EXHIBIT 10.38
EXECUTION COPY
FIRST AMENDMENT, dated as of September 9,
2004 (this "Amendment"), to the AMENDED AND
RESTATED TERM LOAN AGREEMENT, dated as of May 24,
2004 (as amended, restated, supplemented or
otherwise modified from time to time, the "Term
Loan Agreement"), among THE READER'S DIGEST
ASSOCIATION, INC., a Delaware corporation (the
"Company"), the BORROWING SUBSIDIARIES party
thereto (the "Borrowing Subsidiaries"), the
LENDERS party thereto (the "Lenders") and JPMORGAN
CHASE BANK, as administrative agent (in such
capacity, the "Administrative Agent") and
collateral agent (in such capacity, the
"Collateral Agent").
witnesseth:
WHEREAS, pursuant to the Term Loan Agreement, the
Lenders have agreed to extend credit to the Borrowers on the
terms and subject to the conditions set forth therein.
WHEREAS, the Company has requested that the Required
Lenders amend certain provisions of the Term Loan Agreement and
the Lenders whose signatures appear below, constituting at least
the Required Lenders, are willing to amend the Term Loan
Agreement on the terms and subject to the conditions set forth
herein.
NOW, THEREFORE, 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. Defined Terms. Capitalized terms used but not
otherwise defined herein have the meanings assigned to them in
the Term Loan Agreement.
SECTION 2. Amendment of Section 1.01. The following sentence
is hereby inserted at the end of the definition of "Consolidated
EBITDA" in Section 1.01 of the Term Loan Agreement:
"Notwithstanding the foregoing, for purposes of
determining Consolidated EBITDA, reductions in Consolidated Net
Income in the five consecutive fiscal quarters of the Company
commencing with the fiscal quarter ending June 30, 2004, that are
attributable to the expensing during such fiscal quarters of
promotion costs capitalized by the Company prior to June 30,
2004, shall be excluded; provided, that the reductions in
Consolidated Net Income that are excluded under this sentence
shall not exceed $66,500,000 in the aggregate."
SECTION 3. Amendment of Section 5.01. The following sentence
is hereby inserted at the end of Section 5.01 of the Term Loan
Agreement:
"Notwithstanding the foregoing, it is agreed that the
Company may change its accounting practices with respect to
promotion costs by expensing rather than capitalizing such costs,
and that such change will not be deemed to prevent the
satisfaction of any requirement in this Section that financial
statements be prepared in accordance with GAAP consistently
applied."
SECTION 4. Representations, Warranties and Agreements. The
Company, as to itself and each of its Subsidiaries, hereby
represents and warrants to and agrees with each Lender and the
Administrative Agent that:
(a) The representations and warranties set forth in Article IV
of the Term Loan Agreement, as amended hereby, are true and
correct in all material respects on and as of the Amendment
Effective Date (as defined below), and after giving effect
to this Amendment, 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) This Amendment has been duly authorized, executed and
delivered by the Company and each Borrowing Subsidiary.
Each of this Amendment and the Term Loan 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; and
(c) As of the Amendment Effective Date (as defined below), after
giving effect to this Amendment, no Default has occurred and
is continuing.
SECTION 5. Conditions to Effectiveness. This Amendment shall
become effective as of the date that the following conditions are
satisfied (the "Amendment Effective Date"):
(a) The Administrative Agent shall have received duly executed
counterparts hereof which, when taken together, bear the
authorized signatures of the Company, the Borrowing
Subsidiaries and the Required Lenders; and
(b) To the extent invoiced, the Administrative Agent shall have
been reimbursed for all its reasonable out of pocket
expenses, including the reasonable fees, charges and
disbursements of its counsel, related to this Amendment or
the Term Loan Agreement.
SECTION 6. Term Loan Agreement. Except as specifically
stated herein, the Term Loan 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 of similar import shall, unless the
context otherwise requires, refer to the Term Loan Agreement as
modified hereby.
SECTION 7. Applicable Law. THIS AMENDMENT SHALL BE CONSTRUED
IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW
YORK.
SECTION 8. 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. Delivery of an executed counterpart of a signature
page of this Amendment by telecopy shall be effective as delivery
of a manually executed counterpart hereof.
SECTION 9. Expenses. The Company agrees to (a) pay all fees
separately agreed to between the Company and the Administrative
Agent relating to this Amendment and (b) reimburse the
Administrative Agent for its reasonable out-of-pocket expenses in
connection with this Amendment, including the reasonable fees,
charges and disbursements of Cravath, Swaine & ▇▇▇▇▇ LLP, 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:
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Name:
Title:
BOOKS ARE FUN, LTD.,
by:
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Name:
Title:
QSP, INC.,
by:
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Name:
Title:
▇▇▇▇▇▇ MEDIA GROUP, INC.,
by:
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Name:
Title:
JPMORGAN CHASE BANK, individually and as
Administrative Agent and Collateral Agent,
by:
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Name:
Title:
To approve the First Amendment to the Term Loan Agreement:
Name of Institution:
by:
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Name:
Title: