such Registration Statement effective for the
applicable period in accordance with Section 2 hereof and cause each
Prospectus to be supplemented by any required prospectus supplement
and, as so supplemented, to be filed pursuant to Rule 424 under the
Securities Act; and keep each Prospectus current during the period
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described in Section 4(3) of and Rule 174 under the Securities Act that
is applicable to transactions by brokers or dealers with respect to the
Registrable Securities or Exchange Securities;
(c) in the case of a Shelf Registration, furnish to each
Holder of Registrable Securities, to counsel for the Initial
Purchasers, to counsel for such Holders and to each Underwriter of an
Underwritten Offering of Registrable Securities, if any, without
charge, as many copies of each Prospectus, including each preliminary
Prospectus, and any amendment or supplement thereto, in order to
facilitate the sale or other disposition of the Registrable Securities
thereunder; and the Company consents to the use of such Prospectus and
any amendment or supplement thereto in accordance with applicable law
by each of the selling Holders of Registrable Securities and any such
Underwriters in connection with the offering and sale of the
Registrable Securities covered by and in the manner described in such
Prospectus or any amendment or supplement thereto in accordance with
applicable law;
(d) use its reasonable best efforts to register or
qualify the Registrable Securities under all applicable state
securities or blue sky laws of such jurisdictions as any Holder of
Registrable Securities covered by a Registration Statement shall
reasonably request in writing by the time the applicable Registration
Statement is declared effective by the SEC; cooperate with the Holders
in connection with any filings required to be made with the National
Association of Securities Dealers, Inc.; and do any and all other acts
and things that may be reasonably necessary or advisable to enable each
Holder to complete the disposition in each such jurisdiction of the
Registrable Securities owned by such Holder; provided, however, that
the Company shall not be required to (i) qualify as a foreign
corporation or other entity or as a dealer in securities in any such
jurisdiction where it would not otherwise be required to so qualify,
(ii) file any general consent to service of process in any such
jurisdiction or (iii) subject itself to taxation in any such
jurisdiction if it is not so subject;
(e) in the case of a Shelf Registration, notify each
Holder of Registrable Securities, counsel for such Holders and counsel
for the Initial Purchasers promptly and, if requested by any such
Holder or counsel, confirm such advice in writing (i) when a
Registration Statement has become effective and when any post-effective
amendment thereto has been filed and becomes effective, (ii) of any
request by the SEC or any state securities authority for amendments and
supplements to a Registration Statement and Prospectus or for
additional information after the Registration Statement has become
effective, (iii) of the issuance by the SEC or any state securities
authority of any stop order suspending the effectiveness of a
Registration Statement or the initiation of any proceedings for that
purpose, (iv) if, between the effective date of a Registration
Statement and the closing of any sale of Registrable Securities covered
thereby, the representations and warranties of the Company contained in
any underwriting agreement, securities sales agreement or other similar
agreement, if any, relating to an offering of such Registrable
Securities cease to be true and correct in all material respects or if
the Company receives any notification with respect to the suspension of
the qualification of the Registrable
8
Securities for sale in any jurisdiction or the initiation of any
proceeding for such purpose, (v) of the happening of any event during
the period a Shelf Registration Statement is effective that makes any
statement made in such Registration Statement or the related Prospectus
untrue in any material respect or that requires the making of any
changes in such Registration Statement or Prospectus in order to make
the statements therein not misleading and (vi) of any determination by
the Company that a post-effective amendment to a Registration Statement
would be appropriate;
(f) use its reasonable best efforts to obtain the
withdrawal of any order suspending the effectiveness of a Registration
Statement as soon as practicable and provide prompt notice to each
Holder of the withdrawal of any such order;
(g) in the case of a Shelf Registration, furnish to each
Holder of Registrable Securities, without charge, at least one
conformed copy of each Registration Statement and any post-effective
amendment thereto (without any documents incorporated therein by
reference or exhibits thereto, unless requested);
(h) in the case of a Shelf Registration, cooperate with
the selling Holders of Registrable Securities to facilitate the timely
preparation and delivery of certificates representing Registrable
Securities to be sold and not bearing any restrictive legends and
enable such Registrable Securities to be issued in such denominations
and registered in such names (consistent with the provisions of the
Indenture) as the selling Holders may reasonably request at least two
Business Days prior to the closing of any sale of Registrable
Securities;
(i) in the case of a Shelf Registration, upon the
occurrence of any event contemplated by Section 3(e)(v) hereof, use its
reasonable best efforts to prepare and file with the SEC a supplement
or post-effective amendment to a Registration Statement or the related
Prospectus or any document incorporated therein by reference or file
any other required document so that, as thereafter delivered to
purchasers of the Registrable Securities, such Prospectus will not
contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading; and the
Company shall notify the Holders of Registrable Securities to suspend
use of the Prospectus as promptly as practicable after the occurrence
of such an event, and such Holders hereby agree to suspend use of the
Prospectus until the Company has amended or supplemented the Prospectus
to correct such misstatement or omission;
(j) a reasonable time prior to the filing of any
Registration Statement, any Prospectus, any amendment to a Registration
Statement or amendment or supplement to a Prospectus or of any document
that is to be incorporated by reference into a Registration Statement
or a Prospectus after initial filing of a Registration Statement,
provide copies of such document to the Initial Purchasers and their
counsel (and, in the case of a Shelf Registration Statement, to the
Holders of Registrable Securities and their counsel) and make such of
the representatives of the Company as shall be reasonably requested by
the Initial Purchasers or their
9
counsel (and, in the case of a Shelf Registration Statement, the
Holders of Registrable Securities or their counsel) available for
discussion of such document; and the Company shall not, at any time
after initial filing of a Registration Statement, file any Prospectus,
any amendment of or supplement to a Registration Statement or a
Prospectus, or any document that is to be incorporated by reference
into a Registration Statement or a Prospectus, of which the Initial
Purchasers and their counsel (and, in the case of a Shelf Registration
Statement, the Holders of Registrable Securities and their counsel)
shall not have previously been advised and furnished a copy or to which
the Initial Purchasers or their counsel (and, in the case of a Shelf
Registration Statement, the Holders or their counsel) shall reasonably
object; provided, however, that the foregoing shall not prevent the
Company from fulfilling its ongoing reporting requirements under
applicable law;
(k) obtain a CUSIP number for all Exchange Securities or
Registrable Securities, as the case may be, not later than the
effective date of a Registration Statement;
(l) cause the Indenture to be qualified under the Trust
Indenture Act (unless an exemption therefrom is available) in
connection with the registration of the Exchange Securities or
Registrable Securities, as the case may be; cooperate with the Trustee
and the Holders to effect such changes to the Indenture as may be
required for the Indenture to be so qualified in accordance with the
terms of the Trust Indenture Act; and execute, and use its reasonable
best efforts to cause the Trustee to execute, all documents as may be
required to effect such changes and all other forms and documents
required to be filed with the SEC to enable the Indenture to be so
qualified in a timely manner;
(m) in the case of a Shelf Registration, make available
for inspection prior to the filing of the Shelf Registration Statement
and during the Shelf Effectiveness Period by a representative of the
Holders of the Registrable Securities (an "Inspector"), any Underwriter
participating in any disposition pursuant to such Shelf Registration
Statement, and attorneys and accountants designated by the Holders, at
reasonable times and in a reasonable manner, all pertinent financial
and other records, pertinent documents and properties of the Company,
and cause the respective officers, directors and employees of the
Company to supply all information reasonably requested by any such
Inspector, Underwriter, attorney or accountant in connection with a
Shelf Registration Statement as shall be reasonably necessary to enable
them to conduct a reasonable investigation within the meaning of
Section 11 of the Securities Act or to otherwise establish any
applicable due diligence defense; provided, however, that if any such
information is identified by the Company as being confidential or
proprietary, it shall be maintained in confidence and shall not be
disclosed to any other Person until such time as (i) the disclosure of
such information is required to be set forth in the Shelf Registration
Statement or the prospectus included therein or in an amendment to such
Shelf Registration Statement or an amendment or supplement to such
prospectus in order that such Shelf Registration Statement, prospectus,
amendment or supplement as the case may be, does not contain an untrue
statement of a material fact or omit to state a material fact required
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to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing, (in which case
the subject information may only be disclosed to another Person
following such time as the Shelf Registration Statement in which such
information is included is publicly filed by the Company with the SEC),
(ii) such Person shall be legally compelled to disclose such
information pursuant to a subpoena or other order from a court of
competent jurisdiction or request from a governmental or other
regulatory agency or body (but only after such Person shall have given
the Company prior written notice of such requirement) or (iii) the
information has been made generally available to the public. Each such
Inspector or other Person will be required to agree to keep information
obtained by it as a result of its inspections pursuant to this
Agreement confidential and not to use such information as the basis for
any market transactions in the securities of the Company unless and
until such is made generally available to the public. Each such
Inspector or other Person will be required to further agree that it
will, upon learning that disclosure of such information is sought under
(ii) above, give notice to the Company and allow the Company at its
expense to undertake appropriate action to prevent disclosure of the
information deemed confidential;
(n) in the case of a Shelf Registration, use its
reasonable best efforts to cause all Registrable Securities to be
listed on any securities exchange or any automated quotation system on
which similar securities issued or guaranteed by the Company are then
listed if requested by the Majority Holders, to the extent such
Registrable Securities satisfy applicable listing requirements;
(o) if reasonably requested by any Holder of Registrable
Securities covered by a Shelf Registration Statement, promptly
incorporate in a Prospectus supplement or post-effective amendment such
information with respect to such Holder as such Holder reasonably
requests to be included therein and make all required filings of such
Prospectus supplement or such post-effective amendment as soon as
reasonably practicable after the Company has received notification of
the matters to be incorporated in such filing; and
(p) in the case of a Shelf Registration, enter into such
customary agreements and take all such other actions as may be
reasonably required in connection therewith (including those requested
by the Holders of a majority in principal amount of the Registrable
Securities being sold) in order to expedite or facilitate the
disposition of such Registrable Securities including, but not limited
to, an Underwritten Offering and in such connection, (i) in connection
with an Underwritten Offering, to the extent possible, make such
representations and warranties to the Holders and any Underwriters of
such Registrable Securities with respect to the business of the Company
and its subsidiaries, the Registration Statement, Prospectus and
documents incorporated by reference or deemed incorporated by
reference, if any, in each case, in form, substance and scope as are
customarily made by issuers to underwriters in underwritten offerings
and confirm the same if and when requested, (ii) in connection with an
Underwritten Offering, obtain opinions of counsel to the Company (which
counsel and opinions, in scope and substance similar to that provided
in the Purchase Agreement, as modified for a registered offering,
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shall be reasonably satisfactory to the Holders and such Underwriters
and their respective counsel) addressed to each selling Holder and
Underwriter of Registrable Securities, covering the matters customarily
covered in opinions requested in underwritten offerings, (iii) in
connection with an Underwritten Offering, obtain "comfort" letters from
the independent certified public accountants of the Company (and, if
necessary, any other certified public accountant of any subsidiary of
the Company, or of any business acquired by the Company for which
financial statements and financial data are or are required to be
included in the Registration Statement) addressed to each selling
Holder and Underwriter of Registrable Securities, such letters to be in
customary form and covering matters of the type customarily covered in
"comfort" letters in connection with underwritten offerings and (iv) in
connection with an Underwritten Offering, deliver such documents and
certificates as may be reasonably requested by the Holders of a
majority in principal amount of the Registrable Securities being sold
or the Underwriters, and which are customarily delivered in
underwritten offerings, to evidence the continued validity of the
representations and warranties of the Company made pursuant to clause
(i) above and to evidence compliance with any customary conditions
contained in an underwriting agreement.
In the case of a Shelf Registration Statement, the Company may
require, as a condition to including such Holder's Registrable Securities in
such Shelf Registration Statement, each Holder of Registrable Securities to
furnish to the Company such information regarding such Holder and the proposed
disposition by such Holder of such Registrable Securities as the Company may
from time to time reasonably request in writing.
In the case of a Shelf Registration Statement, each Holder of
Registrable Securities agrees that, upon receipt of any notice from the Company
of the happening of any event of the kind described in Section 3(e)(iii) or
3(e)(v) hereof, such Holder will forthwith discontinue disposition of
Registrable Securities pursuant to a Registration Statement until such Holder's
receipt of the copies of the supplemented or amended Prospectus contemplated by
Section 3(i) hereof and, if so directed by the Company, such Holder will deliver
to the Company all copies in its possession, other than permanent file copies
then in such Holder's possession, of the Prospectus covering such Registrable
Securities that is current at the time of receipt of such notice.
If the Company shall give any such notice to suspend the
disposition of Registrable Securities pursuant to a Registration Statement, the
Company shall extend the period during which the Registration Statement shall be
maintained effective pursuant to this Agreement by the number of days during the
period from and including the date of the giving of such notice to and including
the date when the Holders shall have received copies of the supplemented or
amended Prospectus necessary to resume such dispositions. The Company may give
any such notice only twice during any 365-day period and any such suspensions
shall not exceed 30 days for each suspension and there shall not be more than
two suspensions in effect during any 365-day period.
The Holders of Registrable Securities covered by a Shelf
Registration Statement who desire to do so may sell such Registrable Securities
in an Underwritten
12
offering. In any such Underwritten Offering, the investment banker or investment
bankers and manager or managers (the "Underwriters") that will administer the
offering will be selected by the Majority Holders of the Registrable Securities
included in such offering.
4. Participation of Broker-Dealers in Exchange Offer.
(a) The Staff of the SEC has taken the position that any broker-dealer that
receives Exchange Securities for its own account in the Exchange Offer in
exchange for Securities that were acquired by such broker-dealer as a result of
market-making or other trading activities (a "Participating Broker-Dealer") may
be deemed to be an "underwriter" within the meaning of the Securities Act and
must deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such Exchange Securities.
The Company understands that it is the Staff's position that
if the Prospectus contained in the Exchange Offer Registration Statement
includes a plan of distribution containing a statement to the above effect and
the means by which Participating Broker-Dealers may resell the Exchange
Securities, without naming the Participating Broker-Dealers or specifying the
amount of Exchange Securities owned by them, such Prospectus may be delivered by
Participating Broker-Dealers to satisfy their prospectus delivery obligation
under the Securities Act in connection with resales of Exchange Securities for
their own accounts, so long as the Prospectus otherwise meets the requirements
of the Securities Act.
(b) In light of the above, and notwithstanding the other
provisions of this Agreement, the Company agrees to amend or supplement the
Prospectus contained in the Exchange Offer Registration Statement, as would
otherwise be contemplated by Section 3(i), until the earlier of (A) 180 days
after the effectiveness of such Registration Statement and (B) the date on which
all Participating Broker-Dealers have sold their respective allotments of
Exchange Securities (as such period may be extended pursuant to the penultimate
paragraph of Section 3 of this Agreement), if requested by the Initial
Purchasers or by one or more Participating Broker-Dealers, in order to expedite
or facilitate the disposition of any Exchange Securities by Participating
Broker-Dealers consistent with the positions of the Staff recited in Section
4(a) above. The Company further agrees that Participating Broker-Dealers shall
be authorized to deliver such Prospectus during such period (but not thereafter)
in connection with the resales contemplated by this Section 4.
(c) The Initial Purchasers shall have no liability to the
Company or any Holder with respect to any request that they may make pursuant to
Section 4(b) above.
5. Indemnification and Contribution.
(a) Indemnification of the Initial Purchasers. The
Company agrees to indemnify and hold harmless each Holder (including each
Initial Purchaser), their respective officers and directors, each of their
respective affiliates and each person, if any, who controls any Holder or any
Initial Purchaser within the meaning of either Section 15 of the Securities Act
or Section 20 of the Exchange Act, from and against any and all losses, claims,
damages and liabilities or actions in respect thereof (including without
limitation the reasonable legal fees and other reasonable expenses incurred in
connection with any suit, action or proceeding or any claim asserted) caused by
any untrue statement or alleged untrue
13
statement of a material fact contained in any Registration Statement or any
Prospectus (as amended or supplemented if the Company shall have furnished any
amendments or supplements thereto) or any preliminary Prospectus, or caused by
any omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading;
provided, however, that such losses, claims, damages or liabilities are not
caused by any untrue statement or omission or alleged untrue statement or
omission made in reliance upon and in conformity with information relating to
any Holder furnished to the Company in writing by or on behalf of such Holder
expressly for use therein; and provided further, however, that such losses,
claims, damages or liabilities are not caused by the fact that a Holder sold
Securities to a person to whom there was not sent or given, at or prior to the
written confirmation of such sale, a copy of a preliminary Prospectus or the
Prospectus if the Company has previously furnished copies thereof to such Holder
and the losses, claims, damages or liabilities of such Holder result from an
untrue statement or omission of a material fact contained in the preliminary
Prospectus which was corrected in the Prospectus.
