PERMANENT
WAIVER AND AMENDMENT NO. 2, dated as of August 22, 2008 (this
“Permanent Waiver and Amendment” ), among
CAMBIUM LEARNING, INC., a Delaware corporation and successor to
VSS-Cambium Merger Corp. (“Company” ),
VSS-CAMBIUM HOLDINGS, LLC, a Delaware limited liability company
(“Holdings” ), TCW/CRESCENT MEZZANINE PARTNERS
IV, L.P., as Administrative Agent, and the Required Note-Holders,
in each case listed on the signature pages hereto, to the Note
Purchase Agreement dated as of April 12, 2007 (as waived and
amended by the Temporary Waiver and Amendment (“Amendment
No. 1” ), dated as of May 20, 2008, such
Amendment No. 1 as extended by the letter agreement dated
July 15, 2008 (“Letter Agreement” ), and as
further amended, supplemented, amended and restated, extended or
otherwise modified from time to time, the “Purchase
Agreement” ) among Company, Holdings, each purchaser from
time to time party thereto (collectively, the
“Purchasers” and individually, a
“Purchaser” ) and TCW/CRESCENT MEZZANINE
PARTNERS IV, L.P., as administrative agent (in such capacity,
“Administrative Agent” ) for the Purchasers.
Capitalized terms used and not otherwise defined herein shall have
the meanings assigned to them in the Purchase Agreement.
WHEREAS,
at the request of the Issuer Parties, the Administrative Agent and
the Required Note-Holders have agreed to make certain amendments to
and waive certain defaults by the Company of its obligations under
the Purchase Agreement, but only on the terms and conditions set
forth in this Permanent Waiver and Amendment.
NOW,
THEREFORE, in consideration of the premises and covenants contained
herein and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties
hereto, intending to be legally bound hereby, agree as
follows:
Section 1. Waivers . Subject to the satisfaction
of the conditions set forth in Section 5 of this
Permanent Waiver and Amendment, with respect to any Defaults or
Events of Default set forth on Schedule I hereto (the
“Schedule I Defaults” ), the Required
Note-Holders hereby waive such Schedule I Defaults; provided
that if Company has not complied in all material respects with the
covenant set forth in Section 6(e) hereto, all waivers
hereby shall be immediately rescinded and the Schedule I
Defaults shall be immediately reinstated with full force and
effect. Notwithstanding anything herein to the contrary, any
material new information and/or material change in existing
information provided to the Purchasers or the Administrative Agent
prior to the date hereof, in each case with respect to the
Schedule I Defaults waived hereby, may be the basis for any
new Defaults or Events of Default.
Section 2. Amendment to the Purchase Agreement .
In connection with the waivers set forth in Section 1
above, from and after the Permanent Amendment Effective Date (as
defined below), the Purchase Agreement shall be deemed modified to
reflect the following:
(i)
Section 1.1 of the Purchase Agreement is amended by
including the following defined terms therein in appropriate
alphabetical order:
“Escrow and Settlement
Agreement” shall
mean the Escrow Settlement, Release, and Indemnity Agreement dated
as of July 10, 2008 by and among
Holdings,
Company, VSS-Cambium Settlement Fund, LLC, Whitney & Co., LLC,
Whitney V, L.P. and the other persons party thereto.
“Insolvency or Liquidation
Proceeding” shall
mean, collectively, (a) any voluntary or involuntary case or
proceeding under the Bankruptcy Code or any similar federal, state
or foreign law for the relief of debtors or any arrangement,
reorganization, insolvency, moratorium, assignment for the benefit
of creditors, any other marshalling of the assets and liabilities
of the Company, (b) any other voluntary or involuntary
insolvency, reorganization or bankruptcy case or proceeding, or any
receivership, liquidation, reorganization or other similar case or
proceeding with respect to Company or with respect to any
substantial part of its assets, (c) any liquidation,
dissolution or winding up of Company, whether voluntary or
involuntary and whether or not involving insolvency or bankruptcy,
(d) any assignment for the benefit of creditors or any other
marshaling of assets and liabilities of Company, and
(e) Company ceases to operate its business.
“Moody’s”
shall mean Moody’s Investors
Service, Inc.
“Permanent Amendment Effective
Date” shall mean
August 22, 2008.
“Permanent Waiver and
Amendment” shall
mean the Permanent Waiver and Amendment No. 2 which amends
this Agreement, dated as of the Permanent Amendment Effective Date,
among the Company, Holdings, the Administrative Agent and the
Purchasers party thereto.
“Ratings” shall mean, as of any date of determination, the
corporate family ratings level assigned to Company as determined
and published by Moody’s and S&P, as
applicable.
“S&P” shall mean Standard & Poor’s Rating
Services, a Division of the McGraw Hill Companies, Inc.
“Windle Matter Event”
shall mean any indemnity payment,
insurance payment or any other payment or recovery (including,
without limitation, recoveries from Jeffrey S. Windle’s
estate) arising from or related to any judgment, arbitration,
order, decree, settlement negotiation or other proceeding, whether
criminal or civil in nature, in connection with the theft, fraud,
malfeasance and other conduct committed by Jeffrey S. Windle or any
other person involved in such conduct against the Issuer
Parties.
