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. (“ Borrower ”),
BARCLAYS BANK PLC, as Administrative Agent, and the Required
Lenders, in each case listed on the signature pages hereto, to the
Credit Agreement dated as of April 12, 2007 (as waived and
amended by the Limited 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 ”), as
further amended, supplemented, amended and restated, extended or
otherwise modified from time to time) (the “ Credit
Agreement ”) among Borrower, VSS-CAMBIUM HOLDINGS, LLC, a
Delaware limited liability company (“ Holdings
”), the Subsidiary Guarantors, each lender from time to time
party thereto (collectively, the “ Lenders ” and
individually, a “ Lender ”), CREDIT SUISSE
SECURITIES (USA) LLC, as co-syndication agent (in such
capacity, “ Co-Syndication Agent ”), BNP
PARIBAS, as co-syndication agent (in such capacity, “
Co-Syndication Agent ” and together with the other
Co-Syndication Agent, the “ Syndication Agents
”), TD Securities (USA) LLC, as documentation agent (in
such capacity, “ Documentation Agent ”), and
BARCLAYS BANK PLC, as issuing bank (in such capacity, “
Issuing Bank ”), as administrative agent (in such
capacity, “ Administrative Agent ”) for the
Lenders and as collateral agent (in such capacity, “
Collateral Agent ”) for the Secured Parties and the
Issuing Bank. Capitalized terms used and not otherwise defined
herein shall have the meanings assigned to them in the Credit
Agreement.
WHEREAS,
at the request of the Loan Parties, the Administrative Agent and
the Required Lenders have agreed to make certain amendments to and
waive certain defaults by the Borrower of its obligations under the
Credit 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 4 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
Lenders hereby waive such Schedule I Defaults; provided
that if Borrower has not complied in all material respects with the
covenant set forth in Section 5(f) 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 Lenders 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 Credit Agreement .
In connection with the waivers hereinabove described, from the
Permanent Amendment Effective Date (as defined below), the Credit
Agreement shall be deemed modified to reflect the
following:
(i)
Section 1.01 of the Credit 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, Borrower, 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 Borrower, (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 Borrower or with respect to any
substantial part of its assets, (c) any liquidation,
dissolution or winding up of Borrower, 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 Borrower, and
(e) Borrower 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
Borrower, the Administrative Agent and the Lenders party
thereto.
“
Ratings ” shall mean, as of any date of determination,
the corporate family ratings level assigned to Borrower as
determined and published by Moody’s and S&P, as
applicable.
“
Revolver Availability Date ” shall have the meaning
set forth in the Permanent Waiver and Amendment.
“
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 Loan Parties. For
purposes of Section 2.10(k), the Net Cash Proceeds from the Escrow
and Settlement Agreement shall be deemed to be $23 million and
shall constitute a Windle Matter Event.
(ii)
Section 1.01 of the Credit Agreement is amended by
amending or restating the following defined terms as
follows:
(a) the definition
of “ Applicable Margin ” shall be amended and
restated in its entirety as follows:
“
Applicable Margin ” shall mean, for any day,
(i) with respect to any Tranche B Loan, the applicable
percentage set forth in Annex I-A under the columns
“Eurodollar” or “ABR”, as applicable for
the appropriate Type of Tranche B Loan that is opposite the
applicable “Level” of the Borrower as of the date of
such Borrowing and (ii) with respect to any Revolving Loan,
the applicable percentage set forth in Annex I-B under the columns
“Eurodollar” or “ABR”, as applicable for
the appropriate Type of Revolving Loan that is opposite the
applicable “Level” of the Borrower as of the date of
such Borrowing; provided that, in each case of clause
(i) and (ii) above, from and including September 5, 2008
and until but excluding the date Section 5(a) of the
Permanent Waiver and Amendment has been satisfied in all material
respects, such Applicable Margin shall be increased by an
additional 1.00% per annum.”
(b) the definition
of “ Base Rate ” shall be amended by adding the
following sentence to the end of such definition:
“Notwithstanding anything above to the contrary, at no time
shall the Base Rate be less than 4.0% per annum.”
(c) 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 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 4(c) and 7 of the Permanent Waiver and
Amendment (and such substantially similar fees paid pursuant to
that certain amendment and waiver to the Senior Unsecured Note
Purchase 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”
(d) the definition
of “ Equity Issuance ” shall be amended by
deleting the words “(y) any Permitted Cure
Securities”, and replacing the words “and (z)”
with the words “and (y)”.
(e) the definition
of “ Excess Cash Flow ” shall be amended by
deleting the word “and” at the end of clause (l),
adding the word “and” at the end of clause (m) and
adding new clause (n) as follows: “(n) all fees,
expenses and losses incurred in respect of clauses (m) and
(n) of the definition of Consolidated EBITDA that are paid in
cash during such Excess Cash Flow Period;”
(f) 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; provided that a Windle Matter Event shall not
be subject to Section 2.10(g) , but shall be subject to
Section 2.10(k) of this Agreement. For the avoidance of
doubt, “Extraordinary Event” shall not include a
Casualty Event.”