(b) Indemnification of the Company. Each Holder agrees,
severally and not jointly, to indemnify and hold harmless the Company, the other
selling Holders, their respective affiliates, the directors and officers of the
Company and each person who controls the Company or any other selling Holder
within the meaning of Section 15 of the Securities Act and Section 20 of the
Exchange Act, to the same extent as the foregoing indemnity from the Company to
each Holder, but only with reference to information relating to such Holder
furnished to the Company in writing by or on behalf of such Holder expressly for
use in the Offering Memorandum, any amendment or supplement thereto, or the
Preliminary Offering Memorandum.
(c) Notice and Procedures. If any suit, action,
proceeding (including any governmental or regulatory investigation), claim or
demand shall be brought or asserted against any person in respect of which
indemnity may be sought pursuant to either of the two preceding paragraphs, such
person (the "Indemnified Person") shall promptly notify the person against whom
such indemnity may be sought (the "Indemnifying Person") in writing (but the
omission to so notify the indemnifying party shall not relieve it from any
liability which it may have to any Indemnified Person otherwise than under such
subsection except to the extent that it has been materially prejudiced in such
suit, action, proceeding, claim or demand brought hereunder (through the
forfeiture of substantive rights or defenses) by such failure), and the
Indemnifying Person, upon request of the Indemnified Person, shall retain
counsel reasonably satisfactory to the Indemnified Person to represent the
Indemnified Person and any others the Indemnifying Person may designate in such
proceeding and shall pay the reasonable fees and expenses of such counsel
related to such proceeding. In any such proceeding, any Indemnified Person shall
have the right to retain its own counsel, but the fees and expenses of such
counsel shall be at the expense of such Indemnified Person unless (i) the
Indemnifying Person and the Indemnified Person shall have mutually agreed to the
contrary, (ii) the Indemnifying Person has failed within a reasonable time to
retain counsel reasonably satisfactory to the Indemnified Person or (iii) the
named parties in any such proceeding (including any impleaded parties) include
both the Indemnifying Person and the Indemnified Person and representation of
both parties by the same counsel would be inappropriate due to actual or
potential differing interests between them. It is understood that
14
the Indemnifying Person shall not, in connection with any proceeding or related
proceeding in the same jurisdiction, be liable for the fees and expenses of more
than one separate firm (in addition to any local counsel) for all Indemnified
Persons, and that all such fees and expenses shall be reimbursed as they are
incurred. Any such separate firm for the Holders, the Initial Purchasers, their
respective officers and directors, each of their respective affiliates and such
control persons of the Holders and the Initial Purchasers shall be designated in
writing by such Persons and any such separate firm for the Company, its
directors, its officers and such control persons of the Company or authorized
representatives shall be designated in writing by the Company. The Indemnifying
Person shall not be liable for any settlement of any proceeding effected without
its written consent, but if settled with such consent or if there be a final
judgment for the plaintiff, the Indemnifying Person agrees to indemnify any
Indemnified Person from and against any loss or liability by reason of such
settlement or judgment. Notwithstanding the foregoing sentence, if at any time
an Indemnified Person shall have requested an Indemnifying Person to reimburse
the Indemnified Person for fees and expenses of counsel as contemplated by the
third sentence of this paragraph, the Indemnifying Person agrees that it shall
be liable for any settlement of any proceeding effected without its written
consent if (i) such settlement is entered into more than 30 days after receipt
by such Indemnifying Person of the aforesaid request and (ii) such Indemnifying
Person shall not have reimbursed the Indemnified Person in accordance with such
request prior to the date of such settlement. No Indemnifying Person shall,
without the prior written consent of the Indemnified Person, effect any
settlement of any pending or threatened proceeding in respect of which any
Indemnified Person is or could have been a party and indemnity could have been
sought hereunder by such Indemnified Person, unless such settlement includes an
unconditional release of such Indemnified Person from all liability on claims
that are the subject matter of such proceeding and does not include a statement
as to or an admission of fault, culpability, or a failure to act, by or on
behalf of any Indemnified Person.