(ii)
Section 1.1 of the Purchase Agreement is amended by
amending or restating the following defined terms as
follows:
(a)
the definition of “Consolidated EBITDA” shall be
amended by deleting the word “and” at the end of clause
(x)(ii)(l) and adding new clauses (x)(ii)(m) and (x)(ii)(n) as
follows: “(m)(A) all losses incurred for such period in
respect of any Windle Matter Event (and/or the underlying
embezzlement related thereto) and which shall not exceed $1,801,000
in the
2
aggregate after
December 31, 2007 and (B) all fees and expenses incurred
for such period in respect of any Windle Matter Event (and/or the
underlying embezzlement related thereto) not to exceed
$9.5 million, and (n) the fees paid under
Sections 5(c) and 8 of the Permanent Waiver and
Amendment (and such substantially similar fees paid pursuant to
that certain amendment and waiver to the Senior Credit Agreement
dated as of the Permanent Amendment Effective Date) and the cost of
funds paid under item 3 of Schedule I to the Permanent Waiver
and Amendment not in excess of $125,000, and”
(b)
the definition of “Extraordinary Event” shall be
amended and restated in its entirety as follows:
“Extraordinary Event”
shall mean any purchase price
adjustment, indemnity payment, pension plan revision or a Windle
Matter Event. For the avoidance of doubt, “Extraordinary
Event” shall not include a Casualty Event.”
(c)
the definition of “Net Cash Proceeds” shall be
amended by amending and restating subsection (d) of such
definition as follows:
“(d) with
respect to any Extraordinary Event (including, without limitation,
a Windle Matter Event), the cash proceeds or other compensation
received in respect thereof, net of all reasonable costs and
expenses incurred in connection with the collections of such
proceeds, awards or other compensation in respect of such
Extraordinary Event.”
(iii)
Section 8.1(b) of the Purchase Agreement is amended by
deleting the word “and” at the end of clause (iii),
adding the word “and” at the end of clause
(iv) and adding a new clause (v) as follows:
“(v) any
public announcement by Moody’s or S&P of any change or
possible change in a Rating.”
(iv)
Section 8.2(a)(xv) of the Purchase Agreement is amended
and restated as follows:
“(xv)
(x) from the Permanent Amendment Effective Date until the date
Section 6(d) of the Permanent Waiver and Amendment has been
satisfied in all respects, unsecured Indebtedness of any Company in
an aggregate amount not to exceed $8.0 million at any time
outstanding; provided that such Indebtedness shall be
evidenced by a note in form and substance as set forth in
Exhibit I to the Limited Waiver and Amendment with
modifications to such terms, if any, not more adverse to the
interest of the Purchasers than any other Indebtedness incurred
under this clause (o) and
3
outstanding on
May 20, 2008 (including, without limitation, the subordination
of such Indebtedness to the Obligations) nor more favorable to the
creditors of any other Indebtedness of any Company than to the
Purchasers hereunder; provided, further, that such
Indebtedness shall only accrue interest (including any default
interest) in the form of pay-in-kind interest and such Indebtedness
shall not have any sinking fund or other principal payment and
shall not be redeemable or prepayable without the prior written
consent of the Required Note-Holders and (y) thereafter,
unsecured Indebtedness of any Company in an aggregate amount not to
exceed $5.0 million at any time outstanding; provided ,
however , that (a) upon the occurrence of an Insolvency or
Liquidation Proceeding, all Obligations shall be paid in full in
cash prior to any payment, whether in cash or in kind, by offset,
securities or any other property, being made on account of such
Indebtedness (provided that, if the Equity Investors are the
holders of such unsecured Indebtedness, nothing herein shall
prohibit or prevent the Equity Investors from converting such
Indebtedness into or exchanging such Indebtedness for Qualified
Capital Stock of Holdings); (b) the cash portion payable with
respect to such Indebtedness shall not accrue at an interest rate
in excess of 10% per annum and (c) such Indebtedness shall not
be on terms more favorable to the creditors of any other
Indebtedness of the Issuer Parties than to the Purchasers
hereunder.”
(v)
Schedule 5.21 to the Purchase Agreement is amended by
including therein the Escrow and Settlement Agreement.
Section 3. Amendment to Notes .
(a) In
connection with and in consideration of the waivers and amendments
set forth above, from and after the date hereof, Section 2(a) of
each Note is hereby amended so that the Company promises to pay
interest on the Accreted Principal Amount (as defined in the Notes)
of such Note at the rate of thirteen and three-quarters percent
(13.75%) per annum (“Interest Rate”) on the same
dates and on the same conditions as set forth in the Notes and
three and three-quarters percent (3.75%) per annum of the Interest
Rate shall constitute the PIK Amount; provided ,
however , if the Total Leverage Ratio exceeds 5.5 to 1.0,
the Interest Rate then in effect shall be increase
|