(g) the definition
of “ LIBOR Rate ” shall be amended by adding the
following sentence to the end of such definition:
“Notwithstanding anything above to the contrary, at no time
shall the LIBOR Rate be less than 3.0% per annum.”
(h) 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.”
(i) the definition
of “ Preferred Stock Issuance ” shall be amended
by inserting the words “or any Permitted Cure
Securities” immediately after the words “to the Equity
Investors”.
(iii)
Section 2.06 (c) of the Credit Agreement shall be
amended and restated in its entirety as follows:
“(c)
Default Rate . Notwithstanding the foregoing, during an
Event of Default, all Obligations shall, to the extent permitted by
applicable law, bear interest, after as well as before judgment, at
a per annum rate equal to (i) in the case of principal and
premium, if any, of or interest on any Loan, 2% (or 1% to the
extent such Event
of Default
relates solely to the failure of the Borrower to comply with
Section 5(a) of the Permanent Waiver and Amendment) plus the
rate otherwise applicable to such Loan as provided in the preceding
paragraphs of this Section 2.06 or (ii) in the
case of any other amount, 2% (or 1% to the extent such Event of
Default relates solely to the failure of the Borrower to comply
with
Section 5(a) of the Permanent Waiver and Amendment) plus the
rate applicable to ABR Revolving Loans as provided in
Section 2.06(a) (in either case, the “ Default
Rate ”).”
(iv)
Section 2.10 of the Credit Agreement is amended by
(x) amending and restating Section 2.10(e) in its
entirety as follows:
“(e)
Equity Issuance . Not later than five Business Days
following the receipt of any Net Cash Proceeds of (i) any
Equity Issuance (other than with respect to any Permitted Cure
Securities and other than the Net Cash Proceeds of any Equity
Issuance used to finance Capital Expenditures), Borrower shall make
prepayments in accordance with Sections 2.10(i) and
(j) in an aggregate amount equal to 50% of such Net Cash
Proceeds ( provided that such percentage shall be reduced to
25% if, and for so long as, the Total Leverage Ratio as of the end
of the most recent Test Period is less than 4.0 to 1.0); and
(ii) any Permitted Cure Securities, Borrower shall make
prepayments in accordance with Section 2.10(i) and (j) in
an aggregate amount equal to 100% of such Net Cash
Proceeds.”
and
(y) inserting Section 2.10(k) immediately after
Section 2.10(j) as follows:
“(k)
Windle Matter Event . Not later than five Business Days
following the receipt of any Net Cash Proceeds from a Windle Matter
Event by Holdings, its Affiliates or any of their respective
Subsidiaries or any other Person acting on behalf of the foregoing,
Borrower shall make a prepayment of the Tranche B Loans in reverse
order of the prepayments required under Section 2.09 ,
and otherwise in accordance with the terms of the second paragraph
of Section 2.10(i) and Section 2.10(j) in an
aggregate amount equal to 100% of such Net Cash
Proceeds.”
(v)
Section 2.19(c)(iv) of the Credit Agreement is amended
and restated in its entirety as follows:
“the
Applicable Margins for the Incremental Term Loans shall be
determined by Borrower and the Lenders of the Incremental Term
Loans; provided that in the event that the Applicable
Margins for any Incremental Term Loans are greater than the
Applicable
Margins for the
Tranche B Loans, then the Applicable Margins for the Tranche B
Loans shall be increased to the extent necessary so that the
Applicable Margins for the Incremental Term Loans are equal to the
Applicable Margins for the Tranche B Loans; provided ,
further , that in determining the Applicable Margins
applicable to the Tranche B Loans and the Incremental Term Loans,
(x) original issue discount (“ OID ”) or
upfront fees (which shall be deemed to constitute like amounts of
OID) payable by Borrower to the Lenders of the Tranche B Loans or
the Incremental Term Loans in the primary syndication thereof shall
be included (with OID being equated to interest based on an assumed
four-year life to maturity) and (y) customary arrangement or
commitment fees payable to the Arrangers (or their respective
affiliates) in connection with the Tranche B Loans or to one or
more arrangers (or their affiliates) of the Incremental Term Loans
shall be excluded.”
(vi)
Section 4.02 of the Credit Agreement is amended by
inserting Section 4.02(e) immediately after
Section 4.02(d) as follows:
“(e)
Revolving Loan Credit Extension . Pursuant to any Revolving
Borrowing, the proceeds of which will be used, in whole or in part,
to fund a Permitted Acquisition, Borrower shall have delivered and
the Administrative Agent shall have received an Officer’s
Certificate certifying that based on the current financi
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