(d) Contribution. If the indemnification provided for in
paragraph (a) or (b) of this Section 5 is unavailable to an Indemnified Person
or insufficient in respect of any losses, claims, damages or liabilities or
actions in respect thereof referred to therein, then each Indemnifying Person
under such paragraph, in lieu of indemnifying such Indemnified Person
thereunder, shall contribute to the amount paid or payable by such Indemnified
Person as a result of such losses, claims, damages or liabilities (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company on the one hand and the Initial Purchasers on the other hand from the
offering of the Securities or the Holders from receiving Securities or Exchange
Securities under the Securities Act or (ii) if the allocation provided by clause
(i) above is not permitted by applicable law or if the Indemnified Person failed
to give the notice required under the preceding paragraph, in such proportion as
is appropriate to reflect not only the relative benefits referred to in clause
(i) above but also the relative fault of the Indemnifying Person on the one hand
and the Indemnified Person on the other in connection with the statements or
omissions that resulted in such losses, claims, damages or liabilities or
actions in respect thereof, as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one hand
and the Holders on the other shall be deemed to be in such proportion as is
appropriate to reflect the relative benefits received by the Company from the
offering of the Securities and the Exchange Securities, on the one hand, and by
the Holders from receiving Securities or
15
Exchange Securities registered under the Securities Act, on the other hand. The
relative fault of the Indemnifying Person on the one hand and the Indemnified
Person on the other shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Indemnifying Person or by the Indemnified Person and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
(e) Limitation on Liability. The Company, the Holders and
the Initial Purchasers agree that it would not be just and equitable if
contribution pursuant to this Section 5 were determined by pro rata allocation
(even if the Initial Purchasers were treated as one entity for such purpose) or
by any other method of allocation that does not take account of the equitable
considerations referred to in Section 5(d). The amount paid or payable by an
Indemnified Person as a result of the losses, claims, damages or liabilities (or
actions in respect thereof) referred to above in Section 5(d) shall be deemed to
include any legal or other expenses reasonably incurred by such Indemnified
Person in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 5, in no event shall a Holder be
required to contribute any amount in excess of the amount by which the total
price at which the Securities or Exchange Securities sold by such Holder exceeds
the amount of any damages that such Holder has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
(f) Non-Exclusive Remedies. The remedies provided for in
this Section 5 are not exclusive and shall not limit any rights or remedies
which may otherwise be available to any Indemnified Person at law or in equity.
(g) Survival. The indemnity and contribution provisions
contained in this Section 5 shall remain operative and in full force and effect
regardless of (i) any termination of this Agreement, (ii) any investigation made
by or on behalf of the Initial Purchasers or any Holder, their respective
affiliates or any Person controlling any Initial Purchaser or any Holder, or by
or on behalf of the Company, its affiliates or the officers or directors of or
any Person controlling the Company, (iii) acceptance of any of the Exchange
Securities and (iv) any sale of Registrable Securities pursuant to a Shelf
Registration Statement.
6. General.
(a) No Inconsistent Agreements. The Company represents,
warrants and agrees that (i) the rights granted to the Holders hereunder do not
in any way conflict with and are not inconsistent with the rights granted to the
holders of any other outstanding securities issued or guaranteed by the Company
under any other agreement and (ii) the Company has not entered into, or on or
after the date of this Agreement will enter into, any agreement that is
inconsistent with the rights granted to the Holders of Registrable Securities in
this Agreement or otherwise conflicts with the provisions hereof.
16
(b) Amendments and Waivers. The provisions of this
Agreement, including the provisions of this sentence, may not be amended,
modified or supplemented, and waivers or consents to departures from the
provisions hereof may not be given unless the Company has obtained the written
consent of Holders of at least a majority in aggregate principal amount of the
outstanding Registrable Securities affected by such amendment, modification,
supplement, waiver or consent; provided, however, that no amendment,
modification, supplement, waiver or consent to any departure from the provisions
of Section 5 hereof shall be effective as against any Holder of Registrable
Securities unless consented to in writing by such Holder. Any amendments,
modifications, supplements, waivers or consents pursuant to this Section 6(b)
shall be by a writing executed by each of the parties hereto.
(c) Notices. All notices and other communications
provided for or permitted hereunder shall be made in writing by hand-delivery,
registered first-class mail, telex, telecopier, or any courier guaranteeing
overnight delivery (i) if to a Holder, at the most current address given by such
Holder to the Company by means of a notice given in accordance with the
provisions of this Section 6(c), which address initially is, with respect to the
Initial Purchasers, the address set forth in the Purchase Agreement; (ii) if to
the Company, initially at the Company's address set forth in the Purchase
Agreement and thereafter at such other address, notice of which is given in
accordance with the provisions of this Section 6(c); and (iii) to such other
persons at their respective addresses as provided in the Purchase Agreement and
thereafter at such other address, notice of which is given in accordance with
the provisions of this Section 6(c). All such notices and communications shall
be deemed to have been duly given at the time delivered by hand, if personally
delivered; five Business Days after being deposited in the mail, postage
prepaid, if mailed; when answered back, if telexed; when receipt is
acknowledged, if telecopied; and on the next Business Day if timely delivered to
an air courier guaranteeing overnight delivery. Copies of all such notices,
demands or other communications shall be concurrently delivered by the Person
giving the same to the Trustee, at the address specified in the Indenture.
(d) Successors and Assigns. This Agreement shall inure to
the benefit of and be binding upon the successors, assigns and transferees of
each of the parties, including, without limitation and without the need for an
express assignment, subsequent Holders; provided, however, that nothing herein
shall be deemed to permit any assignment, transfer or other disposition of
Registrable Securities in violation of the terms of the Purchase Agreement or
the Indenture. If any transferee of any Holder shall acquire Registrable
Securities in any manner, whether by operation of law or otherwise, such
Registrable Securities shall be held subject to all the terms of this Agreement,
and by taking and holding such Registrable Securities such Person shall be
conclusively deemed to have agreed to be bound by and to perform all of the
terms and provisions of this Agreement and such Person shall be entitled to
receive the benefits hereof. The Initial Purchasers (in their capacity as
Initial Purchasers) shall have no liability or obligation to the Company with
respect to any failure by a Holder to comply with, or any breach by any Holder
of, any of the obligations of such Holder under this Agreement.
(e) Purchases and Sales of Securities. The Company shall
not, and shall use its reasonable best efforts to cause its affiliates (as
defined in Rule 405 under the
17
Securities Act) not to, purchase and then resell or otherwise transfer any
Registrable Securities.
(f) Third Party Beneficiaries. Each Holder shall be a
third party beneficiary to the agreements made hereunder between the Company, on
the one hand, and the Initial Purchasers, on the other hand, and shall have the
right to enforce such agreements directly to the extent it deems such
enforcement necessary or advisable to protect its rights or the rights of other
Holders hereunder.
(g) Counterparts. This Agreement may be executed in any
number of counterparts and by the parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for
convenience of reference only, are not a part of this Agreement and shall not
limit or otherwise affect the meaning hereof.
(i) Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York.
(j) Miscellaneous. This Agreement contains the entire
agreement between the parties relating to the subject matter hereof and
supersedes all oral statements and prior writings with respect thereto. If any
term, provision, covenant or restriction contained in this Agreement is held by
a court of competent jurisdiction to be invalid, void or unenforceable or
against public policy, the remainder of the terms, provisions, covenants and
restrictions contained herein shall remain in full force and effect and shall in
no way be affected, impaired or invalidated. The Company and the Initial
Purchasers shall endeavor in good faith negotiations to replace the invalid,
void or unenforceable provisions with valid provisions the economic effect of
which comes as close as possible to that of the invalid, void or unenforceable
provisions.
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IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
THE READER'S DIGEST ASSOCIATION, INC.
By: /s/ Xxxxxxx X. Xxxxxxxxxx
--------------------------------
Name: Xxxxxxx X. Xxxxxxxxxx
Title: Senior Vice President and
Chief Financial Officer
19
Confirmed and accepted as of the date
first above written:
X.X. XXXXXX SECURITIES INC.
For itself and on behalf of the
several Initial Purchasers
By: /s/ Xxxxxxxxx Xxxx
----------------------------
Authorized Signatory
